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Office of Personnel Management.
Direct final rule.
The Office of Personnel Management (OPM) is issuing a direct final rule to raise the maximum annual uniform allowance and the maximum allowable cost payable by the agency for furnishing uniforms from $800 to $1,500, amend the purpose of the subpart and the definition of “uniform,” and ensure agencies maintain policies for administering uniform allowance programs. This document also provides guidance on appropriate and inappropriate uses of the allowance, distinguishes uniforms from personal protective equipment, and makes technical edits to improve transparency, accountability, and usability.
This rule is effective July 13, 2026, unless significant adverse comments are received by May 14, 2026. If significant adverse comments are received, OPM will withdraw the relevant provisions of this direct final rule.
You may submit comments for this direct final rule within the Federal eRulemaking Portal at
All comments must be received by the end of the comment period for them to be considered. All comments and other submissions received generally will be posted on the internet at
A summary of this rule may be found in the docket for this rulemaking at
Ed Ames, Office of Personnel Management, Workforce Policy and Innovation, (202) 606-2858,
Under 5 U.S.C. 5901 through 5903, OPM may adjust the maximum allowance for uniforms and the maximum allowable cost payable by the agency for furnishing uniforms and may prescribe such regulations as it considers necessary for the administration of uniforms. Any uniform allowance funds paid or uniforms furnished directly to employees are not “wages” for Social Security or Federal employment tax/wage withholding purposes—that is, not “wages” under the Social Security Act's definition (42 U.S.C. 409), the Federal Insurance Contributions Act (26 U.S.C. chapter 21), or the Federal wage withholding rules (26 U.S.C. chapter 24). (See 5 U.S.C. 5901(c).)
The uniform allowance authority, as set forth in 5 U.S.C. 5901 through 5903, along with related OPM regulations, apply exclusively to civilian employees governed by title 5 of the United States Code. However, it is important to recognize that some agencies possess separate statutory authorities or appropriations that enable them to pay uniform allowances or provide uniforms independently of the title 5 provisions. OPM is aware of several examples of such independent authorities. For instance, civilian employees of the Department of War (10 U.S.C. 1593) and police officers within the Department of Veterans Affairs (38 U.S.C. 903) are subject to their own statutory provisions which allow for uniform allowances or the furnishing of uniforms. Additionally, certain components within the Department of Homeland Security may operate under their own authorities or appropriations to either provide a uniform allowance or furnish uniforms to employees. It is important to note that agencies possessing independent statutory authority or appropriations for uniform allowances might not be able to utilize these independent authorities concurrently with the title 5 uniform allowance authority under 5 U.S.C. 5901 through 5903, depending on the limitations of the specific authority. Agencies must ensure compliance with the applicable statutory provisions governing the payment of uniform allowances or the furnishing of uniforms.
OPM last increased the Governmentwide maximum from $400 to $800 via final rule on April 26, 2007 (72 FR 20701). Nearly two decades have passed since that adjustment, during which uniform costs have risen significantly due to inflation and advancements in materials that improve durability, comfort, and safety.
This direct final rule amends 5 CFR part 591, subpart A, and includes several key changes: increasing the maximum annual uniform allowance rate and the maximum allowable cost of furnishing uniforms to $1,500; clarifying OPM's authority under 5 U.S.C. 5901 through 5903; updating the purpose of the subpart (§ 591.101); clarifying the definition of “uniform” (§ 591.102); and adding a new section (§ 591.105) governing written agency policies when providing a uniform allowance or furnishing uniforms to employees.
The rule also provides guidance on appropriate and inappropriate uses of the uniform allowance. For example, uniform-allowance funds must not be used for personal protective equipment (PPE), which is governed separately under 5 U.S.C. 7903 and applicable agency safety standards or U.S. Department of Labor (DOL) Occupational Safety and Health Administration (OSHA) standards, or for items required solely for job performance, for example a tool such as a hammer. These clarifications distinguish uniforms from PPE and other non-uniform costs to promote consistency and accountability while preserving agency discretion to set allowance levels below the maximum. (See 5 U.S.C. 7903; 29 U.S.C. 668; 29 CFR part 1960; and 29 CFR part 1910, subpart I.)
OPM plans to issue guidance to agencies on administering the uniform allowance authority, including the changes made by this final rule. All guidance will be available at
OPM considered a variety of materials, which are listed in the docket
Since the last adjustment to the maximum uniform allowance in 2007, the cost of uniforms for Federal employees—particularly those in law enforcement and public safety roles—has risen substantially. The Consumer Price Index for All Urban Consumers (CPI-U) increased by over 57 percent between April 2007 and January 2026, meaning that the purchasing power of the current $800 maximum allowance has been significantly diminished. However, the CPI-U does not fully capture the sharp increases in uniform and apparel costs experienced in recent years, especially for specialized, durable garments required in law enforcement. (BLS, 2026)
The Producer Price Index for Textile Products and Apparel (WPU03) (
Because nearly two decades had passed since the last adjustment to the maximum uniform allowance in 2007, OPM initiated an interagency engagement process in 2024 to better understand current uniform costs, agency practices, and employee needs. As a direct result, many of the revisions and clarifications to part 591, as well as the supplementary information provided in this rule, reflect input and findings from that interagency process. On June 25, 2024, OPM sent an email to Chief Human Capital Officers Council (CHCOC) members (CHCOs, Deputy CHCOs, and Key Principals) totaling 77 recipients, and separately to 16 points of contact at agencies that are not part of the CHCOC. The two emails requested agencies designate a representative to participate in a uniform allowance interagency workgroup (IAWG) meeting and presented a data call consisting of an online survey regarding each agency's use of the uniform allowance and a spreadsheet to document the costs of various uniform garments, accessories, and related items. The IAWG meeting was held on September 26, 2024, and survey and spreadsheet submissions were requested by October 10, 2024.
The data call resulted in survey responses from twelve agencies and consolidated cost spreadsheets from six agencies. A comprehensive review of agency survey responses and uniform cost data revealed that the majority of agencies reported the current $800 maximum uniform allowance is insufficient for at least some occupations. Agencies attribute this inadequacy to a combination of rising costs for textiles, apparel, and labor, as well as the need for uniforms with enhanced features such as comfort, stretch, durability, and stain resistance. Some agencies specifically cited post-COVID market volatility, supply chain disruptions, and the introduction of new uniform materials as key drivers of increased costs. Only one agency indicated that the $800 allowance remains adequate for their current needs. The detailed cost data further supports these findings, with many agencies reporting average annual uniform costs that exceed the current maximum, particularly for firefighters and law enforcement positions. Of those submitting cost data, all but one reported at least one occupational group requiring uniforms. One agency submitted a spreadsheet without any cost data and confirmed that it does not have uniformed employees. Therefore, OPM excluded it from any cost analysis of uniformed employees. Additionally, one agency that did not use the uniform allowance authority indicated in its survey that it was considering implementation for at least one occupation. Among agencies with uniformed occupational groups, all but one department headquarters supported an increase to the maximum uniform allowance. The exception did not have complete component-level data to make an informed recommendation but reported the cost of one occupation's uniforms at approximately $900. One large department specifically recommended a maximum rate of $1,500.
Since 2020, uniform and apparel costs have increased at a notably sharper rate than in prior years, as reflected in the Producer Price Index by Commodity: Textile Products and Apparel, the Producer Price Index by Industry: Apparel Manufacturing, and the Consumer Price Index for All Urban Consumers: Apparel (WPU03) (
Global supply chain disruptions during the COVID pandemic significantly contributed to U.S. producer price index inflation, particularly in manufacturing, where bottlenecks and labor constraints drove costs upward (Federal Reserve Bank of St. Louis, 2022). Similarly, supply chain congestion and reduced labor supply were major drivers of inflation during and after the pandemic (National Bureau of Economic Research, 2024). Industry analysis indicates that apparel brands are facing rising labor costs and are diversifying production locations to manage these increases. (
OPM is revising the purpose of the regulations to make clear that this subpart applies to both agencies that provide payment of the uniform allowance and those agencies that furnish uniforms to employees. In addition, OPM is adding “5 U.S.C. 5901 through 5903” as the prescribing authority—the current regulation only cites 5 U.S.C. 5903.
OPM is revising the definition of “uniform” to eliminate ambiguity and prevent misuse of uniform allowance funds. Based on inconsistent practices across agencies, OPM concludes that the current definition does not adequately distinguish between appearance-based uniform items and PPE and other non-uniform items.
During the interagency engagement process, feedback showed that some agencies have used uniform allowances to purchase items that are clearly PPE, such as ballistic vests, face shields, motor helmets, and footwear worn exclusively for safety purposes. Additional information gleaned from OPM's engagement includes a comment from one agency noting, “Ballistic vests at $1,800 are considered an article of a uniform to be purchased with the uniform allowance,” and another agency specifically requested clarification on whether certain items are PPE or uniform components.
Multiple agencies also reported using the uniform allowance for services like tailoring and cleaning, which are not uniform items and are prohibited. (See,
In addition, among agencies with uniformed employees, more than half reported using 5 U.S.C. 7903 for PPE purchases, which is the appropriate procurement authority for protective equipment and clothing, but at least three said they do not, and one of the three was unaware of the authority. These gaps underscore the importance of defining boundaries between appropriate items for a uniform allowance and other unauthorized items. (See 5 U.S.C. 7903; 29 U.S.C. 668; 29 CFR part 1960; and 29 CFR part 1910, subpart I.)
The revised definition will specify that a “uniform” means specified article(s) of clothing or other items required by an agency to be worn “to provide a distinctive and easily identifiable appearance” when performing the employee's job. OPM is also including multiple examples in the definition and more clearly excluding PPE required for safety and other non-uniform items. The changes related to PPE will better align with applicable safety standards set by the employing agency, DOL OSHA standards (see 29 U.S.C. 668; 29 CFR part 1960; and 29 CFR part 1910, subpart I), or other applicable standards. OPM expects that the revised definition will ensure consistent application governmentwide and support proper use of agency and taxpayer funds.
These revisions do not alter the substantive meaning of the term; rather, they provide additional clarity for agencies and employees of existing requirements.
We have added a new paragraph (b) to § 591.103, based on 5 U.S.C. 5901(a), making clear that an agency that provides uniforms to its employees can use appropriated uniform allowance funds to pay up to 4 percent of any service charges, but the sum of the cost of the uniform(s) and the service charge cannot exceed the maximum allowance amount.
We have added a new section to strengthen accountability and ensure consistent administration of uniform allowance programs. Although the previous regulations only addressed a written policy if a uniform allowance was provided to employees, an agency furnishing uniforms would have also needed written procedures governing the program. This section makes clear that agencies need written policies if they provide a uniform allowance and/or furnish uniforms under part 591.
OPM has determined that this regulatory action is necessary to update and clarify uniform allowance regulations under 5 U.S.C. 5901 through 5903. The maximum uniform allowance rate has not been revised since April 26, 2007 (72 FR 20701). Over the past 19 years, the Bureau of Labor Statistics' Consumer Price Index for All Urban Consumers (CPI-U) increased by 57.36 percent (BLS, 2026). Thus, purchasing $800 (the current maximum uniform allowance rate) worth of goods in 2007 would now cost approximately $1,260 as of January 2026. Through OPM's interagency engagement process and based on our research, OPM determined that uniform costs have risen beyond inflation due to advancements in materials that improve durability, comfort, stain resistance, stretchability, and safety. In addition, this regulatory action is necessary to restore the effectiveness of the uniform allowance program for Federal employees, particularly those in law enforcement and related public safety occupations, which represent the largest group in the reviewed data.
Without an increase, employees in these occupations are required to bear a disproportionate share of uniform costs, which can negatively affect recruitment, retention, and morale in occupations such as law enforcement, firefighting, and other uniformed roles. The February 2026 GAO report (
Finally, OPM's data call showed that several agencies do not maintain adequate records or uniform allowance policies, resulting in inconsistent application of statutory and regulatory requirements and, in some cases, unauthorized expenditures for items outside the definition of “uniform.” These deficiencies undermine transparency, accountability, and fiscal stewardship of taxpayer funds.
This rule will primarily affect Federal agencies that administer uniform allowance programs and employees who are required to wear uniforms in the performance of official duties. The rule will also affect Congress and OPM in their oversight capacities. The public and taxpayers are indirectly impacted through improved accountability and stewardship of Federal funds.
Federal agencies with employees required to wear costly uniforms will experience increased expenditures based on the increase of the maximum allowance. However, although agencies are authorized to pay up to the annual uniform allowance maximum rate, many employees will not need the full $1,500 per year for uniforms. In fact, for many employees, the needed allowance may be much less. OPM believes agencies are in the best position to identify and manage the specific uniform allowance needs of their employees.
In addition, by OPM providing greater clarity in regulation and guidance on inappropriate purchases utilizing the uniform allowance, for example PPE and items required in the performance of employees' duties, multiple agencies will experience decreases in their uniform allowance and furnishing of uniform costs. Agencies will also be able to better plan for and track appropriate uniform costs, PPE, and other items by providing employees with the allowance intended by statute for employees' mandatory and appropriate uniform costs.
In addition to some agencies needing to allocate additional funding for uniform allowances, some Federal agencies covered by 5 CFR part 591, subpart A, may experience operational impacts related to compliance with policy requirements at § 591.105 if the agency does not have a formalized uniform allowance policy or does not maintain documentation sufficient to administer and oversee programs. These changes should improve consistency across agencies but may require initial administrative adjustments, such as updating internal systems, training staff on new procedures, and revising policies to ensure that uniform standards and procurement practices align with clarified definitions.
Agencies with independent statutory authorities or appropriations for uniforms that allow or require an agency to provide an allowance and/or furnish uniforms for its employees are not expected to be affected by this final rule. However, any such agency is advised to review the applicable authorities and/or appropriations to determine if they reference 5 U.S.C. 5901 through 5903 and assess if any action may be required based on this final rule.
Federal employees whose required uniform expenses exceed the $800 maximum annual uniform allowance will experience reduced out-of-pocket costs. Employees whose uniform costs are $800 or less per year will not see any change in what they have received in the past, but some agencies report that they would like to update the uniform styles of some occupations based on a new higher maximum rate. Notably, one agency emphasized rising costs and wear-and-tear and argued a higher maximum rate will ensure a professional appearance and safe performance. Employees may be subject to updated agency policies governing uniform standards within § 591.105.
Congress will see an impact in its oversight role. Agency policy requirements will support Congressional inquiries and audits by ensuring agencies maintain standardized data on uniform allowance expenditures and program administration. This facilitates reporting and strengthens fiscal accountability.
Taxpayers and the public will be indirectly impacted through improved fiscal stewardship. This rule reduces the risk of misuse of funds and strengthens accountability for taxpayer dollars. These changes promote confidence in government operations and ensure that uniform allowance programs operate transparently and in accordance with statutory intent.
Executive Order 12866 requires OPM to design regulations in the most cost-effective manner that achieve the intended policy objectives while minimizing burden on Federal agencies and their employees. To meet this standard, OPM utilized a structured and transparent methodology for evaluating uniform costs across the Federal workforce. Agencies provided uniform cost data in October 2024, which reflected unadjusted spending levels at the time of collection. Because these submissions spanned multiple agencies, procurement methods, and occupational requirements, OPM normalized these data using the Producer Price Index (PPI) by Commodity: Textile Products and Apparel to present all figures consistently in December 2025 dollars. The PPI rose from 185.18 in October 2024 to 193 in January 2026, producing an adjustment factor of 1.040. (FRB St. Louis, 2026) Applying this factor allows for consistent comparison across agencies and ensures that cost estimates accurately reflect current market conditions for uniform components.
It is important to note that vendor prices were not adjusted using the PPI factor. Because vendor prices were collected contemporaneously as part of this rulemaking and already reflect current retail and catalog market conditions, OPM treated them as December 2025 values. The PPI adjustment applies only to agency reported costs submitted in October 2024, consistent with the methodology documented in the cost analysis.
Using this methodology, OPM converted all agency-reported uniform costs from October 2024 to December 2025 values. In October 2024, the highest annual uniform cost reported by agencies was $3,200, which increases to approximately $3,333 after applying the PPI adjustment factor. The lowest reported annual cost—$53—increases to just over $55 under the same adjustment. The average annual cost reported by agencies was $977 in October 2024 and rises to approximately $1,017 in December 2025 dollars. This paired presentation of October 2024 values and their PPI-adjusted equivalents provides a clear and consistent basis for evaluating the sufficiency of both the current $800 allowance and the $1,500 maximum.
The same methodology was applied to agency reported costs of weekly uniform sets for positions requiring different types of full uniform sets each week. Based on agency submissions, the average cost for all weekly sets was approximately $3,760 in October 2024. When adjusted using the PPI factor, this rises to $3,915 in January 2026 dollars. Under the existing $800 maximum allowance, employees in such positions face average out-of-pocket costs of $3,115. With an increased maximum of $1,500, the average out-of-pocket cost decreases to $2,415, demonstrating meaningful financial relief even though the increase does not fully eliminate the gap for employees in the most uniform-intensive occupations.
OPM's analysis of uniform components further shows that agency-reported average costs for key items—such as long-sleeve shirts, belts, uniform jackets, and duty footwear—often exceed the lowest vendor prices available nationally. For example, agencies reported an average October 2024 boot cost of $156.74, which rises to $163.26 after PPI adjustment with vendor prices that ranged from approximately $70 to $200. While vendor prices show a wide range, agency-reported averages consistently reflect garments that meet specific durability, safety, and compliance requirements rather than minimum-priced consumer alternatives. This reinforces the extent to which uniformed employees incur costs above the current $800 limit, even before accounting for the number of required uniform sets per year.
In addition to agency-reported and vendor pricing, OPM conducted a market analysis of non-PPE uniform components across national retailers and catalog sources. Market prices for long-sleeve shirts appropriate for uniform wear averaged $60 to $70, with uniform trousers averaging $75 to $90 per pair. Uniform jackets and sweaters averaged $100 to $130, while duty footwear ranged from $200 to $350 per pair. Because these prices were collected contemporaneously, they reflect current conditions and did not require PPI adjustment. These findings support the conclusion that uniform programs relying on current retail pricing—even for non-specialized garments—regularly generate costs that exceed the current $800 maximum allowance, especially for employees requiring multiple sets over the course of a uniform cycle.
Illustrative occupational scenarios highlight the cumulative effect of uniform costs. A law enforcement employee requiring five shirts, four pairs of trousers, one jacket, and one pair of duty footwear would incur costs of between $1,265 and $1,465 annually using current market averages. Under the current $800 cap, such employees may face out-of-pocket costs of $465 to $665, whereas a $1,500 maximum reduces this amount to $0 to $235. Similar cost burdens appear in fire department daily wear (non-PPE), where individual garment prices accumulate to significant totals when multiple sets and styles are required, exceeding the current allowance ceiling.
As part of OPM's October 2024 uniform allowance survey, agencies reported both their uniform cost concerns and estimated budgetary impacts under a higher maximum allowance. Of the 12 respondents, three expressed potential budget concerns while nine reported none. One large agency estimated that increasing the maximum allowance to $1,500 would raise its program expenses by up to $100,000 based on October 2024 costs. After applying the PPI factor, this
This rule provides significant benefits to multiple stakeholders by reducing financial burdens, improving program integrity, and enhancing transparency and accountability in the administration of uniform allowance programs.
Federal employees will benefit most directly from the increase in the maximum uniform allowance rate from $800 to $1,500. This adjustment reflects inflation and rising uniform costs, ensuring that employees required to wear uniforms in the performance of official duties receive an allowance that reasonably defrays the cost of those uniforms, as Congress intended (See U.S. Congress,
Federal agencies will benefit from clearer regulatory standards and improved guidance on distinguishing uniforms from PPE and other non-uniform items, reducing ambiguity and preventing improper expenditures. The enhanced policy requirements at § 591.105 will strengthen program integrity and ensure consistent application of statutory and regulatory requirements.
In addition, providing a higher uniform allowance for law enforcement personnel—and likely other occupations that require more expensive, full uniform sets—may improve agencies' ability to recruit new candidates and retain current employees, based on GAO's February 2026 report.
OPM will benefit from enhanced oversight capability through broader policy requirements, enabling data-driven policy guidance and improved compliance monitoring.
Congress will benefit from increased transparency and accountability in uniform allowance programs. The codification of a broader policy requirement supports Congressional oversight responsibilities and ensures that taxpayer funds are used appropriately and as intended under 5 U.S.C. 5901 through 5903.
Taxpayers and the public will benefit from improved fiscal stewardship and accountability. By clarifying allowable expenses and requiring agencies to establish policies, this rule reduces the risk of misuse of funds and promotes responsible use of public resources.
Alternatives considered by OPM included maintaining the current $800 maximum rate or setting a lower increase based solely on CPI-U adjustments. Congress intended the uniform allowance to defray the costs of purchasing a uniform for employees who were not being furnished uniforms by their agencies (See U.S. Congress,
If any provision of this final rule is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, we believe that the various provisions should be severable and need not be impacted. Similarly, many of the operational requirements have no bearing on other provisions and are severable. For example, a change in the maximum uniform allowance rate is not subject to notice and comment and should be upheld even if another provision, such as the program administration provision, is found to be invalid.
Although 5 U.S.C. 1105 and 1103(b)(1) requires OPM to provide notice of and to seek comment on certain rules, 5 U.S.C. 1103(b)(4) exempts OPM rules that establish, among other things, allowances under 5 U.S.C. part III, subpart D. This rule establishes the allowance for uniforms, the authority for which is found in subchapter I of chapter 59 of title 5, United States Code. This rule does not establish any procedures, methodology, or criteria used to establish the uniform allowance.
In addition to the change to the maximum uniform allowance rate, which is not subject to notice and comment rulemaking, this rule makes minor modifications to subpart A of part 591. This rule is suitable for direct final rulemaking because it is non-controversial and consistent with Federal law and policy. OPM does not expect to receive any significant adverse comments related to these minor modifications. These provisions of the rule will be beneficial to agencies and members of the public because they will improve compliance with statutory restrictions on the use of uniform allowances. The revision of the definition of a uniform makes no changes to the legal obligations or rights of any affected parties (
This rule will be effective July 13, 2026, unless significant adverse comments are received by May 14, 2026. A significant adverse comment is one that explains: (1) why the rule is inappropriate, including challenges to the rule's underlying premise or approach; or (2) why the direct final rule will be ineffective or unacceptable without a change. If such comments are received, the provisions of this direct final rule that are subject to notice and comment (
OPM has examined the impact of this rule as required by E.O. 12866 and 13563, which direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public, health, and safety effects, distributive impacts, and equity). A regulatory impact analysis must be prepared for rules that have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities. This rulemaking does not reach that threshold but has otherwise been designated as a “significant regulatory action” under section 3(f) of E.O. 12866. This rule is not expected to be considered an E.O. 14192 regulatory action because it imposes no more than de minimis costs.
The Director of OPM certifies that this rulemaking will not have a significant economic impact on a substantial number of small entities because the rule will apply only to Federal agencies and employees.
This rulemaking will not have substantial direct effects on the States, on the relationship between the national government and the States, or on distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 13132, the Director of OPM certifies that this rulemaking does not have sufficient federalism implications to warrant preparation of a Federalism Assessment.
This rulemaking meets the applicable standards set forth in section 3(a) and (b)(2) of Executive Order 12988.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits before issuing any rule that would impose spending costs on State, local, or tribal governments in the aggregate, or on the private sector, in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold is currently approximately $206 million. This rulemaking will not result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, in excess of the threshold. Thus, no written assessment of unfunded mandates is required.
OMB's Office of Information and Regulatory Affairs has determined this rule does not satisfy the criteria listed in 5 U.S.C. 804(2).
This regulatory action does not impose any new reporting or record-keeping requirements subject to the Paperwork Reduction Act.
• Ana Maria Santacreu and Jesse LaBelle, “Global Supply Chain Disruptions and Inflation During the COVID-19 Pandemic,” Federal Reserve Bank of St. Louis
• National Bureau of Economic Research. (2024). “Supply Chain Disruptions and Pandemic-Era Inflation.”
• Just Style. (2024). “Impact of increasing labour costs on apparel supply chains.” Available at:
•
• U.S. Government Accountability Office (GAO). (2026).
• Federal Reserve Bank of St. Louis.
Government employees, Travel and transportation expenses, Wages.
The Director of OPM, Scott Kupor, reviewed and approved this document and has authorized the undersigned to electronically sign and submit this document to the Office of the Federal Register for publication.
For the reasons stated in the preamble, the Office of Personnel Management amends 5 CFR part 591 as follows:
5 U.S.C. 1103(b)(4), 5 U.S.C. 5901, 5902, 5903.
This subpart prescribes the regulations authorized by 5 U.S.C. 5901 through 5903 for the purpose of payment of an allowance or to furnish or purchase uniforms for one or more employees.
(a) Unless a higher initial maximum uniform allowance rate is payable under § 591.104 or other agency authority or specific appropriation to an employee who is required by statute, regulation, or an agency's written administrative procedures to wear a uniform, the head of an agency, out of funds available, must—
(1) Pay an allowance for a uniform not to exceed $1,500 a year; or
(2) Furnish a uniform at a cost not to exceed $1,500 a year.
(b) If an agency purchases a uniform directly from a vendor, the agency can spend up to 4 percent on service charges but the total cost of the uniform and any service charges cannot exceed the maximum allowance set forth in paragraph (a)(2) of this section.
An agency that provides a uniform allowance or furnishes uniforms under this subpart must establish policies to administer the program sufficient to ensure compliance with 5 U.S.C. 5901 and this subpart.
Office of State and Community Energy Programs, U. S. Department of Energy.
Final rule.
The Department of Energy (DOE) publishes a final rule to eliminate the subject regulations due to their non-applicability to operating DOE programs. In 1996, DOE consolidated legacy programs into the State Energy Program and determined all programming would be regulated through a different regulatory framework, leaving the regulations at this part without utility. Now, these regulations are a legacy of an ancestral program and remain in place despite decades without Congress funding the underlying statutory program. This final rule has no impact on stakeholders and further streamlines the State Energy Program by eliminating extraneous and derelict regulations, and does not directly reduce availability of financial assistance.
This rule is effective on May 14, 2026.
Mr. Michael Li, U.S. Department of Energy, Office of State and Community Energy Programs, 1000 Independence Avenue SW, Washington, DC 20585; (240) 204-3026 or
On May 16, 2025, the U.S. Department of Energy (DOE) published a proposed rule to rescind the Grant Programs for Schools and Hospitals and Buildings Owned by Units of Local Government and Public Care Institutions regulations at 10 CFR part 455. 90 FR 20945; (May 2025 proposal). In the proposal, DOE explained that the regulations were established to implement the Institutional Conservation Program (ICP), which provided grants to various institutions to fund detailed energy audits, called technical assistance programs, and energy conservation measures. The ICP and its regulations were authorized under Title III of the Energy Policy and Conservation Act, as amended, 42 U.S.C. 6371
As discussed in the May 2025 proposal, the ICP was consolidated in 1996 with the State Energy Conservation Program (SECP) to establish the State Energy Program (SEP), which provides formula grants using SECP's amended regulations at 10 CFR part 420. Through that consolidation process, DOE did not eliminate ICP's regulations at 10 CFR part 455 and instead directed states wishing to undertake activities previously administered through ICP to apply to SEP and comply with the newly amended regulations at 10 CFR part 420. 90 FR 20945, 20945.
This final rule rescinds those regulations that remained in place even though the supporting statutory authority for the ICP has gone unfunded for many years and the regulations are no longer in use.
DOE received three comments in response to the May 2025 proposal.
Anonymous commenter and Christina Sobczak do not support rescinding 10 CFR part 455 on the basis that Federal grant programs are beneficial to local governments, schools, and public care institutions. Sobczak commented that 30 percent of schools have poor energy efficiency and cited firsthand experience as to the importance of children having well-maintained schools. Misty Duvall advocates for protecting against impairments to institutions currently using the regulations in 10 CFR part 455.
In response, DOE notes that all comments received reflect a misunderstanding of the consequences of the proposed rule. Commenters advocated for funding opportunities for energy efficiency measures in schools, hospitals, and buildings of local units of government and discussed the benefit of such measures to children, patients, and citizens, which will not be impacted by the recission of 10 CFR part 455. This is precisely why Congress has regularly appropriated the State Energy Program (SEP), which utilizes the regulations in 10 CFR part 420 to accomplish these and other energy efficiency measures in public buildings. The purpose of this final rule is to eliminate extraneous and derelict regulations that have no bearing on an existing program.
For the reasons discussed in the preceding sections of this document, DOE is finalizing this final rule.
Section 6(a) of Executive Order (“E.O.”) 12866, “Regulatory Planning and Review,” 58 FR 51735 (Oct. 4, 1993), requires agencies to submit “significant regulatory actions” to the Office of Information and Regulatory Affairs (“OIRA”) in the Office of Management and Budget (“OMB”) for review. OIRA has determined that this
DOE has examined this final rule and has determined that it is consistent with the policies and directives outlined in E.O. 14154 “Unleashing American Energy,” E.O. 14192, “Unleashing Prosperity Through Deregulation,” and Presidential Memorandum, “Delivering Emergency Price Relief for American Families and Defeating the Cost-of-Living Crisis.” While this final rule does not result in cost savings per E.O. 14192, DOE considers this a deregulatory action because it removes obsolete regulations.
The Regulatory Flexibility Act (5 U.S.C. 601
DOE reviewed this final rule under the provisions of the Regulatory Flexibility Act and the policies and procedures published on February 19, 2003. This final rule will not impact small businesses/entities as there is no active Financial Assistance program subject to 10 CFR part 455. Therefore, DOE concludes that the impacts of the rule would not have a “significant economic impact on a substantial number of small entities,” and that the preparation of an FRFA is not warranted. DOE will transmit this certification and supporting statement of factual basis to the Chief Counsel for Advocacy of the Small Business Administration for review under 5 U.S.C. 605(b).
This final rule imposes no new information collection requirements subject to the Paperwork Reduction Act and OMB clearance is not required. (44 U.S.C. 3501
Pursuant to the National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. 4321
DOE is rescinding the regulations at 10 CFR part 455 because these regulations are no longer in use; no new appropriations have been directed/provided to ICP since 1998 as new funding has been directed to SEP (the successor program) since that time. As such, DOE has determined that this rulemaking is strictly procedural and, therefore, is an administrative and routine action and is not a major Federal action significantly affecting the quality of the human environment within the meaning of NEPA and no further environmental review is needed. For more information, please see appendix A of 10 CFR part 1021 (“A6, Procedural rulemakings”) and appendix A of DOE's NEPA implementing procedures, A6, Procedural rulemakings (June 30, 2025).”
Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999), imposes certain requirements on Federal agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. The Executive order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. 65 FR 13735. DOE has examined this final rule and has determined that it would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, no further action is required by Executive Order 13132.
With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (February 7, 1996), imposes on Executive agencies the general duty to adhere to the following requirements: (1) eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard and promote simplification and burden reduction. With regard to the review required by section 3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, this final rule meets the relevant standards of Executive Order 12988.
Title II of the Unfunded Mandates Reform Act of 1995 (“UMRA”) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). For a regulatory action likely to result in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a “significant intergovernmental mandate,” and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect them. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. 62 FR 12820. DOE's policy statement is also available at
DOE examined this final rule according to UMRA and its statement of policy and determined that the final rule does not contain a Federal intergovernmental mandate, nor is it expected to require expenditures of $100 million or more in any one year by State, local, and Tribal governments, in the aggregate, or by the private sector. As a result, the analytical requirements of UMRA do not apply.
Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well being. This final rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.
Pursuant to E.O. 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights,” 53 FR 8859 (March 18, 1988), DOE has determined that this final rule would not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.
Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for Federal agencies to review most disseminations of information to the public under information quality guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, Improving Implementation of the Information Quality Act (April 24, 2019), DOE published updated guidelines which are available at:
Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OIRA at OMB, a Statement of Energy Effects for any significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that: (1) is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is designated by the Administrator of OIRA as a significant energy action. For any significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.
This final rule is not a significant regulatory action under E.O. 12866. Moreover, it would not have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as such by the Administrator at OIRA. Accordingly, DOE has not prepared a Statement of Energy Effects.
As required by 5 U.S.C. 801, DOE will submit to Congress a report regarding the issuance of this final rule prior to the effective date set forth at the outset of this final rule. The report will state that it has been determined that the rule is not a “major rule” as defined by 5 U.S.C. 804(2).
The Secretary of Energy has approved publication of final rule.
Administrative practice and procedure, Buildings and facilities, Community facilities, Energy conservation, Grant programs—energy, Health facilities, Hospitals, Reporting and recordkeeping requirements, Schools, Solar energy, and Technical assistance.
This document of the Department of Energy was signed on February 2, 2026, by Michael Li, Director, Office of State and Community Energy Programs, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the
Federal Aviation Administration (FAA), DOT.
Final rule.
The FAA is superseding Airworthiness Directive (AD) 2023-11-05, which applied to all Pilatus Aircraft Ltd. (Pilatus) Model PC-24 airplanes. AD 2023-11-05 required revising the airworthiness limitations section (ALS) of the existing aircraft maintenance manual (AMM) or instructions for continued airworthiness (ICA) to incorporate new or more restrictive airworthiness limitations. Since the FAA issued AD 2023-11-05, the FAA has determined that new or more restrictive airworthiness limitations are necessary. This AD requires revising the ALS of the existing AMM or ICA for your airplane. The FAA is issuing this AD to address the unsafe condition on these products.
This AD is effective May 19, 2026.
The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of May 19, 2026.
• For European Union Aviation Agency (EASA) material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 901 Locust, Kansas City, MO 64106. For information on the availability of this material at the FAA, call (817) 222-5110. It is also available at
Doug Rudolph, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (816) 329-4059; email:
The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2023-11-05, Amendment 39-22451 (88 FR 38382, June 13, 2023) (AD 2023-11-05). AD 2023-11-05 applied to all Pilatus Model PC-24 airplanes. AD 2023-11-05 required revising the ALS of the existing AMM or ICA to incorporate new or more restrictive airworthiness limitations. The FAA issued AD 2023-11-05 to address failure of certain parts, which could result in loss of control of the airplane.
The NPRM was published in the
In the NPRM, the FAA proposed to require revising the ALS of the existing AMM or ICA for your airplane, as specified in EASA AD 2025-0211. Additionally, the actions required to address the unsafe condition in AD 2023-11-05 are included in “the applicable ALS,” as defined in EASA AD 2025-0211. The FAA is issuing this AD to address failure of certain parts, which could result in loss of control of the airplane.
You may examine the MCAI in the AD docket at
The FAA received comments from one individual commenter. The commenter supported the NPRM without change.
These products have been approved by the civil aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, that authority has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data, considered any comments received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on these products. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.
The FAA reviewed EASA AD 2025-0211, which specifies procedures for revising the aircraft maintenance program (AMP) by incorporating airworthiness limitations, tasks, and associated thresholds and intervals, including life limits and maintenance tasks. EASA AD 2025-0211 also specifies doing corrective actions if any discrepancy (as defined in “the applicable ALS” as defined in EASA AD 2025-0211) is found during accomplishment of any task in paragraph (1) of EASA AD 2025-0211 and revising the AMP by incorporating the limitations, tasks, and associated thresholds and intervals described in “the applicable ALS” as defined in EASA AD 2025-0211.
This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
Where EASA AD 2025-0211 specifies revising the approved AMP within 12 months after the effective date of EASA AD 2025-0211, this AD requires revising the ALS of the existing approved maintenance or inspection program, as applicable, within 30 days after the effective date of this AD.
The FAA estimates that this AD affects 167 airplanes of U.S. registry.
The FAA estimates the following costs to comply with this AD:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA has determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Will not affect intrastate aviation in Alaska, and
(3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective May 19, 2026.
This AD replaces AD 2023-11-05, Amendment 39-22451 (88 FR 38382, June 13, 2023) (AD 2023-11-05).
This AD applies to Pilatus Aircraft Ltd. Model PC-24 airplanes, all serial numbers, certificated in any category.
Joint Aircraft System Component (JASC) Codes 2710, Aileron Control System; 2720, Rudder Control System.
This AD was prompted by a revision to the airworthiness limitations section (ALS) of the existing aircraft maintenance manual (AMM) introducing new and more restrictive instructions and maintenance tasks. These include revisions to various fuselage section inspection intervals and aileron and rudder trim actuator inspection intervals. The FAA is issuing this AD to ensure revision of the ALS of the existing AMM or instructions for continued airworthiness (ICA) for your airplane. The unsafe condition, if not addressed, could result in failure of certain parts, which could result in loss of control of the airplane.
Comply with this AD within the compliance times specified, unless already done.
(1) Except as specified in paragraphs (h) and (i) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, European Union Aviation Safety Agency (EASA) AD 2025-0211, dated September 26, 2025 (EASA AD 2025-0211).
(2) The actions required by this AD may be performed by the owner/operator (pilot) holding at least a private pilot certificate and must be entered into the aircraft records showing compliance with this AD in accordance with 14 CFR 43.9(a) and 91.417(a)(2)(v). The record must be maintained as required by 14 CFR 91.417, 121.380, or 135.439.
(1) Where EASA AD 2025-0211 refers to its effective date, this AD requires using the effective date of this AD.
(2) This AD does not adopt paragraphs (1), (2), (4), and (5) of EASA AD 2025-0211.
(3) Where paragraph (3) of EASA AD 2025-0211 specifies “Within 12 months after the effective date of this AD, revise the approved AMP”, this AD requires replacing that text with “Within 30 days after the effective date of this AD, revise the airworthiness limitations section of your existing aircraft maintenance manual or instructions for continued airworthiness and your existing approved maintenance or inspection program, as applicable”.
(4) The initial compliance time for doing the tasks specified in paragraph (3) of EASA AD 2025-0211 is on or before the applicable limitations and associated thresholds as incorporated by the requirements of paragraph (3) of EASA AD 2025-0211 or within 30 days after the effective date of this AD, whichever occurs later.
(5) This AD does not adopt the “Remarks” section of EASA AD 2025-0211.
After the action required by paragraph (g)(1) of this AD has been done, no alternative actions and associated thresholds and intervals, including any life limits, are allowed unless they are approved as specified in the provisions of the “Ref. Publications” section of EASA AD 2025-0211.
(1) The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the International Validation Branch, send it to the attention of the person identified in paragraph (k) of this AD and email to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager
For more information about this AD, contact Doug Rudolph, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (816) 329-4059; email:
(1) The Director of the Federal Register approved the incorporation by reference of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this material as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) European Union Aviation Safety Agency (EASA) AD 2025-0211, dated September 26, 2025.
(ii) [Reserved]
(3) For EASA material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
(4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 901 Locust, Kansas City, MO 64106. For information on the availability of this material at the FAA, call (817) 222-5110.
(5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit
Federal Aviation Administration (FAA), DOT.
Final rule.
The FAA is superseding Airworthiness Directive (AD) 2025-05-09, which applied to all Airbus Helicopters Model SA330J helicopters. AD 2025-05-09 required revising the existing maintenance records by incorporating new or more restrictive airworthiness limitations. Since the FAA issued AD 2025-05-09, the FAA has determined that new or more restrictive airworthiness limitations are necessary. This AD requires revising the airworthiness limitations section (ALS) of the existing maintenance manual (MM) or instructions for continued airworthiness (ICA) and the existing approved maintenance or inspection program, as applicable. The FAA is issuing this AD to address the unsafe condition on these products.
This AD is effective May 19, 2026.
The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of May 19, 2026.
• For European Union Aviation Safety Agency (EASA) material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 10101 Hillwood Parkway, Fort Worth, TX 76177. For information on the availability of this material at the FAA, call (817) 222-5110. It is also available at
Adam Hein, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (316) 946-4116; email:
The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2025-05-09, Amendment 39-22981 (90 FR 14717, April 4, 2025) (AD 2025-05-09). AD 2025-05-09 applied to all Airbus Helicopters Model SA330J helicopters. AD 2025-05-09 required revising the existing maintenance records by incorporating new or more restrictive airworthiness limitations. The FAA issued AD 2025-05-09 to prevent failure of certain parts, which if not addressed, could result in loss of control of the helicopter.
The NPRM was published in the
In the NPRM, the FAA proposed to require revising the ALS of the existing MM or ICAs and the existing approved maintenance or inspection program, as applicable.
You may examine the MCAI in the AD docket at
The FAA received no comments on the NPRM or on the determination of costs.
These products have been approved by the civil aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, that authority has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data, considered any comments received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on these products. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.
The FAA reviewed EASA AD 2025-0127, which specifies procedures for replacing components before exceeding their life limits and accomplishing all applicable maintenance tasks within thresholds and intervals specified in the ALS as defined in EASA AD 2025-0127. Depending on the results of the maintenance tasks, EASA AD 2025-
Additionally, EASA AD 2025-0127 specifies procedures for revising the Aircraft Maintenance Programme (AMP) by incorporating the limitations, tasks, and associated thresholds and intervals described in the specified ALS, as applicable. Revising the AMP constitutes terminating action for the requirement to record accomplishment of the actions of replacing components before exceeding their life limits and accomplishing maintenance tasks within thresholds and intervals specified in the applicable ALS as required by EASA AD 2025-0127 for demonstration of AD compliance on a continued basis.
This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
EASA AD 2025-0127 specifies, as individual tasks, replacing certain components before exceeding applicable life limits, accomplishing certain maintenance tasks within thresholds and intervals as specified in the ALS, as defined within, and depending on the results, accomplishing corrective action, whereas this AD does not because the applicable ALS, along with the FAA regulatory framework, make it unnecessary or inappropriate to adopt certain paragraphs of the MCAI.
EASA AD 2025-0127 also requires revising the approved AMP by incorporating the limitations, tasks, and associated thresholds and intervals described in that ALS within 12 months, whereas this AD requires revising the existing maintenance records by incorporating the limitations, tasks, and associated thresholds and intervals described in that ALS within 30 days, and clarifies that if the initial instance of an incorporated limitation or threshold therein is reached before 30 days after the effective date of this AD, you still have up to 30 days after the effective date of this AD to accomplish the corresponding task.
The FAA estimates that this AD affects six helicopters of U.S. registry.
The FAA estimates the following costs to comply with this AD:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA has determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Will not affect intrastate aviation in Alaska, and
(3) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective May 19, 2026.
This AD replaces AD 2025-05-09, Amendment 39-22981 (90 FR 14717, April 4, 2025).
This AD applies to all Airbus Helicopters Model SA330J helicopters, certificated in any category.
Air Transport Association (ATA) of America Code 05, Time Limits/Maintenance Checks.
This AD was prompted by new and more restrictive airworthiness limitations. The FAA is issuing this AD to prevent failure of critical parts and primary structural components, which, if not addressed, could result in loss of control of the helicopter.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraph (h) of this AD, comply with all required actions and compliance times specified in, and in accordance with European Union Aviation Safety Agency AD 2025-0127, dated May 28, 2025 (EASA AD 2025-0127).
(1) Where EASA AD 2025-0127 refers to its effective date, this AD requires using the effective date of this AD.
(2) This AD does not adopt paragraphs (1), (2), (4), and (5) of EASA AD 2025-0127.
(3) Where paragraph (3) of EASA AD 2025-0127 specifies “Within 12 months after the effective date of this AD, revise the approved AMP,” this AD requires replacing that text with “Within 30 days after the effective date of this AD, revise the airworthiness limitations section of the existing maintenance manual or instructions for continued airworthiness and the existing approved maintenance or inspection program, as applicable”.
(4) The initial compliance time for doing the tasks specified in paragraph (3) of EASA AD 2025-0127 is on or before the applicable “limitations” and “associated thresholds” as incorporated by the requirements of paragraph (3) of EASA AD 2025-0127 or within 30 days after the effective date of this AD, whichever occurs later.
(5) This AD does not adopt the “Remarks” section of EASA AD 2025-0127.
After the action required by paragraph (g) of this AD has been done, no alternative actions and associated thresholds and intervals, including life limits, are allowed unless they are approved as specified in the provisions of the “Ref. Publications” section of EASA AD 2025-0127.
(1) The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the International Validation Branch, send it to the attention of the person identified in paragraph (k) of this AD and email to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
For more information about this AD, contact Adam Hein, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (316) 946-4116; email:
(1) The Director of the Federal Register approved the incorporation by reference of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this material as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) European Union Aviation Safety Agency (EASA) AD 2025-0127, dated May 28, 2025.
(ii) [Reserved]
(3) For EASA material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
(4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 10101 Hillwood Parkway, Fort Worth, TX 76177. For information on the availability of this material at the FAA, call (817) 222-5110.
(5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit
Federal Aviation Administration (FAA), DOT.
Final rule; request for comments.
The FAA is adopting a new airworthiness directive (AD) for certain Airbus SAS Model A350-1041 airplanes. This AD was prompted by a report of a misalignment between a certain flap shaft and the catcher due to incorrect installation of the bracket supporting the catcher. This AD requires an inspection of affected parts and applicable corrective actions. The FAA is issuing this AD to address the unsafe condition on these products.
This AD is effective April 29, 2026.
The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of April 29, 2026.
The FAA must receive comments on this AD by May 29, 2026.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
• For European Union Aviation Safety Agency (EASA) material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available at
Nicholas Benson, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3647; email:
The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments using a method listed under the
Except for Confidential Business Information (CBI) as described in the following paragraph, and other
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Nicholas Benson, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3647; email:
EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2025-0117, dated May 19, 2025 (EASA AD 2025-0117) (also referred to as the MCAI), to correct an unsafe condition for certain Airbus SAS Model A350-1041 airplanes. The MCAI states that a misalignment between flap shaft F02 and the catcher was reported during an inspection on the final assembly line. The root cause is an incorrect installation of the bracket supporting the catcher, which was mounted 180 degrees inverted, causing the flap shaft F02 and catcher to be misaligned. This could lead to premature wear and possible rupture of the flap shaft under specific loads. This condition, if not addressed, could lead to a flap surface detachment, resulting in reduced control of the airplane and parts detached from the airplane, which could damage the airplane.
The FAA is issuing this AD to address the unsafe condition on these products.
You may examine the MCAI in the AD docket at
The FAA reviewed EASA AD 2025-0117, which specifies procedures for performing a one-time detailed inspection to ensure the correct installation of the bracket supporting the catcher on both the left- and right-hand sides and applicable corrective actions. Corrective actions include replacing the flap shaft and catcher, doing a detailed inspection of the bracket and fastener holes for any discrepancy (any scratch or wear mark), performing a rototest inspection and a dimensional check of each fastener hole, and depending on findings, replacing the bracket, or contacting Airbus for approved instructions and accomplishing those instructions. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
These products have been approved by the civil aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, that authority has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA is issuing this AD after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
This AD requires accomplishing the actions specified in EASA AD 2025-0117 described previously, except for any differences identified as exceptions in the regulatory text of this AD.
In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, EASA AD 2025-0117 is incorporated by reference in this AD. This AD requires compliance with EASA AD 2025-0117 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this AD. Using common terms that are the same as the heading of a particular section in EASA AD 2025-0117 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2025-0117. Material required by EASA AD 2025-0117 for compliance will be available at
Section 553(b) of the Administrative Procedure Act (APA) (5 U.S.C. 551
There are currently no domestic operators of these products. Accordingly, notice and opportunity for prior public comment are unnecessary, pursuant to 5 U.S.C. 553(b). In addition, for the foregoing reason(s), the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days.
The requirements of the RFA do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because the FAA has determined that it has good cause to adopt this rule without notice and comment, RFA analysis is not required.
Currently, there are no affected U.S.-registered airplanes. If an affected airplane is imported and placed on the U.S. Register in the future, the FAA provides the following cost estimates to comply with this AD:
The FAA estimates the following costs to do any necessary on-condition actions that would be required based on the results of any required actions. The FAA has no way of determining the number of aircraft that might need these on-condition actions:
According to the manufacturer, some or all of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. The FAA does not control warranty coverage for affected individuals. As a result, the FAA has included all known costs in the cost estimate.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866, and
(2) Will not affect intrastate aviation in Alaska.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective April 29, 2026.
None.
This AD applies to Airbus SAS Model A350-1041 airplanes, certificated in any category, as identified in European Union Aviation Safety Agency (EASA) AD 2025-0117, dated May 19, 2025 (EASA AD 2025-0117).
Air Transport Association (ATA) of America Code 53, Fuselage.
This AD was prompted by a report of a misalignment between a flap shaft and the catcher due to incorrect installation of the bracket supporting the catcher. The FAA is issuing this AD to address premature wear and possible rupture of the flap shaft under specific loads. This condition, if not addressed, could lead to a flap surface detachment, resulting in reduced control of the airplane and parts detached from the airplane, which could damage the airplane.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraphs (h) and (i) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, EASA AD 2025-0117.
(1) Where EASA AD 2025-0117 refers to its effective date, this AD requires using the effective date of this AD.
(2) Where EASA AD 2025-0117 defines “Affected parts” and refers to “in the AOT”, this AD requires replacing that text with “in Airbus Alert Operators Transmission (AOT) A53P018-25, dated March 24, 2025”.
(3) Where paragraph (3) of EASA AD 2025-0117 specifies if “any discrepancy is detected, as defined in the AOT, before next flight, contact Airbus for approved instructions and, within the compliance time identified therein, accomplish those instructions accordingly”, this AD requires replacing that text with “any discrepancy is detected, the discrepancy must be repaired before further flight using a method approved by the Manager, AIR-520, Continued Operational Safety Branch, FAA; or EASA; or Airbus SAS's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature”.
(4) This AD does not adopt the “Remarks” section of EASA AD 2025-0117.
Although the material referenced in EASA AD 2025-0117 specifies to submit certain information to the manufacturer, this AD does not include that requirement.
The following provisions also apply to this AD:
(1)
(2)
For more information about this AD, contact Nicholas Benson, Aviation Safety Engineer, FAA, 2200 South 216th St., Des Moines, WA 98198; phone: 206-231-3647; email:
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this material as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) European Union Aviation Safety Agency (EASA) AD 2025-0117, dated May 19, 2025.
(ii) [Reserved]
(3) For EASA material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email
(4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit
Federal Aviation Administration (FAA), DOT.
Final rule; request for comments.
The FAA is adopting a new airworthiness directive (AD) for certain Airbus Helicopters Model AS350B, AS350BA, AS350B1, AS350B2, AS350B3, and AS350D helicopters. This AD was prompted by a report of a gap between the bolted assemblies under the attachment fittings of the main gearbox (MGB) suspension bars. This AD requires replacing any affected front and rear attachment fittings, screws, nuts and washers of the MGB suspension bars, and prohibits installing any affected parts unless they are new (never previously installed) parts. The FAA is issuing this AD to address the unsafe condition on these products.
This AD is effective April 29, 2026.
The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of April 29, 2026.
The FAA must receive comments on this AD by May 29, 2026.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
• For European Union Aviation Safety Agency (EASA) material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
• You may view this material at the FAA, Office of the Regional Counsel, Southwest Region, 10101 Hillwood Parkway, Room 6N-321, Fort Worth, TX 76177. For information on the availability of this material at the FAA, call (817) 222-5110. It is also available at
Matthew Bloomer, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (847) 294-7524; email:
The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments using a method listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private,
EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2026-0021, dated January 29, 2026 (EASA AD 2026-0021) (also referred to as the MCAI), to correct an unsafe condition on Airbus Helicopters Model AS 350 B, AS 350 BA, AS 350 BB, AS 350 B1, AS 350 B2, AS 350 B3, and AS 350 D helicopters, all serial numbers, delivered before January 1, 2026 (date of EASA Form 52, or equivalent statement of conformity). The MCAI states there was a report of occurrences of a gap between bolted assemblies under the attachment fittings of the MGB suspension bars. The MCAI also states that after investigations it was determined that this unsafe condition could impact the safe life limit of the MGB fittings and bolts. This condition, if not addressed, could lead to structural failure of the MGB attachment screws, which could result in detachment of the MGB suspension bars with consequent loss of control of the helicopter.
You may examine the MCAI in the AD docket at
The FAA reviewed EASA AD 2026-0021, which specifies procedures for certain helicopters, performing a torque check of the nuts of each MGB attachment fitting. EASA AD 2026-0021 also specifies procedures for certain helicopters, performing a sealing compound check in the inspection areas as defined in EASA AD 2026-0021 and, depending on the inspection results, performing a torque check of the nuts of the MGB attachment fitting, measuring the flatness of the MGB deck, measuring the plays of the assembly between the reinforcement plate and shim, measuring the cumulative thickness of the assembly between the reinforcement plate and shim, and reporting results to Airbus Helicopters.
Additionally, EASA AD 2026-0021 specifies procedures for replacing the front and rear attachment fittings, screws, nuts and washers of the MGB suspension bars with new (never previously installed) parts. EASA AD 2026-0021 also prohibits installing any affected front and rear attachment fittings, screws, nuts and washers on any helicopter unless they are new (never previously installed) parts.
This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
These products have been approved by the civil aviation authority (CAA) of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, that authority has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA is issuing this AD after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
This AD requires accomplishing the actions specified in EASA AD 2026-0021, described previously, as incorporated by reference, except for any differences identified as exceptions in the regulatory text of this AD. See “Differences Between this AD and the MCAI” for a discussion of the general differences included in this AD.
The MCAI applies to Airbus Helicopters Model AS350BB helicopters, whereas this AD does not because that model does not have an FAA type certificate. The MCAI requires replacing affected parts after having accomplished certain inspections as defined in EASA AD 2026-0021, whereas this AD requires those actions before exceeding certain compliance times as specified in Table 1 of EASA AD 2026-0021.
The MCAI requires performing a torque check and performing a sealing compound check in certain inspection areas as defined in EASA AD 2026-0021 and, depending on the inspection results, performing corrective actions, whereas this AD does not require those actions and only requires replacing the affected parts before exceeding certain compliance times as defined in EASA AD 2026-0021.
The MCAI also requires reporting results to Airbus Helicopters, whereas this AD does not require reporting.
The FAA considers that this AD is an interim action. If final action is later identified, the FAA might consider additional rulemaking.
In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some CAA ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, EASA AD 2026-0021 is incorporated by reference in this AD. This AD requires compliance with EASA AD 2026-0021 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this AD. Using common terms that are the same as the heading of a particular section in EASA AD 2026-0021 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2026-0021. Material required by EASA AD 2026-0021 for compliance will be available at
Section 553(b) of the Administrative Procedure Act (APA) (5 U.S.C. 551
An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies forgoing notice
In addition, the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days, for the same reasons the FAA found good cause to forgo notice and comment.
The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because the FAA has determined that it has good cause to adopt this rule without prior notice and comment, RFA analysis is not required.
The FAA estimates that this AD affects 903 helicopters of U.S. registry.
The FAA estimates the following costs to comply with this AD:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866, and
(2) Will not affect intrastate aviation in Alaska.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective April 29, 2026.
None.
This AD applies to all Airbus Helicopters Model AS350B, AS350BA, AS350B1, AS350B2, AS350B3, and AS350D helicopters, certificated in any category, that were delivered before January 1, 2026.
Joint Aircraft System Component (JASC) Code 6330, Main rotor transmission mount.
This AD was prompted by a report of a gap between the bolted assemblies under the attachment fittings of the main gearbox (MGB) suspension bars. The FAA is issuing this AD to prevent structural failure of the MGB attachment screws. The unsafe condition, if not addressed, could result in detachment of the MGB suspension bars with consequent loss of control of the helicopter.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraph (h) of this AD: Comply with all required actions and compliance times specified in, and in accordance with European Union Aviation Safety Agency (EASA) AD 2026-0021, dated January 29, 2026 (EASA AD 2026-0021).
(1) Where EASA AD 2026-0021 refers to its effective date, this AD requires using the effective date of this AD.
(2) Where EASA AD 2026-0021 requires compliance in terms of flight hours, this AD requires using hours time-in-service.
(3) Where EASA AD 2026-0021 defines “affected part”, this AD requires replacing that definition with “Front and rear attachment fittings, screws, nuts and washers of the MGB suspension bars, having a part number as defined in Airbus Helicopters Emergency Alert Service Bulletin (EASB)
(4) This AD does not adopt paragraphs (1), (2), (3), (4), (6), and (7) of EASA AD 2026-0021.
(5) Where paragraph (5) of EASA AD 2026-0021 specifies “before next flight after having accomplished the actions as required by paragraph (1), (3), or (4) of this AD, as applicable,”, this AD requires replacing that text with “Within the compliance time as specified in Table 1 of EASA AD 2026-0021, as applicable, after the effective date of this AD”.
(6) Where the material referenced in EASA AD 2026-0021 specifies “discard”, this AD requires replacing that text with “remove from service”.
(7) This AD does not adopt the “Remarks” section of EASA AD 2026-0021.
(1) The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the International Validation Branch, send it to the attention of the person identified in paragraph (j) of this AD and email to
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
For more information about this AD, contact Matthew Bloomer, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (847) 294-7524; email:
(1) The Director of the Federal Register approved the incorporation by reference of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this material as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) European Union Aviation Safety Agency (EASA) AD 2026-0021, dated January 29, 2026.
(ii) [Reserved]
(3) For EASA material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
(4) You may view this material at the FAA, Office of the Regional Counsel, Southwest Region, 10101 Hillwood Parkway, Room 6N-321, Fort Worth, TX 76177. For information on the availability of this material at the FAA, call (817) 222-5110.
(5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit
Federal Aviation Administration (FAA), DOT.
Final rule; removal.
The FAA is removing Emergency Airworthiness Directive (AD) 2026-01-51, which applied to all Airbus Helicopters Model H160-B helicopters. Emergency AD 2026-01-51 required replacing the upper and lower pitch rod end bearings on the pitch rods of the main rotor with new pitch rod end bearings and reporting information after accomplishment of the replacement. Emergency AD 2026-01-51 also prohibited installing any affected main rotor lower and upper pitch rod end bearings on any helicopter, unless it is a serviceable part. The FAA issued Emergency AD 2026-01-51 to address the structural failure of the main rotor lower and upper pitch rod end bearings. Since the FAA issued Emergency AD 2026-01-51, the manufacturer determined the failure of the main rotor pitch rod end was caused by an inadequate maintenance procedure and that the airworthiness concern is not an unsafe condition and therefore no AD is warranted. The FAA concurs and removes Emergency AD 2026-01-51.
This AD becomes effective April 14, 2026.
The FAA must receive comments on this AD by May 29, 2026.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
Jacob Fitch, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (817) 222-4130; email:
The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments using a method listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information
The European Union Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, previously issued Emergency AD 2026-0001-E, dated January 8, 2026; corrected January 9, 2026 (EASA Emergency AD 2026-0001-E), to correct an unsafe condition on all Airbus Helicopters Model H160-B helicopters. The FAA issued corresponding Emergency AD 2026-01-51, Amendment 39-23249, directly to affected owners and operators on January 12, 2026, and later in the
Since the FAA issued Emergency AD 2026-01-51, EASA issued AD 2026-0001-E-CN, dated March 10, 2026 (EASA AD 2026-0001-E-CN) (also referred to as the MCAI), to cancel EASA Emergency AD 2026-0001-E. EASA AD 2026-0001-E-CN states that the manufacturer determined after further investigations the rupture of a main rotor pitch rod end during flight was caused by an inadequate maintenance procedure applied by an operator. The MCAI further states that the manufacturer confirmed that fatigue strength of a pitch rod with no permanent plastic deformation is in line with Model H160-B helicopter certification. Consequently, the unsafe condition addressed by EASA Emergency AD 2026-0001-E is no longer supported by the data and has been canceled.
Upon further consideration, the FAA has determined that Emergency AD 2026-01-51 is no longer appropriate. Accordingly, this AD removes Emergency AD 2026-01-51. Removal of Emergency AD 2026-01-51 does not preclude the FAA from issuing another course of action in the future. This AD terminates all actions of Emergency AD 2026-01-51.
Section 553(b) of the Administrative Procedure Act (APA) (5 U.S.C. 551
The actions required by Emergency AD 2026-01-51 are unwarranted because further investigations have shown that the airworthiness concern addressed by that AD is not an unsafe condition. Accordingly, notice and opportunity for prior public comment are unnecessary pursuant to 5 U.S.C. 553(b). In addition, for the foregoing reasons, the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days.
The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because FAA has determined that it has good cause to adopt this rule without prior notice and comment, RFA analysis is not required.
This AD adds no costs. This AD removes Emergency AD 2026-01-51 from 14 CFR part 39; therefore, operators are no longer required to show compliance with that Emergency AD.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority.
The FAA determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify that this AD:
(1) Is not a “significant regulatory action” under Executive Order 12866, and
(2) Will not affect intrastate aviation in Alaska.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective April 14, 2026.
This AD replaces Emergency AD 2026-01-51, Amendment 39-23249 (91 FR 4431, February 2, 2026) (Emergency AD 2026-01-51).
This action applies to all Airbus Helicopters Model H160-B helicopters, certificated in any category.
Joint Aircraft Service Component (JASC) Code: 6200, Main Rotor System.
This AD terminates all requirements of Emergency AD 2026-01-51.
For more information about this AD, contact Jacob Fitch, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (817) 222-4130; email:
None.
National Environmental Satellite, Data and Information Service (NESDIS), National Oceanic and Atmospheric Administration (NOAA), Department of Commerce.
Final rule.
In this final rule, NESDIS establishes an updated schedule of fees for special access to NOAA data, information, and related products and services. NOAA continues to make its environmental data available to the public without any fee in most instances consistent with Foundations for Evidence-Based Policymaking Act of 2018 (44 U.S.C. 3501
Effective May 14, 2026.
Kasandra Harley, (301) 713-7153.
NESDIS operates NOAA's NCEI. Through NCEI, NESDIS provides and ensures timely access to global environmental data from satellites and other sources, provides information services, and develops science products. NOAA makes these resources available at no fee and under an open license, consistent with the Foundations for Evidence-Based Policymaking Act (44 U.S.C. 3501
NESDIS maintains some 1,300 databases containing over 2,400 environmental variables at NCEI and 7 World Data Centers. These centers respond to over 2,000,000 requests for these data and products annually from over 70 countries, the vast majority of which are fulfilled at no fee to the requestor via NOAA CLASS. Other users can access NOAA environmental data online using the NOAA OneStop. This collection of environmental data and products is growing rapidly, both in size and sophistication, and as a result the associated costs have increased.
If the freely available services are unable to meet users' needs, users have the ability to access the special data products described in the table below offline, online, and through the NESDIS e-Commerce System (NeS) online store. NOAA's ability to provide these special data, information, products, and services depends on user fees.
NESDIS is authorized under 15 U.S.C. 1534 to assess fees, up to fair market value, depending upon the user and intended use, for access to environmental data, information, and products derived from, collected, and/or archived by NOAA. In this final rule, NESDIS establishes a new schedule of fees for access to these special data, information, and related products and services. NESDIS is revising the fee schedule that has been in effect since 2023 to ensure that the fees accurately reflect the costs of providing access to the environmental data, information, and related products and services. The new fee schedule lists both the current fee charged for each item and the new fee to be charged to users that will take effect beginning May 14, 2026. The schedule applies to the listed services provided by NESDIS on or after May 14, 2026, except for products and services covered by a subscription agreement in effect as of May 14, 2026 that extends beyond May 14, 2026. In those cases, the increased fees will apply upon renewal of the subscription agreement or at the earliest amendment date provided by the agreement.
NESDIS will continue to review these user fees periodically and will revise such fees as necessary. Any future changes in the user fees and their effective date will be announced through notice in the
This rule has been determined not to be significant for purposes of Executive Order (E.O.) 12866. This proposed rule is not an E.O. 14192 regulatory action because this rule is not significant under E.O. 12866.
The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking and the opportunity for public participation are inapplicable because this rule falls within the public property exception of subparagraph (a)(2) of section 553, as it relates only to the assessment of fees, as authorized by 15 U.S.C. 1534. Further, no other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule under 5 U.S.C. 553 or by any other law, the requirements of the Regulatory Flexibility Act (5 U.S.C. 601
This proposed rule contains no information collection requirements under the Paperwork Reduction Act of 1995.
Organization and functions (Government agencies).
For the reasons set forth above, NESDIS amends 15 CFR part 950 as follows:
(5 U.S.C. 552, 553). Reorganization Plan No. 4 of 1970.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; closure.
NMFS announces the closure of the Northern Gulf of Maine (NGOM) Scallop Management Area for the remainder of the 2026 fishing year for Limited Access General Category (LAGC) vessels. Regulations require this action once NMFS projects that 100 percent of the Northern Gulf of Maine Set-Aside will be harvested. This action is intended to prevent the overharvest of the 2026 Northern Gulf of Maine Set-Aside.
Effective 0001 hours local time, April 13, 2026, through March 31, 2027.
Ashley Trudeau, Fishery Resource Management Specialist, (978) 281-9252.
The regulations governing fishing activity in the NGOM Scallop Management Area are located at 50 CFR 648.54 and 648.62. These regulations authorize vessels issued a valid Federal scallop permit to fish in the NGOM Scallop Management Area under specific conditions, including the NGOM Set-Aside for the 2026 fishing year, and a State Waters Exemption Program for the State of Maine and Commonwealth of Massachusetts. Section 648.62(b)(2) requires the NGOM Scallop Management Area to be closed to scallop vessels issued Federal LAGC scallop permits, except as provided below, for the remainder of the fishing year once the NMFS Greater Atlantic Regional Administrator determines that 100 percent of the NGOM Set-Aside is projected to be harvested. Any vessel that holds a Federal NGOM (LAGC B) or Individual Fishing Quota (LAGC A) permit may continue to fish in the Maine or Massachusetts state waters portion of the NGOM Scallop Management Area under the State Waters Exemption Program found in § 648.54 provided it has a valid Maine or Massachusetts state scallop permit and fishes only in that state's respective waters.
Based on trip declarations by federally permitted LAGC scallop vessels fishing in the NGOM Scallop Management Area and analysis of fishing effort, we project that the 2026 NGOM Set-Aside will be harvested as of April 13, 2026. Therefore, in accordance with § 648.62(b)(2), the NGOM Scallop Management Area is closed to all federally permitted LAGC scallop vessels as of April 13, 2026. As of this date, no vessel issued a Federal LAGC scallop permit may fish for, possess, or land scallops in or from the NGOM Scallop Management Area after 0001 hours local time, April 13, 2026, unless the vessel is fishing exclusively in state waters and is participating in an approved state waters exemption program as specified in § 648.54. Any federally permitted LAGC scallop vessel
This action is required by 50 CFR part 648 and is exempt from review under Executive Order 12866.
The Assistant Administrator for Fisheries, NOAA, finds good cause pursuant to 5 U.S.C. 553(b)(B) to waive prior notice and the opportunity for public comment because it would be contrary to the public interest and impracticable. NMFS also finds, pursuant to 5 U.S.C 553(d)(3), good cause to waive the 30-day delayed effectiveness period for the reasons noted below. The NGOM Scallop Management Area opened for the 2026 fishing year on April 1, 2026, under specifications implemented under Framework Adjustment 40 (91 FR 14782, March 27, 2026). The regulations at § 648.60(b)(2) require this closure to ensure that federally permitted scallop vessels do not harvest more than the allocated NGOM Set-Aside. NMFS can only make projections for the NGOM closure date as trips into the area occur on a real-time basis and as activity trends appear. As a result, NMFS can typically make an accurate projection only shortly before the set-aside is harvested. The rapid harvest rate that has occurred in the last 7 days makes it more difficult to project a closure well in advance. To allow federally permitted LAGC scallop vessels to continue taking trips in the NGOM Scallop Management Area during the period necessary to publish and receive comments on a proposed rule would result in vessels harvesting more than the 2026 NGOM Set-Aside for the NGOM Scallop Management Area. This would result in excessive fishing effort in the area, thereby undermining conservation objectives of the Atlantic Sea Scallop Fishery Management Plan and requiring more restrictive future management measures to make up for the excessive harvest.
16 U.S.C. 1801
Office of Personnel Management.
Proposed rule.
The Office of Personnel Management is proposing to add prescribed (planned) wildland fire duties as covered activities triggering payment of Hazardous Duty Pay for General Schedule (GS) employees and Environmental Differential Pay for Federal Wage System (FWS) employees. The proposed new differentials would apply to GS and FWS employees participating as a member of a firefighting crew engaged in activities on the fireline directly involving the implementation and control of prescribed wildland fires. This rulemaking would authorize a 25 percent differential.
Send comments on or before June 15, 2026.
You may submit comments on the Federal eRulemaking Portal:
Please arrange and identify your comments on the regulatory text by subpart and section number. If your comments relate to the supplementary information, please reference the heading and page number in the supplementary section. All comments must be received by the end of the comment period for them to be considered. All comments and other submissions received generally will be posted on the internet at
As required by 5 U.S.C. 553(b)(4), a summary of this rule may be found in the docket for this rulemaking at
Ana Paunoiu, by telephone at (202) 606-2858 or by email at
The Office of Personnel Management (OPM) is proposing to establish new Hazardous Duty Pay (HDP) and Environmental Differential Pay (EDP) categories at a 25 percent rate for Federal employees performing prescribed (planned) wildland fire activities. HDP is a pay differential authorized by 5 U.S.C. 5545(d) and 5 CFR part 550, subpart I, for General Schedule (GS)
The Forest Service in the United States Department of Agriculture (USDA), which manages the National Forest System comprised of 193 million acres of forest and grasslands, and the Office of Wildland Fire within the Department of the Interior (DOI), which manages 2.6 million acres of forest and grasslands, requested OPM add prescribed wildland fire activities as new HDP and EDP categories. “Prescribed fire” is the planned or controlled application of fire under specific conditions to restore the health of ecosystems that depend on fire.
Certain firefighting work is listed as a hazardous duty in Appendix A to subpart I of part 550 and Appendix A to subpart E of part 532 of title 5 of the Code of Federal Regulations qualifying for HDP and EDP. The language in the HDP regulations includes “Forest and range fires” under the “Firefighting” category. A 25 percent hazard pay differential is authorized for participating as a member of a firefighting crew in “fighting forest and range fires on the fireline.” The language in the EDP regulations describes firefighting work as participating or assisting in firefighting operations where the firefighter is “on the immediate fire scene and in direct exposure to the hazards inherent in containing or extinguishing fires.” Fighting forest fires and range fires on the fireline is considered a “high degree” of hazard and provides for a 25 percent differential rate. These existing HDP and EDP categories were specifically created to cover the fighting of wildfires and not activities related to prescribed fires.
The proposed regulatory changes would provide for—
1. An HDP for GS employees and an EDP for FWS employees participating in prescribed wildland fire operations and engaged in activities on the fireline involving implementation and control of a prescribed wildland fire.
2. Assigning the rate of 25 percent for prescribed wildland fire activities for both HDP and EDP.
Generally, HDP is not payable to a GS employee when the hazardous duty has been taken into account in the classification of the position encumbered by the employee. See 5 U.S.C. 5545(d)(1) and 5 CFR 550.904(a)-(b). However, in 2021, 5 U.S.C. 5545(d)(1) was amended to allow, as a special exception, HDP for firefighters who are placed in a separate classification series based on the primary duties of their position involving the prevention, control, suppression, or management of wildland fires—even though firefighting duties are taken into account in the
Prescribed fire duties (
OPM is responsible for establishing HDP categories for GS employees under 5 U.S.C. 5545(d) and EDP categories for FWS employees under 5 U.S.C. 5343(c)(4). The GS HDP categories are contained in Appendix A to 5 CFR part 550, subpart I, and FWS EDP categories are contained in Appendix A to subpart E of 5 CFR part 532. The proposal to add an EDP of 25 percent for prescribed wildland fire activities was presented to the Federal Prevailing Rate Advisory Committee (FPRAC), the national labor-management committee responsible for advising OPM on matters concerning the pay of FWS employees, at its July 18, 2024, meeting.
After analyzing data presented by USDA and DOI and reviewing FPRAC's recommendation, OPM decided to propose an amendment to current regulations to include a 25 percent differential for EDP applicable to the implementation and control of a prescribed wildland fire when performed by FWS employees since these employees are exposed to most of the same physical, chemical, and biological hazards that may affect an employee's short- and long-term health and safety as employees fighting wildfires. The proposed language reviewed by FPRAC was “participating as a member of a firefighting crew, engaged in activities on the fire line related to the preparation, implementation, and control on prescribed wildland fire.” The language approved by OPM in this proposed regulation replaces “related to” with “directly involves” and does not include activities of “preparation” for a prescribed fire, since the hazards justifying coverage are associated with management of an active fire and its aftermath by employees working on the fireline, not preparatory activities before a fire has been ignited.
OPM's proposed regulations are consistent with Executive Order (E.O.) 14308, titled “Empowering Commonsense Wildfire Prevention and Response,” (90 FR 23175) signed by President Donald J. Trump on June 12, 2025, directing USDA and DOI to consolidate their wildland fire programs and recommend additional measures to modernize wildland fire prevention efforts.
The proposed change would apply the first day of the first pay period starting after the effective date of a final rule.
Per USDA and DOI,
Prescribed fire and wildfire operations use similar hazard mitigation measures. Standard wildland safety practices—briefings on assignments, hazards, weather, and unique risks; posting lookouts; use of PPE; and following established checklists and avoidance procedures—reduce risk but cannot eliminate it. Any fire operation increases the risk of injury or illness, and prescribed burns occur in inherently unpredictable conditions. Their hazards and required actions mirror those of wildfires—unstable terrain, falling trees and rolling material, necessary proximity to fire, and chemical and biological exposures—so risks cannot be fully controlled or mitigated.
“Degree” in this case is characterized as a qualitative measure of magnitude, expressed over time. “Exposure” in this case is characterized as any occurrence where an employee is directly affected by the hazard and is therefore subject to the consequences of the hazard.
While conducting the implementation and patrol phase of prescribed fire operations, employees are exposed to variable degrees of a discrete or cumulative number of hazards. Not all hazards that employees are exposed to can be fully mitigated. Specific examples are described in the following table.
During implementation and patrol, employees face multiple, sometimes cumulative hazards that cannot be fully mitigated. Smoke exposure on both wildfires and prescribed fires is associated with reduced lung function, increased airway responsiveness, and elevated biomarkers of systemic inflammation, oxidative stress, and urinary mutagenicity after shifts and across seasons. Exposure assessments consistently detect hazardous air pollutants, including carcinogens. In 2022, the International Agency for Research on Cancer (IARC) classified occupational exposure as a firefighter as carcinogenic to humans.
An IARC working group did not differentiate between structural and wildland fire exposures and cancer risk, and many of their studies that provided evidence of carcinogenicity were in wildland firefighters working on wildfires and prescribed fires reporting increases in inflammation and oxidative stress. Congress likewise recognized these hazards in section 5305 (Fairness for Federal Firefighters) of the James M. Inhofe National Defense Authorization Act of 2023, Public Law 117-263 (Dec. 23, 2022), which provides presumptive workers' compensation coverage under 5 U.S.C. 8143b for certain cancers and cardio-pulmonary diseases associated with fire protection activities. In the first year of coverage under this Act, 29 Forest Service wildland firefighters submitted claims to the Department of Labor, Office of Workers' Compensation Programs under section 5305.
According to USDA and DOI, injury patterns are similar for large-fire and prescribed-fire operations, with fireline work accounting for the largest share in both, but more heavily so during prescribed fires. In large-fire operations, roughly one-third of injuries occur on the fireline, about one-quarter are environmental, around one-fifth are illness-related, and a smaller share are tied to ground transportation, while aviation and other categories make up only a small fraction. In prescribed-fire operations, fireline injuries make up the largest portion at just over 40 percent, followed by ground transportation at a little over 20 percent, with environmental injuries in the mid-teens, aviation near 10 percent, illness below that, and almost none in the “other” category. The average injury severity is slightly higher for large fires than for prescribed fires, although the overall severity levels are relatively close.
The Wildland Fire Lessons Learned Center Incident Review Database (IRDB) (
East Eagle-Mud Springs Prescribed Fire Hit by Tree 2023
Although it was previously opined that prescribed fires are planned and in “control,” this term has not been used by the wildland fire community in public communications or Federal policy. Since 1995,
Within the wildland fire community, control refers to an end state of a wildfire or prescribed fire or to specific tactics/features (
Standard safety practices—thorough briefings on hazards and weather, posting lookouts, and adherence to established checklists and avoidance procedures—mitigate some risks. Nevertheless, any fire, prescribed or wildfire, increases the likelihood of exposure, injury, and illness. Prescribed burns occur in an inherently unpredictable environment with limited ability to control hazards. Required tasks—traversing unstable terrain, working in close proximity to flame, and exposure to chemical and biological hazards—create conditions that cannot be fully mitigated or controlled. Coupled with recent research and congressional mandates recognizing smoke exposure as a hazard, these realities justify additional HDP and EDP compensation for GS and FWS employees engaged in prescribed fire operations.
This proposed regulation is needed because there is currently pay disparity between FWS and GS employees performing prescribed (planned) wildland fire activities and those working wildfire firelines. The purpose of these regulations is to achieve pay parity for Federal employees conducting prescribed wildland fire activities and Federal employees performing duties involving wildfires. As stated previously, while prescribed fire plans contain certain feasible mitigations, unavoidable hazards remain. Because providing a 25 percent HDP/EDP differential only to Federal firefighters engaged in wildland fire activities could potentially perpetuate a disparate compensation practice, the Federal Government is taking steps to address the compensation policy for those Federal employees who are exposed to unusual health risks caused by working in close proximity to prescribed wildland fires and that cannot be mitigated.
Lack of EDP and HDP compensation is also a persistent barrier in recruiting and retaining FWS and GS employees to carry out prescribed-fire operations.
This proposed rule would provide a 25 percent HDP for GS employees and EDP for FWS employees participating in prescribed wildland fire operations and engaged in activities on the fireline related to implementation and patrol of prescribed wildland fires. The proposed changes would primarily apply to firefighters at USDA Forest Service and DOI. However, other agencies have advised OPM that in limited situations they may also have employees temporarily assigned to prescribed wildland fire activities who may meet the criteria for payment of the proposed 25 percent EDP or HDP differential. The proposed new differentials may apply to employees performing qualifying prescribed wildland fire duties in agencies outside of USDA Forest Service and DOI. Decisions on whether employees meet the criteria for application of the prescribed wildland fire differentials would be made by the employing agencies.
Under 5 U.S.C. 5545(d) and 5343(c)(4), OPM has the authority and responsibility to establish and make changes to HDP and EDP categories to provide additional compensation to GS and FWS employees. Any changes to the HDP and EDP schedules in title 5 will have the long-term effect of increasing pay for Federal employees in affected locations. OPM expects this rulemaking to impact approximately 10,000 GS employees and 2,500 FWS employees at USDA and DOI. Considering the number of employees affected, OPM does not anticipate that this proposed rule will substantially impact local economies or have a large impact in local labor markets.
Within known technological limits, the duty of prescribed fire as currently implemented by the U.S. Federal Government has no foreseeable point in time in which it will cease to exist. The role of prescribed fire within natural ecosystems has been established by over 100 years of relevant science as the only practical mitigation and restoration tool available to professional land managers. The USDA Forest Service Wildfire Crisis Strategy Implementation Plan,
Utilizing current GS and FWS pay rates, USDA has estimated that providing HDP and EDP for prescribed fires would cost the Government $20 million, while the DOI has estimated it to be $12.5 million in FY2026.
All Forest Service employees engaged in prescribed fires and wildfire response are paid from a single salary line for firefighters. The Forest Service sees on average roughly 80 percent of the operational firefighters participating in prescribed fire in any given fiscal year. The cost estimate of $20 million for the Forest Service for FY26 is based on approximately 250 hours of prescribed fire operations. These numbers can fluctuate heavily depending on burn conditions, weather, frequency of wildfires (which take priority), etc.
Using the FY25 total as the baseline, DOI compared FY25 prescribed fire accomplishments (acres treated) with draft FY26 and FY27 targets, which are about 10 percent higher than FY25 accomplishments. To accommodate both the expected increase in work and labor costs—including a 1 percent pay increase from FY25 to FY26, DOI increased the FY26 Hazard Pay (“H-pay”) estimate by 11 percent over FY25 actual obligations, resulting in $8.95 million, rounded up to $9.0 million. For FY27, DOI increased the estimate from $9.0 million to $9.5 million (a 5.6 percent increase) to account for
If this rulemaking is finalized, agency payroll providers will need to properly assign EDP and HDP time and attendance, payroll, and/or other internal codes and documentation necessary to ensure payment of the differential for qualifying work. Payroll providers may establish their own payroll codes as needed, as long as they report the required data based on OPM's established Enterprise Human Resources Integration data elements. This is not anticipated to be a significant additional cost burden or to require additional funding as agency payroll systems are often updated as a routine business matter.
This proposed rule has important benefits. As already stated, the hazards faced by FWS and GS employees conducting prescribed fire activities mirror those faced by FWS and GS employees managing wildfires; however, employees conducting prescribed fire activities do not receive any differential in pay. Recent research has heightened awareness of smoke and other environmental risks during prescribed burns. Providing commensurate pay for prescribed fire operations will help with recruiting and retaining FWS and GS employees. Providing the differential pay also shows a recognition of the risks associated with the position and places a higher value on the needed service.
OPM considered not providing differential pay and, instead, allowing Federal agencies to rely on their discretionary authority to provide pay and leave flexibilities to address significant recruitment and retention problems. However, pay and leave flexibilities would not solve the underlying pay inequities between Federal employees exposed to similar types of fire hazards because such incentives are optional, uneven, and not tightly tied to hazard exposure. Two employees performing the same risky work may still end up paid very differently depending on location, local management decisions, or budget.
OPM also considered providing a lower percentage than a 25 percent differential, however this approach would underappreciate the hazards involved in prescribed fire activities, which are equivalent to wildland fire hazards.
OPM requests public comments from local businesses on the implementation and impacts of USDA and DOI paying an additional compensation of 25 percent HDP to GS employees and EDP to prevailing rate employees participating in prescribed wildland fire operations and whether these changes would be likely to affect them.
OPM has examined the impact of this rule as required by E.O.s 12866 and 13563, which direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public, health, and safety effects, distributive impacts, and equity). A regulatory impact analysis must be prepared for rules that have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities. This rulemaking does not reach that threshold but has otherwise been designated as a “significant regulatory action” under section 3(f) of E.O. 12866. This rule is not expected to be considered an E.O. 14192 regulatory action because it imposes no more than de minimis costs.
The Director of OPM certifies that this rulemaking will not have a significant economic impact on a substantial number of small entities.
This regulation will not have substantial direct effects on the States, on the relationship between the National Government and the States, or on distribution of power and responsibilities among the various levels of government. Therefore, in accordance with E.O. 13132, the Director of OPM certifies that this proposed rule does not have sufficient federalism implications to warrant preparation of a Federalism Assessment.
This rulemaking meets the applicable standard set forth in section 3(a) and (b)(2) of E.O. 12988.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits before issuing any rule that would impose spending costs on State, local, or tribal governments in the aggregate, or on the private sector, in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold is currently approximately $206 million. This rulemaking will not result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, in excess of the threshold. Thus, no written assessment of unfunded mandates is required.
This rulemaking does not impose any reporting or record-keeping requirements subject to the Paperwork Reduction Act, as amended (44 U.S.C. Chapter 35).
Administrative practice and procedure, Freedom of information, Government employees, Reporting and recordkeeping requirements, Wages.
Administrative practice and procedure, Claims, Government employees, Wages.
The Director of OPM, Scott Kupor, reviewed and approved this document and has authorized the undersigned to electronically sign and submit this document to the Office of the Federal Register for publication.
Accordingly, OPM is proposing to amend 5 CFR parts 532 and 550 as follows:
5 U.S.C. 5343, 5346. Sec. 532.707 also issued under 5 U.S.C. 552.
5 U.S.C. 5545(d), 5548(b).
(f) The provisions of this section concerning payment of a hazard pay differential when a hazard or physical hardship is taken into account in the classification of an employe's position does not apply to an employee in an occupational series covering positions for which the primary duties involve the prevention, control, suppression, or management of wildland fire.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to adopt a new airworthiness directive (AD) for all Columbia Helicopters, Inc. Model 234 helicopters and all Restricted Category Model CH-47D helicopters. This proposed AD was prompted by reports of corrosion detected on certain flight control rigid connecting links (connecting link). This proposed AD would require repetitive borescope inspections of the connecting links for corrosion and, depending on the results of the inspection, repair of the corrosion or replacement of the connecting link with a serviceable part. This proposed AD would also require reporting the results of these inspections and would prohibit installing a certain part-numbered connecting link or a connecting link with an unknown part number on a helicopter unless certain requirements are met. The FAA is proposing this AD to address the unsafe condition on these products.
The FAA must receive comments on this proposed AD by May 29, 2026.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
David Herron, Aviation Safety Engineer, FAA, 3960 Paramount Boulevard, Lakewood, CA 90712; phone: (206) 231-3544; email:
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments using a method listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to David Herron, Aviation Safety Engineer, FAA, 3960 Paramount Boulevard, Lakewood, CA 90712. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.
The FAA received reports regarding corrosion detected on connecting links with part numbers (P/N) 145C3340-1, -2, -7, -8, -9, -10, -11, and -12 installed on Columbia Helicopters, Inc. Model 234 helicopters and Restricted Category Model CH-47D helicopters. The connecting links are hollow control tubes that have witness holes to facilitate verification of proper rod end thread engagement during installation. When manufactured from non-stainless steel, these links are susceptible to corrosion over time. This corrosion is internal to the connecting link and is attributed to a lack of proper corrosion inhibition methods or damage to corrosion protection during installation or inspection. This condition, if not addressed, could result in connecting link failure within the flight control system that could lead to reduced controllability of the helicopter and reduced ability of the flight crew to maintain the safe flight and landing of the helicopter.
The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
This proposed AD would require repetitive borescope inspections of the connecting links to identify if there is light corrosion (less than 0.001 inches), moderate corrosion (0.001 to 0.005 inches), or severe corrosion (greater than 0.005 inches), as defined in this proposed AD. Depending on the results of these inspections, this proposed AD would require repair of the corrosion or removal of the affected connecting link from service and replacement with a serviceable part. Additionally, this proposed AD would require reporting the results of the borescope inspections to the FAA for four inspection cycles and would prohibit the installation of an affected link on a helicopter unless certain requirements are met.
The FAA estimates that this AD, if adopted as proposed, would affect 36 helicopters of U.S. registry. There are 324 connecting links identified as having this unsafe condition. There are nine connecting links installed per helicopter. The FAA has no way of knowing the number of helicopters of U.S. registry that may have the affected connecting links installed. The estimated cost on U.S. operators reflects
The FAA estimates the following costs to comply with this proposed AD:
The FAA estimates the following costs to do any repairs or replacements that would be required based on the results of the proposed borescope inspection. The agency has no way of determining the number of helicopters that might need these repairs or replacements:
A federal agency may not conduct or sponsor, and a person is not required to respond to, nor shall a person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act unless that collection of information displays a currently valid OMB Control Number. The OMB Control Number for this information collection is 2120-0056. Public reporting for this collection of information is estimated to be approximately 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. All responses to this collection of information are mandatory. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to: Information Collection Clearance Officer, Federal Aviation Administration, 10101 Hillwood Parkway, Fort Worth, TX 76177-1524.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Would not affect intrastate aviation in Alaska, and
(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) by May 29, 2026.
None.
This AD applies to the helicopters identified in paragraphs (c)(1) and (2) of this AD:
(1) Columbia Helicopters, Inc. Model 234 helicopters, certificated in any category; and
(2) Restricted Category Model CH-47D helicopters; current type certificate holders include, but are not limited to, Billings Flying Service, Inc., Columbia Helicopters, Inc., Tandem Rotor, LLC, and Unical Air Inc.
Joint Aircraft System Component (JASC) Code 2700, Flight Control System.
This AD was prompted by reports of corrosion detected on certain connecting links. The FAA is issuing this AD to detect and address corrosion on certain connecting links. The unsafe condition, if not addressed, could result in failure of the connecting link within the flight control system that could lead to reduced controllability of the helicopter and reduced ability of the flight crew to maintain the safe flight and landing of the helicopter.
Comply with this AD within the compliance times specified, unless already done.
(1) For helicopters identified in paragraphs (c)(1) and (2) of this AD with a flight control rigid connecting link (connecting link) having part numbers (P/N) 145C3340-1, 145C3340-2, 145C3340-7, 145C3340-8, 145C3340-9, 145C3340-10, 145C3340-11, or 145C3340-12, or a link with an unknownP/N installed, within 30 days after the effective date of this AD, accomplish a borescope inspection to determine the level of corrosion (if any) by accomplishing the actions required by paragraphs (g)(1)(i) and (ii) of this AD:
(i) With connecting links removed from the helicopter, loosen the locknut and unscrew the rod end bearing on non-riveted end.
(ii) Using a borescope, inspect the interior surface of the support rod for corrosion. Complete the following actions depending on the results:
(A) For connecting links properly treated with primer and no corrosion is found, before further flight, using a label or paint pen, if unmarked, mark the tube with the part number, and mark the following, “H-47-24-ASAM-03 Compliant” after each part number, and repeat the borescope inspection at the intervals specified in table 1 to paragraph (g)(1)(ii) of this AD.
(B) If no corrosion is found and the connecting link is not treated with primer, or if any light or moderate corrosion is found on any connecting link during any inspection required by this AD, depending on the condition found, before further flight, repair the primer defects or remove or repair the corrosion by using a method approved by the Manager, West Certification Branch, FAA. For a repair method to be approved by the Manager, West Certification Branch, FAA as required by this paragraph, the Manager's approval letter must specifically refer to this AD. After repair as approved by the FAA, mark the following, “H-47-24-ASAM-03 Compliant” after each part number. Repeat the borescope inspection at the intervals specified in table 1 to paragraph (g)(1)(ii) of this AD.
(C) For connecting links that are determined to have severe corrosion during any inspection required by this AD, before further flight, remove the connecting link from service and replace it with a serviceable part. If the replacement connecting link is not marked “H-47-24-ASAM-03 Compliant”, mark it in accordance with paragraph (g)(1)(ii)(A) of this AD. Repeat the borescope inspection of the replacement connecting link at the intervals specified in table 1 to paragraph (g)(1)(ii) of this AD.
(2) Within 30 days after each inspection required by paragraph (g)(1) of this AD or within 30 days after the effective date of this AD, whichever occurs later, and for 3 reporting/inspection intervals thereafter, report the results of these inspections to the FAA by either email:
After the effective date of this AD, do not install a connecting link having P/N 145C3340-1, 145C3340-2, 145C3340-7, 145C3340-8, 145C3340-9, 145C3340-10, 145C3340-11, or 145C3340-12 on any helicopter, unless it is a serviceable part as defined in paragraph (i)(1) of this AD.
For the purpose of this AD:
(1) A “serviceable” part is a connecting link that has been inspected and repaired if necessary, as required by paragraphs (g)(1)(i) and (ii) of this AD, or a connecting link that is new (zero hours).
(2) Light corrosion involves scaling, blistering, or flaking of the surface and penetrates to a depth less than 0.001 inches.
(3) Moderate corrosion involves scaling, pitting, blistering, or flaking of the surface area and penetrates to a depth between 0.001 inches to 0.005 inches.
(4) Severe corrosion involves scaling, pitting, blistering, or flaking of the surface area and penetrates to a depth greater than 0.005 inches.
Special flight permits, as described in 14 CFR 21.197 and 21.199, are not allowed.
(1) The Manager, West Certification Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the West Certification Branch, send it to the attention of the person identified in paragraph (l)(1) of this AD and email to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
(1) For more information about this AD, contact David Herron, Aviation Safety Engineer, FAA, 3960 Paramount Boulevard, Lakewood, CA 90712; phone: (206) 231-3544; email:
(2) For material identified in this AD that is not incorporated by reference, contact U.S. Army Aviation and Missile Command (AMCOM), AMCOM Safety, 5300 Martin Road, Redstone Arsenal, AL 35898-5000; phone: (256) 313-4870.
None.
Federal Aviation Administration (FAA), DOT.
Noticification of meeting; correction.
This action corrects a notice that FAA published in the
The meeting will be held virtually on May 6, 2026, from 5:00 p.m.
Send comments on the proposal to Andreese Davis, Acting Group Manager, Operations Support Group, Eastern Service Center, Air Traffic Organization, Federal Aviation Administration, 1701 Columbia Avenue, College Park, GA 30337; or via email to:
Paul Shreve, Operations Supervisor, FAA Raleigh ATCT 1000, Sawyer Circle, Morrisville, NC 27560-7688. Telephone Number: 919-380-3110, email:
Due to a change in facility personnel, the point of contact for further information on the fact-finding informal airspace meeting has changed. This action corrects the
As published in the
1. On page 13529, in the first column, correct the section titled
Paul Shreve, Operations Supervisor, FAA Raleigh ATCT 1000, Sawyer Circle, Morrisville, NC 27560-7688. Telephone Number: 919-380-3110, email:
Internal Revenue Service (IRS), Treasury.
Cancellation of a notice of public hearing on a proposed rulemaking.
This document cancels a public hearing on proposed rulemaking by cross-reference to the interim final regulations to amend the current regulations to reduce from $11 to $10 the amount of the user fee imposed on tax return preparers to apply for or renew a preparer tax identification number (PTIN) plus an amount payable directly to the third party contractor.
The public hearing scheduled for April 24, 2026, at 10 a.m. ET is cancelled.
See public comments submitted electronically via the Federal eRulemaking Portal at
Martina Greene of the Publications and Regulations Section, Associate Chief Counsel (Procedure and Administration) at (202) 317-6901 (not a toll-free number).
A notice of proposed rulemaking appeared in the
Surface Transportation Board.
Advance Notice of Proposed Rulemaking.
The Surface Transportation Board has received a petition asking it to revise and streamline the rules governing ex parte communications. The Board is considering several changes to its ex parte regulations and seeks comment from interested persons on the changes being considered. The Board also invites commenters to identify additional options for revisions to the Board's ex parte communications rules.
Comments are due by May 29, 2026.
Comments and replies may be filed with the Board either via e-filing or in writing addressed to: Surface Transportation Board, Attn: Docket No. EP 782, 395 E Street SW, Washington, DC 20423-0001. Comments and replies will also be posted to the Board's website.
Jonathon Binet at (202) 915-4348. If you require accommodation under the Americans with Disabilities Act, please call (202) 245-0245.
On May 16, 2025, the Association of American Railroads (AAR) filed a petition to institute a proceeding under 49 CFR 1110.2(b) to revise and streamline the rules governing ex parte communications set forth in 49 CFR part 1102. The Private Railcar Food and Beverage Association (PRFBA) and the Freight Rail Customer Alliance (FRCA) submitted replies in opposition to the petition on June 5, 2025. The Board issued a decision on September 11, 2025, instituting a proceeding to consider changes to the existing rules.
The Board's existing regulations define an “ex parte communication” as “an oral or written communication that concerns the merits or substantive outcome of a pending proceeding; is made without notice to all parties and without an opportunity for all parties to be present; and could or is intended to influence anyone who participates or could reasonably be expected to participate in the decision.” 49 CFR 1102.2(a)(5). The definition of “ex parte communication” covers communications made by nonparties to a proceeding as well as communications by parties, as any communications concerning the merits or the substantive outcome of a case have the potential to influence decisions.
Ex parte communications with Board members and staff are generally prohibited, and violations are subject to sanctions. 49 CFR 1102.2(c) & (f). However, the Board's rules except some ex parte communications from this general prohibition. Section 1102.2(b) identifies several categories of communication that are not prohibited and do not need to be disclosed on the public record. As relevant here, these exceptions cover any communications that occur during informal rulemaking proceedings prior to the issuance of a notice of proposed rulemaking (NPRM) and any communications that the Board formally determines may be made on an ex parte basis. 49 CFR 1102.2(b)(1)-(2).
Additionally, section 1102.2(g) allows Board members to participate in ex parte meetings during prescribed periods after the issuance of an NPRM. Section 1102.2(g)(1) permits ex parte meetings from the date an NPRM is served until a cutoff date 20 days before the deadline for reply comments set forth in the NPRM. These meetings are subject to the disclosure requirements of section 1102.2(g)(4), which require prompt written, public disclosure of the substance of the ex parte communications. Although each meeting must be scheduled with a Board member's office, members may delegate their participation in these meetings to Board staff.
Finally, in the ICC Termination Act of 1995, Public Law 104-33 88, 109 Stat. 803 (ICCTA), Congress permitted, but did not require, the Board to entertain ex parte communications in proceedings related to the consolidation, merger, or acquisition of control of a railroad where at least one Class I railroad is involved in the transaction. 49 U.S.C. 11324(f). Consistent with this congressional grant of discretion, the Board adopted a policy of not entertaining ex parte communications in railroad merger proceedings.
AAR's petition seeks six changes to the Board's ex parte rules. AAR describes its first three requests as seeking clarifications to the ex parte rules and argues that the proposed regulatory amendments would be consistent with practices at other agencies. (Pet. 6-9.) AAR first asks the Board to add language to clarify that the ban on ex parte communications does not prohibit communications occurring in any proceeding regarding routine, procedural matters. (
AAR's petition next requests a regulatory amendment related to the Board's
Finally, AAR's petition seeks two changes to the ex parte meeting rules for informal rulemaking proceedings set forth in section 1102.2(g). (Pet. 11-15.) AAR contends that the existing processes inhibit potentially useful communications between parties and the agency and argues that both of the requested changes are consistent with practices at other agencies. (
The Board received replies to AAR's petition from FRCA and PRFBA. FRCA and PRFBA oppose AAR's petition, arguing that the regulatory changes AAR requests are unnecessary and likely to reduce transparency in Board proceedings. (FRCA Reply 1-2; PRFBA Reply 1.) FRCA and PRFBA both argue that Board regulations already allow status and procedural inquiries because 49 CFR 1102.2(a)(5) defines “ex parte communications” as “an oral or written communication that concerns the merits or substantive outcome of a pending proceeding.” (FRCA Reply 1; PRFBA Reply 1.)
FRCA further argues that the other clarifications requested in AAR's petition are unnecessary. (FRCA Reply 1.) FRCA asserts that the Board's Office of Public Assistance, Government Affairs, and Compliance (OPAGAC) staff already accommodates parties' needs for clarifying communications regarding submitted evidence and Board orders, and questions the need for ex parte communications in proceedings involving only one party because such proceedings are typically adjudications that must take into account the interest of the public. (
PRFBA also argues that AAR's petition is inconsistent with the policy reasons underlying the existing limitations on ex parte communications. (PRFBA Reply 1.) PRFBA asserts that the Board's ex parte communication rules are intended to promote impartial decision-making, ensure due process in Board proceedings, and maintain public trust in the Board's adjudicatory system. (
Consistent with its authority in 49 U.S.C. 1321 to prescribe regulations, the Board is exploring whether and how best to modify its regulations to better leverage the benefits of ex parte communications while minimizing or eliminating the potential harms. AAR's request for modifications to the ex parte rules raises issues that the agency began to explore in May 2025. Vice Chairman Schultz led a series of informal listening sessions with practitioners as part of an effort to streamline the Board's processes, and the recommendations generated during these meetings included action items focused on ex parte communications.
The Board has considered AAR's petition and the comments submitted by FRCA and PRFBA. At this time, the Board does not intend to move forward with two of the requested modifications in AAR's petition. Specifically, AAR's request to revise section 1102.2(b) to explicitly permit ex parte communications in uncontested one-party proceedings is not necessary. AAR's examples in support of this modification all involve communications between the agency and the single party before it. (Pet. 7-8.) But these communications do not fit the definition of ex parte communications. To be ex parte, a communication must be made “without notice to all parties and without an opportunity for all parties to be present.” 49 CFR 1102.2(a)(5). When the sole party in a proceeding communicates with the Board, there is no other party without an opportunity to be present. Although AAR notes that the Board does not engage in these communications during petition for exemption and declaratory order proceedings, (Pet. 7-8), there is oftentimes reason to be cautious when another party is likely to join the case, but has not yet filed pleadings. For example, in declaratory order proceedings, it is often clear from the petition that another party will join the matter and reply in opposition. In this setting, entertaining substantive communications beyond the written comments from the original filer before the reply period ends could raise fairness concerns, even if the early communication does not technically qualify as ex parte. In light of the clarifications in this decision, the Board will consider comments as to whether amending the existing regulatory language would provide further clarification and guidance to stakeholders.
The Board also does not intend to modify the regulation to affirmatively allow ex parte communications in merger transactions involving Class I railroads. AAR's request would require the Board to reverse its longstanding policy of not entertaining ex parte communications in railroad merger proceedings.
First, as a practical matter, allowing ex parte communications subject to the section 1102.2(g)(4) disclosure process in all Class I transactions, especially across all issues and without a specified timeframe, is likely to complicate such proceedings, which are subject to specific statutory timelines.
AAR suggests that the Board can manage these potential impacts by entertaining only those ex parte communications that would increase efficiency and declining the rest, consistent with the discretion afforded by 49 U.S.C. 11324(f). AAR does not explain how the Board should determine which ex parte communications within a proceeding would increase efficiency before the communications are made. Moreover, given that the record does not suggest a workable, appropriate mechanism the Board could apply in this context, differentiating between communications within a rail merger proceeding also risks undermining fairness in the Board's procedures by giving the appearance of unequal access. For example, it is not clear if the differentiation here would involve some parties being denied meetings and others being granted, which is generally not the case today in the context of informal rulemaking ex parte meetings and may not arise if the Board were to adopt other changes suggested by the petition. In
The disclosure process outlined in section 1102.2(g)(4) is certainly helpful but may not always fully remedy the transparency and fairness concerns outlined in
Thus, the Board is not persuaded that ex parte communications are broadly appropriate in merger proceedings involving Class I railroads. However, the Board recognizes that circumstances may arise in merger proceedings where ex parte communications may have particular value or address a specific need. Should this occur, the option to seek a waiver of the ex parte prohibition in
Notwithstanding the general policy of prohibiting ex parte communications in merger proceedings involving Class I railroads, the Board recognizes the potential for ex parte communications to enhance other Board proceedings. Where appropriate and when safeguards are in place to protect against abuse and ensure fairness and transparency, ex parte communications can aid the Board in producing timely, well-informed, and effective decisions. Ex parte communications can assist in the Board's decision-making process by helping the Board obtain and understand important information, and the success of the section 1102.2(g)(4) documentation process shows that these communications can be conducted in a transparent and fair manner. Explicitly allowing certain communications that the Board's regulations currently prohibit or appear to prohibit could also improve stakeholder engagement and make agency processes more efficient, and in certain instances these benefits may outweigh potential risks or drawbacks associated with ex parte communications. Additionally, to the extent that changes have the effect of clarifying the Board's regulations, they can help stakeholders better understand their opportunities and obligations related to communication with the Board. Thus, many of the remaining ideas outlined in the petition warrant further exploration.
Based on the petition and responsive comments, as well as feedback provided in the informal listening sessions and the Board's experiences with ex parte communications, the Board is exploring several potential amendments to the rules governing ex parte communications. The potential changes to the regulations are intended to improve stakeholder engagement, facilitate well-informed decision-making, and make agency processes more efficient. The Board seeks comments on the merits of adopting the following regulatory changes.
In its petition, AAR requests that the Board add language to clarify that the ban on ex parte communications does not prohibit communications occurring in any proceeding regarding routine, procedural matters. (Pet. 6.) The Board has previously stated that communications about purely procedural issues and communications that solely concern the status of a proceeding are permissible because they naturally do not concern the merits or substantive outcome of pending proceedings.
Stating this principle directly in the regulatory text could benefit stakeholders by helping them determine what does and does not constitute an ex parte communication without the need for additional research. Clear guidelines could also promote the expeditious handling and resolution of proceedings before the Board by helping Board employees quickly and easily determine whether it is appropriate for them to respond to stakeholder questions. The Board is therefore considering amending the existing regulatory text to clarify that routine, procedural communications are permitted. The Board is also considering adding language to the regulatory text that would explain what “routine” and “procedural” mean and seeks ideas regarding such definitions.
AAR suggests that the Board revise its rules to clarify that communications with Board staff concerning submitted evidence and compliance with orders seeking additional information are permissible, subject to the disclosure requirements in 49 CFR 1102.2(g)(4). (Pet. at 7.) During Board proceedings, it is sometimes necessary for the parties and the Board to resolve technical and clarifying questions about Board orders or evidence. RCPA is available to provide stakeholders with informal, nonbinding guidance on complying
The Board recognizes concerns related to fairness, due process, and impartiality, and acknowledges that even where questions are strictly technical and clarifying in nature, the answer might have implications for the outcome of the case. However, the risks posed by ex parte conversations may not be as significant in the context of technical and clarifying inquiries, such that the benefits of quickly resolving these questions may outweigh the associated risks. Furthermore, it may be possible to mitigate the associated fairness and transparency concerns with prompt, thorough documentation of the ex parte contacts. The documentation procedures set forth in 49 CFR 1102.2(g)(4) have worked well in the context of ex parte meetings conducted during informal rulemaking proceedings, and they may also be suitable for this application.
In order to realize the potential benefits of allowing Board staff to resolve technical and clarifying questions, the Board is exploring amending the existing regulatory language to permit technical and clarifying communications with Board staff concerning submitted evidence and compliance with orders seeking additional information, subject to the disclosure requirements in 49 CFR 1102.2(g)(4), as well as any statutory limitations applicable to the proceeding.
In its petition, AAR requests that the Board revise 49 CFR 1102.2(g)(1) to authorize ex parte communications between the public and Board staff in informal rulemaking proceedings, subject to the same requirements that govern communications with Board Members. (Pet. 12.) Under the Board's current rules, the ex parte meetings permitted during informal rulemakings can only be scheduled with Board Members. Board Members may invite Board staff to attend these meetings, but stakeholders cannot meet with Board staff without a Board Member present, unless the entire Board formally delegates its participation to Board staff.
While it offers several potential benefits, allowing ex parte meetings with Board staff during informal rulemaking proceedings also raises several concerns. Expanding the available options for ex parte meetings during these proceedings could increase the number of opportunities available for stakeholders and members of the public to discuss pending rulemakings with the Board, but it may raise risks or drawbacks regarding fairness during the rulemaking process. Subjecting meetings with Board staff to the same disclosure requirements as meetings with Board Members,
Considering the pros and cons, the Board is exploring amending the existing regulations to allow stakeholders to request meeting with Board staff in informal rulemaking proceedings during the same period that meetings with Board Members are permitted and subject to the same disclosure requirements in 49 CFR 1102.2(g)(4). This change has the potential to promote efficiency and improve decision-making. In order to manage the number of ex parte meetings and facilitate coordination between staff offices, the Board is considering amending the regulatory text to allow office directors to delegate Board staff to participate in ex parte meetings and to specify the manner in which such meetings may be requested.
AAR requests that the Board expand the timeframe in which it allows ex parte meetings in informal rulemaking proceedings. (Pet. 12.) The Board's current rules allow Board Members to attend ex parte meetings during informal rulemakings from the time an NPRM is issued until 20 days before the deadline for reply comments.
The Board is mindful of the concerns implicated by changing the end date in section 1102.2(g)(1). Moving the end date closer to the end of the reply period could make it more difficult for stakeholders and members of the public to reply to information presented in ex parte meetings. If the end date is extended beyond the deadline for replies, parties may attempt to have the last word in informal rulemaking proceedings by withholding information in their public comments and presenting it to the Board in an ex parte meeting after the reply period has ended.
In order to promote more informed decision-making and maintain flexibility to accommodate variations in the technical complexity and procedural timelines of informal rulemaking proceedings, the Board is exploring amending the regulatory text to allow the Board to set the end date for ex parte meetings on a case-by-case basis. Under the case-by-case approach under consideration, the end date in a given case could be set before or after the deadline for reply comments, based on the particular comment/reply period lengths and the Board's assessment of the need for a longer period for ex parte meeting opportunities in each informal rulemaking proceeding. All ex parte meetings would remain subject to the disclosure requirements in section 1102.2(g)(4), and the Board could set an additional deadline for replies to the ex parte summaries if it is needed to preserve fairness or due process.
The Board seeks comments on all aspects of the regulatory changes under consideration. The Board invites comments on the extent to which entertaining the communications discussed above could save time and resources for participants in Board proceedings, help the Board obtain and understand important information, or otherwise assist timely, well-informed, and effective decisions. Where applicable, the Board invites commenters to discuss whether and to what extent the section 1102.2(g)(4) disclosure process could address fairness and transparency concerns, as well as whether different or additional safeguards may be more effective. Additionally, where the amendment under consideration would involve defining new terms, the Board invites commenters to provide input on the appropriate scope of those definitions.
The Board also invites commenters to identify additional or alternative ways that the current regulations governing ex parte communications could be changed to benefit the public interest and improve agency processes.
1. Notice of this decision will be published in the
2. Comments are due by May 29, 2026.
3. A copy of this decision will be served upon the Chief Counsel for Advocacy, Office of Advocacy, U.S. Small Business Administration.
4. This decision is effective on its date of service.
By the Board, Board Members Fuchs, Hedlund, and Schultz.
Commodity Credit Corporation and Farm Service Agency, USDA.
Notice; request for comments.
In accordance with the Paperwork Reduction Act of 1995, the Commodity Credit Corporation (CCC) and the Farm Service Agency (FSA) are requesting comments from all interested individuals and organizations on an extension, without change, of a currently approved information collection. CCC and FSA use the information to determine whether representatives or survivors of a producer are entitled to receive payments earned by a producer who dies, disappears, or is declared incompetent before receiving payments or other disbursements.
We will consider comments that we receive by June 15, 2026.
We invite you to submit comments on this notice. You may submit comments, identified by Docket ID: FSA-2026-0232 in the Federal eRulemaking Portal: Go to
You may also send comments to the Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503. Copies of the information collection may be requested by contacting Jody Kenworthy.
Jody Kenworthy; by email:
Information is obtained only when a person claims that they are due a payment that was earned, but not paid to a producer that has died, disappeared, or has been declared incompetent, and documentation is needed to determine if any individuals are entitled to receive such payments or disbursements.
The burden hours in this collection remained the same at 1,000 hours since the last OMB approval.
For the following estimated total annual burden on respondents, the formula used to calculate the total burden hours is the estimated average time per response multiplied by the estimated total annual responses.
We are requesting comments on all aspects of this information collection to help us to:
(1) Evaluate whether the collection of information is necessary for the proper performance of the functions of FSA, including whether the information will have practical utility;
(2) Evaluate the accuracy of FSA's estimate of burden including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected;
(4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
All responses to this notice, including names and addresses when provided, will be summarized and included in the request for OMB approval. All comments will also become a matter of public record.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that forged steel fluid end blocks (FEB) from Germany were not sold in the United States at less than normal value during the period of review (POR) January 1, 2024, through December 31, 2024. Interested parties are invited to comment on these preliminary results.
Applicable April 14, 2026.
Mark Hoadley, AD/CVD Operations, Office II, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-3148.
On January 29, 2021, Commerce published the antidumping duty order on fluid end blocks from Germany.
On September 4, 2025, Commerce extended the time period for issuing the preliminary results.
For a detailed description of the events that followed the initiation of this review, see the Preliminary Decision Memorandum.
The products covered by this
Commerce is conducting this review in accordance with section 751(a)(1)(B) and (2) of the Act. We calculated export price in accordance with section 772(a) of the Act. We calculated NV in accordance with section 773 of the Act. For a full description of the methodology underlying these preliminary results,
We preliminarily determine the following estimated weighted-average dumping margin for the period January 1, 2024, through December 31, 2024.
We intend to disclose the calculations and analyses performed to interested parties for the preliminary results of review within five days of public announcement or, if there is no public announcement, within five days of the date of publication of this notice in the
Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance.
As provided under 19 CFR 351.309(c)(2)(iii) and (d)(2)(iii), we request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to
All submissions, including case and rebuttal briefs, should be filed via ACCESS.
Unless otherwise extended, Commerce intends to issue the final results of this administrative review, including the results of its analysis of issues raised in written case briefs, no later than 120 days after the date of publication of this notice in the
Upon completion of this administrative review, pursuant to section 751(a)(2)(A) of the Act and 19 CFR 351.212(b)(1), Commerce shall determine, and U.S. Customs and Border Protection (CBP) shall assess, antidumping duties on all appropriate entries of subject merchandise covered by this review. Commerce intends to issue assessment instructions to CBP no earlier than 35 days after the date of publication of the final results of this administrative review in the
If BGH's weighted-average dumping margin is not zero or
In accordance with Commerce's “automatic assessment” practice, for entries of subject merchandise during the POR produced by BGH for which it did not know that the merchandise was destined for the United States, we intend to instruct CBP to liquidate those entries at the all-others rate in the original less-than-fair-value investigation if there is no rate for the intermediate company(ies) involved in the transaction.
The following cash deposit requirements will be effective for all shipments of subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this administrative review, as provided for by section 751(a)(2)(C) of the Act: (1) the company-specific cash deposit rate for BGH will be equal to the weighted-average dumping margin established in the final results of this review (except, if that rate is
This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping and/or countervailing duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of antidumping and/or countervailing duties occurred and the subsequent assessment of double antidumping duties, and/or an increase in the amount of antidumping duties by the amount of the countervailing duties.
We are issuing and publishing these preliminary results in accordance with sections 751(a)(1) and 777(i) of the Act, and 19 CFR 351.213(h)(2) and 351.221(b)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that countervailable subsidies were being provided to producers and exporters of certain softwood lumber products (softwood lumber) from Canada during the period of review (POR), January 1, 2024, through December 31, 2024. Commerce is also rescinding this review with respect to 56 companies. Interested parties are invited to comment on these preliminary results.
Applicable April 14, 2026.
Samuel Brummitt, Kristen Johnson, Elizabeth Talbot Russ, and T.J. Worthington, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-7851, (202) 482-4793, (202) 482-5516, and (202) 482-4567, respectively.
On January 3, 2018, Commerce published the countervailing duty (CVD) order on softwood lumber from Canada in the
On August 1, 2025, Commerce extended the deadline for the preliminary results of this administrative review to January 30, 2026, in accordance with 19 CFR 351.213(h)(2).
For a complete description of the events that followed the initiation of this review,
The products covered by this order are certain softwood lumber products from Canada. For a complete description of the scope of the
Pursuant to 19 CFR 351.213(d)(3), it is Commerce's practice to rescind an administrative review of a CVD order where it concludes that there were no reviewable entries of subject merchandise during the POR for an exporter or producer. Normally, upon completion of an administrative review, the suspended entries are liquidated at the CVD assessment rate for the review period.
Based on our analysis of CBP data and comments received from interested parties, we determine that 56 producers/exporters, for which a review had been requested, had no reviewable shipments, sales, or entries of subject merchandise during the POR. Accordingly, absent evidence of a shipment on the record, Commerce is rescinding the administrative review of the companies listed in Appendix III of this notice, pursuant to 19 CFR 351.213(d)(3). For further information,
Commerce is conducting this CVD administrative review in accordance with section 751(a)(1)(A) of the Tariff Act of 1930, as amended (the Act). For each of the subsidy programs found countervailable, Commerce preliminarily determines that there is a subsidy,
There are 215 companies for which a review was requested and not rescinded but were not selected as mandatory respondents.
Section 705(c)(5)(A)(i) of the Act instructs Commerce, as a general rule, to calculate an all-others rate equal to the
For the period January 1, 2024, through December 31, 2024, we preliminarily determine the following estimated countervailable subsidy rates:
Commerce intends to disclose its calculations performed to interested parties for these preliminary results within five days of the date of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
Interested parties will be notified of the timeline for the submission of case briefs and written comments at a later date. Rebuttal briefs, limited to issues raised in the case briefs, may be filed not later than five days after the date for filing case briefs.
As provided under 19 CFR 351.309(c)(2) and (d)(2), we request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c)(2), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must do so within 21 days of publication of these preliminary results by submitting a written request to the Assistant Secretary for Enforcement and Compliance using ACCESS.
In accordance with 19 CFR 351.221(b)(4)(i), Commerce has preliminarily assigned the subsidy rates as indicated above. Pursuant to section 751(a)(2)(C) of the Act, upon issuance of the final results, Commerce shall determine, and CBP shall assess, countervailing duties on all appropriate entries covered by this review. Commerce intends to issue assessment instructions to CBP no earlier than 41 days after the date of publication of the final results of this review in the
For the companies for which this review is rescinded, Commerce will instruct CBP to assess countervailing duties on all appropriate entries at a rate equal to the cash deposit of estimated countervailing duties required at the time of entry, or withdrawal from warehouse, for consumption, during the period January 1, 2024, through December 31, 2024, in accordance with 19 CFR 351.212(c)(1)(i). Commerce intends to issue rescission instructions to CBP no earlier than 41 days after the date of publication of the notice of rescission in the
Pursuant to section 751(a)(1) of the Act, Commerce intends, upon publication of the final results, to instruct CBP to collect cash deposits of estimated countervailing duties in the amounts indicated above for each of the respective companies listed above and in Appendix II with regard to shipments of subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this review. For all non-reviewed companies, we will instruct CBP to collect cash deposits of estimated countervailing duties at the most recent company-specific or all-others rate applicable to the company, as appropriate. These cash deposit requirements, when imposed, shall remain in effect until further notice.
Unless the deadline is extended, Commerce intends to issue the final results of this administrative review,
These preliminary results and notice are issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.221(b)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that certain softwood lumber (softwood lumber) from Canada was made at less than normal value (NV) during the period of review (POR) January 1, 2024, through December 31, 2024. In addition, Commerce intends to rescind this review with respect to 21 companies. Interested parties are invited to comment on these preliminary results.
Applicable April 14, 2026.
Joshua Jacobson, Thomas Martin, or Dylan Hill, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-0266, (202) 482-3936, or (202) 482-1197, respectively.
On January 3, 2018, Commerce published in the
On September 16, 2025, we extended the preliminary results of this review by an additional 119 days, in accordance with section of 751(a)(3) of the Tariff Act of 1930, as amended (the Act), and 19 CFR 351.213(h)(2).
The merchandise subject to the
Pursuant to 19 CFR 351.213(d)(3), Commerce will rescind an administrative review when there are no reviewable entries of subject merchandise during the POR for which liquidation is suspended.
As discussed in greater detail in the Preliminary Decision Memorandum, the POR entry totals reflected in the CBP data reflected no POR entries of subject merchandise from the companies listed in Appendix II. In the absence of any suspended entries of subject merchandise from these companies during the POR, Commerce hereby notifies all interested parties of its intent to rescind this administrative review with respect to these companies. Commerce is providing interested parties with an opportunity to submit comments in their case briefs on this intent to rescind.
Commerce is conducting this review in accordance with section 751(a)(1)(B) of the Act. For a full description of the methodology underlying our conclusions,
The Act and Commerce's regulations do not address the establishment of a weighted-average dumping margin to be determined for companies not selected for individual examination when Commerce limits its examination in an administrative review pursuant to section 777A(c)(2) of the Act. Generally, Commerce looks to section 735(c)(5) of the Act, which provides instructions for calculating the all-others rate in a market economy less-than-fair-value (LTFV) investigation, for guidance when determining the weighted-average dumping margin for companies which were not selected for individual examination in an administrative review. Under section 735(c)(5)(A) of the Act, the all-others rate is normally “an amount equal to the weighted average of the estimated weighted average dumping margins established for exporters and producers individually investigated, excluding any zero or
In this review, we preliminarily calculated above
As a result of this review, we preliminarily determine the following estimated weighted-average dumping margins for the period of January 1, 2024, through December 31, 2024:
Commerce intends to disclose the calculations performed for these preliminary results to interested parties within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
Pursuant to 19 CFR 351.309(c), interested parties may submit case briefs to Commerce no later than 21 days after the date of the publication of this notice. Rebuttal briefs, limited to issues raised in the case briefs, may be filed not later than five days after the date for filing case briefs.
As provided under 19 CFR 351.309(c)(2)(iii) and (d)(2)(iii), we request that interested parties provide, at the beginning of their briefs, a public executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, must submit a written request to the Assistant Secretary for Enforcement and Compliance, filed electronically via ACCESS. An electronically filed document must be received successfully in its entirety via ACCESS by 5:00 p.m. Eastern Time within 30 days after the date of publication of this notice.
Upon issuance of the final results, Commerce will determine, and CBP shall assess, antidumping duties on all appropriate entries covered by this review.
The final results of this administrative review shall be the basis for the assessment of antidumping duties on entries of merchandise under review and for future deposits of estimated duties, where applicable. Commerce intends to issue assessment instructions to CBP no earlier than 41 days after the date of publication of the final results of this review in the
The following deposit requirements will be effective upon publication in the
Unless otherwise extended, Commerce intends to issue the final results of this administrative review, including the results of its analysis of the issues raised in any written briefs, no later than 120 days after the date of publication of this notice in the
This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping and/or countervailing duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of antidumping and/or countervailing duties occurred and the subsequent assessment of double antidumping duties.
These preliminary results of review are issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.221(b)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily finds that certain producers/exporters of forged steel fluid end blocks (fluid end blocks) from Italy received countervailable subsidies during the period of review (POR) January 1, 2024, through December 31, 2024. In addition, Commerce is rescinding this review, in part, with respect to one company. Interested parties are invited to comment on these preliminary results.
Applicable April 14, 2026.
Stefan Smith AD/CVD Operations, Office I, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-4342.
On February 21, 2025, Commerce published in the
On September 12, 2025, Commerce extended the deadline for the preliminary results of this review until February 2, 2026.
For a complete description of the events that followed the initiation of this administrative review,
The products covered by the
Pursuant to 19 CFR 351.213(d)(3), Commerce will rescind an administrative review of the countervailing duty order when there are no reviewable entries of subject merchandise during the POR for which liquidation is suspended.
On March 16, 2026, we issued a memorandum notifying parties of our intent to rescind this administrative review with respect to Forge Monchieri S.p.A. (Forge Monchieri).
Commerce is conducting this administrative review in accordance with section 751(a)(1)(A) of the Tariff Act of 1930, as amended (the Act). For each subsidy program found countervailable, Commerce preliminarily determines that there is a subsidy,
There are two companies, Cogne Acciai Speciali S.p.A. (CAS) and Officine Meccaniche Roselli S.r.l. (Roselli) for which a review was requested, which had reviewable entries, and which were not selected as mandatory respondents or found to be cross-owned with a mandatory respondent. For these companies, because the rates calculated for the mandatory respondents, Lucchini and Metalcam, were above
As a result of this review, we preliminarily determine the following net countervailable subsidy rates exist for the POR, January 1, 2024, through December 31, 2024:
Commerce intends to disclose its calculations and analysis performed to interested parties for these preliminary results within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b).
Pursuant to 19 CFR 351.309(c), interested parties may submit case briefs to Commerce no later than 21 days after the date of publication of these preliminary results of review.
As provided under 19 CFR 351.309(c)(2)(iii) and (d)(2)(iii), we request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, filed electronically via ACCESS by 5:00 p.m. Eastern Time within 30 days after the date of publication of this notice. Requests should contain: (1) the party's name, address, and telephone number; (2) the number of participants; and (3) a list of issues to be discussed. Oral presentations at the hearing will be limited to issues raised in the briefs. If a request for a hearing is made, Commerce will inform parties of the scheduled date for the hearing.
In accordance with section 751(a)(1) of the Act and 19 CFR 351.212(b)(2), we preliminarily assigned subsidy rates in the amounts shown above for the producers/exporters shown above. Upon completion of the administrative review, consistent with section 751(a)(1) of the Act and 19 CFR 351.212(b)(2), Commerce shall determine, and U.S. Customs and Border Protection (CBP) shall assess, countervailing duties on all appropriate entries covered by this review. We intend to issue assessment instructions to CBP no earlier than 35 days after the date of publication of the final results of this review in the
For the companies listed above for which this review is rescinded with these preliminary results, we will instruct CBP to assess countervailing duties on all appropriate entries at a rate equal to the cash deposit of estimated countervailing duties required at the time of entry, or withdrawal from warehouse, for consumption, during the period January 1, 2024, through December 31, 2024, in accordance with 19 CFR 351.212(c)(1)(i). Commerce intends to issue rescission instructions to CBP no earlier than 35 days after the date of publication of this notice in the
In accordance with section 751(a)(2)(C) of the Act, Commerce also intends, upon publication of the final results, to instruct CBP to collect cash deposits of estimated countervailing duties in the amounts calculated in the final results of this review for the respective companies listed above, on shipments of subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this
For all non-reviewed firms, CBP will continue to collect cash deposits of estimated countervailing duties at the all-others rate or the most recent company-specific rate applicable to the company, as appropriate. These cash deposit instructions, when imposed, shall remain in effect until further notice.
Unless extended, Commerce intend to issue the final results of this administrative review, which will include the results of our analysis of the issues raised in the case briefs, within 120 days after the date of publication of these preliminary results in the
The preliminary results and notice are issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.213 and 351.221(b)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily determines that Lucchini Mamé Forge S.p.A. (Lucchini) sold forged steel fluid end blocks (FEBs) from Italy in the United States at prices below normal value (NV) during the period of review (POR) January 1, 2024, through December 31, 2024. We are also rescinding this review, in part, with respect to three companies. Commerce invites interested parties to comment on these preliminary results of review.
Applicable April 14, 2026.
Stephen Bailey, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-0193.
On January 29, 2021, Commerce published in the
On August 21, 2025, in accordance with section 751(a)(3)(A) of the Act, Commerce extended the deadline for these preliminary results by 119 days.
For a complete description of the events that followed the initiation of this administrative review,
The product covered by the
In accordance with 19 CFR 351.213(d)(1), Commerce will rescind an administrative review, in whole or in part, if a party who requested a review withdraws its request within 90 days of the date of publication of notice of initiation. On April 15, 2025, pursuant to 19 CFR 351.213(d)(1), the petitioners timely withdrew their requests for review for the three producers and/or exporters listed in Appendix II to this notice.
Pursuant to 19 CFR 351.213(d)(3), Commerce will rescind an administrative review when there are no reviewable suspended entries. Based on our analysis of U.S. Customs and Border Protection (CBP) information, and a no shipments letter filed by Cogne Acciai Speciali S.p.A. (Cogne),
Commerce is conducting this administrative review in accordance with section 751(a)(1)(B) of the Act. Pursuant to sections 776(a) and (b) of the Act, Commerce preliminarily assigned a weighted average dumping margin to Lucchini based on partial adverse facts available (AFA). For a full description of the methodology underlying the preliminary results of this review,
Commerce preliminarily determines that the following weighted-average dumping margins exist for the period January 1, 2024, through December 31, 2024:
We intend to disclose the calculations and analyses performed to interested parties for the preliminary results of review within five days of public announcement or, if there is no public announcement, within five days of the date of publication of this notice in the
Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance. Pursuant to 19 CFR 351.309(c)(1)(ii), we have modified the deadline for interested parties to submit case briefs to Commerce to no later than 21 days after the date of the publication of this notice.
As provided under 19 CFR 351.309(c)(2)(iii) and (d)(2)(iii), we request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, filed electronically via ACCESS, by 5 p.m. Eastern time, within 30 days after the date of publication of this notice in the
In accordance with section 751(a)(2)(C) of the Act, upon issuance of the final results, Commerce shall determine, and CBP shall assess, antidumping duties on all appropriate entries of subject merchandise covered by this review.
If Commerce continues to base Lucchini's weighted-average dumping margin upon partial AFA in the final results of this review, then Commerce will instruct CBP to assess antidumping duties on subject merchandise sold by Lucchini and entered, or withdrawn
Commerce intends to issue assessment instructions to CBP no earlier than 35 days after the date of publication of the final results of this review in the
The following cash deposit requirements for estimated antidumping duties will be effective for all shipments of subject merchandise entered, or withdrawn from warehouse, for consumption on, or after, the date of publication of the notice of the final results of this administrative review in the
This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this period of review. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
We are issuing and publishing these preliminary results of administrative review in accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.213(h) and 351.221(b)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) is conducting an administrative review of the antidumping duty (AD) order on aluminum extrusions from the People's Republic of China (China). The period of review (POR) is May 1, 2024, through April 30, 2025. Commerce preliminarily determines that none of the companies for which an administrative review was requested, and not withdrawn, demonstrated eligibility for a separate rate, and are, therefore, all part of the China-wide entity. For the 79 companies for which all requests for administrative review have been timely withdrawn, we are rescinding this administrative review.
Interested parties are invited to comment on these preliminary results.
Applicable April 14, 2026.
George McMahon, AD/CVD Operations, Office VI, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-1167.
On May 26, 2011, Commerce published the AD order on aluminum extrusions from China in the
On November 14, 2025, due to the lapse in appropriations and Federal Government shutdown, Commerce tolled all deadlines in administrative proceedings by 47 days.
For a complete description of the events that followed the initiation of this review,
The products covered by this
Pursuant to 19 CFR 351.213(d)(1), Commerce will rescind an administrative review, in whole or in part, if the party or parties that requested a review withdraws the request within 90 days of the publication date of the notice of initiation of the requested review. As noted above, all requests for an administrative review were timely withdrawn for 79 of the 97 companies named in the
Of the 18 companies for which an administrative review was requested and not withdrawn, none of these submitted evidence of their eligibility for separate rate status. Therefore, we preliminarily determine that the 18 companies listed in Appendix III are not eligible for a separate rate in this administrative review and are part of the China-wide entity.
Under Commerce's policy regarding conditional review of the China-wide entity, the China-wide entity will not be under review unless a party specifically requests, or Commerce self-initiates, a review of the entity.
Normally, Commerce discloses to interested parties the calculations performed in connection with the preliminary results within five days of the public announcement, or if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b). However, because Commerce did not calculate weighted-average dumping margins for any companies in this review, nor for the China-wide entity, there is nothing to disclose. This satisfies our regulatory obligation.
Case briefs or other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance. Pursuant to 19 CFR 351.309(c)(1)(ii), we have modified the deadline for interested parties to submit case briefs to Commerce to no later than 21 days after the date of the publication of this notice.
As provided under 19 CFR 351.309(c)(2)(iii) and (d)(2)(iii), we request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, via ACCESS by 5:00 p.m. Eastern Time within 30 days after the
In accordance with section 751(a)(2)(C) of the Act, upon issuance of the final results, Commerce shall determine, and CBP shall assess, antidumping duties on all appropriate entries of subject merchandise covered by this review.
For the companies for which this review is rescinded with these preliminary results, we will instruct CBP to assess antidumping duties on all appropriate entries at rates equal to the cash deposit of antidumping duties required at the time of entry, or withdrawal from warehouse, for consumption, during the POR in accordance with 19 CFR 351.212(c)(1)(i). Commerce intends to issue these rescission instructions to CBP no earlier than 35 days after the date of publication of this notice in the
The final results of this administrative review shall be the basis for the assessment of antidumping duties on entries of merchandise covered by the final results of this review and for future deposits of estimated duties, where applicable.
The following cash deposit requirements will be effective upon publication of the final results of this administrative review for shipments of the subject merchandise from China entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of review, as provided in section 751(a)(2)(C) of the Act: (1) for the individually calculated respondent and the non-selected separate rate respondents, the cash deposit rate will be equal to the weighted-average dumping margin established in the final results of this administrative review (except, if the
Unless the deadline is extended, Commerce intends to issue the final results of this administrative review, including the results of its analysis of issues raised by interested parties in the case and rebuttal briefs, within 120 days of these preliminary results in the
This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping and/or countervailing duties prior to liquidation of the relevant entries during this POR. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of antidumping and/or countervailing duties occurred and the subsequent assessment of double antidumping duties, and/or an increase in the amount of antidumping duties by the amount of the countervailing duties.
We are issuing and publishing notice of these preliminary results in accordance with sections 751(a)(1) and 777(i)(1) of the Act, 19 CFR 351.213(d)(4), and 19 CFR 351.221(b)(4).
Department of the Air Force, Department of Defense.
Notice of record of decision.
On March 27, 2026, the Department of the Air Force (DAF) and on March 17, 2026, the Department of the Army (DA) signed the Record of Decision (ROD) for the Final Environmental Impact Statement for Proposed Mortar and Artillery Training at Richardson Training Area, Joint Base Elmendorf-Richardson, Alaska.
Mr. David Martin, NEPA Project Manager, by email at
The DAF and DA have decided to implement Alternative 1, which includes all-season live-fire training, use of 155-mm artillery and expansion of the Eagle River Flats Impact Area, as analyzed in the Final Environmental Impact Statement. The Final Environmental Impact Statement was made available to the public on January 30, 2026 through the project website (
The DAF and DA decision documented in the ROD was based on matters discussed in the Final EIS, inputs from the public and regulatory agencies, and other relevant factors. Authority for this notice is 42 U.S.C. 4321,
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Urooj Zahra at (703) 695-6233,
This 36(b) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of the attached Transmittal 26-0R.
(i)
(ii)
Date: May 12, 2025
Implementing Agency: Army
Funding Source: National Funds
(iii)
This transmittal notifies the inclusion of the following MDE items: two (2) CH-47 Block II aircraft with air-to-air refuel probe capability and extended range fuel tanks; six (6) T55-GA-714A engines; four (4) AN/AAR-57 CMWS; eight (8) ARC-231A, RT-1987 COMSEC radios; six (6) embedded GPS/INS (EAGLE-M); and six (6) M240H machine guns. The following non-MDE items will also be included: CMWS classified software update; AVR-2B laser detecting sets; aircraft survivability equipment; AN/APX-119; WESCAM MX-15HDi; ARN-147 VOR/ILS receivers; ARN-153 TACAN radios; APN-209 receiver transmitters; APN-209 indicators; AN/ARC-220 high frequency radios; KIV-77 COMSEC IFF cryptographic appliques; AN/PYQ-10 simple key loaders; FliteScene license; Improved Data Modem-401; Infrared Suppression System; FRIES; ERFS; firefighting equipment; ballistic armor protection system; air worthiness support; spare and repair parts; communications equipment; personnel training and training equipment; site surveys; tool and test equipment; ground support equipment; repair and return services; publications and technical documentation; QAT; U.S. Government and contractor engineering, technical and logistics support services; and other related elements of logistics and program support. The estimated total value of the new items is $1.40 billion. The estimated MDE value will increase by $1.0 billion to a revised $1.65 billion. The estimated non-MDE value will increase by $0.40 billion to a revised $1.07 billion. The estimated total case value will increase by $1.40 billion to a revised $2.72 billion. MDE constitutes $1.65 billion of this total.
(iv)
(v)
(vi)
(vii)
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Urooj Zahra at (703) 695-6233,
This 36(b) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of the attached Transmittal 26-41, Policy Justification, and Sensitivity of Technology.
(i)
(ii)
Funding Source: National Funds
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
* as defined in Section 47(6) of the Arms Export Control Act.
The Government of the United Arab Emirates has requested to buy one (1) long-range discrimination radar integrated with Terminal High Altitude Area Defense (THAAD); twelve (12) Sentinel A4 uplinkers; two (2) THAAD C3 Fire Control and Communications (TFCC) tactical operations stations; and two (2) THAAD C3 TFCC launch and control stations. The following non-major defense equipment items will also be included: array faces; subarray suites; active elements; synthesizer cabinets; local oscillator distribution cabinets; environmental control unit cabinets; power conversion cabinets; energy storage cabinets; radar processor group cabinets; mission processor group cabinets; display consoles; auxiliary cooling group 500-ton chillers; five years of sustainment support; construction; training; publications and technical data; encryptors; communications and communications security equipment; U.S. Government and contractor technical assistance; spares; training devices; and other related elements of logistics and program support. The estimated total cost is $4.5 billion.
This proposed sale will support the foreign policy and national security objectives of the United States by helping to improve the security of an important regional partner. The United Arab Emirates continues to be a vital U.S. partner for political stability and economic progress in the Middle East.
This proposed sale will improve the United Arab Emirate's capability to meet current and future threats in the region by expanding the defended area to 360 degrees which benefits the U.S. and its partners. The United Arab Emirates will have no difficulty absorbing these articles and services into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The principal contractor will be Lockheed Martin Corporation, located in Moorestown, NJ, and Huntsville, AL. At this time, the U.S. Government is not aware of any offset agreement proposed in connection with this potential sale. Any offset agreement will be defined in negotiations between the purchaser and the contractor.
Implementation of this proposed sale will require the assignment of four (4) additional U.S. Government and ten (10) contractor representatives to the United Arab Emirates for a duration of three (3) years to support the construction, integration, and delivery phases of the program.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The Terminal High Altitude Area Defense (THAAD) system is the first weapon system with both endo and exo-atmospheric capability developed specifically to defend against ballistic missiles. The higher altitude and theater wide protection offered by THAAD provides more protection of larger areas than lower-tier systems alone. THAAD is designed to defend against short, medium, and intermediate-range ballistic missiles. The THAAD system consists of four major components: fire control/communications, radar, launchers, and interceptors.
2. The long-range discrimination radar (LRDR) is a software defined scalable, modular, and extensible family of radars that include ground-based, transportable, and ship-based variants. The LRDR-Middle East (ME) is a ground-based variant of the U.S. To address the entire United Arab Emirates threat set, LRDR-ME will contain software technology from the U.S. variants as well as LRDR software technology.
3. The Sentinel A4 is a medium-range air defense active electronically scanned array radar developed to track airborne systems and artillery/mortar threats. It is a U.S. Army program of record, currently in low-rate initial production for nineteen units. The Sentinel array will need to be fully populated with transmit/receive modules to provide link margin throughout the entire THAAD kinematic envelope.
4. In the LRDR-THAAD integrated weapon system, there is a need to provide the THAAD interceptor with updates during flyout. Sentinel A4, a mobile, rotating radar, will be used as an X-band uplinker for the THAAD interceptors. This solution will provide in-flight target updates to the interceptor and receive downlinks for interceptor status. Each additional launch site (remote or co-located) will have a dedicated Sentinel to provide dedicated communications with an interceptor from that launch site.
5. The highest level of classification of defense articles, components, and services included in this potential sale is SECRET.
6. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce system effectiveness or be used in the development of a system with similar or advanced capabilities.
7. A determination has been made that the United Arab Emirates can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This proposed sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
8. All defense articles and services listed in this transmittal have been authorized for release and export to the Government of the United Arab Emirates.
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Urooj Zahra at (703) 695-6233,
This 36(b) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of the attached Transmittal 25-0I.
(i)
(ii)
Date: May 3, 2019
Implementing Agency: Army
Funding Source: National Funds
(iii)
On September 28, 2021, Congress was notified by congressional certification transmittal number 21-0C of the inclusion of an additional five hundred ten (510) Patriot Advanced Capability 3 (PAC-3) Missiles Segment Enhanced (MSE) (included 10 fly-to-buy missiles). The following non-MDE items were also included: tools and test equipment, support equipment, publications and technical documentation, personnel training and training equipment, spare and repair parts, facility design, U.S. Government and contractor technical, engineering, and logistics support services, and other related elements of logistics, sustainment and program support. The estimated total value of the new items was $3.172 billion. This value included $2.728 billion in MDE value and $0.444 billion in non-MDE value that was added to the previously notified estimated total value of $2.728 billion. The revised estimated total value was $5.90 billion. MDE constituted $5.428 billion of this total.
This transmittal notifies an increase in value due to recent cost increases. There are no additional MDE or non-MDE items being reported with this notification. The previously notified estimated non-MDE value of $444 million will increase by $28 million to a revised $472 million. The estimated MDE value will increase by $5.532 billion to a revised $10.96 billion. The estimated total value will increase by $5.56 billion to a revised $11.46 billion.
(iv)
(v)
(vi)
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Urooj Zahra at (703) 695-6233,
This 36(b) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of the attached Transmittal 26-27, Policy Justification, and Sensitivity of Technology.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
* as defined in Section 47(6) of the Arms Export Control Act.
The Government of Sweden has requested to buy twenty (20) M142 high mobility artillery rocket systems; thirty-five (35) M31A2 guided multiple launch rocket system (GMLRS) unitary pods with insensitive munitions propulsion system (IMPS); thirty-five (35) M30A2 GMLRS alternative warhead (AW) pods with IMPS; thirty-five (35) M403 extended range (ER) GMLRS AW pods with IMPS; thirty-five (35) M404 ER
This proposed sale will support the foreign policy and national security objectives of the United States by improving the security of a NATO Ally that is a force for political stability and economic progress in Europe.
The proposed sale will improve Sweden's capability to meet current and future threats and enhance its interoperability with U.S. and other allied forces. It will also enhance Sweden's artillery and mid-range fire capability. Sweden will have no difficulty absorbing these articles and services into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The principal contractor will be Lockheed Martin, located in Grand Prairie, TX. At this time, the U.S. Government is not aware of any offset agreement proposed in connection with this potential sale. Any offset agreement will be defined in negotiations between the purchaser and the contractor.
Implementation of this proposed sale will require up to fifteen additional U.S. Government and up to fifteen contractor representatives to Sweden, as required, to provide program management reviews to support the program.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The M142 high mobility artillery rocket system (HIMARS) is a C-130 transportable wheeled launcher mounted on a 5-ton family of medium tactical vehicle truck chassis. HIMARS is the modern Army-fielded version of the Multiple Launch Rocket System (MLRS) M270 launcher and can fire all of the MLRS family of munitions (FOM) including guided multiple launch rocket system (GMLRS) variants and the Army Tactical Missile System (ATACMS). Utilizing the MLRS FOM, HIMARS can engage targets between 15 and 300 kilometers with global positioning system (GPS)-aided precision accuracy.
2. GMLRS M31A2 unitary pods are the Army's primary munition for units fielding the M142 HIMARS and M270Al MLRS launchers. The M31 Unitary is a solid propellant artillery rocket that uses GPS/precise positioning service (GPS/PPS)-aided inertial guidance provided by selective availability anti-spoofing module (SAASM) and/or M-Code and will accurately and quickly deliver a single high-explosive blast fragmentation warhead to targets at ranges from 15 to70 kilometers. The rockets are fired from a launch pod container that also serves as the storage and transportation container for the rockets. Each rocket pod holds six total rockets.
3. The M30A2 GMLRS alternative warhead (AW) shares a greater than 90% commonality with the M31A1 unitary (GMLRS-U). The primary difference between the GMLRS-U and GMLRS-AW is the replacement of the unitary' s high explosive warhead with a 200-pound fragmentation warhead of pre-formed tungsten penetrators which is optimized for effectiveness against large area and imprecisely located targets. The munitions otherwise share a common motor, GPS/PPS-aided inertial guidance provided by SAASM and/or M-Code, and a control system, fusing mechanism, multi-option height of burst capability, and effective range of 15 to 70 kilometers.
4. The extended range guided multiple launch rocket system (ER GMLRS) provides a persistent, responsive all-weather, rapidly deployed, long-range, surface-to-surface, area and point-precision strike capability. The M403 alternative warhead variant carries a 200-pound fragmentation assembly filled with high explosives which, upon detonation, accelerates two layers of preformed penetrators optimized for effectiveness against large area and imprecisely located targets.
5. The M404 unitary variant is a 200-pound class unitary with a steel blast fragmentation case designed for low collateral damage against point targets. The ER GMLRS maintains the accuracy and effectiveness demonstrated by the baseline GMLRS to a maximum range of 150 kilometers (double the GMLRS capability) while also including a new height of burst capability.
6. The M57 ATACMS-unitary is a conventional, semi-ballistic missile that utilizes a 500-pound high explosive warhead. It has an effective range of between 70 and 300 kilometers and has increased lethality and accuracy over previous versions of the ATACMS due to a GPS/PPS aided navigation system provided by SAASM or M-Code.
7. The international field artillery tactical data system (IFATDS) is a multi-service (U.S. Army and U.S. Marine Corps) automated, support system used for command, control, communications, and integration, and synchronization of fires on ground targets during all phases of military conflict. The IFATDS provides automated tools that augment the capabilities of fire support coordinators, fire support asset commanders, and their respective staff at every echelon during the planning and execution of fire support on dynamic battlefields in support of the maneuver commander's plans.
8. The defense advanced GPS receiver (DAGR) is a small commercial navigational satellite timing and ranging system GPS receiver designed for military operations. The SAASM is a security device controlling the encryption that enables PPS Y-code signals from GPS satellites and resists adversary attempts to spoof GPS signals. The DAGR with SAASM will provide position and location information necessary for ground-based operations. The DAGR provides secure, SAASM-based GPS in a reliable handheld form. It is a military-grade, dual frequency receiver, and has the security hardware necessary to decode encrypted P(Y)-code GPS signals. Imbedded features include graphical screen with the ability to overlap map images, 12-channel continuous satellite tracking for “all-in view” operation, simultaneous L1/L2 dual frequency GPS signal reception, extended performance in a diverse jamming environment, and SAASM compatibility.
9. The simple key loader (SKL) is a ruggedized, portable, hand-held device, for securely receiving, storing, and transferring data between compatible cryptographic and communications equipment. SKL employs Type 1 encryption to protect stored key data and its software, firmware, and security architecture and are subject to strict Department of War and National Security Agency security controls.
10. The AN/PRC-160 radio is a tactical wideband high frequency/very high frequency (HF/VHF) transceiver providing Type 1 encryption and SAASM GPS location and timing
11. The AN/PRC-158 delivers dual-channel connectivity across the full 30-2500 MHz frequency range in a compact, lightweight and multi-channel manpack. Equipped with a software communications architecture and a portfolio of narrowband and wideband waveforms, the AN/PRC-158 ensures interoperability and in-field updates for new capabilities. The manpack's two channels and routing and crossbanding technologies support communications redundancy and share critical voice and data intelligence, surveillance, and reconnaissance with a variety of networks and sub-networks.
12. The highest level of classification of defense articles, components, and services included in this potential sale is SECRET.
13. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce system effectiveness or be used in the development of a system with similar or advanced capabilities.
14. A determination has been made that Sweden can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This proposed sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
15. All defense articles and services listed in this transmittal have been authorized for release and export to the Government of Sweden.
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Urooj Zahra at (703) 695-6233,
This 36(b) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of the attached Transmittal 26-32, Policy Justification, and Sensitivity of Technology.
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Funding Source: Foreign Military Financing
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* as defined in Section 47(6) of the Arms Export Control Act.
The Government of Israel has requested to buy twelve thousand (12,000) BLU-110A/B general purpose, 1,000-pound bomb bodies. The following non-major defense equipment items will also be included: U.S. Government and contractor engineering, logistics, and technical support services; and other related elements of logistics and program support. The estimated total cost is $151.8 million.
This proposed sale will contribute to the foreign policy and national security of the United States by helping to improve the security of a strategic regional partner that has been, and continues to be, an important force for political stability and economic progress in the Middle East.
The proposed sale will improve Israel's capability to meet current and future threats by improving its ability to defend its borders, vital infrastructure, and population centers. This proposed sale will increase the interoperability with U.S. forces and conveys U.S. commitment to Israel's security and armed forces modernization. Israel will have no difficulty absorbing this equipment into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The principal contractor will be Repkon USA, located in Garland, TX. Part of the BLU-110 A/B requirement will be transferred from stock. At this time, the U.S. Government is not aware of any offset agreement proposed in connection with this potential sale. Any offset agreement will be defined in negotiations between the purchaser and the contractor.
Implementation of this proposed sale will not require the assignment of any additional U.S. Government or contractor representatives to Israel.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The BLU-110A/B are general purpose 1,000-pound bombs used by the Navy, Marine Corps, Air Force, and foreign partners. The BLU-110 series general purpose bomb is a 1,000-pound warhead used for unguided delivery in
2. The highest level of classification of defense articles, components, and services included in this potential sale is UNCLASSIFIED.
3. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce system effectiveness or be used in the development of a system with similar or advanced capabilities.
4. A determination has been made that Israel can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This proposed sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
5. All defense articles and services listed in this transmittal have been authorized for release and export to the Government of Israel.
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Urooj Zahra at (703) 695-6233,
This 36(b) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of the attached Transmittal 26-46, Policy Justification, and Sensitivity of Technology.
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Funding Source: National Funds
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* As defined in Section 47(6) of the Arms Export Control Act.
The Government of the United Arab Emirates (UAE) has requested to buy three (3) GBU-39/B inert practice bombs; one thousand five hundred (1,500) GBU-39/B Small Diameter Bombs Increment I; nine hundred (900) KMU-556 Joint Direct Attack Munition (JDAM) guidance sets; and three hundred (300) KMU-557 JDAM guidance sets. The following non-major defense equipment items will also be included: GBU-39 tactical training rounds; FMU-139 fuze systems; DSU-42 and DSU-40 laser illuminated target detectors; ground support system for Link 16; AN/PYQ-10 Simple Key Loaders; KG-250 Link Encryptors; precision navigation; Joint Mission Planning System with unique planning components and software; aircraft maintenance support equipment; spare and repair parts, consumables and accessories, and repair and return support; weapons and weapons support equipment; test equipment; training aids, devices, and spare parts; classified and unclassified software and software support; classified and unclassified publications and technical documentation; personnel training and training equipment; transportation support; aerial refueling; U.S. Government and contractor engineering, technical, and logistics support services; and other related elements of logistics and program support. The estimated total cost is $644 million.
This proposed sale will support the foreign policy and national security objectives of the United States by improving the security of a major defense partner. The UAE is a force for political stability and economic progress in the Middle East.
The proposed sale will improve the UAE' ability to defend its sovereignty and territorial integrity to meet its national defense requirements. The UAE will have no difficulty absorbing these articles and services into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The principal contractor will be Lockheed Martin, located in Greenville, SC. At this time, the U.S. Government is not aware of any offset agreement proposed in connection with this potential sale. Any offset agreement will be defined in negotiations between the purchaser and the contractor.
Implementation of this proposed sale will not require the assignment of any additional U.S. Government or contractor representatives to UAE.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
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1. The GBU-39/B Small Diameter Bomb Increment I (SDB-I) all-up-round is a 250-lb Global Positioning System/Inertial Navigation System (GPS/INS) aided small autonomous, day or night, adverse weather, conventional, air-to-ground precision glide weapon able to strike fixed and stationary relocatable non-hardened targets from standoff ranges. The SDB system employs a smart carriage capable of carrying four 250-lb class guided air-to-surface munitions. They are capable of destroying high-priority fixed and stationary targets from Air Force fighters and bombers in internal bays or on external hard-points. The SDB increases aircraft loadout, decreases the logistical footprint, decreases collateral damage, and improves aircraft sortie generation times. This potential sale includes GBU-39/B inert practice bombs, and GBU-39/B inert tactical training rounds.
2. The Joint Direct-Attack Munition (JDAM) consist of a bomb body paired with a warhead specific tail kit containing an GPS/INS guidance capability that converts unguided free-fall bombs into accurate, adverse weather “smart” munitions. The JDAM weapon can be delivered from modest standoff ranges at high or low altitudes against a variety of land and surface targets during the day or night. The JDAM can receive target coordinates via preplanned mission data from the delivery aircraft, by onboard aircraft sensors (
3. The AN/APQ-10 Simple Key Loader is a handheld fill device for securely receiving, storing, and transferring data between cryptographic and communications equipment.
4. The KG-250 are high-security, network encryptor.
5. The Joint Mission Planning System is a multi-platform personal computer-based mission planning system.
6. The highest level of classification of defense articles, components, and services included in this potential sale is SECRET.
7. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce system effectiveness or be used in the development of a system with similar or advanced capabilities.
8. A determination has been made that the United Arab Emirates can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This proposed sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
9. All defense articles and services listed in this transmittal have been authorized for release and export to the Government of the United Arab Emirates.
Defense Security Cooperation Agency, Department of Defense (DoD).
Arms sales notice.
The DoD is publishing the unclassified text of an arms sales notification.
Urooj Zahra at (703) 695-6233,
This 36(b) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of the attached Transmittal 25-IN.
(i)
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Date: November 4, 2015
Implementing Agency: Air Force
Funding Source: National Funds
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On August 25, 2022, Congress was notified by congressional certification transmittal number 20-0M of the inclusion of the following additional MDE items and support items: eight-hundred (800) GBU-56V1 Laser Joint Direct Attack Munitions (LJDAM) (consisting of eight-hundred (800) KMU-556 tail kits; eight-hundred (800) DSU-40 Laser Sensors, and eight-hundred (800) MK-84 bombs); two-hundred (200) GBU-56V3 Laser JDAMs (consisting of two-hundred (200) KMU-557 tail kits; two-hundred (200) DSU-42 Laser Sensors, and two-hundred (200) BLU-109 bombs; three-thousand (3,000) FMU-139 fuzes; and associated munitions support items. The total cost of the new MDE articles was $69 million and did not result in a net increase in the total cost of MDE. The total case value remained $380 million.
This transmittal notifies the inclusion of the following MDE items: up to two thousand seven hundred fifty (2,750) KMU-572 Joint Direct Attack Munition
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The Sensitivity of Technology Statement contained in the original notification applies to items reported here.
The highest level of classification of defense articles, components, and services included in this potential sale is SECRET.
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Office of Environmental Management, Department of Energy.
Notice of open meeting.
This notice announces an in-person/virtual meeting of the Environmental Management Site-Specific Advisory Board (EM SSAB), Idaho Cleanup Project (ICP). The Federal Advisory Committee Act requires that public notice of this meeting be announced in the
Thursday, May 14, 2026; 9 a.m.-4:15 p.m. MDT.
Holiday Inn & Suites, 3005 South Fork Boulevard, Idaho Falls, Idaho 83402. This meeting will be open to the public in-person at the Holiday Inn & Suites and virtually via Zoom. To attend virtually, please contact Cecelia Hruska, ICP Citizens Advisory Board (CAB) Administrator, by email at
Cecelia Hruska, ICP CAB Administrator, by email at
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f. Members of the public and intervenors in the referenced proceeding may attend the meeting as observers; however, participation will be limited to representatives from the ACHP, West Virginia SHPO, Pennsylvania SHPO, Lake Lynn Generation, interested Tribes, and Commission staff. If meeting attendees decide to disclose information about a specific location which could create a risk or harm to an archaeological site or Native American cultural resource, attendees other than representatives from the ACHP, West Virginia SHPO, Pennsylvania SHPO, Lake Lynn Generation, interested Tribes, and Commission staff will be excused for that portion of the meeting.
g. A summary of the meeting will be placed in the public record of this proceeding. As appropriate, the meeting summary will include both a public, redacted version that excludes any information about the specific location of an archeological site or Native American cultural resource and an unredacted privileged version. Please call or email Christopher Brosman at (202) 502-8573, or
In an order issued on October 8, 2004, the Commission set forth a guideline for Other Federal Agencies (OFAs) to submit their costs related to Administering Part I of the Federal Power Act.
The Commission will hold a technical conference, via conference call, at the time identified below. The technical conference will address the accepted costs submitted by the OFAs. The purpose of the conference will be for OFAs and licensees to discuss costs reported on the forms and any other supporting documentation or analysis.
The technical conference will also be transcribed. Those interested in obtaining a copy of the transcript immediately for a fee should contact the Ace-Federal Reporters, Inc., at 202-347-3700, or 1-800-336-6646. Two weeks after the post-forum meeting, the transcript will be available for free on the Commission's e-library system. Anyone without access to the Commission's website or who has questions about the technical conference should contact Raven A. Rodriguez at (202) 502-6276 or via email at
FERC conferences are accessible under section 508 of the Rehabilitation Act of 1973. For accessibility accommodations please send an email to
+1 202-984-3352,,531228996# United States, Washington.
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, contact the Office of Public Participation at (202) 502-6595 or
Federal Energy Regulatory Commission.
Notice of information collection and request for comments.
In compliance with the requirements of the Paperwork Reduction Act of 1995, 44 U.S.C. 3507(a)(1)(D), the Federal Energy Regulatory Commission (Commission or FERC) is submitting the following currently approved information collections: FERC-547 (Gas Pipeline Rates: Refund Report Requirements), FERC-550 (Oil Pipeline Rates—Tariff Filings and Depreciation Studies), and FERC-914 (Cogeneration and Small Power Production—Tariff Filings). There are no changes to the information collection requirements.
Comments on the collections of information are due May 14, 2026.
Send written comments on to OMB through
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You can also visit
Please submit a copy of your comments via email to
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Kayla Williams may be reached by email at
The Commission uses FERC-547 (Gas Pipeline Rates: Refund Report Requirements) to implement the statutory refund provisions governed by Sections 4, and 16 of the Natural Gas Act (NGA).
The Commission uses the data collected in FERC-547 to monitor refunds owed by natural gas companies to ensure that the flow-through of refunds owed by these companies are made as expeditiously as possible and to assure that refunds are made in compliance with the Commission's regulations.
The FERC-550 550 (Oil Pipeline Rates—Tariff Filings and Depreciation Studies) is required to assist the Commission in implementing the duties and powers that were vested on October 1, 1977, in the Interstate Commerce Commission pursuant to 49 U.S.C. 60502. The Commission's regulatory jurisdiction over oil pipelines includes:
• Regulation of rates and practices of oil pipeline companies engaged in interstate transportation;
• Establishment of equal service conditions to provide shippers with equal access to pipeline transportation; and
• Establishment of reasonable rates for transporting petroleum and petroleum products by pipeline.
The FERC-550 data collection provides the Commission with the information it needs to analyze proposed tariffs, rates, fares, and charges of oil pipelines and other carriers in connection with the transportation of crude oil and petroleum products. Specifically, these filings typically include indexing, market-based rates, or initial rate filings. The Commission uses this information to determine whether the proposed tariffs and rates are just and reasonable.
The Commission's regulations at 18 CFR parts 341 through 348 provide that letters of transmittal must describe the filings and explain any changes to the carrier's rates, rules, terms or conditions of service; state if a waiver is being requested, and specify the statute, section, regulation, policy, or order requested to be waived; and identify the tariffs supplemental numbers, or tariff sections and the proposed effective date of the tariff publication. The letter of transmittal must certify that the filing has been sent to each subscriber of the tariff publication. A carrier may file to amend or modify a tariff contained in a tariff filing at any time during the pendency of the filing. Carriers must cancel tariffs when the service or transportation movement is terminated. If the service in connection with the tariff is no longer in interstate commerce, the tariff publication must state so. Whenever the tariff of a carrier on file with the Commission is to be adopted by another carrier as a result of an acquisition, merger, or name change, the succeeding company must file with the Commission, and post within 30 days after such succession, the tariff, or portion thereof, that has been adopted in the electronic format required by 18 CFR 341.1 bearing the name of the successor company.
The FERC-550 data collection also collects information necessary to inform the Commission about oil pipeline depreciation. Specifically, The Commission's regulation at 18 CFR 347.1 provides that oil pipelines must file material to support requests for newly established or changed property account depreciation studies. It requires an applicant to file electronically, and the transmittal letter must give a general description of the change in depreciation rates, certify that the transmittal also has been sent to each shipper and to each subscriber, and state if there are no subscribers. The proposed depreciation rates being established must be used until they are either accepted or modified by the Commission. Rates in effect at the time of the proposed revision must continue to be used until the proposed revised rates are approved or modified by the Commission. The oil pipeline must provide information in sufficient detail to fully explain and justify the proposed rates. Modifications, additions, and deletions to data elements should be made to reflect the individual circumstances of the carrier's properties and operations.
The Commission uses the information collected by FERC-914 to determine if a small power production or cogeneration facility is exempt for rate regulation under 18 CFR 292.
Section 205(c) of the Federal Power Act (FPA) and 18 CFR 292 require that every public utility have all its jurisdictional rates and tariffs on file with the Commission and make them available for public inspection, within such time and in such form as the Commission designates. Section 205(d) of the FPA requires that every public utility must provide notice to the Commission and the public of any changes to its jurisdictional rates and tariffs, file such changes with the Commission, and make them available for public inspection as directed by the Commission. In addition, FPA section 206 requires the Commission, upon complaint or its own motion, to modify existing rates or services that are found to be unjust, unreasonable, unduly discriminatory, or preferential. FPA section 207 requires the Commission upon complaint by a state commission and a finding of insufficient interstate service, to order the rendering of adequate interstate service by public utilities, the rates for which would be filed in accordance with FPA sections 205 and 206.
In Order Nos. 671 and 671-A,
FERC implemented the Congressional mandate of the Energy Policy Act of 2005 (EPAct 2005) to establish criteria for new qualifying cogeneration facilities by: (1) amending the exemptions available to qualifying facilities from the FPA and from Public Utility Holding Company Act [resulting in the burden imposed by FERC-914, the subject of this notice]; (2) ensuring that these facilities are using their thermal output in a productive and beneficial manner; that the electrical, thermal, chemical and mechanical output of new qualifying cogeneration facilities is used fundamentally for commercial, residential or industrial purposes; and there is continuing progress in the development of efficient electric energy generating technology; (3) amending the FERC Form 556
Take notice that on March 31, 2026, WBI Energy Transmission, Inc. (WBI), 1250 West Century Avenue, Bismarck, North Dakota 58503, filed an application under section 7(c) of the Natural Gas Act (NGA) and Part 157 of the Commission's regulations requesting authorization for its Line Section 32 Expansion Project (Project). The Project consists of approximately 17 miles of new 24-inch-diameter pipeline lateral and associated facilities from WBI Energy's Line Section 32 to a proposed new delivery station in Williams County, North Dakota, and modifications at WBI's Northern Border Pipeline Elkhorn Creek interconnect in McKenzie County, North Dakota. The Project will allow WBI to provide 190,000 dekatherms per day of incremental firm transportation service
In addition to publishing the full text of this document in the
User assistance is available for eLibrary and the Commission's website during normal business hours from FERC Online Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at
Any questions regarding the proposed project should be directed to Lori Myerchin, Vice President, Regulatory Affairs and Transportation Services, WBI Energy Transmission, Inc., P.O. Box 5601, Bismarck, North Dakota 58506, by phone at (701) 530-1563, or by email at
Pursuant to section 157.9 of the Commission's Rules of Practice and Procedure,
WBI stated that a water quality certificate under section 401 of the Clean Water Act is required for the Project from the North Dakota Department of Environmental Quality, Division of Water Quality. When available, WBI should submit to the Commission a copy of the request for certification for the Commission authorization, including the date the request was submitted to the certifying agency, and either (1) a copy of the certifying agency's decision or (2) evidence of waiver of water quality certification.
There are three ways to become involved in the Commission's review of this project: you can file comments on the project, you can protest the filing, and you can file a motion to intervene in the proceeding. There is no fee or cost for filing comments or intervening. The deadline for filing a motion to intervene is 5:00 p.m. Eastern Time on April 30, 2026. How to file protests, motions to intervene, and comments is explained below.
For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, contact the Office of Public Participation (OPP) at (202) 502-6595 or
Any person wishing to comment on the project may do so. Comments may include statements of support or objections, to the project as a whole or specific aspects of the project. The more specific your comments, the more useful they will be.
Pursuant to sections 157.10(a)(4)
To ensure that your comments or protests are timely and properly recorded, please submit your comments on or before 5:00 p.m. Eastern Time on April 30, 2026.
There are three methods you can use to submit your comments or protests to the Commission. In all instances, please reference the Project docket number CP26-158-000 in your submission.
(1) You may file your comments electronically by using the eComment feature, which is located on the Commission's website at
(2) You may file your comments or protests electronically by using the eFiling feature, which is located on the Commission's website (
(3) You can file a paper copy of your comments or protests by mailing them to the following address below. Your written comments must reference the Project docket number (CP26-158-000).
The Commission encourages electronic filing of comments (options 1 and 2 above) and has eFiling staff available to assist you at (202) 502-8258 or
Persons who comment on the environmental review of this project will be placed on the Commission's environmental mailing list and will receive notification when the environmental documents (EA or EIS) are issued for this project and will be notified of meetings associated with the Commission's environmental review process.
The Commission considers all comments received about the project in determining the appropriate action to be taken. However, the filing of a comment alone will not serve to make the filer a party to the proceeding. To become a
Any person, which includes individuals, organizations, businesses, municipalities, and other entities,
To intervene, you must submit a motion to intervene to the Commission in accordance with Rule 214 of the Commission's Rules of Practice and Procedure
There are two ways to submit your motion to intervene. In both instances, please reference the Project docket number CP26-158-000 in your submission.
(1) You may file your motion to intervene by using the Commission's eFiling feature, which is located on the Commission's website (
(2) You can file a paper copy of your motion to intervene, along with three copies, by mailing the documents to the address below. Your motion to intervene must reference the Project docket number CP26-158-000.
The Commission encourages electronic filing of motions to intervene (option 1 above) and has eFiling staff available to assist you at (202) 502-8258 or
Protests and motions to intervene must be served on the applicant either by mail at: Lori Myerchin, Vice President, Regulatory Affairs and Transportation Services, WBI Energy Transmission, Inc., P.O. Box 5601, Bismarck, North Dakota 58506, or by email (with a link to the document) at
All timely, unopposed
Throughout the proceeding, additional information about the project will be available from OPP at (202) 502-6595 or on the FERC website at
In addition, the Commission offers a free service called eSubscription which allows you to keep track of all formal issuances and submittals in specific dockets. This can reduce the amount of time you spend researching proceedings by automatically providing you with notification of these filings, document summaries, and direct links to the documents. For more information and to register, go to
The following notice of meeting is published pursuant to section 3(a) of the government in the Sunshine Act (Pub. L. 94-409), 5 U.S.C.552b:
Federal Energy Regulatory Commission.
April 16, 2026, 10:00 a.m.
Room 2C, 888 First Street NE, Washington, DC 20426.
Open.
Agenda.
* Note—Items listed on the agenda may be deleted without further notice.
Debbie-Anne A. Reese, Secretary, Telephone (202) 502-8400.
For a recorded message listing items Stricken from or added to the meeting, call (202) 502-8627.
This is a list of matters to be considered by the Commission. It does not include a listing of all documents relevant to the items on the agenda. All public documents, however, may be viewed online at the Commission's website at
A free webcast of this event is available through the Commission's website. Anyone with internet access who desires to view this event can do so by navigating to
Immediately following the conclusion of the Commission Meeting, a press briefing will be held in the Commission Meeting Room. Members of the public may view this briefing in the designated overflow room. This statement is intended to notify the public that the press briefings that follow Commission meetings may now be viewed remotely at Commission headquarters but will not be telecast.
Take notice that during the month of March 2026, the status of the above-captioned entities as Exempt Wholesale Generators or Foreign Utility Companies became effective by operation of the Commission's regulations. 18 CFR 366.7(a) (2025).
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
Any person desiring to protest in any the above proceedings must file in accordance with Rule 211 of the Commission's Regulations (18 CFR 385.211) on or before 5:00 p.m. Eastern time on the specified comment date.
The filings are accessible in the Commission's eLibrary system (
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, contact the Office of Public Participation at (202) 502-6595 or
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA or Agency) is announcing that there will be two virtual public meetings of the Science Advisory Committee on Chemicals (SACC). On May 26, 2026, a preparatory meeting will be held for the SACC to consider the scope and clarity of the draft charge questions for the peer review of the draft risk evaluations for 1,3,4,6,7,8-hexahydro-4,6,6,7,8,8-hexamethylcyclopenta [
Submit written comments on the draft risk evaluations, draft hazard assessments, and technical support documents for consideration by the SACC for peer review on or before May 29, 2026.
To request time to present oral comments during one of the virtual public meetings, you must register online by the deadlines set in this section of the document. Oral comments during the peer review meeting are limited to five minutes unless arrangements have been made with the Designated Federal Official (DFO), within the constraints of the meeting agenda. In addition, each speaker should submit a written transcript or copy of their oral comments and any supporting materials (
EPA is announcing that there will be two virtual public meetings of the SACC. On May 26, 2026, there will be a preparatory meeting for the SACC to consider the scope and clarity of the draft charge questions for the peer review; and on June 8 through 12, 2026, there will be a peer review meeting for the SACC to consider the draft risk evaluations for HHCB and phthalic anhydride, the draft hazard assessments for
EPA established the SACC in 2016 in accordance with TSCA, 15 U.S.C. 2625(o), to provide independent advice and expert consultation with respect to the scientific and technical aspects of issues relating to the implementation of TSCA. The SACC operates in accordance with the Federal Advisory Committee Act, 5 U.S.C. 10, and supports activities under TSCA, 15 U.S.C. 2601
This action is directed to the public in general and may be of particular interest to those involved in the manufacture, processing, distribution, and disposal of the subject chemical substances, and/or those interested (including members of at-risk communities; non-governmental organizations; and federal, state, and local officials) in the assessment of risks involving chemical substances and mixtures regulated under TSCA.
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You may subscribe to the following listserv for alerts regarding this and other SACC-related activities:
The SACC provides independent advice and recommendations to the EPA on the scientific and technical aspects of risk assessments, methodologies, and pollution prevention measures and approaches for chemicals regulated under TSCA. The SACC is composed of experts in toxicology, environmental risk assessment, exposure assessment, and related sciences (
TSCA requires EPA to conduct risk evaluations on high-priority chemical substances and identifies the minimum components EPA must include in all chemical substance risk evaluations. The purpose of conducting risk evaluations is to determine whether a chemical substance presents an unreasonable risk to human health or the environment under the conditions of use. These evaluations include assessing risks to relevant potentially exposed or susceptible subpopulations. As part of this process, EPA: (1) Integrates hazard and exposure assessments using the best available science that is reasonably available to assure decisions are based on the weight of the scientific evidence and (2) Conducts peer review for risk evaluation approaches that have not been previously peer reviewed. For more information about the three stages of EPA's process for ensuring the safety of existing chemicals (
HHCB (1,3,4,6,7,8-Hexahydro-4,6,6,7,8,8-hexamethylcyclopenta[γ]-2-benzopyran (CASRN 1222-05-5)), commonly known by the trade name Galaxolide, phthalic anhydride (CASRN 85-44-9),
On January 22, 2026, EPA leadership re-committed the Agency to phasing out mammalian animal testing and further incorporating New Approach Methods (NAMs) approaches into chemical risk
EPA is soliciting comments from the SACC on a variety of charge questions related to HHCB, phthalic anhydride,
EPA anticipates requesting the SACC to provide feedback on the following documents:
• Complete draft risk evaluation for HHCB, including risk characterization and associated technical support documents related to hazard and exposure assessment.
• Complete draft risk evaluation for phthalic anhydride, including risk characterization and associated technical support documents related to hazard and exposure assessment.
• Draft hazard assessments and technical support documents for human health and ecological hazard for
In addition, EPA expects to solicit feedback on the following scientific issues, which have been incorporated into forthcoming risk evaluations in alignment with the Agency's recent announcement on phasing out mammalian animal testing.
• Interpretation and application of transcriptomic studies for
• Application of a transcriptomics study and benchmark dose modeling of gene expression in rodent tissues to identify a transcriptomic point-of-departure for
• Constitutive Androstane Receptor mode of action/adverse outcome pathway analysis and non-human relevance determination for
• Application of the Rethinking Carcinogenicity Assessment for Agrochemicals Project weight of evidence framework for HHCB and
• Use of skin sensitization and respiratory sensitization
• Use of skin irritation and dermal absorption
• Computational approaches, including use of the Skin Allergy Risk Assessment-Integrated Chemical Environment model for phthalic anhydride.
• Computational approaches for
• Use and interpretation of the Extended One-Generation Reproductive Toxicity Study for HHCB.
• The data and methods utilized in the screening-level occupational and consumer exposure assessments for HHCB, including evidence regarding bioconcentration and bioaccumulation and associated human exposure through fish consumption.
• The use of the thin film model for dermal exposure and the applicability to the chosen exposure scenarios.
• The data and methods used to characterize environmental hazards of HHCB and phthalic anhydride.
The purpose of the preparatory meeting is for the SACC to consider and ask questions regarding the scope and clarity of the draft charge questions. The purpose of the peer review meeting is for the SACC to consider and peer review the draft risk evaluations, draft hazard assessments, and technical support documents. These public meetings are part of the SACC's peer review of the Agency's methods and novel analyses for the draft risk evaluations and draft hazard assessments. The agenda for these meetings will be posted in the docket and will also be available through the SACC website.
EPA will consider recommendations from this SACC review and public comments in the development of the final TSCA risk evaluations, which may inform other EPA efforts related to the assessment and regulation of the chemical substances. The Agency is seeking peer review of its data analyses and methodologies relevant to human health hazard and exposure analyses that have not been previously peer reviewed.
To participate in these virtual public meetings, you must register online to receive the webcast and streaming service meeting links and audio teleconference information for each meeting. Online registration will be available approximately one month prior to the meeting(s) and will remain open until the end of the meeting. To make oral comments during one of these meetings, follow the instructions in this document.
The draft risk evaluations, draft hazard assessments, related technical supporting materials, and draft charge questions are available in docket ID number EPA-HQ-OPPT-2026-1189 at
After the peer review meeting, the SACC will prepare the meeting minutes and final report document summarizing its recommendations to the EPA, which will also be available in the docket and through the SACC website. EPA will consider the SACC recommendations and public comments to complete the risk evaluations and unreasonable risk determinations under TSCA for these chemical substances. Under TSCA, EPA must then initiate risk management actions to address the unreasonable risk if identified.
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA or Agency) is announcing the availability of and seeking public comment on draft risk evaluations under the Toxic Substances Control Act (TSCA) for 1,3,4,6,7,8-hexahydro-4,6,6,7,8,8-hexamethylcyclopenta [
Comments must be received on or before June 15, 2026.
To submit comments on the HHCB draft risk evaluation, submit your comments, identified by docket identification (ID) number EPA-HQ-OPPT-2018-0430, online at
To submit comments on the phthalic anhydride draft risk evaluation, submit your comments, identified by docket ID number EPA-HQ-OPPT-2018-0459, online at
Follow the online instructions for submitting comments. Do not electronically submit any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Members of the public should also be aware that personal information included in any written comments may be posted on the internet at
This action is directed to the public in general and may be of particular interest to those involved in the manufacture (defined under TSCA section 3(9) to include import), processing, distribution, use, and disposal of HHCB and/or phthalic anhydride, related industry trade organizations, non-governmental organizations with an interest in human and environmental health, State and local governments, Tribal Nations, and/or those interested in the assessment of risks involving chemical substances and mixtures regulated under TSCA. As such, the Agency has not attempted to describe all the specific entities that this action might apply to. If you need help determining applicability, consult the relevant technical contact listed under
The Agency is conducting these risk evaluations under TSCA section 6, (15 U.S.C. 2605) which requires that EPA conduct risk evaluations on chemical substances and identifies the minimum components EPA must include in the risk evaluations. Each risk evaluation must be conducted consistent with the best available science, be based on the weight of the scientific evidence, and consider reasonably available information, and not consider costs or non-risk factors (15 U.S.C. 2625(h), (i), and (k)). See also the implementing procedural regulations at 40 CFR part 702.
EPA is announcing the availability of and seeking public comment on draft risk evaluations under TSCA for HHCB and phthalic anhydride. The purpose of risk evaluations under TSCA is to determine whether a chemical substance presents an unreasonable risk of injury to human health or the environment under the conditions of use, including unreasonable risk to potentially exposed or susceptible subpopulations identified as relevant to the risk evaluation by EPA, and without consideration of costs or non-risk factors. EPA has used the best available science to prepare these draft risk evaluations and, based on the weight of scientific evidence, to preliminarily determine that HHCB does not pose unreasonable risk to human health or the environment and to preliminarily determine that phthalic anhydride does pose unreasonable risk to human health driven primarily by certain COUs analyzed in the draft risk evaluations.
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HHCB is primarily used as a synthetic musk compound found widely in fragrances. HHCB is utilized in household products such as detergents, cleaners, and air fresheners. HHCB is also a key ingredient in non-TSCA uses including perfumes, cosmetics, and personal care products due to its long-lasting scent properties. Workers may be exposed to HHCB through dust, mist, or vapor when making or using these products. Consumers may be exposed to HHCB through dust, mist, or vapor during intended product use (
In December 2019, EPA announced its designation of HHCB (Docket ID: EPA-HQ-OPPT-2018-0430) as a high-priority substance for risk evaluation under TSCA (84 FR 71924 (FRL-10003-15)). In April 2020, EPA published and sought public comment on the draft scope of the HHCB risk evaluation (85 FR 19941 (FRL-10007-11-OCSPP)), and, after considering public comments, issued the final scope on September 4, 2020 (85 FR 55281 (FRL-10013-90-OCSPP)).
EPA seeks feedback on the assessment of risk presented in the draft risk evaluation for HHCB, a copy of which is available in the docket, and encourages all potentially interested parties, including individuals, governmental and non-governmental organizations, non-profit organizations, academic institutions, research institutions, and private sector entities to comment on the draft risk evaluation. To the extent possible, the Agency asks commenters to please cite any public data related to or that support comments provided, and to the extent permissible, describe any supporting data that is not publicly available.
EPA welcomes specific input on each section of the draft risk evaluation, and is particularly interested in:
• Selection and characterization of the bioaccumulation value, implementation of additional modeling refinements, and resulting conclusions;
• Use of screening-level exposure approaches for occupational and consumer assessments;
• Human health hazard conclusions (no acute toxicity and no dermal toxicity at human-relevant doses), and characterization of uncertainties associated with the lack of cancer bioassays, including the application of elements of the Rethinking Carcinogenicity Assessment for Agrochemicals Project.
After consideration of comments received from the public on the draft risk evaluation and input from the Scientific Advisory Committee on Chemicals (SACC) peer review, EPA will issue a final risk evaluation for HHCB. Under TSCA section 6, EPA must use the final risk evaluation as a basis to determine, based on the weight of scientific evidence, whether or not the chemical presents an unreasonable risk to human health or the environment under the chemical's COUs. This includes risks to subpopulations who may be at greater risks than the general population, such as children and workers. TSCA prohibits EPA from considering non-risk factors (
For more information about the TSCA risk evaluation process for existing chemicals, go to
Phthalic anhydride is a white flaky solid primarily used as a chemical intermediate in the manufacture of various products such as plasticizers and resins. Phthalic anhydride is also found as an ingredient in oil-based consumer products such as paints and coatings and as a hardener in adhesives and sealants. Workers may be exposed to phthalic anhydride through dermal contact or inhalation of dusts or mist generated from spray applications when making or using these products. Consumers may be exposed to phthalic anhydride through dermal contact or through mist generated from spray applications during intended product use (
In December 2019, EPA announced its designation of phthalic anhydride (Docket ID: EPA-HQ-OPPT-2018-0459) as a high priority substance for risk evaluation under TSCA (84 FR 71924 (FRL-10003-15)). In April 2020, EPA published and sought public comment on the draft scope of the phthalic anhydride risk evaluation (85 FR 22733 (FRL-10008-05-OCSPP)), and, after considering public comments, issued the final scope on September 4, 2020 (85 FR 55281 (FRL-10013-90-OCSPP)).
EPA seeks feedback on the assessment of risk presented in the draft risk evaluation for phthalic anhydride, a copy of which is available in the docket, and encourages all potentially interested parties, including individuals, governmental and non-governmental organizations, non-profit organizations, academic institutions, research institutions, and private sector entities to comment on the draft risk evaluation. To the extent possible, the Agency asks commenters to please cite any public data related to or that support comments provided, and to the extent permissible, describe any supporting data that is not publicly available.
EPA welcomes specific input on each section of the draft risk evaluation, particularly input on the following:
• Workplace exposure information including air monitoring data including task-based exposure durations, air monitoring methods (including uncertainties in existing methods such as OSHA 90), engineering controls, personal protective equipment practices and usage;
• EPA's approach to estimate dermal exposures from spray products for consumers and workers;
• EPA's approach to estimate dermal exposure from contact with solids for occupational exposure scenarios using the study by Lansink (1996), including additional studies or information that may inform dermal loading for contact with solids;
• EPA's approach to determine dermal loadings for products using the U.S. EPA (1992b) study wipe experiment, which incorporates wiping off the excess product with a saturated cloth after application as advised in the products' use instructions (
• Product-specific phthalic anhydride concentration ranges and use patterns, including updated publicly available Safety Data Sheets related to the use of phthalic anhydride in products considered under COUs in this assessment (
• EPAs approach to assess inhalation exposures for acute exposure durations of phthalic anhydride from consumer COUs using an 8-hour time weighted average (TWA);
• EPAs approach to assess inhalation exposures for acute exposure durations of phthalic anhydride using an 8-hour TWA rather than a short-term inhalation
• EPA's derivation of a STEV and occupational exposure values (OEV) and the scientific robustness of deriving OEVs and STEVs based on the dataset and the endpoints (
• Newly available or recently published hazard/toxicology studies relevant to phthalic anhydride;
• The selection of environmental hazard thresholds based on a relatively small hazard datasets;
• The strengths and uncertainties of the methodology and data used to derive acute and chronic concentration of concern for aquatic thresholds and the strength of the data to support the quantitative aquatic assessment;
• The following weight of evidence conclusions from the human health hazard assessment: (1) phthalic anhydride and
• The underlying modeling and science used to inform the inhalation toxicokinetics of phthalic anhydride (See Appendix F in the Draft Human Health Hazard Assessment).
After consideration of comments received from the public on the draft risk evaluation and input from the SACC peer review, EPA will issue a final risk evaluation for phthalic anhydride. Under TSCA section 6, EPA must determine in the final risk evaluation, based on the weight of scientific evidence, whether or not the chemical presents an unreasonable risk to human health or the environment under the chemical's conditions of use. This includes consideration of risks to potentially exposed susceptible subpopulations who may be at greater risks than the general population, such as children and workers. TSCA prohibits EPA from considering non-risk factors (
For more information about the TSCA risk evaluation process for existing chemicals, go to
Export-Import Bank of the United States
Notice
This Notice is to inform the public, in accordance with the Export-Import Bank Act of 1945, as amended, the Export-Import Bank of the United States (“EXIM”) has received an application for final commitment for a long-term loan or financial guarantee in excess of $100 million. Comments received within the comment period specified below will be presented to the EXIM Board of Directors prior to final action on this Transaction.
Comments must be received on or before May 11, 2026 to be assured of consideration before final consideration of the transaction by the Board of Directors of EXIM.
Comments may be submitted through
To the extent that EXIM is reasonably aware, the financing is not expected to relate to items to be exported that produce exports or provide services in competition with the exportation of goods or provision of services by a United States industry.
The Commission gives notice that it has formally requested that the parties to the below-listed agreement provide additional information pursuant to 46 U.S.C. 40304(d). This action prevents an amendment to the listed agreement from becoming effective as originally scheduled. Interested parties may submit comments, relevant information, or documents regarding this agreement to the Secretary by email at
By order of the Federal Maritime Commission.
In accordance with the Paperwork Reduction Act of 1995, the Centers for Disease Control and Prevention (CDC) has submitted the information collection request titled “Maritime-related Public Health Activities” to the Office of Management and Budget (OMB) for review and approval. CDC previously published a “Proposed Data Collection Submitted for Public Comment and Recommendations” notice on January 15, 2026 to obtain comments from the public and affected agencies. CDC received one comment related to the previous notice. This notice serves to allow an additional 30 days for public and affected agency comments.
CDC will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that:
(a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(c) Enhance the quality, utility, and clarity of the information to be collected;
(d) Minimize the burden of the collection of information on those who are to respond, including, through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
(e) Assess information collection costs.
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570. Comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Maritime-related Public Health Activities (OMB Control 0920-1335)—Reinstatement—National Center for Emerging and Zoonotic Infectious Diseases (NCEZID), Centers for Disease Control and Prevention (CDC).
The goal of this information collection is to ensure that, consistent with the authorities in the Public Health Service Act and CFR parts 70 and 71, CDC is able to prevent the introduction, transmission and spread of communicable diseases from foreign countries into the United States or from one state or possession into any other state or possession.
This information collection focuses on: (1) ensuring ill travelers and deaths on maritime conveyances (operating or intending to operate in U.S. waters) are reported to CDC as required under regulation; and (2) gathering information needed to help CDC, ships, and state and local health departments understand if they need to conduct public health response and follow-up in the event a traveler on a ship is known to be infectious (confirmed case) or potentially infectious (suspected case), presenting a risk of disease spread to others. Travelers would include ship's passengers or crew, as well as travelers who have disembarked or were removed from the ship due to illness or death.
Historically, some of these maritime-related information collection activities were approved under different OMB control numbers including Maritime Illness and Death Reporting (OMB Control No. 0920-0134, Exp. 3/31/2026), and Outcome Reporting information collections (OMB Control No. 0920-0900, Exp. 9/30/2027). With this current submission, CDC is requesting a Revision that will consolidate maritime-related information collections in CDC's National Center for Emerging and Zoonotic Infectious Diseases (NCEZID) under one OMB Control Number, thereby, improving efficiency of CDC's maritime activities PRA submission process. As such, CDC is recommending revising the previous title from “Phased Approach to the Resumption of Cruise Ship Passenger Operations,” to “Maritime-related Public Health Activities.” CDC requests OMB approval for an estimated 836 annual burden hours.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies the opportunity to comment on a proposed information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled the National Center for Health Statistics (NCHS) Data Detectives Camp. The goal of this proposed activity is to facilitate outreach efforts in the fields of math and science to middle school-aged children and those who support them.
CDC must receive written comments on or before June 15, 2026.
You may submit comments, identified by Docket No. CDC-2026-0595 by either of the following methods:
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To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; Telephone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
National Center for Health Statistics (NCHS) Data Detectives Camp—New—National Center for Health Statistics (NCHS), Centers for Disease Control and Prevention (CDC).
NCHS is authorized to collect data under Section 306 of the Public Health Service Act (42 U.S.C. 242k). Federal statistical agencies are tasked with disseminating relevant and timely statistical information nationwide. To engage students and promote statistical literacy, new strategies may be needed, including STEM-focused enrichment opportunities. NCHS has a history of reaching out to young people to encourage their interest in Science, Technology, Engineering and Math (STEM). Examples of past involvement include adopting local schools, speaking at local colleges, conducting a Statistics Day for high school students, and conducting the NCHS Data Detectives Camp for middle school students.
In prior years, these activities have been approved under a Generic Information Collection titled Youth Outreach Generic Clearance for the National Center for Health Statistics
Information will be collected through application and registration forms, teacher recommendation forms, and evaluation forms. OMB approval is requested for three years to conduct the NCHS Data Detectives Camp. The burden table below represents each type of respondent for one annual cycle of data collection (which includes a maximum of four camps). CDC requests OMB approval for an estimated 1,100 annualized burden hours. Participation is voluntary and there is no cost to respondents other than their time.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other federal agencies the opportunity to comment on a continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled U.S. Tuberculosis Follow-Up Worksheet for Newly Arrived Persons and U.S. Status Adjusters with Tuberculosis Classifications. This Tuberculosis (TB) follow-up worksheet is designed to capture TB examination information for persons newly arrived in the U.S. and for U.S. status adjusters with TB classifications and will provide outcomes for improving national TB prevention programs.
CDC must receive written comments on or before June 15, 2026.
You may submit comments, identified by Docket No. CDC-2025-0563 by either of the following methods:
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To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; Telephone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Information Collection for The Electronic Disease Notification (EDN) System Tuberculosis Follow-Up Worksheet for Newly-Arrived Persons and US Status Adjusters with Overseas Tuberculosis Classifications (OMB Control No. 0920-1238)—Reinstatement—National Center for Emerging and Zoonotic Infectious Diseases (NCEZID), Centers for Disease Control and Prevention (CDC).
This information is designed to assist CDC in fulfilling its regulatory responsibility to prevent the importation and spread of communicable diseases from foreign countries (42 CFR part 71) and interstate control of communicable diseases in humans (42 CFR part 70). Section 361 of the Public Health Service (PHS) Act (42 U.S.C. 264) authorizes the Secretary of Health and Human Services to make and enforce regulations necessary to prevent the introduction, transmission, or spread of communicable disease from foreign countries into the United States. Under its delegated authority in 42 CFR parts 70 and 71, the Division of Global Migration Health (DGMH) works to fulfill this responsibility through numerous activities that include monitoring the arrival of persons with Class A and Class B TB conditions and coordinating domestic follow-up examinations to prevent new transmission of TB in the United States. The TB follow-up worksheet is designed to capture U.S. TB examination data for newly arrived persons and U.S. status adjusters with Classification A and B for TB. The information collected by the TB follow-up worksheet will provide a method of performing several TB prevention activities, both international and domestic in nature.
The U.S. foreign-born population had the highest incidence of TB compared to the U.S. non-foreign-born population. CDC strongly recommends incoming persons receive follow-up examinations for TB in the U.S. This data collection will facilitate the methodical collection of TB follow-up outcome data to monitor and track persons with overseas Classification A and B for TB and will assist in the national effort to prevent new transmission of TB. To accurately determine rates of TB, recent U.S. arrivals receive domestic follow-up evaluations. U.S. health departments will provide domestic follow-up outcome information to CDC. Without this data, DGMH will not have a method of tracking and monitoring newly arrived persons with overseas Classification A or B for TB. DGMH will use information reported on the worksheet to ensure that TB programs are effectively tracking new foreign arrivals and coordinating follow-up evaluations with local clinicians. To monitor and evaluate domestic TB program performance, CDC needs to collect data on all elements of TB domestic follow-up evaluations including chest x-rays, diagnoses, and U.S. treatment outcomes.
DGMH staff along with other federal partners will also use this information to evaluate panel physician/civil surgeon performance and prevention activities. To evaluate panel physician/civil surgeon performance and TB prevention activities, CDC needs to know the results of domestic chest x-rays (CXR), CXR comparison sputum smears and cultures, and TB diagnoses along with domestic reviews of overseas treatment.
Modifications to the previously approved data collection include: (1) changes to the number of respondents due to more applicants requesting access to the EDN system since the last approval; (2) a change to the number of respondents due to addition of U.S. status adjusters with TB classification and data collection efficiencies (specifically using an electronic rather than paper collection system); and (3) minor adjustments made to the information collection in order to provide more clarity through enhancement of particular fields. CDC requests OMB approval for an estimated 3,626 annual burden hours. There are no costs to respondents other than their time to participate.
In accordance with the Paperwork Reduction Act of 1995, the Centers for Disease Control and Prevention (CDC) has submitted the information collection request titled “Poison Center Collaborations for Public Health Emergencies (PCCPHE)” to the Office of Management and Budget (OMB) for review and approval. CDC previously published a “Proposed Data Collection Submitted for Public Comment and Recommendations” notice on January 15, 2026 to obtain comments from the public and affected agencies. CDC received three comments related to the previous notice. This notice serves to allow an additional 30 days for public and affected agency comments.
CDC will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that:
(a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(c) Enhance the quality, utility, and clarity of the information to be collected;
(d) Minimize the burden of the collection of information on those who are to respond, including, through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
(e) Assess information collection costs.
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570. Comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Poison Center Collaborations for Public Health Emergencies (PCCPHE) (OMB Control No. 0920-1166, Exp. 4/30/2026)—Revision—National Center for Environmental Health (NCEH), Centers for Disease Control and Prevention (CDC).
The Centers for Disease Control and Prevention (CDC) is requesting a three-year Paperwork Reduction Act (PRA) Revision of the Generic Information Collection Request (Generic ICR) titled Poison Center Collaborations for Public Health Emergencies (PCCPHE) (OMB Control No. 0920-1166; Expiration date 04/30/2026).
CDC's key partner is America's Poison Centers
When a public health emergency of interest emerges in NPDS, the CDC and America's Poison Centers
The purpose of this Generic ICR is to create a timely mechanism to allow poison centers, supported by CDC, to follow-up with callers during select public health emergencies on exposure and health. These PCCPHE Generic information collections (GenICs) will obtain information on sources of exposure, scenario of exposure, health seeking behaviors following exposure, and awareness of health communication messaging. These additional data can help CDC identify interventions to improve health messaging meant to reduce exposure; improve disaster and emergency response; and prevent future incidents for the specific area or incident of interest.
Trained poison center staff will conduct the call-back telephone survey or will facilitate the call-back web survey, after administering consent. Respondents will include individuals who call poison centers about exposures related to the select public health emergencies. These respondents include adults, 18 years and older; adolescents, 15 to less than 18 years; and parents or guardians on behalf of their children less than 15 years of age.
In 2019, a PCCPHE GenIC, titled “Risk Factors for Harmful Algal Blooms (HABs),” was conducted to identify sources of and risk factors for HAB exposures. New information gained about HAB exposures were used to improve HAB incident response, communication, and outreach at the state and national level.
No PCCPHE GenICs were conducted during the past three-year approval period. However, two NPDS-related follow-up studies were implemented during the 2020-2023 approval period using the Secretary's Public Health Emergency PRA Waiver for COVID-19. During a non-pandemic situation, these two studies would have used this Generic ICR. These studies assessed unintentional exposures associated with cleaning products (
No revisions affecting public burden are proposed, at this time. CDC requests OMB approval for an estimated 250 annual burden hours. There is no cost to the respondents other than their time to participate.
Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS).
Notice.
This notice announces the first biannual Healthcare Common Procedure Coding System (HCPCS) Level II public meeting of 2026 to discuss the CMS' preliminary coding, Medicare benefit category, and Medicare payment determinations, if applicable, for new revisions to the HCPCS Level II code set for non-drug and non-biological items and services, as well as how to register for the meeting.
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Sundus Ashar, (410) 786-0750,
On December 21, 2000, Congress enacted the Medicare, Medicaid, and State Children's Health Insurance Program (SCHIP) Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554). Section 531(b) of BIPA mandated that the Secretary establish procedures that permit public consultation for coding and payment determinations for new durable medical equipment (DME) under Medicare Part B of title XVIII of the Social Security Act (the Act). In the November 23, 2001
In 2020, we implemented changes to our HCPCS Level II coding procedures, including the establishment of quarterly coding cycles for drugs and biological products and biannual coding cycles for non-drug and non-biological items and services.
In the December 28, 2021
The list of topics for discussion, which will become available in the upcoming days at
If all of the agenda items are not addressed during the primary meeting date specified in the
Every speaker must declare at the beginning of their presentation during the meeting, as well as in their written summary, whether they have any financial involvement with the applicant and manufacturer, if different, of the item that is the subject of the HCPCS Level II application, or with any competitors of that manufacturer with respect to the item. This includes any payment, salary, remuneration, or benefit provided to the speaker by the applicant, manufacturer, or any such competitors.
Each applicant that submitted a HCPCS Level II code application that will be discussed at the public meeting is permitted to designate a primary speaker. Fifteen minutes is the total time interval for a primary speaker per agenda item. Any unused time from the primary speaker will be forfeited and cannot be delegated to another speaker. Primary speakers must register as a
Any individual related to the public meeting agenda item, including but not limited to an employee, competitor, insurer, public consumer, or other interested party, may register as a 5-minute speaker by deadline specified in the
All individuals who plan to attend the public meetings to listen and do not plan to speak may access the public meeting using the live stream link posted on the HCPCS Level II website. Alternatively, attendees can register online by the deadline specified in the
Individuals who require special assistance must register and request special assistance services by the deadline specified in the
The registration instructions for the HCPCS Level II public meeting will be posted in the Guidelines for Participation in HCPCS Level II Public Meetings document on the CMS website
• Name.
• Company name (if applicable).
• Email address.
• Topic item and application number (for speakers only).
• Whether the registrant will be attending in person or virtually.
• Whether the registrant is a foreign national (for in-person attendees only).
• Any special assistance requests.
• Whether the registrant is a primary speaker or a 5-minute speaker for an agenda item.
• Whether the primary speaker will use a PowerPoint presentation.
All in-person attendees should monitor the website at
Vehicle screening is conducted and all persons in the vehicle must present a valid ID. Visitors may only enter from Security Boulevard, using the far-right entrance lane to the campus. Parking on campus is increasingly limited, and visitors are not guaranteed a parking space with registration. Visitors are encouraged to consider means of arrival, such as public transportation, taxi, or other ride-share arrangements. Visitors will be required to go through x-ray screening similar to screening at a United States airport, or alternate arrangements as instructed and permitted by security. A cafeteria is available at CMS.
The primary and 5-minute speaker(s) must email a brief, written summary (one paragraph) of their comments and conclusions. Written comments from anyone, including the primary and 5-minute speaker(s), will only be accepted when emailed to the address specified in the
All participants should regularly check the CMS website for updates and final agenda information at
The HCPCS section of the CMS website also includes details regarding the public meeting process for new revisions to the HCPCS Level II code set, including guidelines for an effective presentation. The HCPCS section of the CMS website also contains a document titled “HCPCS Level II Coding Procedures (PDF),” which is a description of the HCPCS Level II coding process, including a detailed explanation of the procedures CMS uses to make HCPCS Level II coding determinations.
When CMS refers to a HCPCS Level II code or HCPCS Level II coding application above, CMS may also be referring to circumstances when a HCPCS Level II code has already been issued, but a Medicare benefit category and/or payment has not been determined. CMS is working diligently to address Medicare benefit category and payment determinations for new items and services that may be DME, prosthetic devices, orthotics and prosthetics, therapeutic shoes and inserts, surgical dressings, or splints, casts, and other devices used for reductions of fractures and dislocations under Medicare Part B.
This document does not impose information collection requirements, that is, reporting, recordkeeping, or third-party disclosure requirements. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The Administrator of the Centers for Medicare & Medicaid Services (CMS), Mehmet Oz, having reviewed and approved this document, authorizes Trenesha Fultz-Mimms, who is the Federal Register Liaison, to electronically sign this document for purposes of publication in the
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the Sickle Cell Disease Advisory Committee.
The meeting will be open to the public, with attendance limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the Contact Person listed below in advance of the meeting. The open session will be videocast and can be accessed from the NIH Videocasting and Podcasting website (
Registration is not required to attend the open portion of this meeting.
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
Information is also available on the Institute's/Center's home page:
National Institutes of Health.
Notice.
The National Heart, Lung and Blood Institute (NHLBI), National Institutes of Health, Department of Health and Human Services, is contemplating the grant of an exclusive patent license to Septune, Inc., located in San Juan, Puerto Rico, to practice the inventions embodied in the patent applications listed in the
Only written comments and/or applications for a license which are received by the NHLBI Office of Technology Transfer and Development May 14, 2026 will be considered.
Requests for copies of the patent applications, inquiries, and comments relating to the contemplated exclusive patent license should be directed to: Michael Shmilovich, Esq., MS, CLP Acting Director, phone number 301-435-5019 or
The following and all continuing U.S. and foreign patents/patent applications thereof are the intellectual properties to be licensed under the prospective license to Septune, Inc.:
The patent rights in these inventions have been assigned to the Government of the United States of America. The prospective exclusive patent license territory may be worldwide and in a field of use limited to catheter-based myocardial myotomy systems for the treatment of cardiovascular disease.
The invention described in E-194-2025 for which we currently have a provisional patent application covers a variable-depth electrosurgical myotomy catheter system configured to perform a longitudinal endomyocardial myotomy, also referred to as septal scoring along the midline endocardium (SESAME). The catheter system is configured to slice the “septal hump” causing symptomatic left ventricular outflow tract obstruction in hypertrophic cardiomyopathy (HCM), a common congenital heart disease in adults and children. The system may have further applications in creating space to allow non-surgical transcatheter mitral valve implantation (TMVR), which excludes more than half of TMVR candidates, and potentially reduces left ventricular stiffness causing heart failure with preserved ejection fraction (HFpEF), a widely prevalent disease.
The invention described in E-166-2022, for which we now have pending national stage applications in the US and Europe, pertains to a controlled-depth myotomy catheter system configured to perform a longitudinal endomyocardial myotomy (also referred to as septal scoring along the midline endocardium (SESAME)) precisely and reproducibly with less operator skill than previous SESAME procedures, less reliance on image guidance, and lowered procedure times. SESAME is conventionally accomplished by navigating a 0.014″ guidewire under x-ray fluoroscopy and ultrasound guidance via a retrograde transaortic guiding catheter through the interventricular septum. A straight rigid engagement guidewire engages the basal
This notice is made in accordance with 35 U.S.C. 209 and 37 CFR part 404. The prospective exclusive patent license will be royalty bearing and may be granted unless within thirty (30) days from the date of this published notice, the NHLBI receives written evidence and argument that establishes that the grant of the license would not be consistent with the requirements of 35 U.S.C. 209 and 37 CFR part 404.
Complete applications for a license in the prospective field of use that are timely filed in response to this notice will be treated as objections to the grant of the contemplated exclusive patent license. Comments and objections submitted to this notice will not be made available for public inspection and, to the extent permitted by law, will not be released under the
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the Board of Scientific Counselors, National Institute of Dental and Craniofacial Research.
The meeting will be closed to the public as indicated below in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended for the review, discussion, and evaluation of individual intramural programs and projects conducted by the National Institute of Dental & Craniofacial Research, including consideration of personnel qualifications and performance, and the competence of individual investigators, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
(Catalogue of Federal Domestic Assistance Program No. 93.121, Oral Diseases and Disorders Research, National Institutes of Health, HHS)
Office of the Assistant Secretary for Community Planning and Development (CPD), U.S. Department of Housing and Urban Development (HUD).
Notice.
This notice serves as guidance to the “Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate” (NSPIRE) rule published May 11, 2023. The rule provided that HUD publish in the
HUD's National Standards for the Physical Inspection of Real Estate (NSPIRE) final rule for Community Planning and Development (CPD) programs was effective October 1, 2023. In accordance with HUD's
Caitlin Renner, Acting Director, Program Policy Division, Department of Housing and Urban Development, 2415 Eisenhower Avenue, Alexandria, VA 22314; email
Prior to implementation of the NSPIRE rule, there were two inspection models used and referenced in the HOME and HTF regulations: the Housing Quality Standards (HQS), which were found at 24 CFR 982.401 and were applicable to units occupied by tenants receiving HOME tenant based rental assistance; and the Uniform Physical Condition Standards (UPCS), which were found at 24 CFR 5.703 with the dictionary of individual UPCS deficiencies contained in a
On May 11, 2023, HUD published the final rule “Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate” (88 FR 30442) to align expectations of housing quality and consolidate inspection standards across HUD programs. On January 6, 2025, HUD published “HOME Investment Partnerships Program: Program Updates and Streamlining” (90 FR 746) (2025 HOME final rule) which provides additional physical condition requirements and flexibilities for inspections of HOME-assisted projects.
Consistent with the preamble to the final rule and the conforming changes at 24 CFR parts 92 and 93 and additional updates in the 2025 HOME final rule, HUD is publishing this
The NSPIRE final rule is effective for projects to which HOME or HTF funds are committed on or after the effective date of October 1, 2023. However, participating jurisdictions and grantees are not required to comply with changes in the NSPIRE rule until the compliance date. In accordance with the “Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE); Extension of NSPIRE Compliance Date for HCV, PBV, Section 8 Moderate Rehab and CPD Programs” (89 FR 55645), the compliance date was extended until October 1, 2025. Subsequently, HUD's notice at 90 FR 46912 further extended the compliance date to October 1, 2026. The HOME final rule was effective on February 5, 2025, with a one-year compliance period. However, the notice delayed the effective date of the 2025 HOME final rule until April 20, 2025, with a one-year compliance period. Due to the delay in publication of this notice, the compliance date for HOME and HTF is further extended to 365 days from the publication of this notice.
To implement the requirements described in this notice, it will be necessary for participating jurisdictions and grantees to make extensive revisions to their written rehabilitation and/or property standards and to train local inspectors on such policies. Consequently, HUD has determined that participating jurisdictions and grantees require at least 12 months for implementation before compliance is possible. Therefore, for all activities with written agreements executed prior to the compliance date, participating jurisdictions and grantees may continue to comply with the previous standards as defined in the HOME and HTF regulations at 24 CFR parts 92 and 93, respectively.
NSPIRE is only applicable to HOME- and HTF-assisted projects with new commitments made on or after the effective date. Because participating jurisdictions and grantees are required to manage the day-to-day operations of their programs in accordance with all program requirements and written agreements as required for HOME and HTF at 24 CFR 92.504(a) and 93.404(a), respectively, new regulatory requirements cannot be imposed on project owners unless permitted by the project written agreement. However, HUD encourages participating jurisdictions and grantees to standardize
The conforming language in the HOME and HTF regulations make several notable changes to the program requirements. First, HUD clarified that “decent, safe, and sanitary” as referenced in Section 211 of the HOME statute, Title II of the Cranston-Gonzalez National Affordable Housing Act of 1990, as amended (42 U.S.C. 12701
Additionally, the HOME and HTF programs apply the requirements at 24 CFR 5.703 and the conforming amendments make clear that participating jurisdictions and grantees are not subject to the requirements at 24 CFR 5.705 through 5.713, which include, but are not limited to, the NSPIRE inspection procedures, administrative processes, and the scoring and ranking, and appeals processes. These procedural requirements are generally applicable to inspections under various programs overseen by the HUD Office of Multifamily Housing and Public and Indian Housing but do not apply to HOME and HTF.
The conforming amendments in HOME and HTF at 24 CFR 92.251 and 93.301 apply the affirmative requirements at 24 CFR 5.703 to rehabilitation projects with two exceptions. First, the carbon monoxide detection requirements at 24 CFR 5.703(b) and (d) do not apply at this time. These requirements were added to the NSPIRE final rule after the public comment period to comply with statutory provisions imposed on several HUD programs but not the HOME or HTF programs. Consequently, HUD will address carbon monoxide detection requirements in future HOME and HTF rulemaking to provide the public with an opportunity to comment. In the meantime, HUD reminds participating jurisdictions and grantees that they must comply with state or local carbon monoxide detection requirements and strongly encourages participating jurisdictions and grantees to incorporate carbon monoxide detection requirements in their written property standards, even when not required by code or HUD regulation.
The second exception is for single room occupancy (SRO) housing. SRO housing projects are only required to comply with 24 CFR 5.703(d), which outlines affirmative requirements for the unit, to the extent that those components exist within the unit. For example, the HOME and HTF definitions of SRO housing do not require that SRO units contain both kitchen and sanitary facilities. In the case of new construction, one or the other is required, and for rehabilitation or acquisition projects neither component is required within an SRO unit. When a participating jurisdiction or grantee is constructing or rehabilitating an SRO unit in compliance with the program regulations and the component is not present in the SRO housing unit, the SRO housing unit is not required to comply with the provisions of 24 CFR 5.703(d)(1) that address the missing components. These provisions require that the unit must have hot and cold running water in both the bathroom and kitchen, including an adequate source of safe drinking water in the bathroom and kitchen.
Similarly, participating jurisdictions and grantees will not be required to comply with the requirements at 24 CFR 5.703(d)(4) that the unit contain a kitchen area with a sink, cooking appliance, refrigerator, food preparation area, and food storage area apply for the missing components. Lastly, the participating jurisdictions and grantees will not be required to comply with 24 CFR 5.703(d)(2), which requires the unit to include its own bathroom or sanitary facility—containing a sink, a bathtub or shower, and an interior flushable toilet—that is in proper operating condition and usable in privacy. However, if the SRO unit has kitchen and/or sanitary facilities, the NSPIRE standards apply to those components.
For rehabilitation and acquisition of standard housing projects, the regulations now provide that HUD must establish lists of specific deficiencies, which must not exist in HOME- or HTF-assisted housing upon project completion. The specific deficiency lists must be based on the national standards for the condition of HUD housing at 24 CFR 5.703, and HUD must publish them in the
Because the previous version of the HOME rule applied HQS to units occupied by tenants receiving HOME TBRA, the conforming changes are significant for TBRA programs. The rule requires that a participating jurisdiction establish written property standards for a HOME TBRA program, which at a minimum must comply with federal lead-based paint requirements, and with state and local codes and ordinances, including those for health and safety. In the absence of state or local habitability or property condition codes, a participating jurisdiction's TBRA property standards must provide that the project will not contain specific deficiencies established by HUD. Similarly, the rule requires that participating jurisdictions require that HOME-assisted rental housing comply with state and local codes and ordinances during the period of affordability, and in the absence of such codes and ordinances the housing must not contain the specific deficiencies established by HUD.
The HTF regulations are slightly different in that they require that at a minimum, the grantee's ongoing property standards for rental housing during the period of affordability must provide that the property does not contain the specific deficiencies established by HUD whether or not state or local codes apply.
The specific deficiency lists for all applicable HOME and HTF activities must be based on the national standards for the condition of HUD housing at 24 CFR 5.703, and HUD must publish them in the
Finally, for ongoing inspections of HTF-assisted rental properties during the period of affordability, the inspection requirements at 93.404(d) require HUD to set forth guidance that explains “a statistically valid sample of units appropriate to the size of the HTF-assisted project.”
Affirmative requirements are the basic requirements that must be met for HOME- and HTF-assisted housing in accordance with the NSPIRE rule. There are additional requirements contained in 24 CFR 92.251 that apply to HOME units pursuant to the 2025 HOME final rule. These requirements will be described later in this Notice. The NSPIRE rule provides the minimum, or affirmative, habitability requirements for each inspectable area at 24 CFR
1. The inside area must include at least one battery-operated or hard-wired smoke detector, in proper working condition, on each level of the property.
2. For the inside area, any outlet installed within six feet of a water source must be a ground-fault circuit interrupter (GFCI) protected.
3. The inside area must have a guardrail when there is an elevated walking surface with a drop of 30 inches or greater measured vertically.
4. The inside area must have permanently mounted light fixtures in any kitchen and each bathroom.
5. The inside area may not contain unvented space heaters that burn gas, oil, or kerosene.
1. For the outside area, outlets within six feet of a water source must be GFCI protected and;
2. The outside area must have a guardrail when there is an elevated walking surface with a drop of 30 inches or greater measured vertically.
1. The unit must have hot and cold running water in both the bathroom and kitchen, including an adequate source of safe drinking water in the bathroom and kitchen.
2. The unit must include its own bathroom or sanitary facility that is in proper operating condition and usable in privacy. It must contain a sink, a bathtub or shower, and an interior flushable toilet.
3. The unit must meet the below standards or follow the specifications of National Fire Protection Association (NFPA) 72, which satisfies the affirmative requirements for smoke detectors.
a. The unit must include at least one battery-operated or hard-wired smoke detector, in proper working condition, in the following locations:
• On each level of the unit.
• Inside each bedroom.
• Within 21 feet of any door to a bedroom measured along a path of travel.
• Where a smoke detector installed outside a bedroom is separated from an adjacent living area by a door, a smoke detector must also be installed on the living area side of the door.
b. If the unit is occupied by any hearing-impaired person, the smoke detectors must have an alarm system designed for hearing-impaired persons.
4. The unit must have a living room and kitchen area with a sink, cooking appliance, refrigerator, food preparation area, and food storage area;
5. The unit must have two working outlets or one working outlet and a permanent light within all habitable rooms;
6. Outlets within six feet of a water source must be GFCI protected;
7. For climate zones designated by the Secretary through notice, the unit must have a permanently installed heating source. No units may contain unvented space heaters that burn gas, oil, or kerosene. In accordance with the NSPIRE Standards notice (88 FR 40832
8. The unit must have a guardrail when there is an elevated walking surface with a drop off of at least 30 inches or greater measured vertically.
9. The unit must have a permanently mounted lighting fixture in the kitchen and each bathroom.
The HOME statute and the HOME and HTF regulations require that a project must comply with all zoning ordinances and meet all state and local codes, ordinances, and standards, which can vary by the type of housing or activity undertaken. Applicable state and local codes include local zoning and building codes as well as state and local occupancy and property maintenance codes. Generally, there are two functional categories of codes:
• Codes that regulate “voluntary” construction or development activity (
• Codes that compel an owner to take action (
NSPIRE at 24 CFR 5.703(f) provides that the NSPIRE standards for the condition of HUD Housing do not supersede state and local codes. Therefore, the NSPIRE standards, as applicable in the HOME and HTF regulations, do not replace or override state and local codes but may impose additional requirements not addressed by state and local codes.
The NSPIRE final rule at 24 CFR 5.705(a) requires that HUD establish NSPIRE inspection standards through notice. The final rule also established a new framework for inspection, which focuses on three areas—common areas and building systems inside the building that are not inside a unit (Inside), the site, exterior building components and systems outside the building (Outside) and interior components within the individual dwelling units where the resident lives (Unit) of HUD housing and ensures that they are “functionally adequate, operable, and free of health and safety hazards.” The requirements in 24 CFR 5.705 do not apply to HOME and HTF projects. Instead, 24 CFR 92.251 and 93.301 each require HUD to publish specific deficiency lists that will apply to certain HOME and HTF housing projects.
This notice is a complementary document which establishes the specific deficiencies that must be corrected before HOME or HTF project completion or during the period of affordability as required by the participating jurisdiction's or grantee's property standards. HUD's goal for the HOME and HTF property standards requirements is to align with NSPIRE to the extent feasible and practical given the unique circumstances of each eligible activity and tenure type. Consequently, the NSPIRE Standards notice (88 FR 40832), and subsequent versions, established the universe of deficiencies that HUD may apply to HOME and HTF. This Notice does not establish new deficiencies. However, HUD acknowledges that the deficiencies in this notice that apply to HOME and HTF may differ due to frequent updates of specific deficiencies in the NSPIRE Standards notice (88 FR 40832). Consequently, HUD's intent is to update this notice periodically to remain consistent with subsequent versions of the NSPIRE Standards notice (88 FR 40832), to the extent feasible. Any changes will be published through notice in the
To determine the appropriateness of applying each NSPIRE deficiency to each HOME or HTF eligible activity, HUD analyzed each NPSIRE standard and considered several factors, including:
• The severity of the deficiency: low, moderate, severe, or life threatening.
• Whether HOME or HTF funds could be used to fix the deficiency, which applies in rehabilitation projects at the time of rehabilitation but not acquisition of standard housing projects or HOME TBRA units.
• Whether the deficiency is considered a low health and safety risk and considered a pass for a Housing Choice Voucher (HCV) program.
• The impact of the deficiency on the assisted occupant's unit, particularly in the homeownership context.
• For HOME TBRA and homebuyer acquisition, whether the owner was likely to correct the deficiency, because their failure to do so would remove the unit from the available inventory for HOME-assisted projects.
• And, for homebuyer acquisition, whether buyers should retain some choice to repair certain minor deficiencies at a later date by excluding such deficiencies from the HOME and HTF requirements (to ensure an adequate availability of homebuyer options, given the constrained housing market).
The specific deficiency lists are applicable based on the type of activity undertaken, the tenure type of the project, and the structure of the building. For example, to streamline the inspection process for single unit structures, HUD will not require any of the “Inside” deficiencies from the checklists to be inspected because the entire interior of the building constitutes the “Unit” and therefore the “Inside” inspectable area is not applicable. The lists are attached as Appendices A-D as follows:
The HOME regulations at 24 CFR 92.251(b) and 92.251(f) and the HTF regulations at 24 CFR 93.301(b) and 93.301(e) require a participating jurisdiction's or grantee's rehabilitation and ongoing property standards for both rental housing and HOME TBRA units to specify the life-threatening deficiencies that must be addressed immediately if a housing unit is occupied. In addition, NSPIRE at 24 CFR 5.703(e) requires that the inside, outside, and unit must be free of health and safety hazards that pose a danger to residents.
Consistent with the Housing Opportunity Through Modernization Act of 2016 (Pub. L. 114-201) (HOTMA), HUD published a list of life-threatening conditions (“HOTMA LT List”) through notice in “Housing Opportunity Through Modernization Act of 2016: Implementation of Various Section 8 Voucher Provisions” (82 FR 5458). In addition, HUD included the HOTMA LT List in the NSPIRE Standards Notice (88 FR 40832), and subsequent versions, and is attached to this notice as Appendix E. In the NSPIRE Standards, deficiencies which are considered life-threatening for purposes of the Housing Choice Voucher (HCV) and Project-Based Voucher (PBV) programs are noted with a 24-hour HCV Correction Timeframe for occupied units.
While neither the HOTMA LT List nor the 24-hour HCV Correction Timeframe formally applies to HOME or HTF, participating jurisdictions and grantees are still required to specify life-threatening deficiencies in their standards. Accordingly, HUD strongly encourages participating jurisdictions and grantees to adopt the HOTMA LT List as part of their rehabilitation, ongoing rental, and HOME TBRA property standards to meet HOME and HTF health and safety requirements. In such instances, participating jurisdictions and grantees may also specify additional deficiencies as life-threatening.
• For rental housing, a participating jurisdiction's or grantee's rehabilitation standards must require an estimate (based on age and condition) of the remaining useful life of these major systems, upon project completion. If the remaining useful life of one or more major system is less than the applicable period of affordability, a participating jurisdiction or grantee's standards must ensure that a replacement reserve is established and that monthly payments to the reserve are adequate to repair or replace the systems as needed. For multifamily housing projects with 26 total units or more, a participating jurisdiction or grantee's standards must require that this determination be made through a capital needs assessment (CNA) for the project.
• For homeownership housing, the rehabilitation standards must require that upon project completion, major systems must have a remaining useful life of at least five years, or a longer period specified by a participating jurisdiction or grantee. If the estimate of useful life of any major system is less than five years, it must be rehabilitated or replaced as part of the scope of work for the rehabilitation.
For rehabilitation projects that do not require a CNA, the participating jurisdiction or grantee should require the project owner to identify the remaining economic life of the major system components after the proposed rehabilitation. Participating jurisdiction or grantee staff may review this analysis internally based on the rehabilitation scope, an onsite inspection of the major system components, and a standard useful life table as the primary inputs. Alternatively, a participating jurisdiction or grantee may hire a professional to conduct the useful life analysis.
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•
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In accordance with 24 CFR 5.703(e), 92.355 and 93.351, all “target housing” assisted with HOME or HTF is subject to the lead-based paint requirements at 24 CFR part 35, subparts A, B, J, K, M and R, as applicable. Target housing is any housing constructed prior to 1978, except housing for the elderly or persons with disabilities or any 0-bedroom dwelling (unless any child who is less than 6 years of age resides or is expected to reside in such housing). A participating jurisdiction or grantee's written property standards must require the target housing to meet the lead-based paint requirements for the type of assistance and the type of activity being undertaken. The NSPIRE final rule did not alter any lead-based paint requirements for the HOME or HTF programs. Additionally, EPA's regulations at 40 CFR 745 continue to apply, especially for renovation, repair and painting projects in target housing where lead-based paint may be disturbed (40 CFR part 745 Subpart E).
The HOME regulations at 24 CFR 92.251 (a) and 92.251(b), and the HTF regulations at 24 CFR 93.301(a) and 93.301(b) require compliance with 24 CFR part 8, which implements Section
Section 481 of the Energy Independence and Security Act of 2007 (“EISA,” Pub. L. 110-140) amended section 109 of the Cranston-Gonzalez National Affordable Housing Act of 1990 (Cranston-Gonzalez) (42 U.S.C. 12709), and establishes procedures for setting minimum energy standards. EISA references two standards: the International Energy Conservation Code (IECC) and ANSI/ASHRAE/IES Standard 90.1. The IECC standard applies to single family homes and multifamily low-rise buildings (up to three stories), while the ASHRAE 90.1 standard applies to multifamily residential buildings with four or more stories. Sections 109(c) and (d) of Cranston-Gonzalez, as amended by EISA, establish procedures for updating HUD and USDA energy standards following periodic revisions to the IECC and ASHRAE 90.1 codes, based on:
1. A determination by HUD and United States Department of Agriculture (USDA) that the revised codes would not negatively affect the availability or affordability of housing covered by the Cranston-Gozalez National Affordable Housing Act of 1990 (NAHA), and
2. The Secretary of Energy's determination under section 304 of the Energy Conservation and Production Act (42 U.S.C. 6833) that the revised codes would improve energy efficiency (42 U.S.C. 12709(d)).
On July 28, 2021, the Department of Energy (DOE) published final determinations that the 2021 IECC and ASHRAE 90.1-2019 standards would improve energy efficiency (86 FR 40529 and 86 FR 40543). On April 26, 2024, HUD and USDA issued a notice of final determination (Final Determination notice) (89 FR 33112) that the 2021 IECC and ASHRAE 90.1-2019 energy codes will not negatively impact the affordability or availability of housing covered by EISA. The effective date of this determination is May 28, 2024. Following the publication of the final determination, HUD published on its website a list of alternative compliance paths, which are high performance building standards that HUD determined meet the 2021 IECC and ASHRAE 90.1-2019 standards.
While the 2013 HOME final rule reserved the energy efficiency requirements at 24 CFR 92.251(a), the requirements in the HOME statute apply to all HOME-assisted new construction projects. Specifically, section 215(a)(1)(F) and section 215(b)(4) of NAHA (42 U.S.C. 12745(a)(1)(F) and (b)(4)) require that all newly constructed HOME-assisted housing meet the energy efficiency standards promulgated in accordance with Section 109 of Cranston-Gonzalez and, therefore, Section 481 of EISA. The 2025 HOME final rule now includes an explicit provision in 24 CFR 92.251(a)(3)(ii) that newly constructed housing shall qualify as affordable housing under 24 CFR part 92 only if it meets the energy efficiency standards promulgated by the Secretary in accordance with section 109 of the HOME statute. In addition, the HTF regulations at 24 CFR 93.301(a) impose the energy efficiency at Section 109 of NAHA on HTF-assisted new construction projects.
The Final Determination notice (89 FR 33112) established a compliance date for HOME and HTF projects one year after the effective date of the determination. Consequently, all HOME- and HTF-assisted new construction projects with commitment dates on or after November 24, 2024, must meet the 2021 IECC or ASHRAE 90.1-2019 energy codes, as applicable, or one of the alternative compliance pathways. However, HUD and USDA adopted later compliance dates for other types of covered housing, ranging from 12 to 24 months. If a HOME or HTF project with a commitment on or after November 24, 2024, is also subject to the updated energy efficiency requirements in the Final Determination notice through another funding source that has a later compliance date, then the participating jurisdiction or grantee is permitted to require compliance with the energy efficiency standards in accordance with the later compliance date for that funding source.
Where relevant, a participating jurisdiction's or grantee's standards must require the housing to be constructed to mitigate the impact of potential disasters (
For new HOME or HTF commitments made after January 19, 2017, all new construction or substantial rehabilitation multifamily rental projects must include the installation of broadband infrastructure.
In accordance with 24 CFR 92.251(a) and 93.301(a), HOME and HTF-assisted new construction multifamily rental projects are excluded from this requirement if a participating jurisdiction or grantee determines and documents its determination that:
• The location of the new construction project makes the installation of broadband infrastructure infeasible; or
• The cost of installing the infrastructure would result in a fundamental alteration in the nature of the participating jurisdiction's program or activity or create an undue financial burden.
Furthermore, in accordance with 24 CFR 92.251(b) and 93.301(b), HOME- and HTF-assisted multifamily rental substantial rehabilitation projects are excluded from this requirement if a participating jurisdiction or grantee determines and documents its determination that:
• The location of the substantial rehabilitation makes installation of broadband infrastructure infeasible;
• The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of the participating jurisdiction's program or activity, or an undue financial burden; or,
• The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible.
1. A hardwired smoke alarm must be installed:
a. On each level of each housing unit;
b. In or near each sleeping area in each housing unit;
c. In the basement of each housing unit and in each common area of a project. A hardwired smoke alarm is not required in crawl spaces or unfinished attics of housing units;
d. Within 21 feet of any door to a sleeping area measured along a path of travel; and
e. Where a smoke alarm installed outside a sleeping area is separated from an adjacent living area by a door, a smoke alarm must also be installed on the living area side of the door.
2. Each hardwired smoke alarm must have an alarm system designed for hearing-impaired persons.
3. The Secretary may establish additional standards through
4. Following the relevant specifications of the International Code Council (ICC) or the National Fire Protection Association Standard (NFPA) 72 also satisfies the HOME requirement for smoke detection.
5. In accordance with 92.251(b), and 92.251(c), if the installation of hardwired smoke detectors places an undue financial burden on the owner or is infeasible, a participating jurisdiction may provide a written exception to allow the owner of housing that is rehabilitated or housing that is acquired in standard condition to install a smoke detector that uses 10-year non-rechargeable, non-replaceable primary batteries. The smoke detector must be sealed, tamper-resistant, contain a means to silence the alarm, and otherwise comply with the HOME property standard requirements.
The HOME regulations at 24 CFR 92.251(f) require that the participating jurisdiction's ongoing property standards require housing to contain smoke detectors in accordance with the requirements contained in 24 CFR 5.703(b) and (d) instead of the above requirements.
A participating jurisdiction or grantee must establish and follow written inspection procedures for initial, progress, final, and ongoing inspections in accordance with 24 CFR 92.251(g) and 93.301(e)(4). These inspection requirements apply whether the participating jurisdiction's HOME funds or grantee's HTF funds are used for construction costs—for example, if HOME funds are disbursed only for acquisition and soft costs or if HOME funds are only provided as permanent financing upon completion of construction. The written policies and procedures must include the following provisions:
A third party, including another project funder, may also pay for the cost of the inspections, as long as the inspector is contractually obligated to the participating jurisdiction or grantee to inspect to HOME or HTF property standards. Inspections may not be paid for or conducted by the owner or related parties, including an equity investor or other member of a partnership entity.
The regulations at 24 CFR 92.251(b) and (c), and 93.301(b) and (c) require that the participating jurisdiction or grantee conduct an initial property inspection to identify deficiencies that must be addressed before completion of the rehabilitation or acquisition project. If an initial property inspection of an acquisition of standard housing by an entity other than a homebuyer identifies deficiencies that require rehabilitation, then the project shall be considered a rehabilitation project. A rehabilitation project must meet the participating jurisdiction's or grantee's rehabilitation standards as described in 24 CFR 92.251(b) or 24 CFR 93.301(b) and this Notice. This includes being free of the deficiencies identified in Appendix A of this Notice and the requirements for progress and final inspections described below.
For acquisition of standard housing by a homebuyer, the inspection must occur no earlier than 90 days before HOME or HTF funds are committed in accordance with 24 CFR 92.251(c) and 24 CFR 93.301(c). If an initial inspection acquisition standard housing for acquisition by a homebuyer in HOME or HTF identifies deficiencies that require rehabilitation and the homebuyer uses HOME or HTF funds to rehabilitate the housing unit, the housing must meet the applicable participating jurisdiction or grantee's rehabilitation standards in accordance with 24 CFR 92.251(b) or 24 CFR 92.301(b) and this Notice. This includes being free of the deficiencies identified in Appendix A of this Notice and the requirements for progress and final inspections described below.
The number and frequency of progress inspections for rehabilitation projects in accordance with 24 CFR 92.251(b) and 93.301(b) will depend on the size, scope, and complexity of the project. Progress inspections are intended to ensure that work is done in accordance with applicable codes and requirements, the construction contract, and related construction documents (
In accordance with 92.251(b) and (c), 93.301(b) and 93.404(d), before completing the project in the Integrated Disbursement and Information system, the participating jurisdiction or grantee must perform an on-site inspection of the project to determine that all contracted work has been completed in accordance with the construction documents and work writeups and that the project complies with the property or rehabilitation standards and requirements. Under the 2025 HOME final rule, 24 CFR 92.251(b) permits a participating jurisdiction to accept a determination made under another funding program that upon completion of the rehabilitation project that the project and units are decent, safe, sanitary and in good repair, based on an inspection conducted in accordance with NSPIRE. If a participating jurisdiction accepts the determination made under another funding program, they are not required to inspect the project for compliance with the NSPIRE requirements at 24 CFR 5.703, however a final on-site inspection may still be necessary to determine compliance with state and local codes and other components of the participating jurisdiction's rehabilitation standards.
For HOME-assisted homebuyer acquisition projects, a final inspection is required when the housing does not meet the participating jurisdiction's property standards at acquisition. If HOME funds are used in the rehabilitation, the property must meet the minimum deficiency requirements for rehabilitation projects, including being free of the minimum deficiencies described in Appendix A of this Notice. If HOME funds are not used in the rehabilitation, then the homebuyer acquisition project must meet the requirements for standard acquisition of housing by a homebuyer and Appendix D of this Notice.
In the 2025 HOME final rule, 24 CFR 92.251(c) permits the participating jurisdiction to require that the property meet its standards within six months of acquisition if funding is secured to complete the rehabilitation. The participating jurisdiction may provide an extension of up to 12 months from the acquisition and must conduct a final inspection.
The participating jurisdiction must perform annual on-site inspections of rental housing occupied by tenants receiving HOME-assisted TBRA to determine compliance with the participating jurisdiction's standards. Under the 2025 HOME final rule, 24 CFR 92.251(f) permits a participating jurisdiction to accept a determination made under another funder's program that within the past 3 months the unit was determined to be decent, safe, sanitary and in good repair, based on an inspection conducted in accordance with NSPIRE.
The participating jurisdiction or grantee must perform on-site inspections of assisted rental housing projects within the first 12 months after project completion and at least once every three years during the period of affordability in accordance with 24 CFR 32.251(f) and 93.404(d). Under the 2025 HOME final rule, 24 CFR 92.251(f) permits a participating jurisdiction to accept a determination made under another funder's program that within the past 12 months the project and units were determined to be decent, safe, sanitary and in good repair, based on an inspection conducted in accordance with NSPIRE. However, a participating jurisdiction may not accept a determination made under another funder's program for the first ongoing inspection occurring 12 months after project completion.
If a participating jurisdiction or grantee finds during an ongoing inspection that a property has life-threatening deficiencies, as defined in its property standards, it must adopt a more frequent inspection schedule for that property. The 2025 HOME final rule permits an exception to this rule for small-scale HOME rental projects (one-to-four-units). In the 2025 HOME final rule, 24 CFR 92.251(f) permits, but does not require a participating jurisdiction to adopt, a more frequent inspection schedule for small-scale housing projects where a life-threatening deficiency is identified. A participating jurisdiction must describe this exception in its inspection procedures.
The regulations at 24 CFR 92.504 (which has been moved to 24 CFR 92.251(f) under the 2025 HOME final rule) and 93.404(d) require rental property owners to certify to the participating jurisdiction or grantee annually that each building and all assisted units in the project are suitable for occupancy. The certification must cover state and local health, safety, and other applicable codes, ordinances, and requirements, and the ongoing property standards established by the participating jurisdiction to meet the requirements of 24 CFR 92.251 and 93.301. These self-certifications do not relieve a participating jurisdiction or grantee of the requirement of its obligation to perform an on-site inspection of all HOME- or HTF-assisted rental housing at least every three years.
• For projects with one to four HOME- or HTF-assisted units, a participating jurisdiction or grantee must inspect 100 percent of the HOME- or HTF-assisted units.
• For projects with more than four HOME- or HTF-assisted units, a participating jurisdiction and grantee must randomly sample and inspect the following number of HOME or HTF units, as applicable:
• For projects with more than one building, the inspection must include all inspectable areas (Inside, Outside, and Unit) and at least one HOME- or HTF-assisted unit in each residential building in the HOME or HTF project.
For non-life-threatening deficiencies identified during the period of affordability, the regulations at 24 CFR 92.504(d) (or 24 CFR 92.251(f) under the 2025 HOME final rule) and 93.404(d) require that a follow-up on-site inspection must be performed within 12 months to verify that deficiencies were corrected. However, a participating jurisdiction or grantee may establish a list of non-hazardous deficiencies for which correction can be verified by third-party documentation (
• Obligate the owner to comply with the onsite inspection schedule: annual for units occupied by tenants receiving HOME TBRA and at least every three years during the period of affordability for HOME- or HTF-assisted rental housing. The agreement should also allow for changes in frequency of inspections based on findings of health and safety defects;
• Require the owner to correct deficiencies identified during onsite inspections, including a requirement to immediately correct health and safety defects; and,
• For rental housing, require the owner to annually certify each building and all assisted units in the project are suitable for occupancy.
The Uniform Administrative Requirements at 2 CFR 200.404 state that a cost is reasonable if, in its nature and amount, it does not exceed what would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. In its determination of cost reasonableness, a participating jurisdiction or grantee should consider market prices for comparable goods or services for the geographic area and document its decision.
In its project file, a participating jurisdiction or grantee must maintain the approved written cost estimates, construction documents, and contracts and the signed and dated checklists or reports for all progress and final inspections in accordance with 24 CFR 92.251(a) and 93.301(a). Absent detailed inspection records, a general certification that the property meets applicable building codes is not sufficient to satisfy the inspection requirement. In addition, approved building plans must be maintained, and the certificate of occupancy and any architect's certifications, if available, should be maintained in the project file.
To demonstrate compliance with the minimum energy standards required under Section 109 of the HOME statute (and at 24 CFR 92.251(a)(3)(ii) of the 2025 HOME final rule) and 93.301(a)(2)(ii), participating jurisdictions or grantees must maintain at least one of the following: a third-party certification conducted by a home energy rater, a certification from the architect or engineer for the project, or an inspection conducted by the participating jurisdiction or its inspector including the local building inspector or code official.
At a minimum, the regulations at 24 CFR 92.251(b) and 93.301(b) require that the project file must contain approved written cost estimates, construction
As applicable, the file should also include the architect's certification and the certificate of occupancy or other similar documentations of local code approvals.
A participating jurisdiction or grantee must maintain records of the approved building plans, the certificate of occupancy, and a signed and dated inspection checklist or report demonstrating that the inspection was conducted no earlier than 90 days before the commitment of HOME or HTF funds in accordance with 24 CFR 92.251(c) or 93.301(c), respectively.
The participating jurisdiction or grantee's project file must contain a signed and dated checklist or report of the final property inspection to demonstrate compliance with property standards. The records must demonstrate that inspection of the property was performed no earlier than 90 days before the commitment of HOME or HTF assistance in accordance with 24 CFR 92.251(c) and 93.301(c), respectively. For the HOME-assisted projects operating under the new flexibilities in the 2025 HOME final rule, if the housing is not rehabilitated to meet the standards of 24 CFR 92.251(c) before acquisition, the project file must include the following in accordance with 24 CFR 92.251(c)(3)(ii):
a. The written agreement between the participating jurisdiction and the homebuyer which requires the property to meet the standards within 6 months of acquisition with HOME assistance;
b. Evidence that funding was secured to complete the rehabilitation necessary to comply with the standards; and
c. Documentation that the final inspection was conducted within six months after acquisition and that the property met the standards.
d. If applicable, documentation of any extension (of up to 12 months from acquisition) provided by the participating jurisdiction to the homebuyer to meet the standards and an amended written agreement that reflects the extension and requires a final inspection to be conducted within 12 months of acquisition.
In accordance with 24 CFR 92.251(f), a participating jurisdiction must maintain signed and dated inspection checklists or reports of the initial and ongoing inspections. Under the 2025 HOME final rule, the HOME regulations at 24 CFR 92.251(f)(4)(ii) permit a participating jurisdiction to maintain records of a determination made within the prior 3 months that the unit is decent, safe, sanitary and in good repair, in satisfaction of another funder's required inspection under NSPIRE.
In accordance with 24 CFR 92.251(f), 93.301(e), and 93.404(d), the participating jurisdiction's or grantee's rental housing project file must contain signed and dated inspection checklists or reports of ongoing inspections. The records must demonstrate that an inspection occurred at project completion, 12 months after project completion, and at least every three years during the project's period of affordability. Such records must demonstrate that any deficiencies were corrected pursuant to the regulations, and the property met the participating jurisdiction's or grantee's property standard requirements. Under the 2025 HOME final rule, the HOME regulations at 24 CFR 92.251(f)(3)(i)(B) permit a participating jurisdiction to maintain records of a determination made within the prior 12 months that the project and units are decent, safe, sanitary and in good repair, in satisfaction of another funder's required inspection under NSPIRE. However, the participating jurisdiction may not accept a determination made by another funder for the initial ongoing inspection conducted 12 months after project completion.
In addition, a participating jurisdiction or grantee must retain records of the owner's annual certification that each building in the project and all HOME- or HTF-assisted units in the project are suitable for occupancy. For target housing, the participating jurisdiction or grantee must retain records of its conducting visual assessment for deteriorated paint surfaces (24 CFR 35.1215(a)(1)) and the failure of any hazard reduction measures at unit turnover and every twelve months (24 CFR 35.175, 35.1220 and 35.1355(a)(2)).
Office of Policy Development and Research, Chief Data Officer, HUD.
Notice.
HUD is seeking approval from the Office of Management and Budget (OMB) for the information collection described below. In accordance with the Paperwork Reduction Act, HUD is requesting comments from all interested parties on the proposed collection of information. The purpose of this notice is to allow for 30 days of public comment.
Comments Due Date: May 14, 2026.
Interested persons are invited to submit comments regarding this proposal. Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
John L. Murphy, PRA Compliance Officer, Paperwork Reduction Act Division, PRAD, Department of Housing Urban Development, 2415 Eisenhower Avenue Alexandria, Virginia 22314, Room 10000; email at
This notice informs the public that HUD is seeking approval from OMB for the information collection described in Section A. The
An issuer can request both commitment authority and pool numbers within one request. If the issuer has available pool numbers but lacks a sufficient amount of commitment authority necessary to form pools, the issuer can apply for Commitment Authority only. An issuer may need to apply for Ginnie Mae Pool Numbers only. This is done when an issuer has sufficient commitment authority available for use but needs pool numbers. There is no fee for requesting pool numbers.
There are two types of Commitment Authority a Ginne Mae issuer may apply for: (1) Single Family or Single Line Commitment Authority which expires one year from date of approval and (2) Multifamily or Multi-Line Commitment Authority which expires two years from date of approval. There is only one type of Pool Numbers a Ginnie Mae issuer may apply for: Alpha-Numeric.Pool Numbers have no expiration date and can only be used once. The information is required by Section 306(g) of the National Housing Act or by Ginnie Mae Handbook 5500.3, Rev. 1.
This notice is soliciting comments from members of the public and affected parties concerning the collection of information described in Section A on the following:
(1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the proposed collection of information;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) Ways to minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology,
HUD encourages interested parties to submit comment in response to these questions.
Section 2 of the Paperwork Reduction Act of 1995, 44 U.S.C. 3507.
U.S. Geological Survey, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act (PRA) of 1995 and its implementing regulations, the U.S. Geological Survey (USGS) proposes to renew an information collection.
Interested persons are invited to submit comments. To be considered, we must receive your comments on or before May 14, 2026.
You may submit comments by one of the following methods:
Internet:
U.S.
Shonta E. Osborne by email at
In accordance with the PRA, as part of our continuing effort to reduce paperwork and respondent burdens, we provide the general public and other Federal agencies with an opportunity to comment on new, proposed, revised, and continuing collections of information. This helps us assess the impact of our information collection requirements and minimize the public's reporting burden. It also helps the public understand our information collection requirements and provides the requested data in the desired format.
A
(1) is the collection necessary to the proper functions of the USGS minerals information mission; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how the USGS might enhance the quality, utility, and clarity of the information to be collected; and (5) how the USGS might minimize the burden of this collection on the respondents, including through the use of information technology.
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personally identifiable information (PII) in your comment, you should be aware that your entire comment—including your PII—may be made publicly available at any time. While you can ask us in your comment to withhold your PII from public review, we cannot guarantee that we will be able to do so.
An agency may not conduct or sponsor, nor is a person required to respond to a collection of information unless it displays a currently valid OMB control number.
The authorities for this action are the PRA, the National Materials and Minerals Policy, Research and Development Act of 1980 (30 U.S.C. 1601
Bureau of Indian Affairs, Interior.
Notice.
The Assistant Secretary—Indian Affairs approves the Fifth Amendment to the Tribal-State Compact for class III gaming between the Port Gamble S'Klallam Tribe and the State of Washington governing the operation and regulation of class III gaming activities.
The Amendment takes effect on April 14, 2026.
Mr. Troy Woodward, Acting Director, Office of Indian Gaming, Office of the Assistant Secretary—Indian Affairs, Washington, DC 20240,
The Indian Gaming Regulatory Act of 1988, 25 U.S.C. 2701
Bureau of Indian Affairs, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, we, the Bureau of Indian Education (BIE) are proposing to renew an information collection without change.
Interested persons are invited to submit comments on or before June 15, 2026.
To submit comments, please visit
Steven Mullen, Information Collection Clearance Officer, Office of Regulatory Affairs and Collaborative Action—Indian Affairs, U.S. Department of the Interior, 1001 Indian School Road NW, Suite 229, Albuquerque, New Mexico 87104;
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501) and 5 CFR 1320.8(d)(1), we provide the general public, and other Federal agencies, with an opportunity to comment on new, proposed, revised, and continuing collections of information. This helps us assess the impact of our information collection requirements and minimize the public's reporting burden. It also helps the public understand our information collection requirements and provide the requested data in the desired format.
As part of our continuing effort to reduce paperwork and respondent burdens, we invite the public and other Federal agencies to comment on new, proposed, revised, and continuing collections of information. We are especially interested in public comment addressing the following:
(1) Whether or not the collection of information is necessary for the proper performance of the functions of the agency, including whether or not the information will have practical utility;
(2) The accuracy of our estimate of the burden for this collection of information, including the validity of the methodology and assumptions used;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) How might the agency minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments that you submit in response to this notice are a matter of public record. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501).
U.S. International Trade Commission.
Notice.
Notice is hereby given that a complaint was filed with the U.S. International Trade Commission on March 10, 2026, under section 337 of the Tariff Act of 1930, as amended, on behalf of Archer Aviation Inc. of San Jose, California. A supplement to the complaint was filed on March 19, 2026. The complaint, as supplemented, alleges violations of section 337 based upon the importation into the United States, the sale for importation, and the sale within the United States after importation of certain electric aircraft, power systems for electric aircraft, and components thereof by reason of the infringement of certain claims of U.S. Patent No. 11,945,594 (“the '594 patent”); U.S. Patent No. 12,162,614 (“the '614 patent”); U.S. Patent No. 8,469,306 (“the '306 patent”); U.S. Patent No. 12,103,404 (“the '404 patent”); and U.S. Patent No. 12,472,087 (“the '087 patent”). The complaint further alleges that an industry in the United States exists as required by the applicable Federal Statute. The complainant requests that the Commission institute an investigation and, after the investigation, issue a limited exclusion order and cease and desist orders.
The complaint, except for any confidential information contained therein, may be viewed on the Commission's electronic docket (EDIS) at
Pathenia M. Proctor, The Office of Unfair Import Investigations, U.S. International Trade Commission, telephone (202) 205-2560.
(1) Pursuant to subsection (b) of section 337 of the Tariff Act of 1930, as amended, an investigation be instituted to determine whether there is a violation of subsection (a)(1)(B) of section 337 in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain products identified in paragraph (2) by reason of infringement of one or more of claims 1, 6-16, and 22-30 of the '594 patent; claims 1, 2, 5-8, 10-14, 23-25, 28, and 30 of the '614 patent; claims 1, 2, 4-6, 10, and 12 of the '306 patent; claims 1-3, 5, 7, 12, and 13 of the '404 patent; and claims 1-15 and 17-30 of the '087 patent, and whether an industry in the United States exists as required by subsection (a)(2) of section 337;
(2) Pursuant to section 210.10(b)(1) of the Commission's Rules of Practice and Procedure, 19 CFR 210.10(b)(1), the plain language description of the accused products or category of accused products, which defines the scope of the investigation, is “electric vertical takeoff and landing (eVTOL) aircraft, including hybrid eVTOL aircraft, power systems for eVTOL aircraft, and components thereof, including battery cells and/or battery packs”
(3) For the purpose of the investigation so instituted, the following are hereby named as parties upon which this notice of investigation shall be served:
(a) The complainant is:
(b) The respondents are the following entities alleged to be in violation of section 337, and are the parties upon which the complaint is to be served:
(c) The Office of Unfair Import Investigations, U.S. International Trade Commission, 500 E Street SW, Suite 401, Washington, DC 20436; and
(4) For the investigation so instituted, the Chief Administrative Law Judge, U.S. International Trade Commission, shall designate the presiding Administrative Law Judge.
Responses to the complaint and the notice of investigation must be submitted by the named respondents in accordance with section 210.13 of the Commission's Rules of Practice and Procedure, 19 CFR 210.13. Pursuant to 19 CFR 201.16(e) and 210.13(a), such responses will be considered by the Commission if received not later than 20 days after the date of service by the Commission of the complaint and the notice of investigation. Extensions of time for submitting responses to the complaint and the notice of investigation will not be granted unless good cause therefor is shown.
Failure of a respondent to file a timely response to each allegation in the complaint and in this notice may be deemed to constitute a waiver of the right to appear and contest the allegations of the complaint and this notice, and to authorize the administrative law judge and the
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice of the institution of investigations and commencement of preliminary phase antidumping and countervailing duty investigation Nos. 701-TA-792 and 731-TA-1786-1788 (Preliminary) pursuant to the Tariff Act of 1930 to determine whether there is a reasonable indication that an industry in the United States is materially injured or threatened with material injury, or the establishment of an industry in the United States is materially retarded, by reason of imports of tin mill products from China, Taiwan, and Turkey, provided for in subheadings 7210.11.00, 7210.12.00, 7210.50.00, 7212.10.00, 7212.50.00, 7225.99.00, and 7226.99.01 of the Harmonized Tariff Schedule of the United States, that are alleged to be sold in the United States at less than fair value and alleged to be subsidized by the Government of China. Unless the Department of Commerce (“Commerce”) extends the time for initiation, the Commission must reach a preliminary determination in antidumping and countervailing duty investigations in 45 days, or in this case by May 26, 2026. The Commission's views must be transmitted to Commerce within five business days thereafter, or by June 2, 2026.
April 9, 2026.
Charles Cummings (202-708-1666), Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
For further information concerning the conduct of these investigations and rules of general application, consult the Commission's Rules of Practice and Procedure, part 201, subparts A and B (19 CFR part 201), and part 207, subparts A and B (19 CFR part 207).
Please note the Secretary's Office will accept only electronic filings during this time. Filings must be made through the Commission's Electronic Document Information System (EDIS,
In accordance with §§ 201.16(c) and 207.3 of the rules, each document filed
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice of the scheduling of an expedited review pursuant to the Tariff Act of 1930 (“the Act”) to determine whether revocation of the antidumping duty order on frozen fish fillets from Vietnam would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time.
March 6, 2026.
Stamen Borisson ((202) 205-3125), Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
For further information concerning the conduct of this review and rules of general application, consult the Commission's Rules of Practice and Procedure, part 201, subparts A and B (19 CFR part 201), and part 207, subparts A, D, E, and F (19 CFR part 207).
In accordance with §§ 201.16(c) and 207.3 of the rules, each document filed by a party to the review must be served on all other parties to the review (as identified by either the public or BPI service list), and a certificate of service must be timely filed. The Secretary will not accept a document for filing without a certificate of service.
By order of the Commission.
U.S. International Trade Commission.
Notice.
Notice is hereby given that a complaint was filed with the U.S. International Trade Commission on March 10, 2026, under section 337 of the Tariff Act of 1930, as amended, on behalf of J.A.R. Laboratories LLC of Lake Forest, Illinois. Supplements to the complaint were filed on March 23, 2026 and March 30, 2026. The complaint, as supplemented, alleges violations of section 337 based upon the importation into the United States, the sale for importation, and the sale within the United States after importation of certain over-the-counter topical lidocaine patches by reason of the infringement of certain claims of U.S. Patent No. 12,109,181 (“the '181 patent”). The complaint further alleges that an industry in the United States exists as required by the applicable Federal Statute. The complainant requests that the Commission institute an investigation and, after the investigation, issue a limited exclusion order and cease and desist orders.
The complaint, except for any confidential information contained therein, may be viewed on the Commission's electronic docket (EDIS) at
Susan Orndoff, The Office of the Secretary, Docket Services Division, U.S. International Trade Commission, telephone (202) 205-1802.
(1) Pursuant to subsection (b) of section 337 of the Tariff Act of 1930, as amended, an investigation be instituted to determine whether there is a violation of subsection (a)(1)(B) of section 337 in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain products identified in paragraph (2) by reason of infringement of one or more of claims 1 and 5 of the '181 patent, and whether an industry in the United States exists as required by subsection (a)(2) of section 337;
(2) Pursuant to section 210.10(b)(1) of the Commission's Rules of Practice and Procedure, 19 CFR 210.10(b)(1), the plain language description of the accused products or category of accused products, which defines the scope of the investigation, is “over-the-counter topical lidocaine patches”;
(3) For the purpose of the investigation so instituted, the following are hereby named as parties upon which this notice of investigation shall be served:
(a) The complainant is:
(b) The respondents are the following entities alleged to be in violation of section 337, and are the parties upon which the complaint is to be served:
(4) For the investigation so instituted, the Chief Administrative Law Judge, U.S. International Trade Commission, shall designate the presiding Administrative Law Judge.
The Office of Unfair Import Investigations will not participate as a party in this investigation.
Responses to the complaint and the notice of investigation must be submitted by the named respondents in accordance with section 210.13 of the Commission's Rules of Practice and Procedure, 19 CFR 210.13. Pursuant to 19 CFR 201.16(e) and 210.13(a), such responses will be considered by the Commission if received not later than 20 days after the date of service by the Commission of the complaint and the notice of investigation. Extensions of time for submitting responses to the complaint and the notice of investigation will not be granted unless good cause therefor is shown.
Failure of a respondent to file a timely response to each allegation in the complaint and in this notice may be deemed to constitute a waiver of the right to appear and contest the allegations of the complaint and this notice, and to authorize the administrative law judge and the Commission, without further notice to the respondent, to find the facts to be as alleged in the complaint and this notice and to enter an initial determination and a final determination containing such findings, and may result in the issuance of an exclusion order or a cease and desist order or both directed against the respondent.
By order of the Commission.
On the basis of the record
Pursuant to section 207.18 of the Commission's rules, the Commission also gives notice of the commencement of the final phase of its investigations. The Commission will issue a final phase notice of scheduling, which will be published in the
On February 24, 2026, Resonac Graphite America Inc., Ridgeville, South Carolina; and Tokai Carbon GE LLC, Charlotte, North Carolina, filed petitions with the Commission and Commerce, alleging that an industry in the United States is materially injured or threatened with material injury by reason of subsidized imports of large diameter graphite electrodes from China and India and LTFV imports of large diameter graphite electrodes from China and India. Accordingly, effective February 24, 2026, the Commission instituted countervailing duty investigation Nos. 701-TA-787-788 and antidumping duty investigation Nos. 731-TA-1775-1776 (Preliminary).
Notice of the institution of the Commission's investigations and of a public conference to be held in connection therewith was given by posting copies of the notice in the Office of the Secretary, U.S. International Trade Commission, Washington, DC, and by publishing the notice in the
The Commission made these determinations pursuant to §§ 703(a) and 733(a) of the Act (19 U.S.C. 1671b(a) and 1673b(a)). It completed and filed its determinations in these investigations on April 10, 2026. The views of the Commission are contained in USITC Publication 5728 (April 2026), entitled
By order of the Commission.
Occupational Safety and Health Administration (OSHA), Labor.
Notice.
In this notice, OSHA announces the application of TÜV SÜD America, Inc. (TUVAM), for expansion of the scope of recognition as a Nationally Recognized Testing Laboratory (NRTL) and presents the agency's preliminary finding to grant the application.
Submit comments, information, and documents in response to this notice, or requests for an extension of time to make a submission, on or before April 29, 2026.
Comments may be submitted as follows:
Information regarding this notice is available from the following sources:
OSHA is providing notice that TÜV SÜD America, Inc. (TUVAM), is applying for an expansion of current recognition as a NRTL. TUVAM requests the addition of one test site to the NRTL scope of recognition.
OSHA recognition of a NRTL signifies that the organization meets the requirements specified in 29 CFR 1910.7. Recognition is an acknowledgment that the organization can perform independent safety testing and certification of the specific products covered within the scope of recognition. Each NRTL's scope of recognition includes (1) the type of products the NRTL may test, with each type specified by the applicable test standard and (2) the recognized site(s) that has/have the technical capability to perform the product-testing and product-certification activities for test standards within the NRTL's scope. Recognition is not a delegation or grant of government authority; however, recognition enables employers to use products approved by the NRTL to meet OSHA standards that require product testing and certification.
The agency processes applications by a NRTL for initial recognition, as well as for an expansion or renewal of recognition, following requirements in Appendix A to 29 CFR 1910.7. This appendix requires that the agency publish two notices in the
TUVAM currently has seventeen facilities (sites) recognized by OSHA for product testing and certification, with the headquarters located at: TÜV SÜD America, Inc., 401 Edgewater Place, Suite # 500, Wakefield, MA 01880, USA. A complete list of TUVAM sites recognized by OSHA is available at
TUVAM submitted an application, dated October 25, 2024 (OSHA-2007-0043-0069), to expand recognition as a NRTL to include one additional test site located at: TÜV SÜD Japan Ltd, 4149-7, 5-Chome, #06-01, Hachimanpara, Yonezawa, 992-1128 Yamagata, Japan. OSHA staff performed an on-site review of TUVAM's testing facility at TUVAM Yonezawa on April 10-11, 2025, in which assessors found some nonconformances with the requirements of 29 CFR 1910.7. TUVAM has addressed these issues sufficiently, and OSHA staff has preliminarily determined that OSHA should grant the application.
TUVAM submitted an acceptable application for expansion of its scope of recognition. OSHA's review of the application file and pertinent documentation preliminarily indicates that TUVAM can meet the requirements prescribed by 29 CFR 1910.7 for expanding its recognition to include one additional test site for NRTL testing and certification. This preliminary finding does not constitute an interim or temporary approval of TUVAM's application.
OSHA seeks public comment on this preliminary determination.
OSHA welcomes public comment as to whether TUVAM meets the requirements of 29 CFR 1910.7 for expansion of recognition as a NRTL. Comments should consist of pertinent written documents and exhibits.
Commenters needing more time to comment must submit a request in writing, stating the reasons for the request by the due date for comments. OSHA will limit any extension to 10 days unless the requester justifies a longer time period. OSHA may deny a request for an extension if it is not adequately justified.
To review copies of the exhibit identified in this notice, as well as comments submitted to the docket, contact the Docket Office, Occupational Safety and Health Administration, U.S. Department of Labor. These materials also are generally available online at
OSHA staff will review all comments to the docket submitted in a timely manner. After addressing the issues raised by these comments, staff will make a recommendation to the Assistant Secretary of Labor for Occupational Safety and Health on whether to grant TUVAM's application for expansion of the scope of recognition. The Assistant Secretary will make the final decision on granting the application. In making this decision, the Assistant Secretary may undertake other proceedings prescribed in Appendix A to 29 CFR 1910.7.
OSHA will publish a public notice of the final decision in the
Amanda Laihow, Principal Deputy Assistant Secretary of Labor for Occupational Safety and Health, 200 Constitution Avenue NW, Washington, DC 20210, authorized the preparation of this notice. Accordingly, the agency is issuing this notice pursuant to 29 U.S.C. 657(g)(2), Secretary of Labor's Order No. 7-2025 (90 FR 27878; June 30, 2025), and 29 CFR 1910.7.
Legal Services Corporation.
Notice of application dates and format for applications for approval to
The Legal Services Corporation (LSC) is the national organization charged with administering Federal funds provided for civil legal services to low-income people. LSC hereby announces the submission dates for applications to make 2026 mid-year and 2027 Basic Field Grant fund subgrants. LSC also provides information about where applicants may locate subgrant application questions and directions for providing the information required to apply for a subgrant.
See
Legal Services Corporation—Office of Compliance and Enforcement, 1825 I Street NW, Suite 800, Washington, DC 20006-5475.
Megan Lacchini, Office of Compliance and Enforcement at
Under 45 CFR part 1627, LSC must publish, on an annual basis, “notice of the requirements concerning the format and contents of the application annually in the
Applications for approval to make 2026 mid-year Basic Field Grant fund subgrants are available. Applications to make calendar year 2027 Basic Field Grant fund subgrants will be available on or around April 13, 2026. An applicant must apply to make a mid-year subgrant of LSC Basic Field Grant funds through GrantEase at least 45 days before the subgrant's proposed effective date. 45 CFR 1627.4(b)(2). An applicant must apply to make calendar year subgrants of 2027 Basic Field Grant funds through GrantEase in conjunction with its application(s) for 2027 Basic Field Grant funding. 45 CFR 1627.4(b)(1). The deadline for 2027 Basic Field Grant funding application submissions is June 1, 2026.
All applicants must provide answers to the application questions in GrantEase and upload the following documents:
• A draft subgrant agreement (with the required terms provided in LSC's Subgrant Agreement Template); and
• A subgrant budget (using LSC's Subgrant Budget Template).
Applicants seeking to subgrant to a new subrecipient that is not a current LSC grantee, or to renew a subgrant with an organization that is not a current LSC grantee in a year in which the applicant is required to submit a full funding application, must also upload:
• The subrecipient's accounting manual;
• The subrecipient's most recent audited financial statements;
• The subrecipient's current cost allocation policy (if not in the accounting manual); and
• The recipient's 45 CFR part 1627 Policy (required under 45 CFR 1627.7).
A list of subgrant application questions, the Subgrant Agreement Template, and the Subgrant Budget Template are available on LSC's website at
LSC encourages applicants to use LSC's Subgrant Agreement Template as a model subgrant agreement. If the applicant does not use LSC's Template, the proposed agreement must include, at a minimum, the substance of the provisions of the Template.
Once submitted, LSC will evaluate the application and provide applicants with instructions on any needed modifications to the submitted documents or Draft Agreement provided with the application. The applicant must then upload a final and signed subgrant agreement through GrantEase by the date requested.
As required by 45 CFR 1627.4(b)(3), LSC will inform applicants of its decision to disapprove or approve an application for a 2026 mid-year subgrant no later than the subgrant's proposed effective date. As required by 45 CFR 1627.4(b)(1)(ii), LSC will inform applicants of its decision to disapprove or approve a 2027 calendar-year subgrant no later than the date LSC informs applicants of LSC's 2027 Basic Field Grant funding decisions.
The National Science Board's ad hoc Committee on Elections hereby gives notice of scheduling of a teleconference for the transaction of National Science Board business pursuant to the National Science Foundation Act and the Government in the Sunshine Act.
April 16, 2026, at 4:00 p.m. Eastern.
This meeting will be held by teleconference through the National Science Foundation, 401 Dulaney Street, Alexandria, VA 22314.
Closed
Chair's Opening Remarks about the agenda; Discussion of the slate of nominees for NSB Chair and Vice Chair positions for the 2026-2028 term, progress toward finalizing the slate, and next steps.
Point of contact for this meeting is: Chris Blair, 202-292-7000. Meeting information and updates may be found at
Week of April 13, 2026.
Via Teleconference.
Open.
For more information or to verify the status of meetings, contact Wesley Held at 301-287-3591 or via email at
The NRC Commission Meeting Schedule can be found on the internet at:
The NRC provides reasonable accommodation to individuals with disabilities where appropriate. If you need a reasonable accommodation to participate in these public meetings or need this meeting notice or the transcript or other information from the public meetings in another format (
Members of the public may request to receive this information electronically. If you would like to be added to the distribution, please contact the Nuclear Regulatory Commission, Office of the Secretary, Washington, DC 20555, at 301-415-1969, or by email at
The NRC is holding the meetings under the authority of the Government in the Sunshine Act, 5 U.S.C. 552b.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Monthly notice.
Pursuant to section 189a.(2) of the Atomic Energy Act of 1954, as amended (the Act), the U.S. Nuclear Regulatory Commission (NRC) is publishing this regular monthly notice. The Act requires the Commission to publish notice of any amendments issued, or proposed to be issued, and grants the Commission the authority to issue and make immediately effective any amendment to an operating license or combined license, as applicable, upon a determination by the Commission that such amendment involves no significant hazards consideration (NSHC), notwithstanding the pendency before the Commission of a request for a hearing from any person.
Comments must be filed by May 14, 2026. A request for a hearing or petitions for leave to intervene must be filed by June 15, 2026.
This monthly notice includes all amendments issued, or proposed to be issued, from February 27, 2026, to March 26, 2026. The last monthly notice was published on March 17, 2026.
You may submit comments by any of the following methods however, the NRC encourages electronic comment submission through the Federal rulemaking website.
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For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
Susan Lent, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-1365; email:
Please refer to Docket ID NRC-2026-1685, facility name, unit number(s), docket number(s), application date, and subject when contacting the NRC about the availability of information for this action. You may obtain publicly available information related to this action by any of the following methods:
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The NRC encourages electronic comment submission through the Federal rulemaking website (
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly
For the facility-specific amendment requests shown in this notice, the Commission finds that the licensees' analyses provided, consistent with section 50.91 of title 10 of
The Commission is seeking public comments on these proposed determinations. Any comments received within 30 days after the date of publication of this notice will be considered in making any final determinations.
Normally, the Commission will not issue the amendments until the expiration of 60 days after the date of publication of this notice. The Commission may issue any of these license amendments before expiration of the 60-day period provided that its final determination is that the amendment involves NSHC. In addition, the Commission may issue any of these amendments prior to the expiration of the 30-day comment period if circumstances change during the 30-day comment period such that failure to act in a timely way would result, for example in derating or shutdown of the facility. If the Commission takes action on any of these amendments prior to the expiration of either the comment period or the notice period, it will publish in the
Within 60 days after the date of publication of this notice, any person (petitioner) whose interest may be affected by any of these actions may file a request for a hearing and petition for leave to intervene (petition) with respect to that action. Petitions shall be filed in accordance with the Commission's “Agency Rules of Practice and Procedure” in 10 CFR part 2. Interested persons should consult 10 CFR 2.309. If a petition is filed, the Commission or a presiding officer will rule on the petition and, if appropriate, a notice of a hearing will be issued.
Petitions must be filed no later than 60 days from the date of publication of this notice in accordance with the filing instructions in the “Electronic Submissions (E-Filing)” section of this document. Petitions and motions for leave to file new or amended contentions that are filed after the deadline will not be entertained absent a determination by the presiding officer that the filing demonstrates good cause by satisfying the three factors in 10 CFR 2.309(c)(1)(i) through (iii).
If a hearing is requested, and the Commission has not made a final determination on the issue of no significant hazards consideration, the Commission will make a final determination on the issue of no significant hazards consideration, which will serve to establish when the hearing is held. If the final determination is that the license amendment request involves no significant hazards consideration, the Commission may issue the amendment and make it immediately effective, notwithstanding the request for a hearing. Any hearing would take place after issuance of the amendment. If the final determination is that the license amendment request involves a significant hazards consideration, then any hearing held would take place before the issuance of the amendment unless the Commission finds an imminent danger to the health or safety of the public, in which case it will issue an appropriate order or rule under 10 CFR part 2.
A State, local governmental body, Federally recognized Indian Tribe, or designated agency thereof, may submit a petition to the Commission to participate as a party under 10 CFR 2.309(h) no later than 60 days from the date of publication of this notice. Alternatively, a State, local governmental body, Federally recognized Indian Tribe, or designated agency thereof, may participate as a non-party under 10 CFR 2.315(c).
For information about filing a petition and about participation by a person not a party under 10 CFR 2.315, see ADAMS Accession No. ML20340A053 (
All documents filed in NRC adjudicatory proceedings, including documents filed by an interested State, local governmental body, Federally recognized Indian Tribe, or designated agency thereof that requests to participate under 10 CFR 2.315(c), must be filed in accordance with 10 CFR 2.302. The E-Filing process requires participants to submit and serve all adjudicatory documents over the internet, or in some cases, to mail copies on electronic storage media, unless an exemption permitting an alternative filing method, as further discussed, is granted. Detailed guidance on electronic submissions is located in the “Guidance for Electronic Submissions to the NRC” (ADAMS Accession No. ML13031A056), and on the NRC's public website (
To comply with the procedural requirements of E-Filing, at least 10 days prior to the filing deadline, the participant should contact the Office of the Secretary by email at
Information about applying for a digital ID certificate is available on the NRC's public website (
A person filing electronically using the NRC's adjudicatory E-Filing system may seek assistance by contacting the NRC's Electronic Filing Help Desk through the “Contact Us” link located on the NRC's public website (
Participants who believe that they have good cause for not submitting documents electronically must file an exemption request, in accordance with 10 CFR 2.302(g), with their initial paper filing stating why there is good cause for not filing electronically and requesting authorization to continue to submit documents in paper format. Such filings must be submitted in accordance with 10 CFR 2.302(b)-(d). Participants filing adjudicatory documents in this manner are responsible for serving their documents on all other participants. Participants granted an exemption under 10 CFR 2.302(g)(2) must still meet the electronic formatting requirement in 10 CFR 2.302(g)(1), unless the participant also seeks and is granted an exemption from 10 CFR 2.302(g)(1).
Documents submitted in adjudicatory proceedings will appear in the NRC's electronic hearing docket, which is publicly available on the NRC's public website (
The following table provides the plant name, docket number, date of application, ADAMS accession number, and location in the application of the licensees' proposed NSHC determinations. For further details with respect to these license amendment applications, see the applications for amendment, which are available for public inspection in ADAMS. For additional direction on accessing information related to this document, see the “Obtaining Information and Submitting Comments” section of this document.
During the period since publication of the last monthly notice, the Commission has issued the following amendments. The Commission has determined for each of these amendments that the application complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations. The Commission has made appropriate findings as required by the Act and the Commission's rules and regulations in 10 CFR chapter I, which are set forth in the license amendment.
A notice of consideration of issuance of amendment to facility operating license or combined license, as applicable, proposed NSHC determination, and opportunity for a hearing in connection with these actions, were published in the
Unless otherwise indicated, the Commission has determined that these amendments satisfy the criteria for categorical exclusion in accordance with 10 CFR 51.22. Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared for these amendments. If the Commission has prepared an environmental assessment under the special circumstances provision in 10 CFR 51.22(b) and has made a determination based on that assessment, it is so indicated in the safety evaluation for the amendment.
For further details with respect to each action, see the amendment and associated documents such as the Commission's letter and safety evaluation, which may be obtained using the ADAMS accession numbers indicated in the following table. The safety evaluation will provide the ADAMS accession numbers for the application for amendment and the
Since publication of the last monthly notice, the Commission has issued the following amendment. The Commission has determined for this amendment that the application for the amendment complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations. The Commission has made appropriate findings as required by the Act and the Commission's rules and regulations in 10 CFR chapter I, which are set forth in the license amendment.
Because of exigent circumstances or emergency situation associated with the date the amendment was needed, there was not time for the Commission to publish, for public comment before issuance, its usual notice of consideration of issuance of amendment, proposed NSHC determination, and opportunity for a hearing.
In circumstances where failure to act in a timely way would have resulted, for example, in derating or shutdown of a nuclear power plant or in prevention of either resumption of operation or of increase in power output up to the plant's licensed power level (an emergency situation), the Commission may not have had an opportunity to provide for public comment on its NSHC determination. In such case, the license amendment has been issued without opportunity for comment prior to issuance. Nonetheless, the State has been consulted by telephone whenever possible.
Under its regulations, the Commission may issue and make an amendment immediately effective, notwithstanding the pendency before it of a request for a hearing from any person, in advance of the holding and completion of any required hearing, where it has determined that NSHC is involved. The Commission has applied the standards of 10 CFR 50.92 and has made a final determination that the amendments involve NSHC. The basis for this determination is contained in the NRC staff safety evaluation related to each action. Accordingly, the amendment has been issued and made effective as indicated.
For those amendments that involve an emergency situation, the Commission is now providing an opportunity to comment on the final NSHC determination for each action; comments should be submitted in accordance with Section I of this notice within 30 days of the date of this notice. Any comments received within 30 days of the date of publication this notice will be considered.
For those amendments that have not been previously noticed in the
Unless otherwise indicated, the Commission has determined that the amendment satisfies the criteria for categorical exclusion in accordance with 10 CFR 51.22. Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared for this amendment. If the Commission has prepared an environmental assessment under the special circumstances provision in 10 CFR 51.12(b) and has made a determination based on that assessment, it is so indicated in the safety evaluation for the amendment.
For further details with respect to these actions, see the amendment and associated documents such as the Commission's letter and safety evaluation, which may be obtained
The following notice was previously published as separate individual notice. It was published as an individual notice either because time did not allow the Commission to wait for this monthly notice or because the action involved exigent circumstances. It is repeated here because the monthly notice lists all amendments issued or proposed to be issued involving NSHC.
For details, including the applicable notice period, see the individual notice in the
For the Nuclear Regulatory Commission.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning a negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
Pursuant to 39 CFR 3041.405, the Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to Competitive negotiated service agreement(s). The request(s) may propose the addition of a negotiated service agreement from the Competitive product list or the modification of an existing product currently appearing on the Competitive product list.
The public portions of the Postal Service's request(s) can be accessed via the Commission's website (
Section II identifies the docket number(s) associated with each Postal Service request, if any, that will be reviewed in a public proceeding as defined by 39 CFR 3010.101(p), the title of each such request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each such request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 and 39 CFR 3000.114 (Public Representative). The Public Representative does not represent any individual person, entity or particular point of view, and, when Commission attorneys are appointed, no attorney-client relationship is established. Section II also establishes comment deadline(s) pertaining to each such request.
The Commission invites comments on whether the Postal Service's request(s) identified in Section II, if any, are consistent with the policies of title 39. Applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3041. Comment deadline(s) for each such request, if any, appear in Section II.
Section III identifies the docket number(s) associated with each Postal Service request, if any, to add a standardized distinct product to the Competitive product list or to amend a standardized distinct product, the title of each such request, the request's acceptance date, and the authority cited by the Postal Service for each request. Standardized distinct products are negotiated service agreements that are variations of one or more Competitive products, and for which financial models, minimum rates, and classification criteria have undergone advance Commission review.
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This Notice will be published in the
Postal Regulatory Commission.
Notice.
The Commission is recognizing a recently filed Postal Service notice of inflation-based rate adjustments affecting market dominant domestic and international products and services, along with proposed classification changes. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
On April 9, 2026, the Postal Service filed a notice of price adjustments affecting Market Dominant domestic and international products and services, along with proposed classification changes to the Mail Classification Schedule (MCS).
The Postal Service's filing consists of the Notice, which the Postal Service represents addresses data and information required under 39 CFR 3030.122 and 39 CFR 3030.123; two attachments (Attachments A and B) to the Notice; and six public library references and two non-public library references.
Attachment A presents the planned price and related product description changes to the MCS. Notice, Attachment A. Attachment B presents the price cap calculation.
The first five public library references provide supporting documentation for the five classes of mail, and the sixth public library reference shows the banked rate adjustment authority for each class of mail over the last 5 years.
The Postal Service's planned percentage changes by class are, on average, as follows:
Notice at 5. Price adjustments for products within classes vary from the average.
The Postal Service identifies the effect of its proposed price and classification changes on the MCS in Attachment A.
• Informed Delivery Add-On/Upgrade Promotion (January 1-December 31, 2027);
• Sustainability Add-On/Upgrade Promotion (January 1-December 31, 2027);
• Tactile, Sensory, and Interactive Base/Primary Promotion (January 1-June 30, 2027);
• Integrated Technology Base/Primary Promotion (mailers will select a start date for a six-month promotion period within calendar year 2027);
• First-Class Mail Advertising Base/Primary Promotion (April 1-December 31, 2027);
• Impact Messaging Base/Primary Promotion (May 1-September 30, 2027);
• Direct Mail Discovery for Marketing Mail Base/Primary Promotion (April 1-September 30, 2027)
Pursuant to 39 CFR 3030.124(a), the Commission establishes Docket No. R2026-1 to consider the planned price adjustments for Market Dominant postal products and services, as well as the related classification changes, identified in the Notice. The Commission invites comments from interested persons on whether the Postal Service's planned price adjustments are consistent with applicable statutory and regulatory requirements. 39 CFR 3030.125. The applicable statutory and regulatory requirements the Commission considers in its review are the requirements of 39 CFR part 3030, Commission directives and orders, and 39 U.S.C. 3626, 3627, and 3629. 39 CFR 3030.126(b). Comments are due no later than May 11, 2026. 39 CFR 3030.124(f). The Commission will not accept late-filed comments as it is not practicable due to the expedited timeline for this proceeding.
The public portions of the Postal Service's filing are available for review on the Commission's website (
Pursuant to 39 U.S.C. 505, the Commission appoints Mallory L. Smith to represent the interests of the general public (Public Representative) in this proceeding. The Public Representative does not represent any individual person, entity or particular point of view, and, when Commission attorneys are appointed, no attorney-client relationship is established.
1. The Commission establishes Docket No. R2026-1 to consider the planned price adjustments for Market Dominant postal products and services, as well as the related classification changes, identified in the Postal Service's April 9, 2026 Notice.
2. Comments on the planned price adjustments and related classification changes are due no later than May 11, 2026.
3. Pursuant to 39 U.S.C. 505, Mallory L. Smith is appointed to serve as an officer of the Commission to represent the interests of the general public (Public Representative) in this proceeding.
4. The order, or abstract thereof, shall be published in the
By the Commission.
Postal Regulatory Commission.
Notice.
The Commission is recognizing a recent filing by the Postal Service rates not of general applicability for its Inbound Letter Post Small Packets (Inbound E-format Letter Post) product and minor classification changes to the Mail Classification Schedule effective January 1, 2027. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
On April 8, 2026, the Postal Service filed a notice of rates not of general applicability for Inbound Letter Post Small Packets (Inbound E-format Letter Post), and a notice of minor classification changes to the
In its Notice, the Postal Service proposes new rates for the Inbound Letter Post Small Packets product.
The Postal Service also proposes minor classification changes to various MCS sections concerning Inbound Letter Post Small Packets, pursuant to 39 CFR 3040.190.
The Commission establishes Docket Nos. MC2026-196 and CP2026-5 for consideration of matters raised by the Notice. Pursuant to 39 CFR 3010.101(q)(3) and 3040.191(d), the Commission appoints Katalin Clendenin to serve as Public Representative in these dockets. The Public Representative does not represent any individual person, entity or particular point of view, and, when Commission attorneys are appointed, no attorney-client relationship is established. The Commission invites comments on whether the Postal Service's filing is consistent with 39 U.S.C. 3632 and 3633 and other appliable policies and criteria of chapter 36 of Title 39 of the United States Code, 39 CFR 3035.105 and .107, 3040.190-192, and any applicable Commission directives and orders. Comments are due no later than April 16, 2026. The public portions of the filing can be accessed via the Commission's website (
1. The Commission establishes Docket Nos. MC2026-196 and CP2026-5 for consideration of the matters raised by the Postal Service's Notice.
2. Comments are due no later than April 16, 2026.
3. Pursuant to 39 CFR 3010.101(q)(3) and 3040.191(d), Katalin Clendenin will serve as an officer of the Commission (Public Representative) to represent the interests of the general public in these dockets.
4. This Order, or abstract thereof, shall be published in the
By the Commission.
Postal Service.
Notice.
The Postal Service gives notice of filing requests with the Postal Regulatory Commission to add certain International Priority Airmail, Commercial ePacket, Priority Mail Express International, Priority Mail International & First-Class Package International Service contracts to the list of Negotiated Service Agreements in the Competitive Product List in the Mail Classification Schedule.
Date of notice: April 14, 2026.
Christopher C. Meyerson, (202) 268-7820.
The United States Postal Service hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), it filed with the Postal Regulatory Commission the following requests:
Documents are available at
On December 12, 2025, Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”) advance notice SR-FICC-2025-801 pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, entitled Payment, Clearing and Settlement Supervision Act of 2010 (“Clearing Supervision Act”),
On December 29, 2025, the Commission published the Advance Notice, as modified by Partial Amendment No. 1, in the
On March 4, 2026, FICC filed Partial Amendment No. 2 to the Advance Notice.
FICC's GSD provides trade comparison, netting, risk management, settlement, and central counterparty (“CCP”) services for the U.S. Government securities market.
A key tool that FICC uses to manage its credit exposures to its members is the daily collection of margin from each member. A member's margin is designed to mitigate potential losses associated with liquidation of the member's portfolio in the event of that member's default. The aggregated amount of all GSD members' margin constitutes the Clearing Fund, which FICC would be able to access should a defaulted member's own margin be insufficient to satisfy losses to FICC caused by the liquidation of that member's portfolio. Each member's margin consists of a number of applicable components, including a value-at-risk charge designed to capture the potential market price risk associated with the securities in a member's portfolio.
Margin requirements are typically designed, in part, to recognize the potential relationship between products in a member's portfolio (
To recognize potential offsets in the risk presented by related products, FICC has a cross-margining arrangement with CME, which acts as a CCP for futures related to the debt instruments that FICC clears.
Pursuant to the terms of the Existing Agreement (
Under the Existing Agreement, both FICC and CME provide a guaranty to each other to make prompt payment when due (whether at maturity, by declaration, by demand or otherwise), and at any and all times thereafter, of all indebtedness and other obligations of every find and nature of each Cross-Margining Participant or its affiliate, arising from or related to the Eligible Positions or the liquidation, transfer, or management of the Eligible Positions, including but limited to, the amounts determined under any suspension or liquidation under Section 7 of the Existing Agreement (as discussed further below in II.4).
FICC is proposing to replace the Second A&R Agreement with the proposed Third A&R Agreement, to extend the availability of cross-margining to positions cleared and carried for customers other than an Eligible Affiliate (“Cross-Margining Customers”) by certain Joint Clearing Members, as discussed further below. FICC states that such amendments would promote the maintenance of more balanced portfolios that present lower risk and facilitate the access of indirect participants to central clearing, in accordance with Rule 17ad-22 under the Exchange Act.
In addition to this Advance Notice and Proposed Rule Change, FICC and CME have also submitted to the Commission and the CFTC petitions for exemptive relief from certain provisions of the Commodity exchange Act and Exchange Act that would enable FICC and CME to make cross-margining available to Cross-Margining Customers.
The amendments to the Existing Agreement would address certain areas, as described further below.
The Third A&R Agreement would identify the eligibility criteria and participation requirements for a Joint Clearing Member and its Cross-Margining Customer to participate in customer cross-margining. FICC states that these criteria and participation requirements are designed to ensure that each participating Cross-Margining Customer and its Joint Clearing Member satisfy certain conditions in the Proposed Orders.
The Third A&R Agreement would require that a Joint Clearing Member be an Eligible BD-FCM. It would also require that each Cross-Margining Customer be a “futures customer” within the meaning of CFTC Regulation 1.3
As discussed further below, a Joint Clearing Member would be required to enter into a participant agreement with the Clearing Organizations, with such agreement included as an Appendix to the Third A&R Agreement.
The Third A&R Agreement would define “Customer” as an indirect clearing participant that meets the definition of futures customer set out in CFTC Regulation 1.3 and is a “Sponsored Member” or “Executing Firm Customer” as defined under the GSD Rules. The Third A&R Agreement would also redefine “Non-Customer” and provide that Eligible Affiliates would continue to be able to access cross-margining under the Proprietary Cross-Margining Arrangement so long as they constitute “Non-Customers.”
A Cross-Margining Customer's participation in the Customer Cross-Margining Arrangement would be intermediated through the Eligible BD-FCM, and Section 2(a) of the Third A&R Agreement would specify that the Clearing Organizations would have no obligation to deal directly with a Cross-Margining Customer, and that a Cross-Margining Customer would have no right to assert a claim against a Clearing Organization with respect to, nor would a Clearing Organization be liable to a Cross-Margining Customer for, any obligations of a Clearing Organization in connection with the Cross-Margining Customer's participation in the Customer Cross-Margining Arrangement pursuant to the Third A&R Agreement. FICC states that these terms are consistent with those applicable to Eligible Firm Customers under the GSD Rules, as well as those applicable to customers under CME's rules.
The Third A&R Agreement would include provisions to enable Eligible BD-FCMs to establish “Customer Cross-Margining Accounts” for purposes of recording Eligible Positions at the Clearing Organizations (such Eligible Positions in a Customer Cross-Margining Account, “Customer Positions”), separate from the accounts established by Eligible BD-FCMs at the Clearing Organizations for the purposes of recording positions subject to the Proprietary Cross-Margining Arrangement (“Proprietary Positions” in “Proprietary Cross-Margining Accounts”
The Third A&R Agreement would describe the methodology for calculating potential reductions to the margin requirements for Customer Positions. FICC states that it would apply the same margin reduction methodology to Customer Positions as it applies to Proprietary Positions, with margin reductions calculated on a customer-by-customer basis for each
The Third A&R Agreement would address how the Clearing Organizations would manage a default of a Joint-Clearing Member carrying Customer Positions for Cross-Margining Customers. FICC states the Third A&R Agreement would follow substantially the same approach to handling Customer Positions carried by a Defaulting Member as applies to Proprietary Positions.
Under the Third A&R Agreement, Customer Positions and Proprietary Positions and associated margin would form part of separate “Liquidation Portfolios” and therefore would not be netted against one another in calculating Net Gain or Net Loss (or VM Net Gain or VM Net Loss). FICC states that, by virtue of these changes, the Clearing Organizations would not be able to apply Customer Positions or associated margin to the obligations arising under a Defaulting Member's Proprietary Positions.
The Third A&R Agreement would require Eligible BD-FCMs to enter into the Customer Cross-Margining Clearing Member Agreement in order to participate in the Cross-Margining Arrangement, as set forth in Appendix C to the Third A&R Agreement, which would clarify the rights and obligations of the Clearing Organizations, the Eligible BD-FCM, and the Cross-Margining Customers.
FICC states that the Customer Cross-Margining Clearing Member Agreement is modeled on the Proprietary Clearing Member Agreement in Appendix A of the Existing Agreement, with the three first paragraphs being substantially identical.
The Customer Cross-Margining Clearing Member Agreement would further provide that:
• The Eligible BD-FCM makes application to establish in its name Customer Cross-Margining Accounts at CME and FICC, in addition to any Proprietary Cross-Margining Account, for transactions and positions carried by the Eligible BD-FCM for Cross-Margining Customers who have signed a Customer Agreement (as defined below) and not commence clearing transactions until such has been executed.
• The Eligible BD-FCM indemnifies and holds harmless the Clearing Organizations from any claim resulting from the carrying of positions in a Customer Cross-Margining Account that belong to any person other than a Cross-Margining Customer.
• The Eligible BD-FCM unconditionally promises immediate payment of any obligations to a Clearing Organization in respect of a Cross-Margining Customer's positions, agrees that each Cross-Margining Customer is bound by the GSD Rules and CME's rules and by the provisions of the Customer Cross-Margining Clearing Member Agreement and the Third A&R Agreement, and represents and warrants that it has full power and authority to bind each of its Cross-Margining Customers to these terms.
• The Eligible BD-FCM pledges and grants to each Clearing Organization a first priority continuing security interest in all of the positions or other property held by either Clearing Organization, as security for its and its Cross-Margining Customers' obligations to the Clearing Organizations arising from its Customer Cross-Margining Accounts, with certain additional assurances aligning with those in the Proprietary Clearing Member Agreement (along with the
• The Eligible BD-FCM may terminate the Customer Cross-Margining Clearing Member Agreement upon two business day's written notice to FICC and CME, with such termination being effective upon written acknowledgement by both FICC and CME and provided that all positions have been closed-out or transferred and all Stand-alone Margin Requirement in respect of any such transferred positions
• Either Clearing Organization may terminate the Eligible BD-FCM's participation at any time upon written notice to the other Clearing Organization and Eligible BD-FCM, and in connection to termination, may require the Eligible BD-FCM to close-out or transfer all positions in the affected Customer Cross-Margining Accounts, with termination being effective provided that all obligations of the Eligible BD-FCM in respect of the affected Customer Cross-Margining Accounts have been fully satisfied.
• The Customer Cross-Margining Clearing Member Agreement would become effective upon the later of execution of the agreement, or all necessary regulatory approvals from the Commission and the CFTC.
The Third A&R Agreement would require that, in order to participate in the Cross-Margining Arrangement, Cross-Margining Customers enter into an agreement with the Eligible BD-FCM (“Customer Agreement”) that includes certain terms as set forth in Appendix C to the Third A&R Agreement.
The Customer Agreement would also require Cross-Margining Customers to acknowledge and agree that:
• All money, securities, and property that the Cross-Margining Customer deposits with the Eligible BD-FCM to margin, guarantee, or secure Customer Positions will be held in a “futures account” as defined in CFTC Regulation 1.3 and subject to CEA Section 4d(a) and (b).
• Customer Positions and associated margin may be commingled with the positions and property of other customers of the Eligible BD-FCM and may be used by the Eligible BD-FCM to carry positions on behalf of the Cross-Margining Customer or other futures customers of the Eligible BD-FCM.
• Property held in connection with Customer Positions will be treated in a manner consistent with the CFTC Order and Section 4d of the CEA.
• In the event that a Clearing Organization suspends or ceases to act for a Clearing Member, it would be the Clearing Organizations' sole discretion to determine whether to transfer, liquidate, or settle Customer Positions in the relevant Customer Cross-Margining Account.
• Participation in the Customer Cross-Margining Arrangement is subject to the terms of (i) the Third A&R Agreement, (ii) the Customer Cross-Margining Clearing Member Agreement, and (iii) the GSD Rules and the rules of CME.
• If CME determines at any time that any Eligible Positions of the Cross-Margining Customer cleared through the Customer Cross-Margining Account at CME are non-risk reducing, CME may either restrict the Cross-Margining Customer from adding positions or require the Cross-Margining Customer to move or liquidate Eligible Positions in the Customer Cross-Margining Account at CME.
The Customer Agreement would also require the Cross-Margining Customer to pledge and grant as security for its obligations in respect of its Customer Positions, a continuing security interest to the Eligible BD-FCM against all positions in each Customer Cross-Margining Account and associated margin and proceeds. The Customer Agreement would also require the Cross-Margining Customer to agree that the Eligible BD-FCM may enter into agreements with the Clearing Organizations on the Cross-Margining Customer's behalf as set forth in the Customer Cross-Margining Clearing Member Agreement.
The Third A&R Agreement would make changes, including new recitals to describe the purpose of the Third A&R Agreement and redefine the prior versions of the agreement, and non-substantive revisions and movements of defined terms, to conform to the addition of the Customer Cross-Margining Arrangement and related provisions. The Third A&R Agreement would revise Section 3(b) to provide that it does not apply to Proprietary Positions of a Joint Clearing Member or to Customer Positions, and Section 7(i) to clarify that the requirement for a Defaulting Member to reimburse a Clearing Organization in the event that the Clearing Organization is obligated to make a guaranty payment to the other Clearing Organization in respect of an obligation of such Defaulting Member applies in respect of the obligations of any Cross-Margining Customer.
The Third A&R Agreement would also include clarifying edits not specifically related to the Customer Cross-Margining Arrangement, including the provision stating FICC's and CME's right to terminate participation of a Cross-Margining Participant, a new provision regarding acceptable collateral to satisfy the Cross-Margin Requirement, and the titles of Appendices to specify that they are for use in connection with the Proprietary Cross-Margining Arrangement.
Along with the Third A&R Agreement, FICC is also proposing related changes to the GSD Rules to effectuate and conform with the Customer Cross-Margining Arrangement, as well as the adoption of new defined terms to effectuate these changes. The proposed rule changes include: (i) a new type of account for customer cross-margining and (ii)
FICC would create a new position Account type, the “Cross-Margining Customer Account,” in which Customer Positions would be recorded. The Cross-Margining Customer Account would constitute an “Indirect Participants Account.” A Netting Member that is an Eligible BD-FCM and approved participant in the Customer Cross-Margining Arrangement would be permitted to designate an Indirect Participants Account (other than a Segregated Indirect Participants Account) as a Cross-Margining Customer Account. Any such designation would constitute a representation to FICC by the Netting Member that the Netting Member has complied with all regulatory requirements applicable to it in connection with its participation in the Customer Cross-Margining Arrangement, including the conditions in the Proposed Orders, and this representation would be deemed repeated each time the Netting Member deposits Cross-Margining Customer Margin.
FICC would also adopt rule changes to set forth how it would calculate, collect, and hold Cross-Margining Customer Margin. Such changes would include:
• FICC would credit all Cross-Margining Customer Margin collected from an Eligible BD-FCM to a securities account on its books and records in the name of the Eligible BD-FCM for the benefit of its customers (a “Cross-Margining Customer Margin Custody Account”). FICC would also agree to treat all assets credited to the Cross-Margining Customer Margin Custody Account as “financial assets” credited to a “securities account” for which FICC is the “securities intermediary,” as such terms are used in Article 8 of the Uniform Commercial Code as in effect in the State of New York (“NYUCC”). FICC states that these provisions are designed to ensure that the Cross-Margining Customer Margin would not form part of FICC's estate in the event FICC became subject to insolvency proceedings and allow CME to perfect its security interest in the Cross-Margining Customer Margin to protect CME in the event of a Cross-Margining Participant default.
• FICC would hold Cross-Margining Customer Margin in (i) an account of FICC at a FDIC insured bank that is segregated from any other account of FICC and used exclusively to hold Cross-Margining Customer Margin, and (ii) an account at the FRBNY that is segregated from any other FICC account and used exclusively to hold Segregated Customer Margin and Cross-Margining Customer Margin. In accordance with the [Orders], any such account (other than one at the FRBNY) would need to be subject to a written notice consistent with the Orders.
• The same requirements applicable to Segregated Customer Margin with respect to the form and composition of eligible collateral, the minimum amounts of cash and Eligible Clearing Fund Treasury Securities, substitution and withdrawal, and treatment of excess margin would be applicable to Cross-Margining Customer Margin, except that (i) a Netting Member's rights or FICC's obligation with respect to any excess Cross-Margining Customer Margin would be subject to the Third A&R Agreement and the Customer Cross-Margining Clearing Member Agreement, and (ii) FICC would be permitted to retain the excess Cross-Margining Customer Margin deposited by a Netting Member with respect to a Cross-Margining Customer when the Netting Member has any outstanding payment or margin obligation arising from any Customer Positions, including those of another Cross-Margining Customer.
• FICC would calculate the margin requirement in respect of each Cross-Margining Customer Account (the “Cross-Margining Customer Margin Requirement”) on a gross (
FICC is also proposing to provide that Cross-Margining Customer Margin would be pledged to FICC to secure all obligations of the Netting Member and its Cross-Margining Customers arising under Customer Positions. FICC proposes to remove the existing Section 10(e) of Rule 3A, which currently prohibits Sponsored Members from participating in the Cross-Margining Arrangement.
The Third A&R Agreement would make clarifying and conforming edits to the GSD Rules, including (i) adding references to Cross-Margining Customer, Cross-Margining Customer Margin, Cross-Margining Customer Account, and Cross-Margining Customer Margin Requirements to relevant provisions that refer to indirect participants, initial margin collected by FICC, position accounts maintained by FICC, and FICC's initial margin requirements; (ii) removing the existing prohibition under Section 10(e) of Rule 3A on Sponsored Members from participating in the Cross-Margining Arrangement; (iii) expanding Rule 43, which sets forth certain terms related to the Proprietary Cross-Margining Arrangement, to encompass the Customer Cross-Margining Arrangement; and (iv) removing references to the Market Professionals cross-margining arrangement, which is no longer offered by FICC.
Although the Clearing Supervision Act does not specify a standard of review for an advance notice, the stated purpose of the Clearing Supervision Act is instructive: to mitigate systemic risk in the financial system and promote financial stability by, among other things, promoting uniform risk management standards for systemically important financial market utilities (“SIFMUs”) and strengthening the liquidity of SIFMUs.
Section 805(a)(2) of the Clearing Supervision Act authorizes the Commission to prescribe regulations containing risk management standards for the payment, clearing, and settlement activities of designated clearing entities engaged in designated activities for which the Commission is the supervisory agency.
• To promote robust risk management;
• To promote safety and soundness;
• To reduce systemic risks; and
• To support the stability of the broader financial system.
Section 805(c) provides that the Commission's risk management standards may address such areas as
The Commission has adopted risk management standards under Section 805(a)(2) of the Clearing Supervision Act and Section 17A of the Exchange Act (the “Clearing Agency Rules”).
The proposed changes contained in the Advance Notice are consistent with the stated objectives and principles of Section 805(b) of the Clearing Supervision Act. Specifically, as discussed below, the changes proposed in the Advance Notice are consistent with promoting robust risk management, promoting safety and soundness, reducing systemic risks, and supporting the stability of the broader financial system.
FICC's proposal is consistent with robust risk management and the promotion of safety and soundness. Specifically, the Advance Notice would provide that, for customer cross margining, FICC would calculate the margin requirement applicable to Customer Positions on a gross customer-by-customer basis, with margin reductions for Eligible Positions at CME that present offsetting risk. FICC would use the same margin methodology as it uses for Segregated Indirect Participant Positions and then determine potential margin reductions using the same methodology as is used for proprietary cross-margining,
The Third A&R Agreement also would require an Eligible BD-FCM to enter into a Customer Cross-Margining Clearing Member Agreement with FICC and CME, under which the Eligible BD-FCM would pledge to FICC, on behalf of itself and each Cross-Margining Customer, the positions and margin subject to the Customer Cross-Margining Arrangement at both FICC and CME. This pledge, coupled with the cross-guaranty between FICC and CME set forth in the Third A&R Agreement,
Further, FICC's proposal is consistent with promoting safety and soundness and reducing systemic risks. The Advance Notice identifies how FICC and CME would address the default of a Joint Clearing Member. Specifically, the Third A&R Agreement would favor joint liquidation by the Clearing Organizations and also contemplates alternative default management scenarios in which a joint liquidation is not feasible, allowing for the most efficient risk management and closeout of positions.
Finally, the Advance Notice is consistent with supporting the stability of the broader financial system. The Advance Notice would allow FICC to use the same margin methodology for Customer Positions as it does for Proprietary Positions, thereby continuing to recognize risk offsets with products cleared at CME. This approach should ensure that margin requirements are based on the particular risks that the portfolio presents to FICC and CME, providing an incentive for customers to maintain profiles that present lower risk. By expanding the Existing Agreement to Customers, FICC should enable and incentivize additional central clearing with respect to Eligible Positions. The ability to cross-margin customer positions should improve the ability of FICC members to provide clearing services because allowing for more efficient determination of margin that takes into account risk offsets between products should free up intermediary capacity to support additional central clearing. In this regard, the ability to cross-margin at the customer level could incentivize additional customers to post their own margin to FICC, when margin requirements are calibrated to overall risk exposure, and, if that were to occur, not having to post margin for customers could also, in turn, free up intermediary capacity.
Commenters generally supported the proposal set forth in the Advance Notice.
One commenter further stated that the Commission, FICC, and CME should actively review the appropriateness of margin levels and maximum offsets to ensure that margin is at all times sufficient.
The Commission agrees that a CCA should monitor the performance of its margin methodology. Under Rule 17ad-22(e)(6), a CCA is required to establish, implement, maintain and enforce written policies and procedures reasonably designed to cover, if the CCA provides CCP services, its credit exposures to its participants by establishing a risk-based margin system that, at a minimum, among other things, is monitored by management on an ongoing basis and is regularly reviewed, tested, and verified by conducting backtests of its margin model at least once each day using standard predetermined parameters and assumptions and conducting a sensitivity analysis of its margin model and a review of its parameters and assumptions for backtesting on at least a monthly basis, and more frequently than monthly during periods of time when the products cleared or markets served display high volatility or become less liquid, or when the size or concentration of positions held by the CCA's participants increases or decreases significantly.
Some commenters supported the proposal, but identified certain issues to be addressed.
A CCA's margin methodology constitutes a material aspect of its operations, meaning that it is part of a CCA's stated policies, practices, or interpretations under Exchange Act Rule 19b-4.
In this way, the rule filing process promotes transparency to market participants and the public by ensuring notice is provided regarding a CCA's new initiatives or changes to governance, operations, and risk management.
Moreover, a CCA is obligated to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide for publicly disclosing all relevant rules and material procedures, including key aspects of its default rules and procedures.
Notwithstanding the commenters' advocating for transparency, the Advance Notice is consistent with the objectives and principles described in Section 805(b) of the Clearing Supervision Act.
With respect to the BD-FCM, the contractual arrangements between an Eligible BD-FCM and its customer would govern the relationship, separate from the provisions of FICC's Rules.
With respect to FICC and CME, Section 7 of the Third A&R Agreement describes the actions that FICC or CME may take with respect to suspension and liquidation of a Cross-Margining Participant, and FICC's Rules address when it may terminate, suspend, or otherwise cease to act for or limit the activities of a Cross-Margining Participant.
Section 2 of the Third A&R Agreement provides that, in addition to Section 7's provisions on suspension and liquidation, either FICC or CME may terminate the participation of a particular Cross-Margining Participant, with respect to some or all Cross-Margining Accounts of the Cross-Margining Participant, upon two business days prior written notice to the other Clearing Organization, but that no such termination shall be effective with respect to (i) any Reimbursement Obligation or Guaranty with respect to that Cross-Margining Participant or its Cross-Margining Affiliate that is incurred prior to the effectiveness of any such termination, or (ii) Section 7 of the Third A&R Agreement until the Stand-Alone Margin Requirement with respect to each Cross-Margining Account subject to such termination has been fully satisfied.
Notwithstanding the lack of the particular termination provisions sought by the commenters, the Advance Notice is consistent with the objectives and principles described in Section 805(b) of the Clearing Supervision Act.
The commenter also stated that FICC and CME should establish a fall-back mechanism short of a complete termination of the arrangement for circumstances in which margin is not able to be calculated pursuant to the cross-margining arrangement.
Accordingly, and for the reasons stated above, the changes proposed in the Advance Notice are consistent with Section 805(b) of the Clearing Supervision Act.
Rule 17ad-22(e)(4)(i) requires that FICC establish, implement, maintain and enforce written policies and procedures reasonably designed to effectively identify, measure, monitor, and manage its credit exposures to participants and those arising from its payment, clearing, and settlement processes, including by maintaining sufficient financial resources to cover its credit exposure to each participant fully with a high degree of confidence.
The proposed changes should ensure that FICC continues to effectively measure and manage its credit exposure to participants by maintaining sufficient financial resources to cover its exposure thereto with a high degree of confidence. This is because, under the Customer Cross-Margining Arrangement, FICC would calculate the margin requirement applicable to Customer Positions on a gross
In addition, the proposed rule change would require each Eligible BD-FCM for whom FICC maintains one or more Cross-Margining Customer Account(s) to deposit to FICC cash or eligible securities to meet the Cross-Margining Customer Margin Requirement that is calibrated to the risks of each Cross-Margining Customer's portfolio. Such Eligible BD-FCM would also be required to enter into a Customer Cross-Margining Clearing Member Agreement with FICC and CME, pursuant to which the Eligible BD-FCM would pledge to FICC, on behalf of itself and each Cross-Margining Customer, the positions and margin subject to the Customer Cross-Margining Arrangement at both FICC and CME. This pledge, coupled with the payment guarantees between FICC and CME set forth in the Third A&R Agreement, would ensure that FICC and CME are able to look to the full portfolio of Customer Positions and associated margin at FICC and CME in order to satisfy any obligations arising under customer positions.
Accordingly, the changes proposed in the Advance Notice are consistent with Rule 17ad-22(e)(4)(i) under the Exchange Act.
Rule 17a-22(e)(6)(i) requires that FICC establish, implement, maintain and enforce written policies and procedures reasonably designed to cover its credit exposures to its participants by establishing a risk-based margin system that, at a minimum, considers, and produces margin levels commensurate with, the risks and particular attributes of each relevant product, portfolio, and market, and, if the CCA provides central counterparty services for U.S. Treasury securities, calculates, collects, and holds margin amounts from a direct participant for its proprietary positions in Treasury securities separately and independently from margin calculated and collected from that direct participant in connection with U.S. Treasury securities transactions by an indirect participant that relies on the services provided by the direct participant to access the CCA's payment, clearing, or settlement facilities.
As discussion in Parts II.B.3, above, FICC and CME would utilize their existing margin methodologies, consistent with how the Clearing Organizations calculate margin under the existing Proprietary Cross-Margining Arrangement. The Commission approved this methodology and overall approach in 2023, including with respect to Rule 17ad-22(e)(6)(i),
In addition, as discussed in Part II.C.2 above, FICC-cleared Customer Positions of a Cross-Margining Customer would be recorded in a Cross-Margining Customer Account, which account would be a separate Type of Account for purposes of the GSD Rules. Because of this, under the GSD Rules,
Accordingly, the changes proposed in the Advance Notice are consistent with Rule 17ad-22(e)(6)(i) under the Exchange Act.
Rule 17ad-22(e)(18)(iv)(C) requires that FICC establish, implement, maintain and enforce written policies and procedures reasonably designed to establish objective, risk-based, and publicly disclosed criteria for participation, which, when the CCA provides central counterparty services for transactions in U.S. Treasury securities, ensure that it has appropriate means to facilitate access to clearance and settlement services of all eligible secondary market transactions in U.S. Treasury securities, including those of indirect participants, which policies and procedures the board of directors of such CCA reviews annually.
Expansion of the current cross-margining arrangement between FICC and CME to the customer level should facilitate access to clearance and settlement in the U.S. Treasury market by better aligning the margin requirements applicable to such indirect participants' positions with the risk those positions present. The Commission agrees that the reduced margin requirements resulting from allowing the cross-margining of Customer Positions should incentivize Cross-Margining Customers to post their own margin, reducing costs and freeing up capacity for Eligible BD-FCMs to provide clearing services, which could provide the opportunity to increase the volume of transactions they clear or to reduce the prices at which they provide services.
One commenter stated that, to fully benefit from cross-margining, customers must be able to consolidate the clearing of their portfolios in one or a small number of clearing members, which requires a “viable done-away clearing model.”
Accordingly, the changes proposed in the Advance Notice are consistent with Rule 17ad-22(e)(18)(iv)(C) under the Exchange Act.
By the Commission.
On December 29, 2025, NYSE American LLC (“NYSE American” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act” or the “Exchange Act”),
As described more fully in the Notice,
The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act
Pursuant to Section 19(b)(2)(B) of the Exchange Act,
The Commission asks that commenters address the sufficiency of the Exchange's statements in support of the proposal, which are set forth in the Notice,
The Commission requests that interested persons provide written submissions of their data, views, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposed rule change is consistent with the Act, and the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of data, views, and arguments, the Commission will consider, pursuant to Rule 19b-4 under the Act,
Interested persons are invited to submit written data, views, and arguments regarding whether the proposed rule change should be approved or disapproved by May 5, 2026. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by May 19, 2026.
Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSEAMER-2025-74. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Rule 13.8 to increase the number of aggregated depth-of-book price levels in the Summary Depth data feeds from five (5) to twelve (12) price levels per side and to provide up to twelve (12) price levels for Cboe One Premium in addition to the existing five (5) price levels currently.
The text of the proposed rule change is also available on the Commission's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend Rule 13.8 to increase the number of aggregated depth-of-book price levels in the Summary Depth data feeds from five (5) to twelve (12) price levels per side and to provide up to twelve (12) price levels for Cboe One Premium in addition to the existing five (5)
Specifically, the Exchange proposes to amend (i) Rule 13.8(f), regarding the EDGX Summary Depth Data Feed to increase the number of aggregated depth-of-book price levels from five (5) to twelve (12) price levels per side, and (ii) Rule 13.8(b)(i), regarding the Cboe One Premium Data Feed to offer both aggregated depth of book price levels of both five (5) and twelve (12) levels for a period of time, until it sunsets the five (5) levels. Within the revised rule text for Cboe One (Rule 13.8(b)(i)), the Exchange will propose language that notes that the twelve (12) level feed will be offered in addition to the existing five (5) level feed; however, the five level feed shall be sunset by December 31, 2026, with the date to be announced via Exchange Notice. At that point, the Exchange will then offer only the twelve (12) level feed for Cboe One Premium.
The Exchange is also proposing to specifically define Cboe One Summary Data Feed and Cboe One Premium Data Feed within its rule text for Cboe One to clarify these different feeds within its rule text. The Exchange already distinguishes between these two products within its fee schedule
By way of background, the Exchange offers the EDGX Summary Depth Data Feed, which is a data feed that offers aggregated two-sided quotations for all displayed orders entered into the System. Currently, this data feed offers aggregated two-sided quotations for up to five (5) price levels. The EDGX Summary Depth Data Feed also contains the individual last sale information, Market Status, Trading Status, and Trade Break messages.
The Exchange also offers the Cboe One Premium Data Feed, which is a data feed that disseminates, on a real-time basis, the aggregate best bid and offer (“BBO”) of all displayed orders for securities traded on the Exchange and its Affiliates and enables recipients to receive aggregated two-sided quotations from EDGX and its Affiliates for up to five (5) price levels. The Cboe One Premium Data Feed is created using the data from the Exchange and each of its Affiliates' Summary Depth data feeds (allowing for up to 20 total price levels).
As discussed above, both the EDGX Summary Depth Data Feed and the Cboe One Premium Data Feed currently allow recipients to receive aggregated two-sided quotations for up to five (5) price levels. Thus, for up to five (5) price levels, each price level includes a two-sided quote and the number of shares available to buy and sell at that particular price level. The Exchange proposes to amend13.8(f), regarding the EDGX Summary Depth Data Feed, to increase the aggregated depth-of-book
The Exchange also proposes to amend Rule 13.8(b)(i), regarding the Cboe One Premium Data Feed, to include the aggregated depth-of-book price levels of twelve (12) price levels per side, in addition to the existing five (5) levels per side which shall continue to be provided for a limited time. As discussed further below, the Exchange proposes that the five (5) levels per side shall be sunset at a later time to prevent the Exchange from needing to maintain an additional optional feed. This sunset timeline allows market participants to adjust systems as necessary to prepare for this change.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes that the proposed amendments to Rule 13.8 are consistent with Section 6(b)(5) of the Act because they protect investors and the public interest and promote just and equitable principles of trade by allowing market participants who subscribe to the data feeds to view and analyze additional aggregated depth-of-book price levels, thereby providing greater transparency into market liquidity. The proposed rule change will provide market participants using the EDGX Summary Depth and Cboe One Premium data feeds with enhanced visibility into the Exchange's and its Affiliates' depth-of-book. This increased transparency will enable market participants to make more informed assessments of potential price movements, thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system.
As noted previously, in conjunction with the proposed addition of the Cboe One Premium Feed of up to twelve (12) levels, the Exchange proposes to remove the Cboe One Premium Feed of five levels from Rule 13.8(b)(i) as the Exchange is not required to offer or maintain this optional offering. The Exchange notes that the current five (5) levels offered will continue to be available for a limited period
The Exchange will announce via Exchange Notice the date on which the five (5) level feed offered will no longer be available. The Exchange further notes that in addition to the Cboe One Premium Feed being an optional offering, of which no participant is required to purchase, that a participant may still extract the top five (5) levels from the twelve (12) level feed offered once the 5 level feed is sunset if a participant only requires the top five levels. As previously noted, there is no pricing impact for this change either.
Additionally, the Exchange notes that other U.S. equities exchanges already offer similar aggregate depth-of-book data on similar market data feeds.
Finally, the Exchange notes that both the EDGX Summary Depth Data Feed and the Cboe One Premium Data Feed are distributed and purchased on a voluntary basis, in that neither the Exchange nor market data distributors are required by any rule or regulation to make these data products available. Thus, users of the data products may discontinue use of the products at any time and for any reason. Further, the increased aggregate depth-of-book price levels will be available to all market participants on an equivalent basis. Therefore, the Exchange believes the proposed rule change will not permit unfair discrimination among market participants.
The Exchange believes its proposed rule change would not impose any
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from Members or other interested parties.
Because the foregoing proposed rule change does not:
A. significantly affect the protection of investors or the public interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Rule 13.8 to increase the number of aggregated depth-of-book price levels in the Summary Depth data feeds from five (5) to twelve (12) price levels per side and to provide up to twelve (12) price levels for Cboe One Premium in addition to the existing five (5) price levels currently offered.
The text of the proposed rule change is also available on the Commission's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend Rule 13.8 to increase the number of aggregated depth-of-book price levels in the Summary Depth data feeds from five (5) to twelve (12) price levels per side and to provide up to twelve (12) price levels for Cboe One Premium in
Specifically, the Exchange proposes to amend (i) Rule 13.8(f), regarding the EDGA Summary Depth Data Feed to increase the number of aggregated depth-of-book price levels from five (5) to twelve (12) price levels per side, and (ii) Rule 13.8(b)(i), regarding the Cboe One Premium Data Feed to offer both aggregated depth of book price levels of both five (5) and twelve (12) levels for a period of time, until it sunsets the five (5) levels. Within the revised rule text for Cboe One (Rule 13.8(b)(i)), the Exchange will propose language that notes that the twelve (12) level feed will be offered in addition to the existing five (5) level feed; however, the five level feed shall be sunset by December 31, 2026, with the date to be announced via Exchange Notice. At that point, the Exchange will then offer only the twelve (12) level feed for Cboe One Premium.
The Exchange is also proposing to specifically define Cboe One Summary Data Feed and Cboe One Premium Data Feed within its rule text for Cboe One to clarify these different feeds within its rule text. The Exchange already distinguishes between these two products within its fee schedule
By way of background, the Exchange offers the EDGA Summary Depth Data Feed, which is a data feed that offers aggregated two-sided quotations for all displayed orders entered into the System. Currently, this data feed offers aggregated two-sided quotations for up to five (5) price levels. The EDGA Summary Depth Data Feed also contains the individual last sale information, Market Status, Trading Status, and Trade Break messages.
The Exchange also offers the Cboe One Premium Data Feed, which is a data feed that disseminates, on a real-time basis, the aggregate best bid and offer (“BBO”) of all displayed orders for securities traded on the Exchange and its Affiliates and enables recipients to receive aggregated two-sided quotations from EDGA and its Affiliates for up to five (5) price levels. The Cboe One Premium Data Feed is created using the data from the Exchange and each of its Affiliates' Summary Depth data feeds (allowing for up to 20 total price levels).
As discussed above, both the EDGA Summary Depth Data Feed and the Cboe One Premium Data Feed currently allow recipients to receive aggregated two-sided quotations for up to five (5) price levels. Thus, for up to five (5) price levels, each price level includes a two-sided quote and the number of shares available to buy and sell at that particular price level. The Exchange proposes to amend13.8(f), regarding the EDGA Summary Depth Data Feed, to increase the aggregated depth-of-book price levels of each from five (5) to twelve (12) price levels per side.
The Exchange also proposes to amend Rule 13.8(b)(i), regarding the Cboe One Premium Data Feed, to include the aggregated depth-of-book price levels of twelve (12) price levels per side, in addition to the existing five (5) levels per side which shall continue to be provided for a limited time. As discussed further below, the Exchange proposes that the five (5) levels per side shall be sunset at a later time to prevent the Exchange from needing to maintain an additional optional feed. This sunset timeline allows market participants to adjust systems as necessary to prepare for this change.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes that the proposed amendments to Rule 13.8 are consistent with Section 6(b)(5) of the Act because they protect investors and the public interest and promote just and equitable principles of trade by allowing market participants who subscribe to the data feeds to view and analyze additional aggregated depth-of-book price levels, thereby providing
As noted previously, in conjunction with the proposed addition of the Cboe One Premium Feed of up to twelve (12) levels, the Exchange proposes to remove the Cboe One Premium Feed of five levels from Rule 13.8(b)(i) as the Exchange is not required to offer or maintain this optional offering. The Exchange notes that the current five (5) levels offered will continue to be available for a limited period
The Exchange will announce via Exchange Notice the date on which the five (5) level feed offered will no longer be available. The Exchange further notes that in addition to the Cboe One Premium Feed being an optional offering, of which no participant is required to purchase, that a participant may still extract the top five (5) levels from the twelve (12) level feed offered once the 5 level feed is sunset if a participant only requires the top five levels. As previously noted, there is no pricing impact for this change either.
Additionally, the Exchange notes that other U.S. equities exchanges already offer similar aggregate depth-of-book data on similar market data feeds.
Finally, the Exchange notes that both the EDGA Summary Depth Data Feed and the Cboe One Premium Data Feed are distributed and purchased on a voluntary basis, in that neither the Exchange nor market data distributors are required by any rule or regulation to make these data products available. Thus, users of the data products may discontinue use of the products at any time and for any reason. Further, the increased aggregate depth-of-book price levels will be available to all market participants on an equivalent basis. Therefore, the Exchange believes the proposed rule change will not permit unfair discrimination among market participants.
The Exchange believes its proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes the proposal would enhance competition by offering alternative aggregate depth-of-book data products with an increased number of price levels like those offered by other U.S. equities exchanges, as discussed above.
Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from Members or other interested parties.
Because the foregoing proposed rule change does not:
A. significantly affect the protection of investors or the public interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Rule 11.22 to increase the number of aggregated depth-of-book price levels in the Summary Depth data feeds from five (5) to twelve (12) price levels per side and to provide up to twelve (12) price levels for Cboe One Premium in addition to the existing five (5) price levels currently offered.
The text of the proposed rule change is also available on the Commission's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend Rule 11.22 to increase the number of aggregated depth-of-book price levels in the Summary Depth data feeds from five (5) to twelve (12) price levels per side and to provide up to twelve (12) price levels for Cboe One Premium in addition to the existing five (5)
Specifically, the Exchange proposes to amend (i) Rule 11.22(k), regarding the BYX Summary Depth Data Feed to increase the number of aggregated depth-of-book price levels from five (5) to twelve (12) price levels per side, and (ii) Rule 11.22(i), regarding the Cboe One Premium Data Feed to offer both aggregated depth of book price levels of both five (5) and twelve (12) levels for a period of time, until it sunsets the five (5) levels. Within the revised rule text for Cboe One (Rule 11.22(i)), the Exchange will propose language that notes that the twelve (12) level feed will be offered in addition to the existing five (5) level feed; however, the five level feed shall be sunset by December 31, 2026, with the date to be announced via Exchange Notice. At that point, the Exchange will then offer only the twelve (12) level feed for Cboe One Premium.
The Exchange is also proposing to specifically define Cboe One Summary Data Feed and Cboe One Premium Data Feed within its rule text for Cboe One to clarify these different feeds within its rule text. The Exchange already distinguishes between these two products within its fee schedule
By way of background, the Exchange offers the BYX Summary Depth Data Feed, which is a data feed that offers aggregated two-sided quotations for all displayed orders entered into the System. Currently, this data feed offers aggregated two-sided quotations for up to five (5) price levels. The BYX Summary Depth Data Feed also contains the individual last sale information, Market Status, Trading Status, and Trade Break messages.
The Exchange also offers the Cboe One Premium Data Feed, which is a data feed that disseminates, on a real-time basis, the aggregate best bid and offer (“BBO”) of all displayed orders for securities traded on the Exchange and its Affiliates and enables recipients to receive aggregated two-sided quotations from BYX and its Affiliates for up to five (5) price levels. The Cboe One Premium Data Feed is created using the data from the Exchange and each of its Affiliates' Summary Depth data feeds (allowing for up to 20 total price levels).
As discussed above, both the BYX Summary Depth Data Feed and the Cboe One Premium Data Feed currently allow recipients to receive aggregated two-sided quotations for up to five (5) price levels. Thus, for up to five (5) price levels, each price level includes a two-sided quote and the number of shares available to buy and sell at that particular price level. The Exchange proposes to amend Rule 11.22(k), regarding the BYX Summary Depth Data Feed, to increase the aggregated depth-of-book price levels of each from five (5) to twelve (12) price levels per side.
The Exchange also proposes to amend Rule 11.22(i), regarding the Cboe One Premium Data Feed, to include the aggregated depth-of-book price levels of twelve (12) price levels per side, in addition to the existing five (5) levels per side which shall continue to be provided for a limited time. As discussed further below, the Exchange proposes that the five (5) levels per side shall be sunset at a later time to prevent the Exchange from needing to maintain an additional optional feed. This sunset timeline allows market participants to adjust systems as necessary to prepare for this change.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes that the proposed amendments to Rule 11.22 are consistent with Section 6(b)(5) of the Act because they protect investors and the public interest and promote just and equitable principles of trade by allowing market participants who subscribe to the data feeds to view and analyze additional aggregated depth-of-book price levels, thereby providing greater transparency into market liquidity. The proposed rule change will provide market participants using the BYX Summary Depth and Cboe One Premium data feeds with enhanced visibility into the Exchange's and its Affiliates' depth-of-book. This increased transparency will enable market participants to make more informed assessments of potential price movements, thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system.
As noted previously, in conjunction with the proposed addition of the Cboe One Premium Feed of up to twelve (12) levels, the Exchange proposes to remove the Cboe One Premium Feed of five levels from Rule 11.22(i) as the Exchange is not required to offer or maintain this optional offering. The Exchange notes that the current five (5) levels offered will continue to be available for a limited period
The Exchange will announce via Exchange Notice the date on which the five (5) level feed offered will no longer be available. The Exchange further notes that in addition to the Cboe One Premium Feed being an optional offering, of which no participant is required to purchase, that a participant may still extract the top five (5) levels from the twelve (12) level feed offered once the 5 level feed is sunset if a participant only requires the top five levels. As previously noted, there is no pricing impact for this change either.
Additionally, the Exchange notes that other U.S. equities exchanges already offer similar aggregate depth-of-book data on similar market data feeds.
Finally, the Exchange notes that both the BYX Summary Depth Data Feed and the Cboe One Premium Data Feed are distributed and purchased on a voluntary basis, in that neither the Exchange nor market data distributors are required by any rule or regulation to make these data products available. Thus, users of the data products may discontinue use of the products at any
The Exchange believes its proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes the proposal would enhance competition by offering alternative aggregate depth-of-book data products with an increased number of price levels like those offered by other U.S. equities exchanges, as discussed above.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from Members or other interested parties.
Because the foregoing proposed rule change does not:
A. significantly affect the protection of investors or the public interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Congress enacted Section 16 of the Securities Exchange Act of 1934 (“Exchange Act”) to address insider trading. Pursuant to Section 16(a), every person who owns more than ten percent of any class of equity security (other than an exempted security) which is registered under Section 12 of the Exchange Act, or who is a director or an officer of the issuer of such security (collectively “reporting persons”) are
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
Please direct your written comments on this 60-Day Collection Notice to Austin Gerig, Director/Chief Data Officer, Securities and Exchange Commission, c/o Tanya Ruttenberg via email to
Securities and Exchange Commission.
Notice.
The Securities and Exchange Commission (“Commission”) is publishing notice that broker-dealers may include a debit in the customer protection rule reserve computations when depositing cash, U.S. Treasury securities, and/or qualified customer securities to meet a margin requirement of the CME Securities Clearing Inc. (“CMESC”) resulting from positions in U.S. Treasury securities of the customers of the broker-dealer.
Raymond Lombardo, Assistant Director; Sheila Dombal Swartz, Senior Special Counsel, or Abraham Jacob, Special Counsel, at (202) 551-5500, Office of Broker-Dealer Finances, Division of Trading and Markets; Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-7010.
On December 13, 2023, the Commission adopted rules under the Securities Exchange Act of 1934 (“Exchange Act”) to amend the standards applicable to covered clearing agencies for U.S. Treasury securities (“U.S. Treasury securities CCAs”) to enhance risk management practices for central counterparties in the U.S. Treasury market and facilitate additional clearing of U.S. Treasury securities transactions.
Certain of the conditions in Note H require the broker-dealer to take a number of steps with respect to the customer and PAB account holder margin in its custody.
Paragraph (b)(3) to Note H sets forth the final condition: that the Commission has approved rules of the U.S. Treasury securities CCA that meet the conditions of Note H and has published (and not subsequently withdrawn) a notice that broker-dealers may include a debit in the customer and/or PAB reserve computations when depositing cash, U.S. Treasury securities, and/or qualified customer securities to meet a margin requirement of the U.S. Treasury securities CCA resulting from positions in U.S. Treasury securities of the customers or PAB account holders of the broker-dealer.
On December 13, 2024, CMESC filed with the Commission an application on Form CA-1 under Section 17A of the Exchange Act
Accordingly, the Commission is publishing this notice to advise broker-dealers that they may include a debit in their customer and/or PAB reserve computations when depositing cash, U.S. Treasury securities, and/or qualified customer securities to meet a margin requirement of CMESC resulting from positions in U.S. Treasury securities of the customers of the broker-dealer.
By the Commission.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Rule 11.22 to increase the number of aggregated depth-of-book price levels in the Summary Depth data feeds from five (5) to twelve (12) price levels per side and to provide up to twelve (12) price levels for Cboe One Premium in addition to the existing five (5) price levels currently offered.
The text of the proposed rule change is also available on the Commission's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend Rule 11.22 to increase the number of aggregated depth-of-book price levels in the Summary Depth data feeds from five (5) to twelve (12) price levels per side and to provide up to twelve (12) price levels for Cboe One Premium in addition to the existing five (5)
Specifically, the Exchange proposes to amend (i) Rule 11.22(m), regarding the BZX Summary Depth Data Feed to increase the number of aggregated depth-of-book price levels from five (5) to twelve (12) price levels per side, and (ii) Rule 11.22(j), regarding the Cboe One Premium Data Feed to offer both aggregated depth of book price levels of both five (5) and twelve (12) levels for a period of time, until it sunsets the five (5) levels. Within the revised rule text for Cboe One (Rule 11.22(j)), the Exchange will propose language that notes that the twelve (12) level feed will be offered in addition to the existing five (5) level feed; however, the five level feed shall be sunset by December 31, 2026, with the date to be announced via Exchange Notice. At that point, the Exchange will then offer only the twelve (12) level feed for Cboe One Premium.
The Exchange is also proposing to specifically define Cboe One Summary Data Feed and Cboe One Premium Data Feed within its rule text for Cboe One to clarify these different feeds within its rule text. The Exchange already distinguishes between these two products within its fee schedule
By way of background, the Exchange offers the BZX Summary Depth Data Feed, which is a data feed that offers aggregated two-sided quotations for all displayed orders entered into the System. Currently, this data feed offers aggregated two-sided quotations for up to five (5) price levels. The BZX Summary Depth Data Feed also contains the individual last sale information, Market Status, Trading Status, and Trade Break messages.
The Exchange also offers the Cboe One Premium Data Feed, which is a data feed that disseminates, on a real-time basis, the aggregate best bid and offer (“BBO”) of all displayed orders for securities traded on the Exchange and its Affiliates and enables recipients to receive aggregated two-sided quotations from BZX and its Affiliates for up to five (5) price levels. The Cboe One Premium Data Feed is created using the data from the Exchange and each of its Affiliates' Summary Depth data feeds (allowing for up to 20 total price levels).
As discussed above, both the BZX Summary Depth Data Feed and the Cboe One Premium Data Feed currently allow recipients to receive aggregated two-sided quotations for up to five (5) price levels. Thus, for up to five (5) price levels, each price level includes a two-sided quote and the number of shares available to buy and sell at that particular price level. The Exchange proposes to amend Rule 11.22(m), regarding the BZX Summary Depth Data Feed, to increase the aggregated depth-of-book price levels of each from five (5) to twelve (12) price levels per side.
The Exchange also proposes to amend Rule 11.22(j), regarding the Cboe One Premium Data Feed, to include the aggregated depth-of-book price levels of twelve (12) price levels per side, in addition to the existing five (5) levels per side which shall continue to be provided for a limited time. As discussed further below, the Exchange proposes that the five (5) levels per side shall be sunset at a later time to prevent the Exchange from needing to maintain an additional optional feed. This sunset timeline allows market participants to adjust systems as necessary to prepare for this change.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes that the proposed amendments to Rule 11.22 are consistent with Section 6(b)(5) of the Act because they protect investors and the public interest and promote just and equitable principles of trade by allowing market participants who subscribe to the data feeds to view and analyze additional aggregated depth-of-book price levels, thereby providing greater transparency into market liquidity. The proposed rule change will provide market participants using the BZX Summary Depth and Cboe One Premium data feeds with enhanced visibility into the Exchange's and its Affiliates' depth-of-book. This increased transparency will enable market participants to make more informed assessments of potential price movements, thereby removing impediments to and perfecting the
As noted previously, in conjunction with the proposed addition of the Cboe One Premium Feed of up to twelve (12) levels, the Exchange proposes to remove the Cboe One Premium Feed of five levels from Rule 11.22(j) as the Exchange is not required to offer or maintain this optional offering. The Exchange notes that the current five (5) levels offered will continue to be available for a limited period
The Exchange will announce via Exchange Notice the date on which the five (5) level feed offered will no longer be available. The Exchange further notes that in addition to the Cboe One Premium Feed being an optional offering, of which no participant is required to purchase, that a participant may still extract the top five (5) levels from the twelve (12) level feed offered once the 5 level feed is sunset if a participant only requires the top five levels. As previously noted, there is no pricing impact for this change either.
Additionally, the Exchange notes that other U.S. equities exchanges already offer similar aggregate depth-of-book data on similar market data feeds.
Finally, the Exchange notes that both the BZX Summary Depth Data Feed and the Cboe One Premium Data Feed are distributed and purchased on a voluntary basis, in that neither the Exchange nor market data distributors are required by any rule or regulation to make these data products available. Thus, users of the data products may discontinue use of the products at any time and for any reason. Further, the increased aggregate depth-of-book price levels will be available to all market participants on an equivalent basis. Therefore, the Exchange believes the proposed rule change will not permit unfair discrimination among market participants.
The Exchange believes its proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes the proposal would enhance competition by offering alternative aggregate depth-of-book data products with an increased number of price levels like those offered by other U.S. equities exchanges, as discussed above.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from Members or other interested parties.
Because the foregoing proposed rule change does not:
A. significantly affect the protection of investors or the public interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On January 5, 2026, Cboe Exchange, Inc. (“Exchange” or “Cboe Options”) filed with the Securities and Exchange Commission (“Commission” or “SEC”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or the “Exchange Act”),
As described more fully in the Notice,
Under the proposal, when a User that is also a member of CFE submits a VIX future-option order to Cboe, Cboe will communicate the VX future component of the order to CFE on behalf of the User.
Under the proposal, the price(s) of the VX future leg(s) of a VIX future-option order are set upon order entry.
The Exchange states that activity related to the execution of the options components of VIX future-option orders will be subject to Commission jurisdiction, and activity related to the execution of the futures components of VIX future-option orders will be subject to the jurisdiction of the Commodity Futures Trading Commission (“CFTC”).
The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act
Pursuant to Section 19(b)(2)(B) of the Exchange Act,
The Commission asks that commenters address the sufficiency of the Exchange's statements in support of the proposal, which are set forth in the Notice,
The Commission requests that interested persons provide written submissions of their data, views, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposed rule change is consistent with the Act, and the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of data, views, and arguments, the Commission will consider, pursuant to Rule 19b-4 under the Act,
Interested persons are invited to submit written data, views, and arguments regarding whether the proposed rule change should be approved or disapproved by May 5, 2026. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by May 19, 2026.
Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Securities and Exchange Commission (“Commission” or “SEC”).
Notice.
Notice of an application under section 6(c) of the Investment Company Act of 1940 (the “Act”) for an exemption from sections 18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c) of the Act for an exemption from rule 23c-3 under the Act, and for an order pursuant to section 17(d) of the Act and rule 17d-1 under the Act.
Applicants request an order to permit certain registered closed-end investment companies to issue multiple classes of shares and to impose asset-based distribution and/or service fees and early withdrawal charges.
AMG BBH Asset-Backed Credit Fund, LLC and Brown Brothers Harriman Credit Partners, LLC
The application was filed on February 23, 2026.
An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing on any application by emailing the SEC's Secretary at
The Commission:
Trace W. Rakestraw, Senior Special Counsel at (202) 551-6825 (Division of Investment Management, Chief Counsel's Office).
For Applicants' representations, legal analysis, and conditions, please refer to Applicants' application, dated February 23, 2026, which may be obtained via the Commission's website by searching for the file number at the top of this document, or for an Applicant using the Company name search field on the SEC's EDGAR system. The SEC's EDGAR system may be searched at
You may also call the SEC's Office of Investor Education and Advocacy at (202) 551-8090.
For the Commission, by the Division of Investment Management, under delegated authority.
U.S. Small Business Administration.
30-Day notice; request for comments.
The Small Business Administration (SBA) will submit the information collection described below to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, as amended, on or after the date of publication of this notice. SBA is publishing this notice to allow all interested members of the public an additional 30 days to provide comments on the collection of information.
Submit comments on or before May 14, 2026.
Written comments and recommendations for this information collection request should be sent within 30 days of publication of this notice to
You may obtain information including a copy of the forms and supporting documents from the Interim Agency Clearance Officer, Shauniece Carter, at (202) 205-6536, or
The recipients of SBA counseling and training grant awards are required by the terms of their Notice of Award and as outlined in each Program Announcement, to collect the information on SBA Form 641 (Counseling Information Form) from each small business or prospective small business that receives one-on-one counseling or advising, and to collect the information on SBA Form 888 (Management Training Report) for each group training session. SBA's Resource Partners submit this information to SBA via the Nexus system. The information is pertinent to management's analysis of each OED program or activity funded by SBA and assists SBA in evaluating the impact of each program or activity. The information is also used to support SBA's budget requests, performance plans, evaluations, and other submissions made to the Office of Management and Budget, the President, and the Congress.
SBA invites the public to submit comments, including specific and detailed suggestions on ways to improve the collection and reduce the burden on respondents. Commenters should also address (i) whether the information collection is necessary for the proper performance of SBA's functions, including whether it has any practical utility; (ii) the accuracy of the estimated burdens; (iii) ways to enhance the quality, utility, and clarity of the information to be collected; and (iv) the use of automated collection techniques or other forms of information technology to minimize the information collection burden on those who are required to respond.
U.S. Small Business Administration.
Notice.
This is notice of an Administrative declaration of a disaster for the state of Illinois dated April 9, 2026.
Issued on April 9, 2026.
Sharon Henderson, Office of Disaster Recovery and Resilience, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205-6734.
Notice is hereby given as a result of the Administrator's disaster declaration, applications for disaster loans may be submitted online using the MySBA Loan Portal
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 21493C and for economic injury is 214940.
The states which received an SBA Administrative declaration are Illinois, Indiana.
Notice is hereby given that Pelion Ventures VIII Financial Institutions Fund, L.P., 14761 S. Future Way, Suite 500, Salt Lake City, UT 84020, a Federal Licensee under the Small Business Investment Act of 1958, as amended (“the Act”), in connection with the financing of small concerns, has sought an exemption under Section 312 of the Act and 13 CFR 107.730,
The proposed transaction is brought within the purview of 13 CFR 107.730 of the Code of Federal Regulations because Pelion Inc., Pelion Ventures VIII, L.P., Pelion Ventures VIII-Enterprise Fund, L.P., Pelion Ventures VIII-A, L.P., and Pelion Ventures VIII-C, L.P., are all Associates of Pelion Ventures VIII Financial Institutions Fund, L.P. by virtue of Common Control as defined in 13 CFR 107.50, will receive proceeds from the transaction.
Therefore, the transaction requires a regulatory exemption pursuant to Section 312 of the Act and 13 CFR 107.730 of the Code of Federal Regulations. Notice is hereby given that any interested person may submit written comments on the transaction within fifteen days of the date of this publication to Associate Administrator for Investment, U.S. Small Business Administration, 409 Third Street SW, Washington, DC 20416.
The Department of State will conduct a public meeting at 10:00 a.m. on Wednesday, June 10, 2026, by teleconference. The primary purpose of the meeting is to prepare for the 13th session of the International Maritime Organization's (IMO) Sub-Committee on Navigation, Communication and Search and Rescue (NCSR 13) to be held at IMO Headquarters in London, United Kingdom from Monday, June 22, 2026 to Friday, June 26, 2026.
in-person.
The agenda items to be considered include:
Those who plan to participate should contact the meeting coordinator, Mr. John Stone at
Additional information regarding this and other IMO public meetings may be found at:
The Department of State will conduct a public meeting at 10:00 a.m. on Friday, May 8, 2026, by teleconference. The primary purpose of the meeting is to prepare for the 111th session of the International Maritime Organization's (IMO) Maritime Safety Committee, to be held at IMO Headquarters in London, United Kingdom from Wednesday, May 13, 2026, to Friday, May 22, 2026.
The agenda items to be considered include:
Those who plan to participate may contact the meeting coordinator, LCDR Emily Rowan, by email at
Additional information regarding this and other IMO public meetings may be found at:
Susquehanna River Basin Commission.
Notice.
This notice lists Grandfathering Registration for projects by the Susquehanna River Basin Commission during the period set forth in
March 1-31, 2026.
Susquehanna River Basin Commission, 4423 North Front Street, Harrisburg, PA 17110-1788.
Jason E. Oyler, General Counsel and Secretary to the Commission, telephone: (717) 238-0423, ext. 1312; fax: (717) 238-2436; email:
This notice lists GF Registration for projects, described below, pursuant to 18 CFR part 806, subpart E, for the time period specified above:
1. Heidelberg Materials Northeast LLC—Salona Quarry, GF Certificate No. GF-202603312, Lamar Township, Clinton County, Pa.; the Active Pit Sump and consumptive use; Issue Date: March 9, 2026.
2. National Limestone Quarry, Inc.—Paxtonville Facility, GF Certificate No. GF-202603313, Franklin and Beaver Townships, Snyder County, Pa.; Well 1 and consumptive use; Issue Date: March 23, 2026.
Public Law 91-575, 84 Stat. 1509
Susquehanna River Basin Commission.
Notice.
This notice lists General Permits approved by the Susquehanna River Basin Commission during the period set forth in
March 1-31, 2026.
Susquehanna River Basin Commission, 4423 North Front Street, Harrisburg, PA 17110-1788.
Jason E. Oyler, General Counsel and Secretary to the Commission, telephone: (717) 238-0423, ext. 1312; fax (717) 238-2436; email:
This notice lists General Permits for projects, described below, pursuant to 18 CFR 806.17(c)(4), for the time period specified above.
1. Pennsylvania Department of Environmental Protection—Bureau of Abandoned Mine Reclamation; Hanover Reservoir Mine Fire, General Permit Approval of Coverage No. GP-02-202603022, Hanover Township, Luzerne County, Pa.; Extinguish a Mine Fire; Consumptive use approved up to 0.068 mgd (30-day average) from Well 1; Approval Date: March 3, 2026.
Susquehanna River Basin Commission.
Notice.
This notice lists the minor modifications approved for previously approved projects by the Susquehanna River Basin Commission during the period set forth in
March 1-31, 2026
Susquehanna River Basin Commission, 4423 North Front Street, Harrisburg, PA 17110-1788.
Jason E. Oyler, General Counsel and Secretary to the Commission, telephone: (717) 238-0423, ext. 1312; fax (717) 238-2436; email:
This notice lists previously approved projects, receiving approval of minor modification or a corrective modification, described below, pursuant to 18 CFR 806.18 or to Commission Resolution Nos. 2013-11 and 2015-06, for the time period specified above. 1. East Cocalico Township Authority—Well 10, Docket No. 20260316, East Cocalico Township, Lancaster County, Pa.; modification approval to remove Well 10 from approved sources; Approval Date: March 25, 2026.
Susquehanna River Basin Commission.
Notice.
This notice lists Approvals by Rule for projects by the Susquehanna River Basin Commission during the period set forth in
March 1-31, 2026.
Susquehanna River Basin Commission, 4423 North Front Street, Harrisburg, PA 17110-1788.
Jason E. Oyler, General Counsel and Secretary to the Commission, telephone: (717) 238-0423, ext. 1312; fax: (717) 238-2436; email:
This notice lists the projects, described below, receiving approval for the consumptive use of water pursuant to the Commission's approval by rule process set forth in 18 CFR 806.22 (f) for the time period specified above.
1. RENEWAL—Diversified Production LLC; Pad ID: Longhorn C-1 (WDV1); ABR-201011061.R3; Jay Township, Elk County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
2. RENEWAL—Expand Operating LLC; Pad ID: Beeman; ABR-201101028.R3; Litchfield Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
3. RENEWAL—Expand Operating LLC; Pad ID: Bustin Homestead; ABR-201101025.R3; Sheshequin Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
4. RENEWAL—Expand Operating LLC; Pad ID: Corl; ABR-201102011.R3; Colley Township, Sullivan County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
5. RENEWAL—Expand Operating LLC; Pad ID: DJ; ABR-201101021.R3; Wysox Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
6. RENEWAL—Expand Operating LLC; Pad ID: Garrison Drilling Pad #1; ABR-201102032.R3; Lemon Township, Wyoming County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
7. RENEWAL—Expand Operating LLC; Pad ID: Harnish; ABR-201102006.R3; Sheshequin Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
8. RENEWAL—Expand Operating LLC; Pad ID: Herr; ABR-201102026.R3; Sheshequin Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
9. RENEWAL—Expand Operating LLC; Pad ID: Jokah; ABR-201102005.R3; Windham Township, Wyoming County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
10. RENEWAL—Expand Operating LLC; Pad ID: Rocks; ABR-201101003.R3; Overton Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
11. RENEWAL—Expand Operating LLC; Pad ID: RU-74 TRETTER PAD; ABR-201601005.R2; Great Bend Township, Susquehanna County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
12. RENEWAL—Expand Operating LLC; Pad ID: Struble; ABR-201101017.R3; Litchfield Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
13. RENEWAL—Expand Operating LLC; Pad ID: VRGC; ABR-201101022.R3; Wilmot Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
14. RENEWAL—Expand Operating LLC; Pad ID: Walker; ABR-201101030.R3; Wilmot Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
15. RENEWAL—Expand Operating LLC; Pad ID: WY 09 OTTEN PAD; ABR-201512002.R2; Forkston Township, Wyoming County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 11, 2026.
16. RENEWAL—Repsol Oil & Gas USA, LLC; Pad ID: UHOUSE (05 081) D; ABR-201102008.R3; Orwell Township, Bradford County, Pa.; Consumptive Use of Up to 6.0000 mgd; Approval Date: March 11, 2026.
17. RENEWAL—Seneca Resources Company, LLC; Pad ID: Brewer 258; ABR-201012013.R3; Jackson Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
18. RENEWAL—Seneca Resources Company, LLC; Pad ID: DCNR 100 Pad C; ABR-201102007.R3; Cogan House Township, Lycoming County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
19. RENEWAL—Seneca Resources Company, LLC; Pad ID: Gee 848W; ABR-201508005.R2; Middlebury Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
20. RENEWAL—Seneca Resources Company, LLC; Pad ID: Harsell 883; ABR-201007066.R3; Nelson Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
21. RENEWAL—Seneca Resources Company, LLC; Pad ID: Martin 421; ABR-201009089.R3; Delmar Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
22. RENEWAL—Seneca Resources Company, LLC; Pad ID: Seymour 599; ABR-201009063.R3; Sullivan Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
23. RENEWAL—Seneca Resources Company, LLC; Pad ID: Shaw Trust 500; ABR-201011070.R3; Sullivan Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
24. RENEWAL—Seneca Resources Company, LLC; Pad ID: Signor 583; ABR-201011059.R3; Covington Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
25. RENEWAL—Seneca Resources Company, LLC; Pad ID: Smith 589; ABR-201009088.R3; Richmond Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
26. RENEWAL—Seneca Resources Company, LLC; Pad ID: Stanley 1106; ABR-201102015.R3; Osceola Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
27. RENEWAL—Seneca Resources Company, LLC; Pad ID: Torpy & Van Order Inc 574; ABR-201011043.R3; Covington Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
28. RENEWAL—Seneca Resources Company, LLC; Pad ID: Vanvliet 614; ABR-201012044.R3; Delmar Township, Tioga County, Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: March 11, 2026.
29. RENEWAL—VEC Energy LLC; Pad ID: Austinburg 1H; ABR-20100313.R3; Brookfield Township, Tioga County, Pa.; Consumptive Use of Up to 6.0000 mgd; Approval Date: March 11, 2026.
30. RENEWAL—Expand Operating LLC; Pad ID: Wasyl; ABR-201101002.R3; Ulster Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 17, 2026.
31. RENEWAL—Repsol Oil & Gas USA, LLC; Pad ID: PECK HILL FARM (05 178); ABR-201101019.R3; Windham Township, Bradford County, Pa.; Consumptive Use of Up to 6.0000 mgd; Approval Date: March 17, 2026.
32. RENEWAL—Repsol Oil & Gas USA, LLC; Pad ID: Red Tailed Hawk; ABR-201011027.R3; Covington Township, Tioga County, Pa.; Consumptive Use of Up to 6.0000 mgd; Approval Date: March 17, 2026.
33. RENEWAL—BKV Operating, LLC; Pad ID: Yarasavage Well Pad; ABR-201102021.R3; Washington Township, Wyoming County, Pa.; Consumptive Use of Up to 5.0000 mgd; Approval Date: March 23, 2026.
34. RENEWAL—Expand Operating LLC; Pad ID: Demento Pad; ABR-201102036.R3; Stevens Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 23, 2026.
35. RENEWAL—S.T.L. Resources, LLC; Pad ID: Sturgis South; ABR-202102004.R1; Grugan Township, Clinton County, Pa.; Consumptive Use of Up to 5.0000 mgd; Approval Date: March 23, 2026.
36. RENEWAL—Coterra Energy Inc.; Pad ID: HawleyJ P1; ABR-201103009.R3; Forest Lake Township, Susquehanna County, Pa.; Consumptive Use of Up to 5.0000 mgd; Approval Date: March 27, 2026.
37. RENEWAL—Coterra Energy Inc.; Pad ID: HeitzenroderA P2; ABR-202103002.R1; Springville Township, Susquehanna County, Pa.; Consumptive Use of Up to 5.0000 mgd; Approval Date: March 27, 2026.
38. RENEWAL—Repsol Oil & Gas USA, LLC; Pad ID: ANTISDEL (05 036) M; ABR-201009016.R3; Warren Township, Bradford County, Pa.; Consumptive Use of Up to 6.0000 mgd; Approval Date: March 27, 2026.
39. RENEWAL—Repsol Oil & Gas USA, LLC; Pad ID: Guillaume 715; ABR-201011002.R3; Liberty Township, Tioga County, Pa.; Consumptive Use of Up to 6.0000 mgd; Approval Date: March 27, 2026.
40. RENEWAL—Repsol Oil & Gas USA, LLC; Pad ID: HARTNETT (05 097) R; ABR-201010045.R3; Orwell Township, Bradford County, Pa.; Consumptive Use of Up to 6.0000 mgd; Approval Date: March 27, 2026.
41. RENEWAL—Repsol Oil & Gas USA, LLC; Pad ID: WATKINS (03 052) M; ABR-201011048.R3; Columbia Township, Bradford County, Pa.; Consumptive Use of Up to 6.0000 mgd; Approval Date: March 27, 2026.
42. RENEWAL—Coterra Energy Inc.; Pad ID: Ely P3; ABR-20080709.R3; Dimock Township, Susquehanna County, Pa.; Consumptive Use of Up to 5.0000 mgd; Approval Date: March 31, 2026.
43. RENEWAL—Coterra Energy Inc.; Pad ID: Teel P3; ABR-20080702.R3; Springville Township, Susquehanna County, Pa.; Consumptive Use of Up to 5.0000 mgd; Approval Date: March 31, 2026.
44. RENEWAL—Expand Operating LLC; Pad ID: Acton; ABR-201103013.R3; Rome Township,
45. RENEWAL—Expand Operating LLC; Pad ID: DPH; ABR-201103011.R3; Windham Township, Wyoming County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 31, 2026.
46. RENEWAL—Expand Operating LLC; Pad ID: Dziuba; ABR-201103012.R3; Tuscarora Township, Bradford County, Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: March 31, 2026.
Federal Aviation Administration (FAA), DOT.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, FAA invites public comments about our intention to request the Office of Management and Budget (OMB) approval to renew a previously approved information collection. The current Fuel Tank Flammability Safety rule 25.981 requires the Design Approval Holder (DAH) to report to the FAA on the component reliability of the fuel tank flammability reduction means. DAH as specified in AC 25.981-2A is the holder of any design approval, including type certificate, amended type certificate, supplemental type certificate, amended supplemental type certificate, Parts Manufacturer Approval (PMA), Technical Standard Order (TSO) authorization, letter of TSO design approval, and field approvals. As the transport aircraft fleet continues to fly longer than expected and component reliability may be affected or degraded, the data collection is needed on an on-going basis to ensure the aircraft fuel tank safety level continues to meet the predicted reliability at the time of certification. This collection of information supports the FAA's Safety Management System (SMS) safety goal and by proactively identifying hazards and mitigating risks before incidents occur.
Written comments should be submitted by May 14, 2026.
Please send written comments:
Phil Dang by email at:
The FAA received 2 anonymous comments published in the previous January 2026
Federal Motor Carrier Safety Administration (FMCSA), Department of Transportation (DOT).
Notice of final disposition.
FMCSA announces its decision to renew exemptions for 21 individuals from the hearing requirement in the Federal Motor Carrier Safety Regulations (FMCSRs) for interstate commercial motor vehicle (CMV) drivers. The exemptions enable these hard of hearing and deaf individuals to continue to operate CMVs in interstate commerce.
Each group of renewed exemptions were applicable on the dates stated in the discussions below and will expire on the dates provided below.
Ms. Christine A. Hydock, Chief, Medical Programs Division, FMCSA, DOT, 1200 New Jersey Avenue SE, Washington, DC 20590-0001; (202) 366-4001;
To view comments, go to
In accordance with 49 U.S.C. 31315(b)(6), DOT solicits comments from the public on the exemption requests. DOT posts these comments, including any personal information the commenter provides, to
FMCSA has authority under 49 U.S.C. 31136(e) and 31315(b) to grant exemptions from the FMCSRs. FMCSA must publish a notice of each exemption request in the
The Agency reviews the application, safety analyses, and public comments submitted and determines whether granting the exemption would likely achieve a level of safety equivalent to, or greater than, the level that would be achieved absent such exemption, pursuant to the standard set forth in 49 U.S.C. 31315(b)(1). The Agency must publish its decision in the
On December 19, 2025, FMCSA published a notice announcing its decision to renew exemptions for 21 individuals from the hearing standard in 49 CFR 391.41(b)(11) to operate a CMV in interstate commerce and requested comments from the public (90 FR 59642). The public comment period ended on January 20, 2026, and no comments were received.
The Agency evaluated the eligibility and determined that renewing these applicants' exemptions would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved by complying with 49 CFR 391.41(b)(11).
The physical qualification standard for drivers regarding hearing, found in 49 CFR 391.41(b)(11), states that a person is physically qualified to drive a CMV if that person first perceives a forced whispered voice in the better ear at not less than 5 feet with or without the use of a hearing aid or, if tested by use of an audiometric device, does not have an average hearing loss in the better ear greater than 40 decibels at 500 Hz, 1,000 Hz, and 2,000 Hz with or without a hearing aid when the audiometric device is calibrated to American National Standard (formerly ASA Standard) Z24.5—1951.
This standard was adopted in 1970 and was revised in 1971 to allow drivers to be qualified under this standard while wearing a hearing aid (35 FR 6458, 6463 (Apr. 22, 1970) and 36 FR 12857 (July 8, 1971)).
FMCSA received no comments in this proceeding.
In accordance with 49 U.S.C. 31136(e) and 31315(b), each of the 21 applicants have satisfied the renewal conditions for obtaining an exemption from the hearing requirement. The 21 drivers in this notice remain in good standing with the Agency. In addition, the Agency has reviewed each applicant's certified driving record from their State Driver's Licensing Agency (SDLA). The information obtained from each applicant's driving record provides the Agency with details regarding any moving violations or reported crash data, which demonstrates whether the driver has a safe driving history and is an indicator of future driving performance. If the driving record revealed a crash, FMCSA requested and reviewed the related police reports and other relevant documents, such as the citation and conviction information. These factors provide an adequate basis for predicting each driver's ability to continue to safely operate a CMV in interstate commerce. Accordingly, FMCSA concludes that extending the exemption for each of these drivers for a period of 2 years is likely to achieve a level of safety equivalent to the level that would be achieved absent such exemption.
The exemptions are extended subject to the following conditions: each driver (1) must report to FMCSA any crashes, as defined in 49 CFR 390.5T, within 7 days of the crash; (2) must report to FMCSA any citations and convictions for disqualifying offenses under 49 CFR parts 383 and 391 within 7 days of the citation and conviction; (3) must submit to FMCSA annual certified driving records from their SDLA; and (4) is prohibited from operating a motorcoach or bus with passengers in interstate commerce. The driver must also have a copy of the exemption when driving, for presentation to a duly authorized Federal, State, or local law enforcement official. In addition, the driver must meet all the applicable commercial driver's license testing requirements.
During the period the exemption is in effect, no State shall enforce any law or regulation that conflicts with this exemption with respect to a person operating under the exemption.
Based upon its evaluation of the 21 renewal exemption applications and supporting materials, FMCSA announces its decision to grant a 2-year exemption to each of the following
As of December 11, 2025, and in accordance with 49 U.S.C. 31136(e) and 31315(b), and FMCSA's policy of issuing medical exemptions for a 2-year period to correspond with the medical certificate, the following 11 individuals have satisfied the renewal conditions for obtaining an exemption from the hearing requirement in the FMCSRs for interstate CMV drivers:
The drivers were included in docket numbers FMCSA-2014-0384, FMCSA-2016-0002, FMCSA-2018-0139, FMCSA-2019-0110, FMCSA-2021-0014, FMCSA-2023-0022, or FMCSA-2023-0024. Their exemptions were applicable as of December 11, 2025, and will expire on December 11, 2027.
As of December 26, 2025, and in accordance with 49 U.S.C. 31136(e) and 31315(b), and FMCSA's policy of issuing medical exemptions for a 2-year period to correspond with the medical certificate, the following 10 individuals have satisfied the renewal conditions for obtaining an exemption from the hearing requirement in the FMCSRs for interstate CMV drivers:
The drivers were included in docket numbers FMCSA-2017-0058, FMCSA-2018-0136, FMCSA-2018-0138, FMCSA-2019-0109, or FMCSA-2019-0110. Their exemptions were applicable as of December 26, 2025, and will expire on December 26, 2027.
In accordance with 49 U.S.C. 31315(b), each exemption will be valid for 2 years from the effective date unless revoked earlier by FMCSA. The exemption will be revoked if the following occurs: (1) the person fails to comply with the terms and conditions of the exemption; (2) the exemption has resulted in a lower level of safety than was maintained prior to being granted; or (3) continuation of the exemption would not be consistent with the goals and objectives of Title 49, chapter 313 or section 31136.
Federal Motor Carrier Safety Administration (FMCSA), Department of Transportation (DOT).
Notice of final disposition.
FMCSA announces its decision to exempt 18 individuals from the hearing requirement in the Federal Motor Carrier Safety Regulations (FMCSRs) to operate a commercial motor vehicle (CMV) in interstate commerce. The exemptions enable these hard of hearing and deaf individuals to operate CMVs in interstate commerce.
The exemptions were applicable on January 25, 2026. The exemptions expire on January 25, 2028.
Ms. Christine A. Hydock, Chief, Medical Programs Division, FMCSA, DOT, 1200 New Jersey Avenue SE, Washington, DC 20590-0001; (202) 366-4001;
To view comments, go to
In accordance with 49 U.S.C. 31315(b)(6), DOT solicits comments from the public on the exemption requests. DOT posts these comments, including any personal information the commenter provides, to
FMCSA has authority under 49 U.S.C. 31136(e) and 31315(b) to grant exemptions from the FMCSRs. FMCSA must publish a notice of each exemption request in the
The Agency reviews the application, safety analyses, and public comments submitted and determines whether granting the exemption would likely achieve a level of safety equivalent to, or greater than, the level that would be achieved absent such exemption, pursuant to the standard set forth in 49 U.S.C. 31315(b)(1). The Agency must publish its decision in the
On December 19, 2025, FMCSA published a notice announcing receipt of applications from 18 individuals requesting an exemption from the hearing requirement in 49 CFR 391.41(b)(11) to operate a CMV in interstate commerce and requested comments from the public (90 FR
FMCSA has evaluated the eligibility of these applicants and determined that granting exemptions to these individuals would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved by complying with 49 CFR 391.41(b)(11).
The physical qualification standard for drivers regarding hearing, found in 49 CFR 391.41(b)(11), states that a person is physically qualified to drive a CMV if that person first perceives a forced whispered voice in the better ear at not less than 5 feet with or without the use of a hearing aid or, if tested by use of an audiometric device, does not have an average hearing loss in the better ear greater than 40 decibels at 500 Hz, 1,000 Hz, and 2,000 Hz with or without a hearing aid when the audiometric device is calibrated to American National Standard (formerly ASA Standard) Z24.5—1951.
This standard was adopted in 1970 and was revised in 1971 to allow drivers to be qualified under this standard while wearing a hearing aid (35 FR 6458, 6463 (Apr. 22, 1970) and 36 FR 12857 (July 8, 1971)).
FMCSA received no comments in this proceeding.
The Agency's decision regarding these exemption applications is based on relevant scientific information and literature, and the 2008 Evidence Report, “Executive Summary on Hearing, Vestibular Function and Commercial Motor Driving Safety.”
Consequently, FMCSA further finds that in each case, exempting these applicants from the hearing standard in 49 CFR 391.41(b)(11) would likely achieve a level of safety equivalent to or greater than the level of safety that would be achieved without the exemption, consistent with the applicable standard in 49 U.S.C. 31315(b)(1).
The terms and conditions of the exemption are provided to the applicants in the exemption document and include the following: each driver (1) must report to FMCSA the date, location, and time of any crashes, as defined in 49 CFR 390.5T, within 7 days of the crash; (2) must report to FMCSA any citations and convictions for disqualifying offenses under 49 CFR parts 383 and 391 within 7 days of the citations and convictions; (3) must submit to FMCSA annual certified driving records from their SDLA; and (4) is prohibited from operating a motorcoach or bus with passengers in interstate commerce. The driver must also have a copy of the exemption when driving, for presentation to a duly authorized Federal, State, or local law enforcement official. In addition, the driver must meet all applicable commercial driver's license testing requirements.
During the period the exemption is in effect, no State shall enforce any law or regulation that conflicts with this exemption with respect to a person operating under the exemption.
Based upon its evaluation of the 18 exemption applications, FMCSA exempts the following drivers from the hearing standard in 49 CFR 391.41(b)(11), subject to the requirements cited above:
In accordance with 49 U.S.C. 31315(b), and FMCSA's policy of issuing medical exemptions for a 2-year period to correspond with the medical certificate, each exemption will be valid for 2 years from the effective date unless revoked earlier by FMCSA. The exemption will be revoked if the following occurs: (1) the person fails to comply with the terms and conditions of the exemption as set forth above; (2) the exemption has resulted in a lower level of safety than was maintained prior to being granted; or (3) continuation of the exemption would not be consistent with the goals and objectives of Title 49, chapter 313 or section 31136.
Federal Motor Carrier Safety Administration (FMCSA), Department of Transportation (DOT).
Notice of final disposition; grant of application for exemption.
FMCSA announces its decision to grant a six-month exemption to allow motor carriers and drivers in all States and the District of Columbia to rely on a paper copy of the medical examiner's certificate (MEC) as proof of the driver's medical certification for up to 60 days after the MEC was issued. FMCSA has analyzed the request from the Commercial Vehicle Safety Alliance
The exemption is effective April 11, 2026 and expires October 11, 2026.
Ms. Evangela Hollowell; Office of Carrier, Driver and Vehicle Safety Standards, FMCSA;
To view any documents mentioned as being available in the docket, go to
FMCSA has authority under 49 U.S.C. 31136(e) and 31315(b) to grant exemptions from the Federal Motor Carrier Safety Regulations. FMCSA must publish a notice of each exemption request in the
The Agency reviews the application, safety analyses, and public comments submitted and determines whether granting the exemption would likely achieve a level of safety equivalent to, or greater than, the level that would be achieved absent such exemption, pursuant to the standard set forth in 49 U.S.C. 31315(b)(1). The Agency must publish its decision in the
FMCSA published the NRII final rule in 2015 (80 FR 22790, Apr. 23, 2015). The Agency extended the original compliance date several times, most recently on June 22, 2021 (86 FR 32643), with compliance ultimately being required as of June 23, 2025. The NRII rule modernizes how driver medical certification is shared, replacing the outdated paper-based process with a secure, electronic transmission system. The NRII rule mandates that certified medical examiners use specific forms to document physical qualification examinations and issue medical certificates to qualified commercial motor vehicle drivers. Among other changes that were implemented on June 23, 2025, medical examiners are no longer required to issue the original/paper MEC, Form MCSA-5876, to commercial learner's permit (CLP) holders and commercial driver's license (CDL) holders. CLP holders and CDL holders are no longer required to submit a paper MEC to their State Driver's Licensing Agency (SDLA) (49 CFR 391.43(g)(2)(ii)). Instead, FMCSA electronically transmits examination results and medical variance information for CLP holders and CDL holders from the National Registry to the SDLAs. SDLAs post the driver's information on the Commercial Driver's License Information System (CDLIS) driver motor vehicle record (49 CFR 383.71(h)(1)(ii) and (h)(3)(ii); 49 CFR 383.73(a)(7)(ii) and (b)(5)(ii)).
In addition, the provisions allowing motor carriers and drivers to rely on paper copies of the MEC for up to 15 days after the certificate was issued expired as of June 22, 2025. 49 CFR 391.23(m)(2)(iii) and (m)(3)(i)(C); 49 CFR 391.41(a)(2)(i)(A) and (a)(2)(ii); 49 CFR 391.51(b)(6)(ii).
On July 14, 2025, FMCSA granted a waiver to interstate CDL and CLP holders and to motor carriers to allow them to continue to rely on a paper copy of the MEC as proof of the driver's medical certification for up to 15 days after the date the MEC was issued. On August 21, 2025, FMCSA modified the waiver to allow CDL holders, CLP holders, and motor carriers to rely on the paper copy of the MEC as proof of the driver's medical certification for up to 60 days after the date the MEC was issued. FMCSA subsequently re-issued the waiver effective October 13, 2025, and January 11, 2026.
As of the date of this notice, 45 States and the District of Columbia have implemented NRII. The States of Alaska, California, Kentucky, Louisiana, and New Hampshire have not yet implemented NRII and are continuing to rely on the paper MEC.
CVSA's request was described in detail in a
FMCSA received nine comments to the docket, one of which was unrelated to CVSA's request. Of the eight relevant comments submitted, six commenters supported granting the exemption, including Crane Cartage LLC, who said “As long as states are not compliant, paper med cards should continue to be allowed as proof of certification.” Tim Watson commented that the exemption should extend for an additional year after all States implement NRII to ensure that all States are “actually” compliant. The Owner-Operator Independent Drivers Association expressed that “No driver who has been medically cleared should be forced off the road due to external processing errors.”
CVSA neither supported nor opposed the exemption but commented that the need for a full-year exemption, as opposed to a short-term waiver, depends on the timeline for the remaining five States to implement NRII and the impact to the motor carriers operating in those States. CVSA noted that since it submitted its request, States have made NRII implementation progress and “many of the data exchange issues have been resolved.” CVSA encouraged FMCSA to continue monitoring implementation of the NRII and, if necessary, to rescind any exemption when all States become compliant.
The American Trucking Associations (ATA) opposed granting a long-term exemption, noting that many technical issues have been resolved since the summer and fall of 2025. ATA stated
FMCSA has evaluated CVSA's request and the public comments and grants the exemption for a period of six months while the remaining five States implement NRII. The exemption provides the same regulatory relief as the waivers provided. Accordingly, FMCSA has determined that the exemption is likely to achieve a level of safety that is equivalent to the level of safety that would be achieved absent the exemption for the same reasons that supported the granting of the waivers. The exemption does not alter the requirement that a person may not operate a commercial motor vehicle unless he or she is certified by a medical examiner as physically qualified to do so and does not alter any physical qualification requirements for drivers. Further, the length of the exemption is for a limited period of six months to enable most of the remaining States to fully implement NRII.
In response to ATA's comment that FMCSA should continue to re-issue waivers, rather than granting a long-term exemption, FMCSA agrees that a long-term exemption of up to five years is unnecessary. The Agency believes that a shorter-term exemption of six months allows sufficient time for most of the remaining States to implement NRII and reduces any uncertainty as to the expected duration of the regulatory relief. States, motor carriers, and drivers should not expect additional nationwide waivers or exemptions beyond the six-month duration of this exemption.
This exemption covers CDL holders, CLP holders, and motor carriers for the period beginning at 12:00 a.m. on April 11, 2026 through 11:59 p.m. on October 11, 2026. This exemption:
1. Extends until October 11, 2026, the ability of a motor carrier to continue to use a copy of the MEC as proof of the driver's medical certification for up to 60 days from the date of the medical certification by waiving the end date of June 22, 2025, and the 15-day time period in 49 CFR 391.23(m)(2)(iii) and 49 CFR 391.23(m)(3)(i)(C).
2. Extends until October 11, 2026, the ability of a driver to continue to use a copy of the MEC carried on his or her person as proof of the driver's medical certification for up to 60 days from the date of the medical certification by waiving the end date of June 22, 2025, and the 15-day time period in 49 CFR 391.41(a)(2)(i)(A) and 49 CFR 391.41(a)(2)(ii).
3. Extends until October 11, 2026, the ability of a motor carrier to continue to use a copy of the MEC in the driver qualification file for up to 60 days from the date of the medical certification by waiving the end date of June 22, 2025, and the 15-day time period in 49 CFR 391.51(b)(6)(ii).
1. This exemption does not apply to a driver if the driver does not have a copy of his or her current, valid, MEC on his or her person that was issued by a certified medical examiner within the prior 60 days.
2. This exemption does not apply to a motor carrier if the motor carrier does not have a copy of the driver's current, valid, MEC that was issued by a certified medical examiner within the prior 60 days.
In accordance with 49 U.S.C. 31315(d), as implemented by 49 CFR 381.600, during the period this exemption is in effect, no State shall enforce any law or regulation applicable to interstate commerce that conflicts with or is inconsistent with this exemption with respect to a firm or person operating under the exemption. States may, but are not required to, adopt the same exemption with respect to operations in intrastate commerce.
FMCSA does not believe the motor carriers and drivers covered by this exemption will experience any deterioration of their safety record. However, the exemption will be revoked if the exemption has resulted in a lower level of safety than was maintained before it was granted or continuation of the exemption would not be consistent with the goals and objectives of Title 49, chapter 313 or section 31136.
Federal Motor Carrier Safety Administration (FMCSA), Department of Transportation (DOT).
Notice of final disposition.
FMCSA announces its decision to exempt 12 individuals from the hearing requirement in the Federal Motor Carrier Safety Regulations (FMCSRs) to operate a commercial motor vehicle (CMV) in interstate commerce. The exemptions enable these hard of hearing and deaf individuals to operate CMVs in interstate commerce.
The exemptions were applicable on January 25, 2026. The exemptions expire on January 25, 2028.
Ms. Christine A. Hydock, Chief, Medical Programs Division, FMCSA, DOT, 1200 New Jersey Avenue SE, Washington, DC 20590-0001; (202) 366-4001;
To view comments, go to
In accordance with 49 U.S.C. 31315(b)(6), DOT solicits comments from the public on the exemption requests. DOT posts these comments, including any personal information the commenter provides, to
FMCSA has authority under 49 U.S.C. 31136(e) and 31315(b) to grant exemptions from the FMCSRs. FMCSA must publish a notice of each exemption request in the
The Agency reviews the application, safety analyses, and public comments submitted and determines whether granting the exemption would likely achieve a level of safety equivalent to, or greater than, the level that would be achieved absent such exemption, pursuant to the standard set forth in 49 U.S.C. 31315(b)(1). The Agency must publish its decision in the
On December 19, 2025, FMCSA published a notice announcing receipt of applications from 12 individuals requesting an exemption from the hearing requirement in 49 CFR 391.41(b)(11) to operate a CMV in interstate commerce and requested comments from the public (90 FR 59644). The public comment period ended on January 20, 2026, and no comments were received.
FMCSA has evaluated the eligibility of these applicants and determined that granting exemptions to these individuals would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved by complying with 49 CFR 391.41(b)(11).
The physical qualification standard for drivers regarding hearing, found in 49 CFR 391.41(b)(11), states that a person is physically qualified to drive a CMV if that person first perceives a forced whispered voice in the better ear at not less than 5 feet with or without the use of a hearing aid or, if tested by use of an audiometric device, does not have an average hearing loss in the better ear greater than 40 decibels at 500 Hz, 1,000 Hz, and 2,000 Hz with or without a hearing aid when the audiometric device is calibrated to American National Standard (formerly ASA Standard) Z24.5—1951.
This standard was adopted in 1970 and was revised in 1971 to allow drivers to be qualified under this standard while wearing a hearing aid (35 FR 6458, 6463 (Apr. 22, 1970) and 36 FR 12857 (July 8, 1971)).
FMCSA received no comments in this proceeding.
The Agency's decision regarding these exemption applications is based on relevant scientific information and literature, and the 2008 Evidence Report, “Executive Summary on Hearing, Vestibular Function and Commercial Motor Driving Safety.”
Consequently, FMCSA further finds that in each case, exempting these applicants from the hearing standard in 49 CFR 391.41(b)(11) would likely achieve a level of safety equivalent to or greater than the level of safety that would be achieved without the exemption, consistent with the applicable standard in 49 U.S.C. 31315(b)(1).
The terms and conditions of the exemption are provided to the applicants in the exemption document and include the following: each driver (1) must report to FMCSA the date, location, and time of any crashes, as defined in 49 CFR 390.5T, within 7 days of the crash; (2) must report to FMCSA any citations and convictions for disqualifying offenses under 49 CFR parts 383 and 391 within 7 days of the citations and convictions; (3) must submit to FMCSA annual certified driving records from their SDLA; and (4) is prohibited from operating a motorcoach or bus with passengers in interstate commerce. The driver must also have a copy of the exemption when driving, for presentation to a duly authorized Federal, State, or local law enforcement official. In addition, the driver must meet all applicable commercial driver's license testing requirements.
During the period the exemption is in effect, no State shall enforce any law or regulation that conflicts with this exemption with respect to a person operating under the exemption.
Based upon its evaluation of the 12 exemption applications, FMCSA exempts the following drivers from the hearing standard in 49 CFR 391.41(b)(11), subject to the requirements cited above:
In accordance with 49 U.S.C. 31315(b), and FMCSA's policy of issuing medical exemptions for a 2-year period to correspond with the medical certificate, each exemption will be valid for 2 years from the effective date unless revoked earlier by FMCSA. The exemption will be revoked if the following occurs: (1) the person fails to comply with the terms and conditions of the exemption as set forth above; (2) the exemption has resulted in a lower level of safety than was maintained prior to being granted; or (3) continuation of the exemption would not be consistent with the goals and objectives of Title 49, chapter 313 or section 31136.
Federal Motor Carrier Safety Administration (FMCSA), Department of Transportation (DOT).
Notice of final disposition.
FMCSA announces its decision to renew exemptions for 13 individuals from the hearing requirement in the Federal Motor Carrier Safety Regulations (FMCSRs) for interstate commercial motor vehicle (CMV) drivers. The exemptions enable these hard of hearing and deaf individuals to continue to operate CMVs in interstate commerce.
Each group of renewed exemptions were applicable on the dates stated in the discussions below and will expire on the dates provided below.
Ms. Christine A. Hydock, Chief, Medical Programs Division, FMCSA, DOT, 1200 New Jersey Avenue SE, Washington, DC 20590-0001; (202) 366-4001;
To view comments, go to
In accordance with 49 U.S.C. 31315(b)(6), DOT solicits comments from the public on the exemption requests. DOT posts these comments, including any personal information the commenter provides, to
FMCSA has authority under 49 U.S.C. 31136(e) and 31315(b) to grant exemptions from the FMCSRs. FMCSA must publish a notice of each exemption request in the
The Agency reviews the application, safety analyses, and public comments submitted and determines whether granting the exemption would likely achieve a level of safety equivalent to, or greater than, the level that would be achieved absent such exemption, pursuant to the standard set forth in 49 U.S.C. 31315(b)(1). The Agency must publish its decision in the
On December 19, 2025, FMCSA published a notice announcing its decision to renew exemptions for 13 individuals from the hearing standard in 49 CFR 391.41(b)(11) to operate a CMV in interstate commerce and requested comments from the public (90 FR 59652). The public comment period ended on January 20, 2026, and no comments were received.
The Agency evaluated the eligibility and determined that renewing these applicants' exemptions would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved by complying with 49 CFR 391.41(b)(11).
The physical qualification standard for drivers regarding hearing, found in 49 CFR 391.41(b)(11), states that a person is physically qualified to drive a CMV if that person first perceives a forced whispered voice in the better ear at not less than 5 feet with or without the use of a hearing aid or, if tested by use of an audiometric device, does not have an average hearing loss in the better ear greater than 40 decibels at 500 Hz, 1,000 Hz, and 2,000 Hz with or without a hearing aid when the audiometric device is calibrated to American National Standard (formerly ASA Standard) Z24.5—1951.
This standard was adopted in 1970 and was revised in 1971 to allow drivers to be qualified under this standard while wearing a hearing aid (35 FR 6458, 6463 (Apr. 22, 1970) and 36 FR 12857 (July 8, 1971)).
FMCSA received no comments in this proceeding.
In accordance with 49 U.S.C. 31136(e) and 31315(b), each of the 13 applicants have satisfied the renewal conditions for
The exemptions are extended subject to the following conditions: each driver (1) must report to FMCSA any crashes, as defined in 49 CFR 390.5T, within 7 days of the crash; (2) must report to FMCSA any citations and convictions for disqualifying offenses under 49 CFR parts 383 and 391 within 7 days of the citation and conviction; (3) must submit to FMCSA annual certified driving records from their SDLA; and (4) is prohibited from operating a motorcoach or bus with passengers in interstate commerce. The driver must also have a copy of the exemption when driving, for presentation to a duly authorized Federal, State, or local law enforcement official. In addition, the driver must meet all the applicable commercial driver's license testing requirements.
During the period the exemption is in effect, no State shall enforce any law or regulation that conflicts with this exemption with respect to a person operating under the exemption.
Based upon its evaluation of the 13 renewal exemption applications and supporting materials, FMCSA announces its decision to grant a 2-year exemption to each of the following drivers from the hearing requirement in 49 CFR 391.41(b)(11).
As of November 3, 2025, and in accordance with 49 U.S.C. 31136(e) and 31315(b), and FMCSA's policy of issuing medical exemptions for a 2-year period to correspond with the medical certificate, the following six individuals have satisfied the renewal conditions for obtaining an exemption from the hearing requirement in the FMCSRs for interstate CMV drivers:
The drivers were included in docket numbers FMCSA-2014-0387, FMCSA-2017-0057, FMCSA-2017-0060, FMCSA-2018-0138, FMCSA-2021-0014, or FMCSA-2023-0022. Their exemptions were applicable as of November 3, 2025, and will expire on November 3, 2027.
As of November 19, 2025, and in accordance with 49 U.S.C. 31136(e) and 31315(b), and FMCSA's policy of issuing medical exemptions for a 2-year period to correspond with the medical certificate, the following seven individuals have satisfied the renewal conditions for obtaining an exemption from the hearing requirement in the FMCSRs for interstate CMV drivers:
The drivers were included in docket numbers FMCSA-2014-0383, FMCSA-2014-0385, FMCSA-2014-0387, FMCSA-2019-0110, or FMCSA-2021-0015. Their exemptions were applicable as of November 19, 2025, and will expire on November 19, 2027.
In accordance with 49 U.S.C. 31315(b), each exemption will be valid for 2 years from the effective date unless revoked earlier by FMCSA. The exemption will be revoked if the following occurs: (1) the person fails to comply with the terms and conditions of the exemption; (2) the exemption has resulted in a lower level of safety than was maintained prior to being granted; or (3) continuation of the exemption would not be consistent with the goals and objectives of Title 49, chapter 313 or section 31136.
Federal Railroad Administration (FRA), Department of Transportation (DOT).
Notice of information collection; request for comment.
Under the Paperwork Reduction Act of 1995 (PRA) and its implementing regulations, this notice announces that FRA is forwarding the Information Collection Request (ICR) summarized below to the Office of Management and Budget (OMB) for review and comment. The ICR describes the information collection and its expected burden. On January 30, 2026, FRA published a notice providing a 60-day period for public comment on the ICR. FRA received no comments in response to the notice.
Interested persons are invited to submit comments on or before May 14, 2026.
Written comments and recommendations for the proposed ICR should be sent within 30 days of publication of this notice to
Ms. Joanne Swafford, Information Collection Clearance Officer, at email:
The PRA, 44 U.S.C. 3501-3520, and its implementing regulations, 5 CFR part 1320, require Federal agencies to issue two notices seeking public comment on information collection activities before OMB may approve paperwork packages.
Before OMB decides whether to approve this proposed collection of information, it must provide 30 days' notice for public comment. Federal law requires OMB to approve or disapprove paperwork packages between 30 and 60 days after the 30-day notice is
Comments are invited on the following ICR regarding: (1) whether the information collection activities are necessary for FRA to properly execute its functions, including whether the information will have practical utility; (2) the accuracy of FRA's estimates of the burden of the information collection activities, including the validity of the methodology and assumptions used to determine the estimates; (3) ways for FRA to enhance the quality, utility, and clarity of the information being collected; and (4) ways to minimize the burden of information collection activities on the public, including the use of automated collection techniques or other forms of information technology.
The summary below describes the ICR that FRA will submit for OMB clearance as the PRA requires:
In addition, § 215.301 requires railroads and private car owners to stencil or otherwise display identification marks on freight cars, including a car number and build date. FRA uses identification marks to help obtain certain information related to a car's compliance with Federal safety requirements. The marks are used consistently across railroad records to identify the car and show: the type of car, what it is carrying, its movement history, and current maintenance schedule. Using the marks to identify the car helps FRA determine the application of Federal safety requirements to that car and who is responsible for compliance. FRA also uses this information to determine if the freight car qualifies for dedicated service and is excluded from the requirements of part 215. Railroads use the required information to provide identification and control so that dedicated cars remain in the prescribed service.
FRA informs all interested parties that it may not conduct or sponsor, and a respondent is not required to respond to, a collection of information that does not display a currently valid OMB control number.
Federal Railroad Administration (FRA), Department of Transportation (DOT).
Notice.
This document provides the public notice that Georgia Central Railway (GC) petitioned FRA for special approval to operate with a one-person train crew.
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Christian Holt, Staff Director, Operating Practices Division, FRA, telephone: 202-366-0978, email:
Under title 49 Code of Federal Regulations (CFR) part 218, subpart G, this document provides the public notice that by letter dated November 7, 2025 GC petitioned FRA for special approval of a one-person train crew operation in Docket Number FRA-2026-0563.
Specifically, GC seeks special approval under 49 CFR 218.135,
A copy of the petition, as well as any written communications concerning the petition, is available for review online at
FRA does not anticipate scheduling a public hearing in connection with these proceedings since the facts do not appear to warrant a hearing. If any interested parties desire an opportunity for oral comment and a public hearing, they should notify FRA, in writing, before the end of the comment period and specify the basis for their request.
Communications received by May 14, 2026 will be considered by FRA before final action is taken. Comments received after that date will be considered if practicable.
Issued in Washington, DC.
Federal Railroad Administration (FRA), Department of Transportation (DOT).
Notice of information collection; request for comment.
Under the Paperwork Reduction Act of 1995 (PRA) and its implementing regulations, this notice announces that FRA is forwarding the Information Collection Request (ICR) summarized below to the Office of Management and Budget (OMB) for review and comment. The ICR describes the information collection and its expected burden. On January 30, 2026, FRA published a notice providing a 60-day period for public comment on the ICR. FRA received no comments in response to the notice.
Interested persons are invited to submit comments on or before May 14, 2026.
Written comments and recommendations for the proposed ICR should be sent within 30 days of publication of this notice to
Ms. Joanne Swafford, Information Collection Clearance Officer, at email:
The PRA, 44 U.S.C. 3501-3520, and its implementing regulations, 5 CFR part 1320, require Federal agencies to issue two notices seeking public comment on information collection activities before OMB may approve paperwork packages.
Before OMB decides whether to approve this proposed collection of information, it must provide 30 days' notice for public comment. Federal law requires OMB to approve or disapprove paperwork packages between 30 and 60 days after the 30-day notice is published. 44 U.S.C. 3507(b) and (c); 5 CFR 1320.12(d);
Comments are invited on the following ICR regarding: (1) whether the information collection activities are necessary for FRA to properly execute its functions, including whether the information will have practical utility; (2) the accuracy of FRA's estimates of the burden of the information collection activities, including the validity of the methodology and assumptions used to determine the estimates; (3) ways for FRA to enhance the quality, utility, and clarity of the information being collected; and (4) ways to minimize the burden of information collection activities on the public, including the use of automated collection techniques or other forms of information technology.
The summary below describes the ICR that FRA will submit for OMB clearance as the PRA requires:
FRA informs all interested parties that it may not conduct or sponsor, and a respondent is not required to respond to, a collection of information that does not display a currently valid OMB control number.
Federal Railroad Administration (FRA), Department of Transportation (DOT).
Notice.
This document provides the public notice that First Coast Railroad (FCRD) petitioned FRA for special approval to operate with a one-person train crew.
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Christian Holt, Staff Director, Operating Practices Division, FRA, telephone: 202-366-0978, email:
Under title 49 Code of Federal Regulations (CFR) part 218, subpart G, this document provides the public notice that by letter dated May 8, 2025 FCRD petitioned FRA for special approval of a one-person train crew operation in Docket Number FRA-2026-0562.
Specifically, FCRD seeks special approval under 49 CFR 218.135,
A copy of the petition, as well as any written communications concerning the petition, is available for review online at
FRA does not anticipate scheduling a public hearing in connection with these proceedings since the facts do not appear to warrant a hearing. If any interested parties desire an opportunity for oral comment and a public hearing, they should notify FRA, in writing, before the end of the comment period and specify the basis for their request.
Communications received by May 14, 2026 will be considered by FRA before final action is taken. Comments received after that date will be considered if practicable.
Issued in Washington, DC.
Federal Railroad Administration (FRA), Department of Transportation (DOT).
Notice of information collection; request for comment.
Under the Paperwork Reduction Act of 1995 (PRA) and its implementing regulations, this notice announces that FRA is forwarding the Information Collection Request (ICR) summarized below to the Office of Management and Budget (OMB) for review and comment. The ICR describes the information collection and its expected burden. On January 30, 2026, FRA published a notice providing a 60-day period for public comment on the ICR. FRA received no comments in response to the notice.
Interested persons are invited to submit comments on or before May 14, 2026.
Written comments and recommendations for the proposed ICR should be sent within 30 days of publication of this notice to
Ms. Joanne Swafford, Information Collection Clearance Officer, at email:
The PRA, 44 U.S.C. 3501-3520, and its implementing regulations, 5 CFR part 1320, require Federal agencies to issue two notices seeking public comment on information collection activities before OMB may approve paperwork packages.
Before OMB decides whether to approve this proposed collection of information, it must provide 30 days' notice for public comment. Federal law requires OMB to approve or disapprove paperwork packages between 30 and 60 days after the 30-day notice is
Comments are invited on the following ICR regarding: (1) whether the information collection activities are necessary for FRA to properly execute its functions, including whether the information will have practical utility; (2) the accuracy of FRA's estimates of the burden of the information collection activities, including the validity of the methodology and assumptions used to determine the estimates; (3) ways for FRA to enhance the quality, utility, and clarity of the information being collected; and (4) ways to minimize the burden of information collection activities on the public, including the use of automated collection techniques or other forms of information technology.
The summary below describes the ICR that FRA will submit for OMB clearance as the PRA requires:
FRA informs all interested parties that it may not conduct or sponsor, and a respondent is not required to respond to, a collection of information that does not display a currently valid OMB control number.
Maritime Administration (MARAD), U.S. Department of Transportation (DOT).
Notice and request for comments.
The Secretary of Transportation, as represented by MARAD, is authorized to make determinations regarding the coastwise use of foreign built; certain U.S. built; and U.S. and foreign rebuilt vessels that solely carry no more than twelve passengers for hire. MARAD has received such a determination request and is publishing this notice to solicit comments to assist with determining whether the proposed use of the vessel set forth in the request would have an adverse effect on U.S. vessel builders or U.S. coastwise trade businesses that use U.S.-built vessels in those businesses. Information about the requestor's vessel, including a description of the proposed service, is in the
Submit comments on or before May 14, 2026.
You may submit comments identified by DOT Docket Number MARAD-2026-0596 by any one of the following methods:
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If you mail or hand-deliver your comments, we recommend that you include the DOT Docket Number, your name and a mailing address, an email address or a telephone number in the body of your document so that we can contact you if we have questions regarding your submission.
Patricia Hagerty, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Mail Stop 2, MAR-620, Washington, DC 20590. Telephone: (202) 366-5400. Email:
Pursuant to 46 U.S.C. 12121(b), the U.S. Coast Guard may issue a certificate of documentation with a coastwise trade endorsement for eligible, small passenger vessels authorized to carry no more than 12 passengers for hire if MARAD, after notice and an opportunity for public comment, determines the use of the small passenger vessel in the coastwise trade will not adversely affect United States vessel builders or the coastwise trade business of any person that employs vessels built in the United States in that business.
MARAD has received an eligibility determination request. Further details about the requester's vessel and its proposed operations may be found in the determination request posted in the DOT Docket Number listed in the
Please submit comments, including the attachments, following the instructions provided under the above heading entitled ADDRESSES. It may take a few hours or even days for comments to be reflected on the docket. Comments must be written in English. Provide concise comments and attach additional documents as necessary. There is no limit on the length of the attachments.
The docket online is located at
Yes. Your entire comment, including your personal identifying information, will be made publicly available.
You may request that MARAD treat your comments as commercially confidential by submitting them to
If MARAD receives a Freedom of Information Act (FOIA) request for the information, procedures described in the Department's FOIA regulation at 49 CFR 7.29 will be followed. Only information that is ultimately determined to be confidential under those procedures will be exempt from disclosure under FOIA.
Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). For information on DOT's compliance with the Privacy Act, please visit
(Authority: 46 U.S.C. 12121, 49 CFR 1.93(a))
By Order of the Maritime Administrator.
Maritime Administration (MARAD), U.S. Department of Transportation (DOT).
Notice and request for comments.
The Secretary of Transportation, as represented by MARAD, is authorized to make determinations regarding the coastwise use of foreign built; certain U.S. built; and U.S. and foreign rebuilt vessels that solely carry no more than twelve passengers for hire. MARAD has received such a determination request and is publishing this notice to solicit comments to assist with determining whether the proposed use of the vessel set forth in the request would have an adverse effect on U.S. vessel builders or U.S. coastwise trade businesses that use U.S.-built vessels in those businesses. Information about the requestor's vessel, including a description of the proposed service, is in the
Submit comments on or before May 14, 2026.
You may submit comments identified by DOT Docket Number MARAD-2026-0531 by any one of the following methods:
•
•
If you mail or hand-deliver your comments, we recommend that you include the DOT Docket Number, your name and a mailing address, an email address or a telephone number in the body of your document so that we can contact you if we have questions regarding your submission.
Patricia Hagerty, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Mail Stop 2, MAR-620, Washington, DC 20590. Telephone: (202) 366-5400. Email:
Pursuant to 46 U.S.C. 12121(b), the U.S. Coast Guard may issue a certificate of documentation with a coastwise trade endorsement for eligible, small passenger vessels authorized to carry no more than 12 passengers for hire if MARAD, after notice and an opportunity for public comment, determines the use of the small passenger vessel in the coastwise trade will not adversely affect United States vessel builders or the coastwise trade business of any person that employs vessels built in the United States in that business.
MARAD has received an eligibility determination request. Further details about the requester's vessel and its proposed operations may be found in the determination request posted in the DOT Docket Number listed in the
Please submit comments, including the attachments, following the instructions provided under the above heading entitled
Where do I go to read public comments, and find supporting information?
The docket online is located at
Yes. Your entire comment, including your personal identifying information, will be made publicly available.
You may request that MARAD treat your comments as commercially confidential by submitting them to
If MARAD receives a Freedom of Information Act (FOIA) request for the information, procedures described in the Department's FOIA regulation at 49 CFR 7.29 will be followed. Only information that is ultimately determined to be confidential under those procedures will be exempt from disclosure under FOIA.
Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). For information on DOT's compliance with the Privacy Act, please visit
By Order of the Maritime Administrator.
Maritime Administration (MARAD), U.S. Department of Transportation (DOT).
Notice and request for comments.
The Secretary of Transportation, as represented by MARAD, is authorized to make determinations regarding the coastwise use of foreign built; certain U.S. built; and U.S. and foreign rebuilt vessels that solely carry no more than twelve passengers for hire. MARAD has received such a determination request and is publishing this notice to solicit comments to assist with determining whether the proposed use of the vessel set forth in the request would have an adverse effect on U.S. vessel builders or U.S. coastwise trade businesses that use U.S.-built vessels in those businesses. Information about the requestor's vessel, including a description of the proposed service, is in the
Submit comments on or before May 14, 2026.
You may submit comments identified by DOT Docket Number MARAD-2026-0595 by any one of the following methods:
•
•
If you mail or hand-deliver your comments, we recommend that you include the DOT Docket Number, your name and a mailing address, an email address or a telephone number in the body of your document so that we can contact you if we have questions regarding your submission.
Patricia Hagerty, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Mail Stop 2, MAR-620, Washington, DC 20590. Telephone: (202) 366-5400. Email:
Pursuant to 46 U.S.C. 12121(b), the U.S. Coast Guard may issue a certificate of documentation with a coastwise trade endorsement for eligible, small passenger vessels authorized to carry no more than 12 passengers for hire if MARAD, after notice and an opportunity for public comment, determines the use of the small passenger vessel in the coastwise trade will not adversely affect United States vessel builders or the coastwise trade business of any person that employs vessels built in the United States in that business.
MARAD has received an eligibility determination request. Further details about the requester's vessel and its proposed operations may be found in the determination request posted in the DOT Docket Number listed in the
Please submit comments, including the attachments, following the instructions provided under the above heading entitled ADDRESSES. It may take a few hours or even days for comments to be reflected on the docket. Comments must be written in English. Provide concise comments and attach additional documents as necessary. There is no limit on the length of the attachments.
The docket online is located at
Yes. Your entire comment, including your personal identifying information, will be made publicly available.
You may request that MARAD treat your comments as commercially confidential by submitting them to
If MARAD receives a Freedom of Information Act (FOIA) request for the information, procedures described in the Department's FOIA regulation at 49 CFR 7.29 will be followed. Only information that is ultimately determined to be confidential under those procedures will be exempt from disclosure under FOIA.
Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). For information on DOT's compliance with the Privacy Act, please visit
(Authority: 46 U.S.C. 12121, 49 CFR 1.93(a))
By Order of the Maritime Administrator.
Maritime Administration (MARAD), U.S. Department of Transportation (DOT).
Notice and request for comments.
The Secretary of Transportation, as represented by MARAD, is authorized to make determinations regarding the coastwise use of foreign built; certain U.S. built; and U.S. and foreign rebuilt vessels that solely carry no more than twelve passengers for hire. MARAD has received such a determination request and is publishing this notice to solicit comments to assist with determining whether the proposed use of the vessel set forth in the request would have an adverse effect on U.S. vessel builders or U.S. coastwise trade businesses that use U.S.-built vessels in those businesses. Information about the requestor's vessel, including a description of the proposed service, is in the
Submit comments on or before May 14, 2026.
You may submit comments identified by DOT Docket Number MARAD-2026-0562 by any one of the following methods:
•
•
If you mail or hand-deliver your comments, we recommend that you include the DOT Docket Number, your name and a mailing address, an email address or a telephone number in the body of your document so that we can contact you if we have questions regarding your submission.
Patricia Hagerty, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Mail Stop 2, MAR-620, Washington, DC 20590. Telephone: (202) 366-5400. Email:
Pursuant to 46 U.S.C. 12121(b), the U.S. Coast Guard may issue a certificate of documentation with a coastwise trade endorsement for eligible, small passenger vessels authorized to carry no more than 12 passengers for hire if MARAD, after notice and an opportunity for public comment, determines the use of the small passenger vessel in the coastwise trade will not adversely affect United States vessel builders or the coastwise trade business of any person that employs vessels built in the United States in that business.
MARAD has received an eligibility determination request. Further details about the requester's vessel and its proposed operations may be found in the determination request posted in the DOT Docket Number listed in the
Please submit comments, including the attachments, following the instructions provided under the above heading entitled
The docket online is located at
Yes. Your entire comment, including your personal identifying information, will be made publicly available.
You may request that MARAD treat your comments as commercially confidential by submitting them to
If MARAD receives a Freedom of Information Act (FOIA) request for the information, procedures described in the Department's FOIA regulation at 49 CFR 7.29 will be followed. Only information that is ultimately determined to be confidential under those procedures will be exempt from disclosure under FOIA.
Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). For information on DOT's compliance with the Privacy Act, please visit
By Order of the Maritime Administrator.
Maritime Administration (MARAD), U.S. Department of Transportation (DOT).
Notice and request for comments.
The Secretary of Transportation, as represented by MARAD, is authorized to make determinations regarding the coastwise use of foreign built; certain U.S. built; and U.S. and foreign rebuilt vessels that solely carry no more than twelve passengers for hire. MARAD has received such a determination request and is publishing this notice to solicit comments to assist with determining whether the proposed use of the vessel set forth in the request would have an adverse effect on U.S. vessel builders or U.S. coastwise trade businesses that use U.S.-built vessels in those businesses. Information about the requestor's vessel, including a description of the proposed service, is in the
Submit comments on or before May 14, 2026.
You may submit comments identified by DOT Docket Number MARAD-2026-0530 by any one of the following methods:
•
•
If you mail or hand-deliver your comments, we recommend that you include the DOT Docket Number, your name and a mailing address, an email address or a telephone number in the body of your document so that we can contact you if we have questions regarding your submission.
Patricia Hagerty, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Mail Stop 2, MAR-620, Washington, DC 20590. Telephone: (202) 366-5400. Email:
Pursuant to 46 U.S.C. 12121(b), the U.S. Coast Guard may issue a certificate of documentation with a coastwise trade endorsement for eligible, small passenger vessels authorized to carry no more than 12 passengers for hire if MARAD, after notice and an opportunity for public comment, determines the use of the small passenger vessel in the coastwise trade will not adversely affect United States vessel builders or the coastwise trade business of any person that employs vessels built in the United States in that business.
MARAD has received an eligibility determination request. Further details about the requester's vessel and its proposed operations may be found in the determination request posted in the DOT Docket Number listed in the
Please submit comments, including the attachments, following the
The docket online is located at
Yes. Your entire comment, including your personal identifying information, will be made publicly available.
You may request that MARAD treat your comments as commercially confidential by submitting them to
If MARAD receives a Freedom of Information Act (FOIA) request for the information, procedures described in the Department's FOIA regulation at 49 CFR 7.29 will be followed. Only information that is ultimately determined to be confidential under those procedures will be exempt from disclosure under FOIA.
Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). For information on DOT's compliance with the Privacy Act, please visit
By Order of the Maritime Administrator.
Maritime Administration (MARAD), U.S. Department of Transportation (DOT).
Notice and request for comments.
The Secretary of Transportation, as represented by MARAD, is authorized to make determinations regarding the coastwise use of foreign built; certain U.S. built; and U.S. and foreign rebuilt vessels that solely carry no more than twelve passengers for hire. MARAD has received such a determination request and is publishing this notice to solicit comments to assist with determining whether the proposed use of the vessel set forth in the request would have an adverse effect on U.S. vessel builders or U.S. coastwise trade businesses that use U.S.-built vessels in those businesses. Information about the requestor's vessel, including a description of the proposed service, is in the
Submit comments on or before May 14, 2026.
You may submit comments identified by DOT Docket Number MARAD-2026-0529 by any one of the following methods:
•
•
If you mail or hand-deliver your comments, we recommend that you include the DOT Docket Number, your name and a mailing address, an email address or a telephone number in the body of your document so that we can contact you if we have questions regarding your submission.
Patricia Hagerty, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Mail Stop 2, MAR-620, Washington, DC 20590. Telephone: (202) 366-5400. Email:
Pursuant to 46 U.S.C. 12121(b), the U.S. Coast Guard may issue a certificate of documentation with a coastwise trade endorsement for eligible, small passenger vessels authorized to carry no more than 12 passengers for hire if MARAD, after notice and an opportunity for public comment, determines the use of the small passenger vessel in the coastwise trade will not adversely affect United States vessel builders or the coastwise trade business of any person that employs vessels built in the United States in that business.
MARAD has received an eligibility determination request. Further details about the requester's vessel and its proposed operations may be found in the determination request posted in the DOT Docket Number listed in the
Please submit comments, including the attachments, following the instructions provided under the above heading entitled
The docket online is located at
Yes. Your entire comment, including your personal identifying information, will be made publicly available.
You may request that MARAD treat your comments as commercially confidential by submitting them to
If MARAD receives a Freedom of Information Act (FOIA) request for the information, procedures described in the Department's FOIA regulation at 49 CFR 7.29 will be followed. Only information that is ultimately determined to be confidential under those procedures will be exempt from disclosure under FOIA.
Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). For information on DOT's compliance with the Privacy Act, please visit
By Order of the Maritime Administrator.
National Highway Traffic Safety Administration (NHTSA), Department of Transportation.
Denial of a petition for a defect investigation.
This notice sets forth the reasons for the denial of a defect petition (DP25-001) submitted by Mr. Luis Armando Vega on August 14, 2025, requesting that the Agency initiate a safety defect investigation into premature degradation and detachment of the plastic underbody shields on Model Year (MY) 2020 Ford Explorer vehicles manufactured by Ford Motor Company. After conducting a technical review of the petition and other information, NHTSA's Office of Defects Investigation has concluded that that the issues raised by the petition do not warrant a defect investigation at this time. Accordingly, the Agency has denied the petition.
Jayson Winick, Vehicle Defect Division C, Office of Defects Investigation, NHTSA, 1200 New Jersey Avenue SE, Washington, DC 20590. Telephone: 202-699-6480. Email:
Interested persons may petition NHTSA requesting that the Agency initiate an investigation to determine whether a motor vehicle or an item of replacement equipment does not comply with an applicable motor vehicle safety standard or contains a defect that relates to motor vehicle safety. 49 U.S.C. 30162(a)(2); 49 CFR 552.1. Upon receipt of a properly filed petition, the Agency conducts a technical review of the petition, material submitted with the petition and any additional information. 49 U.S.C. 30162(a)(2); 49 CFR 552.6. The technical review may consist solely of a review of information already in the possession of the Agency or it may include the collection of information from a motor vehicle manufacturer and/or other sources. After conducting the technical review and considering appropriate factors, which may include, but are not limited to, the nature of the complaint, allocation of Agency resources, Agency priorities, the likelihood of uncovering sufficient evidence to establish the existence of a defect and the likelihood of success in any necessary enforcement litigation, the Agency will grant or deny the petition.
The Office of Defects Investigation (ODI) received a petition dated August 14, 2025, requesting a defect investigation into an alleged defect of the “underbody shields” on the following vehicle model stated by the petitioner: MY 2020 Ford Explorer. The petition itself can be reviewed at
The petition alleges premature degradation and sagging/loosening of the underbody shields, even under normal usage conditions, potentially resulting in road debris if they were to detach completely. The Petitioner also alleged excessive noise and vibration while driving that progressively worsened over time, along with visible sagging of the shields underneath the vehicle.
An analysis of the subject vehicle population was undertaken using complaints submitted to ODI. No related complaints were found in NHTSA's database for the subject vehicle population. Subsequently, ODI conducted a broader search for related complaints and field reports involving MY 2020-2025 Ford Explorer and Lincoln Aviator models, as these vehicles all utilize substantially similar underbody shields. No complaints or reports were found citing any allegations pertaining to any of the underbody shields.
Correspondingly, ODI reviewed manufacturer information and data and did not identify a trend related to the Petitioner's allegations.
After a thorough review of the materials submitted by the Petitioner and other relevant information available to the Agency, NHTSA has not identified sufficient evidence of a vehicle-based defect pertaining to the underbody shields of the subject vehicle. It is noteworthy that the Petitioner alleged the presence of detectability pertaining to this condition, including excessive noise and vibration while driving that progressively worsened over time, and visible sagging of the shields underneath the vehicle. ODI's findings are that there is a low risk of a complete
National Travel and Tourism Office (NTTO), International Trade Administration, U.S. Department of Commerce (DOC); Office of the Assistant Secretary for Aviation and International Affairs (OST), U.S. Department of Transportation (DOT).
Notice of public meetings.
The National Travel and Tourism Office (NTTO) and Office of the Secretary of Transportation (OST) announce two public meetings to be held virtually and the dates, times, and location of the meetings. The purpose of these meetings is to convene stakeholders to provide a forum for individual ideas and approaches for improving the tourism sector in and air service for the Commonwealth of Northern Mariana Islands (CNMI). At the first public meeting, the agenda will focus on tourism recovery. At the second public meeting, the agenda will focus on air service matters.
The first public meeting regarding recovery in the tourism sector will convene on Wednesday, April 22, 2026, beginning at 6:00 p.m. Eastern Time (ET). The second meeting regarding air services will convene on Wednesday, April 29, 2026, beginning at 6:00 p.m. Eastern Time (ET).
The virtual meetings will be open to the public via registration. Registration in advance of the meeting date for the virtual meetings is available at:
April 22 Tourism Sector:
April 29 Air Services:
Office of the Secretary of Transportation,
The CNMI experienced a significant decline in tourism after natural disasters and the COVID-19 public health emergency. These economic conditions and the transportation costs associated with its geographic isolation have hindered a recovery in the tourism sector, which is a primary factor in the CNMI economy. The scope and purpose of the meetings entail obtaining thoughtful feedback from participants about approaches to a recovery in the tourism sector and provision of affordable air services.
First Meeting, Wednesday, April 22, 2026, beginning at 6:00 p.m. Eastern Time (ET). The meeting is not expected to exceed 90 minutes.
At the first meeting on recovery in the tourism sector, the agenda will cover the following topics:
Second Meeting, Wednesday, April 29, 2026, beginning at 6:00 p.m. Eastern Time (ET). The meeting is not expected to exceed 90 minutes.
At the second meeting on air services, the agenda will cover the following topics:
The meetings will be open to the public via virtual meeting platform. Members of the public who wish to participate in the virtual meetings can attend by registering via the relevant website listed above.
This notice issued under the authority of 15 U.S.C. 1512 and 49 U.S.C. 301.
Internal Revenue Service (IRS), Treasury.
Notice of information collection; request for comments.
In accordance with the Paperwork Reduction Act of 1995, the IRS is inviting comments on the information collection request outlined in this notice.
Written comments should be received on or before June 15, 2026 to be assured of consideration.
Direct all written comments to Andres Garcia, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or by email to
View the latest drafts of the tax forms related to the information collection listed in this notice at
The IRS, in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the IRS assess the impact and minimize the burden of its information collection requirements. Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record, and viewable on relevant websites. For this reason, please do not include in your comments information of a confidential nature,
U.S.-China Economic and Security Review Commission.
Notice of open public hearing.
Notice is hereby given of the following hearing of the U.S.-China Economic and Security Review Commission. The Commission is mandated by Congress to investigate, assess, and report to Congress annually on “the national security implications of the economic relationship between the United States and the People's Republic of China.” Pursuant to this mandate, the Commission will hold a public hearing in Washington, DC on April 30, 2026 on “Taking a Bigger Byte: China's Expanding Strategy for Data Dominance.”
The hearing is scheduled for Thursday, April 30, 2026 at 9:30 a.m.
Members of the public will be able to attend in person at or near the U.S. Capitol and adjacent Congressional office buildings (specific building and room number to be announced) or view a live webcast via the Commission's website at
Any member of the public seeking further information concerning the hearing should contact Jameson Cunningham, 444 North Capitol Street NW, Suite 602, Washington, DC 20001; telephone: 202-624-1496, or via email at
The hearing will be co-chaired by Commissioner Leland Miller and Commissioner Chris Slevin. Any interested party may file a written statement by April 30, 2026 by transmitting it to the contact above. A portion of the hearing will include a question and answer period between the Commissioners and the witnesses.
Postal Service.
Proposed rule.
On April 9, 2026, the Postal Service (USPS) filed a notice of mailing services price adjustments with the Postal Regulatory Commission (PRC), effective July 12, 2026. This proposed rule contains the revisions to
Submit comments on or before May 14, 2026.
Mail or deliver written comments to the Director, Product Classification, U.S. Postal Service, 475 L'Enfant Plaza SW, Room 4446, Washington, DC 20260-5015. If sending comments by email, include the name and address of the commenter and send to
You may inspect and photocopy all written comments, by appointment only, at USPS® Headquarters Library, 475 L'Enfant Plaza SW, 11th Floor North, Washington, DC 20260. These records are available for review on Monday through Friday, 9 a.m.-4 p.m., by calling 202-268-2906.
Steven Mills at (202) 268-7433 or Doriane Harley at (202) 268-2537.
All submitted comments and attachments are part of the public record and subject to disclosure. Do not enclose any material in your comments that you consider to be confidential or inappropriate for public disclosure.
Proposed prices will be available under Docket No. R2026-1 on the Postal Regulatory Commission's website at
The Postal Service's proposed rule includes changes to prices, mail classification updates, product simplification efforts, and revisions to the DMM.
The Postal Service is proposing to remove ADC/AADC rates for First-Class Mail®, USPS Marketing Mail®, and Periodicals and replacing with 3-Digit rates. In addition, nomenclature will be revised to label “Mixed ADC”, “Mixed AADC”, and “Mixed NDC” as “Mixed” for First-Class, USPS Marketing Mail, and Periodicals.
Currently, Outside County Periodicals are charged piece, pound, bundle, and container rates. The Postal Service is proposing to simplify the Periodicals pricing structure to more closely resemble the USPS Marketing Mail pricing structure. This would include eliminating bundle rates and container rates and expanding the SCF Pallet and 5-digit/Direct Container discounts to include Periodicals. Nonmachinable barcoded/nonbarcoded flats would be priced the same as parcels and ADC entry would be eliminated.
The Postal Service is proposing to increase the maximum weight for Marketing Mail automation and non-automation flat-shaped pieces from 16 ounces to 20 ounces and increasing the maximum weight for Carrier Route (CR) flats to 24 ounces. Heavy Printed Matter (HPM) will be introduced for Marketing Mail parcels with a weight limit of 15 pounds for Commercial/Nonprofit non-fulfillment pieces.
The Postal Service is proposing to extend the 5-digit Direct Container and SCF Pallet discounts to Heavy Printed Matter Presorted and Carrier Route parcels. Nonpresorted parcels would not be eligible for these discounts.
Currently, First-Class Mail (FCM) cards and FCM letters that are combined in the same mailing are subject to separate minimum presort volume criteria of 500 mailpieces of each mail type (card and letter). The Postal Service is proposing to allow any combination of FCM Cards and FCM Letters that total 500 or more pieces to be combined into a mailing and presented for mailing at the presort price. This mail must be presented at the same time and on the same postage statement.
Currently, commercial Competitive parcels are subject to a noncompliance fee when a published set of package barcode quality criteria is not met. The Postal Service is proposing to implement a package barcode quality noncompliance fee for Market Dominant parcels, excluding Periodicals parcels and Heavy Printed Matter, that mirrors the existing fee for Competitive parcels.
Currently, Bound Printed Matter (BPM) presorted and Carrier Route flats and parcels are priced using both a piece and a pound rate. The Postal Service is proposing to change the price structure for these pieces to better align with the price structure for nonpresorted BPM. This would eliminate the pound pricing and piece prices would apply in weight increments from 1 to 15 pounds based on entry of None (Origin), DSCF, or DDU.
Currently, mail preparation and presort options for USPS Marketing Mail flats presented in flat trays allow for bundling. The Postal Service is proposing to eliminate bundling for USPS Marketing Mail automation and nonautomation flats prepared in flat trays to align with current processing operations.
The Postal Service has been incenting mailers to integrate mobile technology and use innovative print techniques in commercial mail since 2012. These promotions have become an integral way for industry to try new things and innovate their mail campaigns. A 2027 Promotions Calendar is planned with opportunities for mailers to receive a postage discount by applying treatments or integrating technology into their mail campaigns. In addition to the slated 2027 promotions, the Postal Service is introducing two new promotions, Impact Messaging and Direct Mail Discovery.
These proposed revisions will provide consistency within postal products and add value for customers.
Although exempt from the notice and comment requirements of the Administrative Procedure Act (5 U.S.C. 553(b), (c)) regarding proposed rulemaking by 39 U.S.C. 410(a), the Postal Service invites public comments on the following proposed revisions to
We will publish an appropriate amendment to 39 CFR part 111 to reflect these changes.
Administrative practice and procedure, Postal Service.
Accordingly, 39 CFR part 111 is proposed to be amended as follows:
5 U.S.C. 552(a); 13 U.S.C. 301-307; 18 U.S.C. 1692-1737; 39 U.S.C. 101, 401, 403, 404, 414, 416, 3001-3011, 3201-3219, 3403-3406, 3621, 3622, 3626, 3632, 3633, and 5001.
(see 4.6)
These additional standards apply to USPS Marketing Mail flat-size pieces:
a. Each piece must weigh no more than 20 ounces (24 ounces for carrier route).
These additional standards apply to Bound Printed Matter: * * *
b. Bound Printed Matter may not weigh more than 15 pounds.
Maximum weight limits are as follows: * * *
c. For USPS Marketing Mail, 20 ounces.
Pieces mailed at Heavy Printed Matter prices may not weigh more than 15 pounds.
Mailpieces must be marked under the corresponding standards to show the class of service and/or price paid: * * *
6. “Heavy Printed Matter” or “HPM”
7. “Nonprofit Heavy Printed Matter” or “Nonprofit HPM”
e. For Heavy Printed Matter carrier route price mail, the additional required marking is “Carrier Route Presort” (or “CAR-RT SORT”).
For First-Class Mail, Periodicals, USPS Marketing Mail, and Bound Printed Matter, standardized documentation includes:
c. For mail in trays or sacks, list these required elements: * * *
3. The number of pieces for each 5-digit ZIP Code in 5-digit/scheme bundles or trays; for each 3-digit ZIP Code in 3-digit/scheme bundles or trays; for each 3-digit/scheme in SCF bundles or trays; for each SCF in mixed bundles or trays. Exception: documentation for 3-digit/scheme letters in SCF trays or for SCF letters in mixed trays is not required unless those trays contain overflow mail. * * *
d. For bundles on pallets, list these required elements: * * *
[Revise the second sentence of item d(4) to read as follows:]
4. * * * Document sectional center facility/local processing center (SCF/LPC) pallets created as a result of bundle reallocation under 705.8.11 or 705.8.13 by designating the protected pallet with an identifier of “PSCF”. * * *
e. At the end of the documentation, a summary report of the number of pieces mailed at each price for each mailing by postage payment method and the number of pieces in each mailing. This information must match the information reported on the postage statement(s). For Periodicals mailings, documentation also must provide a summary of the number of copies for each entry price.
The actual name of the price level (or abbreviation) is used for column headings required under 3.2 and shown below:
a. Automation First-Class Mail, USPS Marketing Mail, and barcoded Periodicals:
b. Presorted First-Class Mail, barcoded and nonbarcoded Periodicals flats, nonbarcoded Periodicals letters, machinable, nonmachinable, and nonstandard USPS Marketing Mail and presorted Heavy Printed Matter:
c. Carrier Route Periodicals, Enhanced Carrier Route USPS Marketing Mail, and Carrier Route Heavy Printed Matter:
The sortation level (or corresponding abbreviation) is used for the bundle, tray, sack, or pallet levels required under 3.2 and shown below:
Use the price name or the authorized entry abbreviation in the listings in 3.0 and 207.17.4.2:
* * * For example, mail in a full SCF tray need not be bundled if it would have all been prepared in SCF bundles to the same destination. * * *
Bundles must be able to withstand normal transit and handling without breakage and without injuring USPS employees, and are subject to the following requirements:
a. * * * Using twine/string, rubber bands, wire, or metal banding is not allowed.
f. SCF presort level, pink Label A.
g. Mixed presort level, tan Label X.
* * * These standards apply to Carrier Route Periodicals and Enhanced Carrier Route USPS Marketing Mail, Carrier Route Heavy Printed Matter, and Carrier Route Bound Printed Matter mailings.
Letter trays are prepared as follows: * * *
h. If a mailing is prepared using an MLOCR/barcode sorter and is submitted with standardized documentation, then pieces do not have to be grouped by 3-digit ZIP Code prefix (or by 3-digit scheme, if applicable) in SCF trays, or by SCF in mixed trays.
* * * If the processing and distribution manager gives a written waiver, strapping is not required for any mixed or sectional center facility (SCF) letter tray of First-Class Mail or for any letter tray that originates and destinates in the same sectional center facility/local processing center (SCF/LPC) service areas.
All flat-tray preparation is subject to these standards: * * *
h. Pieces prepared as automation flats under the tray-based preparation option in 235.8.0 do not have to be grouped by 3-digit ZIP Code prefix in SCF trays or by SCF in mixed trays if the mailing is prepared using an MLOCR/barcode sorter and standardized documentation is submitted.
i. If pieces in a Periodicals mailing remain after one or more full trays are prepared for a 5-digit scheme, 5-digit, 3-digit, or SCF/LPC destination, an additional tray to the destination must be prepared if the remaining pieces reach the required volume. If the remaining volume is less than the required minimum, the pieces must be moved to the next tray level that meets the minimum volume.
USPS Marketing Mail flat-size pieces may be prepared in letter trays instead of sacks/flat trays only if the following standards are met:
All mail prepared under 245.9.0 must be bundled except for full carrier route trays.
h. All other applicable standards in 245.8.0, 245.9.0, or 245.10.0 must be met, including required preparation sequence and use of sack/flat tray minimums as tray minimums.
Line 1 (destination line) must meet these standards: * * *
b. Information. Line 1 must contain only the information specified by standard, including the appropriate destination facility prefix (
Except for carrier route bundles, the OEL must include the ZIP Code information (5-digit ZIP Code or 3-digit ZIP Code prefix) determined by the sortation level and, when applicable, by the labeling list designated in Exhibit 7.2.5 for SCF or mixed sortation levels. * * *
Postage for Periodicals mail includes a pound price charge and a piece price charge for Outside-County mail, and any discounts for which the mail qualifies under the corresponding standards.
The per piece charge applies to each copy and each firm bundle in the mailing. Outside-County piece prices are based on the shape of the mailpiece (letter, flat, or parcel); the characteristics of the mailpiece (machinable or nonmachinable, see 18.4aa and 18.4ab); the application of a barcode; and the bundle presort level. Firm bundles and carrier route pieces pay separate piece prices that do not vary based on these criteria. For pieces properly prepared loose in trays, the price is based on the tray presort level. Apply piece prices for Outside-County mail as follows: * * *
c.
Periodicals flat-shaped pieces are eligible for the SCF Pallet discount when palletized as follows:
a. 5-digit eligible pieces that are palletized under 705.8.10.2f, 705.8.10.2g, and 705.8.10.2h and entered at Origin (None) or DSCF/LPC entry.
b. 3-digit eligible pieces that are palletized under 705.8.10.2g and 705.8.10.2h and entered at Origin (None) or DSCF/LPC entry.
c. Basic Carrier Route eligible pieces that are palletized under 705.8.10.2f, 705.8.10.2g, and 705.8.10.2h and entered at Origin (None) or DSCF/LPC entry.
d. High Density eligible pieces of 125 or more for each carrier route that are palletized under 705.8.10.2f, 705.8.10.2g, and 705.8.10.2h and entered at Origin (None) or DSCF/LPC entry.
e. Saturation eligible pieces to at least 90 percent or more of the total number of active residential addresses, or 75 percent or more of the total number of active possible delivery addresses, on each carrier route that are palletized under 705.8.10.2f, 705.8.10.2g, and 705.8.10.2h and entered at Origin (None) or DSCF/LPC entry.
f. Firm bundles that are palletized under 705.8.10.2f, 705.8.10.2g, and 705.8.10.2h and entered at Origin (None) or DSCF/LPC entry.
The following Periodicals flat-shaped pieces in bundles are eligible for the Delivery Sort Container discount when meeting the basic standards under 13.2.1b and palletized under 705.8.0, 705.10.0, 705.12.0, or 705.13.0 on a 5-digit scheme carrier routes, 5-digit (scheme) merged, 5-digit carrier route(s), or 5-digit merged pallet entered at an Origin, DSCF, or DDU entry or in a carrier route sack or flat tray under 207.23.4.1 and entered at the DDU:
a. Carrier Route;
b. High Density; and
c. Saturation; and
d. Firm.
Total Outside-County postage is the sum of the per pound and per piece charges and any Ride-Along charges; minus all discounts, rounded off to the nearest whole cent. Total In-County postage is the sum of the per pound and per piece charges, and any Ride-Along charges, less all discounts, rounded off to the nearest whole cent.
Material paid at First-Class Mail or USPS Marketing Mail prices may be enclosed in a Periodicals mailpiece subject to these conditions:
a. The total weight of all enclosed USPS Marketing Mail material must not exceed 20 ounces.
Outside-County prices apply to copies of an authorized Periodicals publication that a publisher or news agent mails and that are not eligible for In-County prices under 11.3. Outside-County prices consist of: * * *
b. An entry-level charge for the weight of the advertising portion of the publication; and
c. An entry-level charge for the weight of the nonadvertising portion.
Outside-County nonbarcoded (Presorted) piece prices are based on shape, machinability, barcoding, and presort level. The presort level of the piece is based primarily on the bundle level of the piece, except the presort level of pieces loose in trays, which is based on the tray level.
All pieces entered under the full-service automation option must: * * *
c. Be scheduled for an appointment through the Facility Access and Shipment Tracking (FAST) system when deposited as a DSCF drop shipment.
Outside-County barcoded (automation) piece prices are based on mailpiece shape (letter, flat, or parcel), machinability, barcoding, and presort level. The presort level of the piece is based on the bundle level of the piece,
The publisher must be able to present documentation that supports the number of copies of each edition of an issue, by entry level, at DDU/S&DC, DSCF/LPC (letters/flats), DSCF/RPDC (parcels), All Others, and In-County prices. * * *
Using one of the following formats, report the number of copies mailed to each 3-digit ZIP Code area at entry prices: * * *
b. Report copies by zone (In-County DDU/S&DC, In-County others, Outside-County DDU/S&DC, Outside-County DSCF/LPC [letters/flats], Outside-County DSCF/RPDC [parcels], and Outside-County All Others) and by 3-digit ZIP Code, in ascending numeric order, for each entry level. * * *
Use the price name or the authorized entry abbreviation in the listings in 17.3 and 17.4.2.
Terms used for presort levels are defined as follows: * * *
r.
For purposes of preparing mail: * * *
e. A
aa.
1. Flat-size pieces meeting the standards in 201.6.0 that are sorted into 5-digit, 3-digit, SCF, and mixed bundles. * * *
The following apply:
a. Mailings must be prepared in letter trays (letters), flat trays (flats) under 22.7 and 25.5, or sacks (see b.).
b. Sacks must be prepared for the following:
1. Carrier route;
2. 5-digit scheme cr-rt and 5-digit cr-rt flats;
3. Nonpalletized residual 5-digit flats entered at a DDU/S&DC along with carrier-route flats;
4. Nonpalletized carrier-route flats entered at the DSCF/LPC (origin);
5. Nonpalletized 5-digit flats entered at the DSCF/LPC (origin);
6. Nonpalletized 3-digit/SCF flats entered at the DSCF/LPC (origin); and
7. All periodicals parcels.
c. DSCF/LPC (origin) 5-digit and 3-digit/SCF sacks must be entered at the BMEU and emptied into a designated container.
d. Palletized mail is subject to 705.8.0.
e. See 203.5.0 and 203.6.0 for tray and sack standards.
* * * Smaller volumes are not permitted, except in mixed bundles and under 22.4. * * *
f. SCF (required); six-piece minimum; pink Label A or OEL.
g. Mixed (required); no minimum; Tan Label X or OEL.
* * * Pieces in these low-volume bundles must be claimed at the mixed price (Outside-County) or basic price (In-County). * * *
Preparation sequence, tray size, and labeling: * * *
c.
1. Line 1: use L005, Column B.
2. Line 2: “PER” or NEWS” as applicable; followed by “LTRS SCF NON BC.”
d.
1. Line 1: “MXD WKG”
2. Line 2: “PER” or NEWS” as applicable; followed by “LTRS NON BC WKG.”
c. SCF/LPC, required at 72 pieces, optional at 24 pieces minimum (no minimum for origin entry SCF).
1. Line 1: use L016, Column B for flats, L051, Column B for parcels.
2. Line 2: “PER” or “NEWS” as applicable; followed by “FLTS” or “NONSTD” as applicable; followed by “SCF”; followed by “NON BC” for flats.
d. Mixed, required (no minimum).
1. Line 1: “MXD WKG”
2. Line 2: “PER” or “NEWS” as applicable; followed by “NONSTD” as applicable; followed by “WKG”.
Mailers must place machinable and nonmachinable (26.0) flat-sized pieces in flat trays (203.5.6) instead of sacks, unless prepared as the following: Direct carrier route; 5-digit scheme carrier route; 5-digit carrier route (23.4.1,
d. SCF/LPC, required at 72 pieces, optional at 24 pieces minimum, (no minimum for origin entry SCF).
1. Line 1: use L016, Column B.
2. Line 2: “PER” or “NEWS” as applicable; followed by “FLTS”; followed by “SCF NON BC”.
e. Mixed (required), no minimum, labeling:
1. Line 1: “MXD WKG.
2. Line 2: “PER” or “NEWS” as applicable; followed by “FLTS”; followed by “NON BC WKG”.
Sacking or traying is not required for carrier route bundles entered at a DDU when the mailer unloads bundles under 29.4.5. Mailers must prepare unsacked, untrayed bundles as follows: * * *
* * * Pieces in these low-volume bundles must be claimed at the mixed price (Outside-County) or basic price (In-County). * * *
Tray size, preparation sequence, and Line 1 labeling: * * *
c. SCF: required (150-piece minimum); overflow allowed; for Line 1, use L005, Column B.
d. Mixed: required (no minimum); for Line 1, use “MXD WKG”.
Line 2: “PER LTRS” or “NEWS LTRS” (except “NEWS LTR” for 5-digit scheme trays), as applicable, and: * * *
e. SCF: “SCF BC.”
f. Mixed: “BC WKG.”
c. * * * The nonbarcoded-price pieces that cannot be placed on SCF or finer pallets may be prepared as flats in flat trays and paid for at nonbarcoded prices.
* * * Pieces in these low-volume bundles must be claimed at the applicable mixed price (Outside-County) or basic price (In-County). * * *
Preparation sequence, bundle size, and labeling: * * *
e. SCF (required); six-piece minimum (fewer permitted under 25.1.8); pink Label A or OEL.
f. Mixed (required); no minimum; tan Label X or OEL.
c. SCF/LPC, required at 72 pieces, optional at 24 pieces; fewer pieces not permitted, (no minimum for origin entry SCF); labeling:
1. Line 1: use L016, Column B.
2. Line 2: use “PER FLTS SCF BC” or “NEWS FLTS SCF BC,” as applicable.
d. Mixed (required), no minimum; labeling:
1. Line 1: “MXD WKG”
2. Line 2: “PER FLTS BC WKG” or “NEWS FLTS BC WKG”, as applicable.
d.
1. Line 1: L016, Column B.
2. Line 2: “PER” “NEWS” as applicable; followed by “FLTS”; followed by “SCF BC”.
e.
1. Line 1: “MXD WKG”.
2. Line 2: “PER” or “NEWS” as applicable; followed by “FLTS”; followed by “BC WKG”.
Each mailing must be accompanied by documentation meeting the standards in 17.0, as well as any additional mailing information requested by the USPS to support the postage claimed (such as advertising percentage and weight per copy). The following additional standards apply:
a. Presort documentation required under 203.3.0 must show the total number of addressed pieces and total number of copies for each publication and each edition in the combined mailing claimed at the carrier route, 5-digit, 3-digit/SCF, and mixed prices. * * *
Mailers must prepare postage statements for a combined mailing as follows: * * *
b. For a combined mailing prepared under 27.1a mailers must prepare a
c. The advertising and nonadvertising portions may be eligible for DSCF or DDU pound prices based on the entry facility and the address on the piece.
The following apply: * * *
Determine price eligibility as follows: * * *
Nonautomation machinable letters are subject to 3-digit and mixed prices only (including round-trip mailings with one optical disc).
The 3-digit price applies to qualifying letter-size machinable pieces (see 201.1.0) in quantities of 150 or more pieces prepared in SCF trays for a single SCF, and to pieces placed in mixed trays in lieu of overflow SCF trays.
The SCF-pallet discount applies to 3-digit/SCF eligible First Class Mail letter-shaped pieces that are palletized under 705.8.10.1b. * * *
The mixed price applies to qualifying letter-size machinable pieces that the mailer prepares in mixed trays, except for pieces placed in mixed trays in lieu of overflow SCF trays (see 235.5.2.2).
* * * Nonautomation nonmachinable letters are subject to 5-digit, 3-digit, and mixed prices.
The 5-digit price applies to letter-size mail in quantities of 150 or more pieces for a 5-digit ZIP Code prepared in 5-digit trays (overflow pieces in 3-digit or mixed trays and 10 or more pieces, bundled in 3-digit origin/entry trays).
The 3-digit price applies to letter-size mail in quantities of 150 or more pieces for a 3-digit ZIP Code prepared in 3-digit trays (overflow pieces in mixed trays and 10 or more pieces bundled in 3-digit origin/entry trays).
The mixed price applies to letter-size pieces that are subject to nonmachinable prices and prepared in mixed trays.
Automation prices apply to each piece that is sorted under 235.6.0 into the corresponding qualifying groups:
a. Groups of 150 or more pieces in 5-digit/scheme trays qualify for the 5-digit price. Preparation to qualify for the 5-digit price is optional. Pieces placed in full SCF trays in lieu of 5-digit/scheme overflow trays under 235.6.5 are eligible for the 5-digit prices.
b. Groups of 150 or more pieces in SCF trays qualify for the 3-digit price.
c. Groups of fewer than 150 pieces placed in mixed trays in lieu of SCF overflow trays under 235.6.5 are eligible for the 3-digit prices.
d. Pieces in mixed trays qualify for the mixed price, except for pieces prepared under 5.4c.
The SCF-pallet discount applies to 3-digit/SCF eligible First Class Mail cards and letter-shaped pieces that are palletized under 705.8.10.1b. * * *
Automation prices apply to each piece that is sorted under 235.8.6, into the corresponding qualifying groups: * * *
c. Groups of fewer than 50 pieces in origin 3-digit trays and all pieces in SCF trays qualify for the 3-digit price. Preparation to qualify for the 3-digit price is optional and need not be done for all SCF destinations.
d. All pieces in mixed trays qualify for the mixed price.
The SCF-pallet discount applies to 3-digit/SCF eligible First Class Mail flat-shaped pieces that are palletized under 705.8.10.1b. * * *
Pieces claimed at First-Class Mail card prices and pieces claimed at First-Class Mail letter prices must meet separate 500-piece minimums when prepared as separate mailings. Card and letter priced pieces are not subject to separate minimum volume criteria when prepared as a combined mailing. Either way, cards and letters may be presented at the same time and reported on the same postage statement.
Terms used for presort levels are defined as follows: * * *
g.
h.
Terms used for presort levels are defined as follows: * * *
f. SCF: All pieces are addressed for delivery in the service area of the same sectional center facility (SCF)/local processing center (LPC) (see L016).
g. Mixed: The pieces are for delivery in the service area of more than one SCF.
For purposes of preparing mail: * * *
Regardless of postage payment method, mailers may present single-piece price First-Class Mail with pieces claimed at automation or presort prices and report all pieces on the same postage statement. The following standards apply:
a. The mailer must prepare the single-piece price pieces in separate trays from the automation and presort pieces. Mailers must label the trays under 204.3.0 using CIN code 260 on trays of single-piece letters. Label trays as follows:
1. Line 1: “MXD WKG”
Machinable pieces are not bundled, except for (see 2.0): * * *
c. All pieces in a less-than-full mixed tray.
Preparation sequence, tray size, and labeling:
a. SCF (required); full trays (no overflow); no minimum for origin entry SCF, with pieces grouped by 3-digit ZIP Code prefix; labeling:
1. Line 1: Use L005.
2. Line 2: “FCM LTR SCF MACH.”
b. Mixed (required); no minimum, with pieces grouped by SCF; labeling:
1. Line 1: “MXD WKG”
2. Line 2: “FCM LTR MACH WKG.”
* * * Smaller volumes are not permitted except for mixed bundles. * * *
c. Mixed (required); no minimum; tan Label X or OEL.
Preparation sequence, tray size, and labeling: * * *
c. Mixed (required); no minimum; labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “FCM LTR MANUAL WKG”.
The requirements for mailings are as follows: * * *
b. First-Class Mail. A single automation price First-Class Mail mailing may include pieces prepared at 5-digit, 3-digit, and mixed prices.
* * * (For example, if a mailer has 30 overflow 5-digit pieces for ZIP Code 20260, these pieces may be added to an existing qualified SCF tray for the correct destination (ZIP Code prefix 202) and the overflow 5-digit pieces will still qualify for the 5-digit price). * * *
Mailers may use this option selectively for SCF ZIP Codes. * * *
b. SCF: optional, but required for 3-digit price (150-piece minimum except no minimum for origin entry SCF); overflow allowed; group pieces by 3-digit ZIP Code. For Line 1, use L005, Column B.
c. Mixed: required (no minimum); group pieces by SCF when overflow pieces from SCF trays are placed in mixed trays. For Line 1: “MXD WKG”
Line 2: “FCM LTR” and: * * *
c. SCF: “SCF BC”.
d. Mixed: “BC WKG”.
Upon presentation of letter-size automation price First-Class Mail mailings to USPS for verification, mailers must present all mixed trays together, and such trays must either be adjacent to one another, or side by side, and must be placed as the top layer(s) on any given container. * * *
* * * Mailers must label the trays under 204.3.0 using CIN code 282 on single-piece trays. Label the trays as follows:
a. Line 1: MXD WKG
Preparation sequence, tray size, and labeling: * * *
c. SCF (optional); full tray or 50 piece minimum (no overflow); labeling:
1. Line 1: L016, Column B.
2. Line 2: “FCM FLTS SCF NON BC”.
d. Mixed (required); no minimum; labeling:
1. Line 1: “MXD WKG”
2. Line 2: “FCM FLTS NON BC WKG”.
* * * First-Class Mail mailings may include pieces prepared at automation 5-digit, 3-digit, and mixed prices. * * *
Tray size, preparation sequence, and Line 1 labeling: * * *
e. SCF: optional, but required for 3-digit price (full tray or 50-piece minimum); one less-than-full or overflow tray allowed; group pieces by 3-digit ZIP Code prefix; labeling:
1. Line 1: L016, Column B.
2. Line 2: “FCM FLTS SCF BC.”
Exception: Pieces are not required to be grouped by 3-digit ZIP Code prefix in SCF trays if the mailing is prepared using an MLOCR/barcode sorter, and standardized documentation is submitted.
f. Mixed (required); no minimum for price eligibility. Group pieces by SCF. labeling:
1. Line 1: “MXD WKG”
2. Line 2: “FCM FLTS BC WKG.”
Mailers using a MLOCR/barcode sorter and submitting standardized documentation need not group pieces by SCF.
USPS Marketing Mail prices are applied as follows:
a. The appropriate minimum per piece price applies to USPS Marketing Mail automation or machinable letter-sized mailpiece that weighs 3.5 ounces (0.2188 pound) or less, Nonautomation nonmachinable letters that weigh 4.0 ounces (0.25 pounds) or less, flat-sized mailpieces that weighs 4.0 ounces (0.25 pound) or less, presorted Marketing Parcels and nonstandard parcels that weighs 3.3 ounces (0.2063 pound) or less, and Heavy Printed Matter nonpresorted parcels.
b. A price determined by adding the per-piece charge and the corresponding per-pound charge applies to the following: * * *
3. Nonprofit machinable and Nonprofit nonstandard parcels that weigh more than 3.3 ounces;
4. Machinable parcels that weigh 3.5 ounces or more; and
5. Regular and Nonprofit Heavy Printed Matter (HPM) presorted and carrier route parcels.
USPS Marketing Mail consists of mailable matter that: * * *
b. Is not authorized to be mailed as Periodicals (unless permitted or required by standard);
c. Weighs no more than 20 ounces (or 24 ounces for carrier route flats); and
d. Weighs no more than 15 pounds if prepared as Heavy Printed Matter under 9.0. * * *
USPS Marketing Mail parcels and Marketing Parcels must weigh no more than 16 ounces. USPS Marketing Mail presorted must weigh no more than 20 ounces. USPS Marketing Mail carrier route flats must weigh no more than 24 ounces. Heavy Printed Matter parcels must weigh no more than 15 pounds. Flat-size pieces that do not meet the standards in 201.4.3 through 201.4.4 must be prepared as parcels, and the mailer must pay the applicable parcel prices. The following weight limits also apply to pieces mailed at USPS Marketing Mail letter prices: * * *
Heavy Printed Matter is a sub-category of Marketing Parcels that includes regular and nonprofit carrier route, presorted, and nonpresorted parcels that weigh no more than 15 pounds. HPM must also meet the additional standards under 9.0.
All USPS Marketing Mail parcels and Heavy Printed Matter parcels must bear an Intelligent Mail package barcode (IMpb) and an Intelligent Mail matrix barcode (IMmb) as outlined in 204.2.0 and Publication 199,
Unless otherwise excepted, mailers of USPS Marketing Mail parcels not meeting the requirements for using a unique IMpb and IMmb, as outlined in 204.2.1.6 and Publication 199,
The following applies: * * *
b. Metered pieces weighing more than 13 ounces but not exceeding 20 ounces that do not qualify for USPS Marketing
c. Mailers with pieces (other than metered pieces weighing more than 13 ounces but not exceeding 20 ounces) that do not qualify for USPS Marketing Mail prices but that are prepared as USPS Marketing Mail and who do not want First-Class Mail or USPS Ground Advantage—Retail service for those pieces may enter their mailpieces “as is” (
The following apply:
f. Heavy Printed Matter (HPM) prices are Carrier Route, Presorted, and Nonpresorted prices (including nonprofit prices). These prices apply to mailings meeting:
1. Basic standards in 2.0 through 4.0; and
2. Corresponding standards for Presorted prices, Carrier Route prices, and Nonpresorted prices under 9.0.
Only the following extra services may be used with USPS Marketing Mail parcels, with restrictions as noted in 4.4.2; see 9.0 for Heavy Printed Matter: * * *
Machinable letters are subject only to 3-digit and mixed prices.
The 3-digit price applies to qualifying letter-size machinable pieces in quantities of 150 or more pieces prepared in SCF trays for a single SCF, and to pieces placed in mixed trays in lieu of overflow SCF trays.
The SCF-pallet discount applies to 3-digit/SCF eligible USPS Marketing Mail letter-shaped pieces that are palletized under 705.8.10.3f and entered at Origin (None) or DSCF/LPC entry.
The mixed price applies to qualifying letter-size machinable pieces that the mailer prepares in mixed trays, except for pieces placed in mixed trays in lieu of overflow SCF trays (see 245.5.3.2).
The 5-digit price applies to letter-size pieces subject to nonmachinable prices in quantities of 150 or more pieces for a 5-digit ZIP Code prepared in 5-digit trays (and overflow pieces in 3-digit or SCF trays) under 245.5.0.
The 3-digit price applies to letter-size pieces subject to nonmachinable prices in quantities of 150 or more pieces for a 3-digit ZIP Code prepared in 3-digit trays (and overflow pieces in SCF or Mixed trays) under 245.5.0.
The SCF pallet discount applies to 3-digit/SCF-eligible USPS Marketing Mail letter-shaped pieces that are palletized under 705.8.10.3e and 705.8.10.3f and entered at Origin (None) or DSCF entry.
The mixed price applies to letter-size pieces that are subject to the nonmachinable prices and prepared in mixed trays.
The 5-digit price applies to flat-size pieces:
a. In groups of 50 or more pieces and all pieces in a full 5-digit/scheme flat tray (see 245.1.4).
b. When palletized under 705.8.0 and 705.10.0 through 705.13.0, in a 5-digit/scheme bundle of 10 or more pieces, or 15 or more pieces, as applicable.
c. When palletized under 705.10.0 in a 5-digit bundle of 10 or more pieces, or 15 or more pieces, as applicable; properly placed on a merged 5-digit/scheme or 5-digit pallet.
The 3-digit price applies to flat-size pieces:
a. In groups of 50 or more and all pieces in a full tray of 5-digit/scheme or 3-digit/scheme pieces in a 3-digit/SCF flat tray (see 245.1.4).
b. When palletized under 705.8.0 and 705.10.0 through 705.13.0, in a 3-digit/scheme bundle of 10 or more pieces.
Mixed prices apply to flat-size pieces in bundles that do not qualify for 5-digit or 3-digit prices; placed in mixed flat trays or on mixed pallets under
The mixed price applies to machinable parcels that are not eligible for 5-digit prices. Machinable parcels at mixed prices must be placed in mixed sacks or on mixed pallets. See 245.11.3 and 705.8.10.
3-digit prices apply to nonstandard parcels and Marketing parcels as follows under either of the following conditions:
a. When dropshipped to a DSCF/RPDC and presented:
1. In an SCF/RPDC sack containing at least 10 pounds of parcels.
2. On an SCF/RPDC pallet, according to 705.8.10.
3. In SCF/RPDC containers prepared under 705.21.0.
b. When presented at the origin acceptance office on a 3-digit or SCF/RPDC pallet containing at least 200 pounds of pieces.
Mixed prices apply to nonstandard parcels and to Marketing Parcels in Mixed containers that are not eligible for 5-digit or 3-digit prices. Parcels at Mixed prices must be placed in mixed sacks under 245.11.4.3 or on mixed pallets under 705.8.10.
All pieces in an Enhanced Carrier Route or Nonprofit Enhanced Carrier Route USPS Marketing Mail mailing must: * * *
k. Flats must not weigh more than 24 ounces.
Automation prices apply to each piece that is sorted under 245.10.0, into the corresponding qualifying groups:
a. * * * Pieces placed in full SCF trays under 245.7.5 in lieu of 5-digit/scheme overflow trays are eligible for 5-digit prices (see 245.7.5.)
b. Groups of fewer than 150 pieces in SCF trays qualify for the 3-digit price. Pieces placed in mixed trays under 245.7.5 in lieu of SCF overflow trays also are eligible for 3-digit prices (see 245.7.5).
c. Pieces in mixed trays qualify for the mixed price, except for pieces prepared under 7.4b.
The SCF-pallet discount applies to 3-digit/SCF-eligible USPS Marketing Mail letter-shaped pieces that are palletized under 705.8.10.3e and 705.8.10.3f and entered at Origin (None) or DSCF/LPC entry.
Automation prices apply to each piece properly sorted into qualifying groups:
a. Groups of 50 or more flat-size pieces and all pieces in a full 5-digit/scheme tray qualify for the 5-digit price.
b. Groups of 50 or more flat-size pieces and all pieces in a full 3-digit/scheme/SCF tray qualify for the 3-digit price.
c. All flat-size pieces in mixed trays qualify for the mixed price (no minimum).
The SCF-pallet discount applies to 3-digit/SCF-eligible USPS Marketing Mail flat-shaped pieces that are palletized under 705.8.10.3e and 705.8.10.3f and entered at Origin (None) or DSCF/LPC entry.
All pieces in a Regular Heavy Printed Matter or Nonprofit Heavy Printed Matter mailing must:
a. Meet the basic standards for USPS Marketing Mail in 2.0 and 3.0 and, for Nonprofit USPS Marketing Mail, the additional standards in 703.1.0.
b. Not be used for “fulfillment purposes” (
c. Weigh no more than 15 pounds.
d. Exceed the standards of a flat by either weight or
e. Meet the standards in 601.10.0 if prepared as a catalog.
f. Not contain books or other non-eligible matter. Such items may be mailed using another eligible service (
g. Meet a volume of at least 200 pieces or 50 pounds of pieces per mailing (except Heavy Printed Matter nonpresorted, non-discounted mailings).
h. Be marked under the corresponding standards in 203.3.5.1 to show the class of service and/or price paid.
i. Bear an Intelligent Mail package barcode (IMpb) and an Intelligent Mail matrix barcode (IMmb) as outlined in 204.2.0 and Publication 199,
Apply the prices and discounts for nonpresorted Heavy Printed Matter (HPM) as follows:
Nonpresorted HPM prices are based on the weight of a single addressed piece or one pound, whichever is heavier. The nonpresorted price applies to HPM not mailed at the Presorted or carrier route prices. For prices, see Notice 123—Price List.
The nonpresorted HPM price is charged per half-pound from 1 through 5 pounds, and per pound from more than 5 through 15 pounds. For pieces weighing 5 pounds or under, any fraction of a half-pound is considered a whole half-pound. For pieces weighing more than 5 but not more than 15 pounds, any fraction of a pound is considered a whole pound. For example, if a HPM item weighs 4.325 pounds, the weight (postage) increment is 4.5 pounds; if an item weighs 6.25 pounds, the weight (postage) increment is 7 pounds. The minimum postage price per piece is the 1-pound price.
Items qualifying as a catalog under 601.10.0 are eligible for an incentive discount when appropriately identified
Apply the prices, fees, and discounts for Regular and Nonprofit Presorted and Carrier Route Heavy Printed Matter as follows:
Postage is based on the price that applies to the weight (postage) increment (up to 15 pounds) of each addressed piece. For prices, see Notice 123—Price List.
The presorted Heavy Printed Matter price and Carrier Route price has a per piece charge and a per pound charge. Pricing is based on two weight tiers: up to 2.5 pounds and over 2.5 pounds.
The following pallet discounts apply to Presorted and Carrier Route Heavy Printed Matter:
a. The SCF-pallet discount applies to Presorted and Carrier Route eligible Heavy Printed Matter parcels that are palletized and entered at Origin or DSCF/LPC entry.
b. The Delivery Sort Container discount applies to each Heavy Printed Matter carrier route parcel palletized under 705.8.0 on a 5-digit carrier route or 5-digit scheme carrier route pallet entered at an Origin, DSCF, or DDU entry or in a carrier route sack under 245.14.0 and entered at the DDU.
Each piece is subject to both a piece price and a pound price.
To determine single-piece weight in a mailing of nonidentical-weight pieces, weigh each piece individually. To determine single-piece weight in a mailing of identical-weight pieces, weigh a sample of at least 10 randomly selected pieces and divide the total sample weight by the number of pieces. Express all single-piece weights in decimal pounds rounded off to two decimal places.
Presorted and Carrier Route Heavy Printed Matter mailings are charged a per pound price and a per piece price as follows:
a. Per pound price:
1.
2.
b. Per piece price. Multiply the total number of addressed pieces by the applicable piece price.
c. Total Postage. Calculate total postage by adding the total per piece calculation to the total per pound calculation. Round off the total postage to the nearest whole cent.
Items qualifying as a catalog under 601.10.0 are eligible for an incentive discount when appropriately identified on the postage statement and/or the eDoc.
Only the following extra services may be used with Heavy Printed Matter parcels:
a. USPS Tracking (electronic option only).
b. Certificate of mailing, as provided in 503.5.0.
An eligible mailpiece with an extra service must bear a return address under 602.1.0, and an ancillary service endorsement under 507.1.0. Pieces with USPS Tracking must bear one of the required endorsements: “Address Service Requested”, “Forwarding Service Requested”, “Return Service Requested”, or “Change Service Requested”.
Postage for all Heavy Printed Matter pieces must be paid via permit imprint.
Mailers with pieces weighing 20 ounces or less that do not qualify for USPS Marketing Mail prices but that are prepared as USPS Marketing Mail must pay single-piece First-Class Mail or USPS Ground Advantage—Retail postage for such pieces. * * *
Mailers of permit imprint pieces weighing more than 13 ounces but no more than 20 ounces that do not qualify for USPS Marketing Mail prices but that are prepared as USPS Marketing Mail must pay the USPS Ground Advantage—Retail postage for such pieces. * * *
There are no presort, sacking, or labeling standards for nonpresorted Heavy Printed Matter.
Terms used for presort levels are defined as follows: * * *
e.
h.
Terms used for presort levels are defined as follows: * * *
n.
Terms used for presort levels are defined as follows: * * *
e.
For purposes of preparing mail: * * *
Machinable pieces are not bundled, except for the following (see 203.4.0): * * *
b. All pieces in a less-than-full mixed tray.
Instead of preparing overflow SCF trays with fewer than 150 pieces, mailers may include these pieces in mixed trays when a tray of 150 or more pieces can be made. Mailers must note these trays on standardized documentation (see 203.3.2). Pieces that are placed in the next tray level must be grouped by destination and placed in the front or back of that tray. Preparation sequence, tray size, and labeling:
a. SCF (optional, but required for 3-digit price); 150-piece minimum except no minimum for origin entry SCF (overflow allowed); group pieces by SCF when overflow pieces from SCF trays are placed in mixed trays; labeling:
1. Line 1: Use L005, Column B.
2. Line 2: “STD LTR SCF MACH.”
b. Mixed (required); no minimum; labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “STD LTR MACH WKG.”
* * * Smaller volumes are not permitted except for mixed bundles. * * *
c. SCF (required); 10-piece minimum; pink Label A or OEL.
d. Mixed (required); no minimum; tan Label X or OEL.
* * * For example, overflow pieces for a 5-digit destination may be placed into an existing correct 3-digit tray; if a 3-digit tray that includes the 5-digit destination does not exist, the overflow pieces may be placed into the correct existing SCF tray. * * *
c. SCF (required); 150-piece minimum; labeling:
1. Line 1: L005, Column B.
2. Line 2: “STD LTR SCF MANUAL.”
d. Mixed (required); no minimum; labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “STD LTR MANUAL WKG.”
a. Line 1: “MXD WKG”.
Instead of preparing overflow trays with fewer than 150 pieces, mailers may include these pieces in an existing qualified tray of at least 150 or more pieces at the next tray level. (For example, if a mailer has 30 overflow 5-digit pieces for ZIP Code 20260, these pieces may be added to an existing qualified SCF tray for the correct destination and the overflow 5-digit pieces will still qualify for the 5-digit price). Mailers must note these trays on standardized documentation (see 203.3.2). Pieces that are placed in the next tray level must be grouped by destination and placed in the front or back of that tray. Mailers may use this option selectively for SCF ZIP Codes. This option does not apply to origin/entry SCF trays. Preparation sequence, tray size, and Line 1 labeling: * * *
b. SCF: optional, but required for 3-digit price (150-piece minimum except no minimum for origin entry SCF); overflow allowed; group pieces by 3-digit (or 3-digit scheme) ZIP Code prefix. For Line 1, use L005, Column B.
c. Mixed: required (no minimum); group pieces by SCF when overflow pieces from SCF trays are placed in mixed trays. For Line 1 labeling: “MXD WKG”.
Line 2: “STD LTR” and: * * *
c. SCF: “SCF BC”.
d. Mixed: “BC WKG”.
Upon presentation of letter-size automation price USPS Marketing Mail mailings to USPS for verification, mailers must present all mixed trays together, and such trays must either be adjacent to one another or side by side, and must be placed as the top layer(s) on any given container.
All mailings and all pieces in each mailing at Regular USPS Marketing Mail and Nonprofit USPS Marketing Mail nonautomation prices are subject to specific preparation standards in 8.2 through 8.8 and to these general standards (automation price mailings must be prepared under 10.0):
a. All pieces must be in the flat-size processing category.
b. Bundling is not permitted in flat trays.
c. All pieces must meet the applicable general preparation standards in 1.0 through 4.0 and the following:
1. All regular and Nonprofit USPS Marketing Mail pieces must be marked under 202.3.0. Regular and Nonprofit USPS Marketing Mail pieces must not be marked “ECRLOT,” “ECRWSH,” “ECRWSS,” “AUTO,” or “Single-Piece” (or “SNGLP”).
2. Unless excepted by standard, all pieces must be in the flat-size
d. All pieces in the mailing must meet the specific sortation and preparation standards in 8.0 or the palletization standards in 705.8.0. Flat-size pieces may be prepared under 705.10.0 through 705.13.0.
e. Sortation determines price eligibility as specified in 243.5.0.
Bundle preparation is for bundles on pallets only. Mailings consisting entirely of pieces meeting the automation-compatibility criteria in 201.6.0 must be prepared in 5-digit scheme bundles for those 5-digit ZIP Codes identified in L007 and in 3-digit scheme bundles for those 3-digit ZIP Codes identified in L008. Preparation sequence, bundle size except as allowed under 203.4.12, and labeling:
a. 5-digit scheme (required for flats meeting the automation-compatibility standards in 201.6.0), see definition in 1.4j:
1. For mailings containing only pieces weighing 5 ounces (0.3125 pound) or less: 15-piece minimum; red Label 5 SCH, or OEL.
2. For mailings containing any pieces weighing more than 5 ounces (0.3125 pound): 10-piece minimum; red Label 5 SCH, or OEL.
b. 5-digit (optional), see definition in 1.4j:
1. For mailings containing only pieces weighing 5 ounces (0.3125 pound) or less: 15-piece minimum; red Label 5 or OEL.
2. For mailings containing any pieces weighing more than 5 ounces (0.3125 pound): 10-piece minimum; red Label 5 or OEL.
c. 3-digit scheme (required for flats meeting the automation-compatibility standards in 201.6.0), see definition in 1.4o; 10-piece minimum; green Label 3 SCH, or OEL.
d. 3-digit (optional), see definition in 1.4p; 10-piece minimum; green Label 3 or OEL.
e. SCF (optional); 10-piece minimum; pink Label A or OEL.
f. Mixed (required); no minimum; tan Label X or OEL.
Except as provided in 8.5, a flat tray, or a letter tray under 3.0, must be prepared when the quantity of mail for a required presort destination reaches a full flat tray (up to the handholds) or 50 pieces, whichever occurs first.
A mailer using Priority Mail or Priority Mail Express to drop ship USPS Marketing Mail flat-size pieces may prepare flat trays/sacks containing fewer than 50 pieces.
Flat trays are allowed for all sortations. Sack preparation is allowed only for the following: Nonpalletized residual 5-digit flats entered at a DDU/S&DC along with carrier-route flats; Nonpalletized carrier-route flats entered at the DSCF/LPC (origin); Nonpalletized 5-digit flats entered at the DSCF/LPC (origin); and nonpalletized 3-digit flats entered at the DSCF/LPC (origin). DSCF/LPC (origin) 5-digit and 3-digit/SCF sacks must be entered at the BMEU and emptied into a designated container. All other sortations require flat-tray preparation. Preparation sequence and labeling:
a. 5-digit/scheme (optional); scheme sort required (before 5-digit sort), only for pieces meeting the automation flats criteria in 201.6.0, see definition in 1.4j; full flat tray or 50-piece minimum; labeling:
1. Line 1: For 5-digit scheme flat trays use L007, Column B. For 5-digit flat trays, use city, state, and 5-digit ZIP Code destination on pieces. (See 203.5.11 for overseas military mail).
2. Line 2: For 5-digit scheme flat trays, use “STD FLT 5D SCH NON BC.” For 5-digit flat trays, “STD FLTS 5D NON BC.”
b. 3-digit (optional); full flat tray or 50-piece minimum; labeling:
1. Line 1: L002, Column A.
2. Line 2: “STD FLTS 3D NON BC.”
c. Origin/entry 3-digits(s) (optional); no minimum; labeling:
1. Line 1: L002, Column A.
2. Line 2: “STD FLTS 3D NON BC.”
d. SCF (optional); full flat tray or 50-piece minimum; labeling:
1. Line 1: L016, Column B.
2. Line 2: “STD FLTS SCF NON BC.”
e. Mixed (required); no minimum; labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “STD FLTS NON BC WKG.”
The following standards apply:
a. If the mailing job contains a carrier route mailing, an automation mailing, and a nonautomation mailing, then it must be prepared under 705.10.0.
b. If the mailing job contains a carrier route mailing and a nonautomation mailing, then it must be separately sacked or trayed under 8.0 and 9.0 or prepared using the merged palletization option in 705.10.0.
c. If the mailing job contains a carrier route mailing and an automation mailing, then it must be separately sacked or trayed under 9.0 and 10.0 or prepared using the merged palletization option in 705.10.0.
d. Nonautomation pieces may be cobundled with automation pieces under the standards in 705.11.0.
Under the optional preparation in 705.10.0, 705.12.0, or 705.13.0, nonautomation 5-digit bundles are copalletized with carrier route bundles prepared under 9.0 and with automation 5-digit bundles prepared under 10.0 on merged 5-digit scheme pallets and merged 5-digit pallets. See 8.5a for information on when preparation under 705.10.0 may be required.
Mailers entering USPS Marketing Mail residual pieces that do not qualify for USPS Marketing Mail prices, and paying the applicable single-piece First-Class Mail or USPS Ground Advantage—Retail prices (but prepared “as is” under 244.5.0), must separately tray residual pieces from the automation and presort pieces. Mailers must label flat trays under 204.3.0 using the CIN code 582 for use with residual flat trays. Label flat trays as follows:
a. Line 1: “MXD WKG”.
b. Line 2: Use the human-readable content line corresponding to content identifier number 582 (see Exhibit 204.3.2.4).
c. Line 3: Office of mailing or mailer information.
Under the optional preparation in 705.10.0, 705.12.0, or 705.13.0, carrier route price bundles prepared under 9.3 and 9.4 are copalletized with Presorted price 5-digit bundles prepared under 8.0 and with automation price 5-digit bundles prepared under 10.0 on merged 5-digit scheme pallets and merged 5-digit pallets. Presorted price pieces may be cobundled with automation price pieces under 705.11.0.
Bundle preparation is for bundles on pallets only. Preparation sequence, bundle size, except as allowed under 203.4.0, and labeling:
a. 5-digit scheme (optional); see definition in 1.4g:
1. For mailings containing only pieces weighing 5 ounces (0.3125 pound) or less: 15-piece minimum; red Label 5 SCH or OEL.
2. For mailings containing any pieces weighing more than 5 ounces (0.3125 pound): 10-piece minimum; red Label 5 SCH or OEL.
b. 5-digit presort (optional); see definition in 1.4g:
1. For mailings containing only pieces weighing 5 ounces (0.3125 pound) or less: 15-piece minimum; red Label 5 or OEL.
2. For mailings containing any pieces weighing more than 5 ounces (0.3125 pound): 10-piece minimum; red Label 5 or OEL.
c. 3-digit scheme (optional); see definition in 1.4p; 10-piece minimum; green Label 3 SCH or OEL.
d. 3-digit presort (optional); see definition in 1.4p; 10-piece minimum; green Label 3 or OEL.
e. SCF (optional); 10-piece minimum; pink Label A or OEL.
f. Mixed (required); no minimum; tan Label X or OEL.
A flat tray or a letter tray under 3.0, must be prepared when the quantity of mail for a required presort destination reaches a full tray (see 1.4e) or 50 pieces, whichever occurs first.
Sack preparation is allowed only for the following: Nonpalletized residual 5-digit flats entered at a DDU/S&DC along with carrier-route flats; Nonpalletized carrier-route flats entered at the DSCF/LPC (origin); Nonpalletized 5-digit flats entered at the DSCF/LPC (origin); and nonpalletized 3-digit flats entered at the DSCF/LPC (origin). DSCF/LPC (origin) 5-digit and 3-digit/SCF sacks must be entered at the BMEU and emptied into a designated container. All other sortations require flat-tray preparation. Preparation sequence and labeling:
a.
1. Line 1: For 5-digit scheme flat trays, use L007, Column B. For 5-digit flat trays/sacks, use city, state, and 5-digit ZIP Code on mail (see 203.5.11for overseas military mail).
2. Line 2: For 5-digit scheme flat trays, use “STD FLTS 5D SCH BC.” For 5-digit flat trays/sacks, use “STD FLTS 5D BC.”
b.
1. Line 1: L002, Column A.
2. Line 2: “STD FLTS 3D BC.”
c.
1. Line 1: L002, Column A.
2. Line 2: “STD FLTS 3D BC.”
d.
1. Line 1: L016, Column B.
2. Line 2: “STD FLTS SCF BC.”
e.
1. Line 1: “MXD WKG”.
2. Line 2: “STD FLTS BC WKG”.
The following apply:
e. Mailers combining machinable Marketing Parcels (3.5 ounces or more) with Nonprofit Machinable priced parcels placed in mixed sacks must prepare the sacks under 11.3.2.
[Revise 11.3.2 to read as follows:]
Preparation sequence, sack size, and labeling:
a. 5-digit/scheme (optional, but required for 5-digit price), see definition in 1.4n.; allowed only for mail deposited at a DSCF/RPDC or DDU/S&DC. Sacks must contain a 10-pound minimum except at DDU/S&DC entry, which has no minimum; labeling:
1. Line 1: For 5-digit scheme sacks, use L606, Column B. For 5-digit sacks, use city, state, and 5-digit ZIP Code destination on pieces (see 203.5.11 for overseas military mail).
2. Line 2: For 5-digit scheme sacks, “STD MACH 5D SCH.” For 5-digit sacks, “STD MACH 5D”.
b. Mixed (required); no minimum; labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “STD MACH WKG”.
11.4.3 Sacking and Labeling
Preparation sequence, sack size, and labeling:
a. 5-digit/scheme (optional, but required for 5-digit price), see definition in 1.4n; allowed only for mail deposited at a DSCF/RPDC or DDU/S&DC. Sacks must contain a 10-pound minimum except at DDU/S&DC entry, which has no minimum; labeling:
1. Line 1: For 5-digit scheme sacks, use L606, Column B. For 5-digit sacks, use city, state, and 5-digit ZIP Code destination on pieces (see 203.5.11 for overseas military mail).
2. Line 2: For 5-digit scheme sacks, “STD NONSTD 5D SCH”. For 5-digit sacks, “STD NONSTD 5D”.
b. SCF; 10-pound minimum; labeling:
1. For Line 1, Use L051.
2. For Line 2, “STD NONSTD SCF”.
Mixed (required); no minimum; labeling:
3. Line 1: “MXD WKG”
4. Line 2: “STD NONSTD WKG”.
All mailings and all pieces in each mailing at Heavy Printed Matter and Nonprofit Heavy Printed Matter prices are subject to the standards in 1.0 to 4.0, and to these general standards:
a. Each mailing must meet the applicable standards in 202.3.0, 243, 245, and 246.
b. All pieces in a mailing must be within the same processing category. See 201.7.0 for definitions of machinable and nonstandard parcels.
c. All pieces must be sorted to the finest extent possible under 13.2 and 13.3 or palletized under 705.8.0.
d. Subject to 202.3.0, pieces must be marked “Heavy Printed Matter” (or “HPM”) and “Presorted” (or “PRSRT”).
Bundling is not permitted.
The following apply:
a. Prepare mailings of regular nonstandard parcels and mailings of Nonprofit nonstandard priced parcels under 13.2.
b. Mailers must prepare a sack when the mail for a presort destination reaches 10 pieces or 20 pounds.
c. There is no minimum for parcels prepared in 5-digit/scheme sacks entered at a DDU/S&DC.
d. Mailers combining Nonprofit nonstandard priced parcels with Nonprofit machinable priced parcels and regular machinable parcels in 5-digit/scheme sacks must prepare those sacks under 13.3.
e. Mailers may not prepare sacks containing nonstandard and machinable parcels to other presort levels.
f. Mailers may combine Nonprofit nonstandard priced parcels with regular nonstandard parcels in sacks under 13.2.3.
Preparation sequence and labeling:
a. 5-digit/scheme (optional),see definition in 1.4n; allowed only for mail deposited at a DSCF/RPDC or DDU/SDC. Sacks must contain a 10 piece or 20-pound minimum except at DDU/SDC entry, which has no minimum; labeling:
1. Line 1: For 5-digit scheme sacks, use L606, Column B. For 5-digit sacks, use city, state, and 5-digit ZIP Code destination on pieces (see 203.5.11 for overseas military mail).
2. Line 2: For 5-digit scheme sacks, “HPM NONSTD 5D SCH”. For 5-digit sacks, “HPM NONSTD 5D”.
b. 3-digit, 10 piece or 20-pound minimum; labeling:
1. For Line 1, Use L002, Column A.
2. For Line 2, “HPM NONSTD 3D”.
c. SCF, 10 piece or 20-pound minimum; labeling:
1. For Line 1, Use L051.
2. For Line 2, “HPM NONSTD SCF”.
d. Mixed (required); no minimum; labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “HPM NONSTD WKG”.
A sack must be prepared when the quantity of mail for a presort destination reaches either 10 addressed pieces or 20 pounds, whichever occurs first. Smaller volumes are not permitted (except mixed sacks). 5-digit scheme sacks may be prepared only when there are at least 10 addressed pieces or 20 pounds, whichever occurs first. Smaller volumes are not permitted. Sacking also is subject to these conditions:
a. Identical-weight pieces that weigh 2 pounds or less must be prepared using the 10-piece minimum; those that weigh more must be prepared using the 20-pound minimum.
b. For nonidentical-weight pieces, mailers must use either the minimum that applies to the average piece weight for the entire mailing (divide the net weight of the mailing by the number of pieces; the resulting average single-piece weight determines whether the 10-piece or 20-pound minimum applies) or sack by the actual piece count or mail weight for each destination, provided that documentation can be provided with the mailing that shows (specifically for each sack) the number of pieces and their total weight.
c. Mailers must note on the postage statement whether they applied the piece count or weight except for USPS Ship mailings prepared under 705.2.9.
d. Prepare mailings of machinable parcels and mailings of Nonprofit machinable priced parcels under 13.3.
e. There is no minimum for parcels in 5-digit/scheme sacks entered at a DDU or DS&DC.
f. Mailers combining nonstandard parcels with machinable parcels places in 5-digit/scheme sacks must prepare those sacks under 13.3.2a.
g. Mailers combing regular machinable parcels with Nonprofit machinable parcels placed in mixed sacks must prepare the sacks under 13.3.2c.
Preparation sequence, sack size, and labeling:
a. 5-digit/scheme, optional. Labeling:
1. Line 1: For 5-digit scheme sacks, use L606, Column B. For 5-digit sacks, use city, state, and 5-digit ZIP Code destination on pieces (see 203.5.11 for overseas military mail).
2. Line 2: For 5-digit scheme sacks, “HPM MACH 5D SCH.” For 5-digit sacks, “HPM MACH 5D”.
b. SCF/RPDC, optional. Labeling:
1. Line 1: Use L051.
2. Line 2: “HPM MACH SCF”.
c. Mixed (required); no minimum; labeling:
1. Line 1: Use “MXD WKG”.
2. Line 2: “HPM MACH WKG”.
[Add a section 14.0 to read as follows:]
All mailings of carrier-route Heavy Printed Matter (HPM) are subject to the standards in 14.2 through 14.4 and to these general standards:
a. Each mailing must meet the applicable eligibility standards in 243, mail preparation standards in 2.0, through 4.0, and deposit and entry standards in 246.
b. All pieces in a mailing must be within the same processing category as described in 201.7.0. A Heavy Printed Matter nonstandard parcel is a piece that is not a machinable parcel as defined in 201.7.5.1. Nonstandard parcels also are pieces that meet the size and weight standards for a machinable parcel but are not individually boxed or packaged to withstand processing on RPDC parcel sorters under 601.3.0 and 601.4.0.
c. All pieces must be sorted to the finest extent possible under 9.0, or palletized under 705.8.0.
d. Subject to 202.3.0, pieces must be marked “Heavy Printed Matter” (or “HPM”) and “Carrier Route Presort” (or “CAR-RT SORT”).
Residual pieces not sorted under 14.2 and 14.3 may be prepared as a Presorted Heavy Printed Matter mailing under 13.0, provided that they are part of the same mailing job and reported on the same postage statement. Residual pieces paid at the presorted price do not need to meet a separate 200 piece/50 pound minimum. These pieces must be separated from the Carrier Route portion when presented to the USPS for verification.
14.2 Preparing Nonstandard Parcels Weighing Less Than 10 Pounds
Bundling is not required in direct carrier route sacks. Otherwise, a carrier route bundle (or bundles) must be prepared when the quantity of addressed pieces for a carrier route reaches a minimum of 10 pieces or 20 pounds, whichever occurs first. Smaller volumes are not permitted. The maximum weight of each physical bundle is 40 pounds. Each bundle must contain at least two addressed pieces except for the last bundle for each carrier route destination under 203.4.10. Bundles must be labeled with a facing slip unless the bundle is labeled using a carrier route information line (204.3.0) or an optional endorsement line (203.7.0). Bundling also is subject to these conditions:
a. Identical-weight pieces that weigh 2 pounds or less must be prepared using the 10-piece minimum; those that weigh more must be prepared using the 20-pound minimum.
b. For nonidentical-weight pieces, mailers must either use the minimum that applies to the average piece weight for the entire mailing (divide the net weight of the mailing by the number of pieces; the resulting average single-piece weight determines whether the 10-piece or 20-pound minimum
c. Mailers must note on the accompanying postage statement whether they applied the piece count, weight, or both.
Mailers may prepare nonstandard parcels as unsacked bundles under 203.4.10 or in bundles on pallets. Otherwise, mailers must prepare a direct carrier route sack when the quantity of mail for an individual carrier route reaches either 10 addressed pieces or 20 pounds, whichever occurs first; smaller volumes are not permitted. Mailers then must place remaining bundles in 5-digit scheme carrier routes sacks or 5-digit carrier routes sacks, which have no minimum sack size. Carrier route sacks also are subject to these conditions:
a. Identical-weight pieces that weigh 2 pounds or less must be prepared using the 10-piece minimum; those that weigh more must be prepared using the 20-pound minimum.
b. For nonidentical-weight pieces, mailers must either use the minimum that applies to the average piece weight for the entire mailing (divide the net weight of the mailing by the number of pieces; the resulting average single-piece weight determines whether the 10-piece or 20-pound minimum applies), or sack by the actual piece count or mail weight for each sack destination, provided that documentation can be provided with the mailing that shows (specifically for each sack) the number of pieces and their total weight.
c. Mailers must note on the accompanying postage statement whether they applied the piece count or weight.
Sack preparation sequence and Line 1 labeling:
a. Carrier route: required; for Line 1, use city, state, and 5-digit ZIP Code on mail (see 203.5.11 for overseas military mail).
b. 5-digit scheme carrier routes: optional (no minimum); for Line 1, use L606, Column B.
c. 5-digit carrier routes: required (no minimum); for Line 1, use city, state, and 5-digit ZIP Code destination of bundles (for military mail, the ZIP Code is preceded by the prefixes under 4.0).
Line 2 information:
a. Carrier route: “HPM NONSTD CR,” followed by the route type and number.
b. 5-digit scheme carrier routes: “HPM NONSTD CR-RTS SCH.”
c. 5-digit carrier routes: “HPM NONSTD CR-RTS.”
Mailers may prepare nonstandard parcels as unsacked bundles under 203.4.10 or in bundles on pallets. When preparing nonstandard parcels in sacks, place parcels only in direct carrier-route sacks. Each carrier route sack must contain a minimum of 20 pounds. Required preparation:
a. Line 1: use city, state, and 5-digit ZIP Code destination of the pieces.
b. Line 2: “HPM NONSTD CR,” followed by the route type and number.
Machinable parcels may be prepared only in direct carrier route sacks. Each carrier route sack must contain a minimum of 10 addressed pieces or 20 pounds, whichever occurs first. Carrier route sacks also are subject to these conditions:
a. Identical-weight pieces that weigh 2 pounds or less must be prepared using the 10-piece minimum; those that weigh more must be prepared using the 20-pound minimum.
b. For nonidentical-weight pieces, mailers must use either the minimum that applies to the average piece weight for the entire mailing (divide the net weight of the mailing by the number of pieces; the resulting average single-piece weight determines whether the 10-piece or 20-pound minimum applies), or sack by the actual piece count or mail weight for each sack destination, provided that documentation can be provided with the mailing that shows (specifically for each sack) the number of pieces and their total weight.
c. Mailers must note on the accompanying postage statement whether they applied the piece count or weight.
Required preparation:
a. Line 1: Use city, state, and 5-digit ZIP Code destination of the pieces.
b. Line 2: “HPM MACH CR,” followed by the route type and number.
All USPS Marketing Mail must be presented at the Post Office where the permit or license is held and the presort mailing fee is paid, at the locations and times specified by the postmaster, except as follows: * * *
d. Nonprofit USPS Marketing Mail (including Nonprofit Heavy Printed Matter) must be presented only at Post Offices where the organization producing the mailing has an approved nonprofit authorization (703.1.0).
e. Nonpresorted Heavy Printed Matter postage must be paid via permit imprint and be deposited and accepted at the Post Office that issued the permit, at a time and place designated by the postmaster, except as otherwise provided for plant-verified drop shipments under 604.5.0.
Pieces in a mailing that meet the standards in 2.0 and 4.0 are eligible for DSCF prices under either 4.2.1a. or 4.2.1b. below:
When deposited at a DSCF/LPC or USPS-designated facility, and placed in a tray labeled to a destination within the SCF's/LPC's service area, when all pieces in the tray are addressed for delivery within that SCF's/LPC's service area.
Pieces in a mailing that meets the standards in 2.0 and 4.0 are eligible for the DSCF price, as follows:
When deposited at a DSCF/LPC or USPS-designated facility, addressed for delivery within the DSCF's/LPC's service area, and placed in a flat tray, sack (when applicable), or on a pallet labeled to the DSCF/LPC or to a destination within its service area.
Heavy Printed Matter pieces in a mailing meeting the standards in 3.0 are eligible for the DSCF price when they meet all of the following additional conditions:
a. Are eligible for and prepared to qualify for Presorted or Carrier Route prices, subject to the corresponding standards for those prices.
b. Are deposited at a DSCF/RPDC listed in L051 or a USPS-designated facility and are addressed for delivery within the DSCF's/RPDC's service area.
c. Are placed in a sack or on a pallet that is labeled to the DSCF/RPDC or labeled to a destination within its service area.
Pieces in a mailing meeting the standards in 2.0, and 5.3 are eligible for the DDU price when they meet all of the following conditions:
a. Are eligible for and prepared to qualify for Presorted or Carrier Route prices, subject to the corresponding standards for those prices.
b. Are addressed for delivery within the ZIP Code(s) served by the destination delivery unit.
c. For parcels prepared using the optional 5-digit scheme sort, use Column B of L606 to determine the 5-digit scheme destination. For parcels prepared using the 5-digit sort, the Drop Shipment Product must be used to determine the 5-digit destination. To determine the location for entry of 5-digit sorted pieces or whether a 5-digit delivery facility can handle pallets (or pallet boxes), refer to the Drop Shipment Product maintained by the National Customer Support Center (NCSC) (see 608.8.1). When the Drop Shipment Product shows that mail for a single 5-digit ZIP Code area is delivered out of more than one postal facility, use the facility from which the majority of city carrier routes are delivered as the facility at which the DDU mail must be entered. The Drop Shipment Product identifies the 5-digit ZIP Codes that are exceptions to the “majority of city carriers rule” or other facilities where parcels are normally dropped. If a mailer transports mail to a DDU/S&DC facility that cannot handle pallets, the driver must unload the pallets into containers that the delivery unit specified.
Presorted machinable parcels in 5-digit scheme and 5-digit sacks or on 5-digit scheme and 5-digit pallets may claim DDU prices. Mail must be entered at the appropriate facility.
Customers mailing presorted nonstandard parcels in 5-digit scheme sacks and 5-digit sacks, on 5-digit scheme or 5-digit pallets may claim DDU prices. Mailers must enter mail at the appropriate facility.
Carrier Route machinable parcels sorted to carrier route sacks may claim DDU prices. Mail must be entered at the appropriate facility.
Customers mailing carrier-route nonstandard parcels in sacks, on 5-digit scheme and 5-digit pallets, or prepared as unsacked carrier route bundles may claim DDU prices. Mailers must enter mail at the appropriate facility.
Postage is based on the weight of a single addressed piece or one pound, whichever is heavier. For prices, see Notice 123-Price List.
The presorted and Carrier Route Bound Printed Matter price is charged per pound from 1 through 15 pounds. Any fraction of a pound is considered a whole pound. For example, if a BPM item weighs 6.25 pounds, the weight (postage) increment is 7 pounds. The minimum postage price per piece is the 1-pound price. Deduct the Full-Service Intelligent Mail per-piece discount for each presorted or Carrier Route barcoded flat that complies with the Full-Service Intelligent Mail option requirements under 705.23.0.
Each piece is charged per pound from 1 through 15 pounds. Deduct the Full-Service Intelligent Mail per-piece discount for each presorted or Carrier Route barcoded flat that complies with the Full-Service Intelligent Mail option requirements under 705.23.0. Presorted DDU prices are not available for flats that weigh 1 pound or less.
To compute the total postage for a mailing, for each weight increment, multiply the number of pieces by the applicable price per piece. Round each product off to four decimal places; add the products and round up the total postage to the nearest whole cent.
Presorted-priced BPM parcels must bear an Intelligent Mail package barcode (IMpb) and an Intelligent Mail matrix barcode (IMmb) as outlined in 204.2.0 and Publication 199,
Unless otherwise excepted, mailers of mailpieces not meeting the requirements for using a unique IMpb and IMmb, as outlined in 204.2.1.6 and Publication 199,
Terms used for presort levels are defined as follows: * * *
h.
For purposes of preparing mail:* * *
g. * * * Three-digit scheme bundles are placed in 3-digit through mixed containers, as applicable, using the OEL “label to” 3-digit ZIP Code or using L008 column B.
* * * Except for mixed bundles and for carrier route bundles in sacks, each physical bundle of BPM must contain at least two pieces. * * *
* * * Only mixed bundles or bundles prepared under 2.3 may contain smaller volumes. * * *
e. SCF (required); pink Label A or OEL.
f. Mixed (required); tan Label X or OEL.
* * * Only mixed sacks may contain smaller volumes. * * *
Preparation sequence and labeling:* * *
d. Mixed (required); labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “PSVC FLTS NON BC WKG”.
Bundles must be prepared and labeled in the following sequence: * * *
e. SCF: (minimum 10 pieces or 10 pounds, maximum weight 20 pounds); pink Label A or OEL.
f. Mixed: (no minimum, maximum weight 20 pounds); tan Label X or OEL.
Preparation sequence, sack size, and labeling: * * *
d. Mixed (required); no minimum; labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “PSVC FLTS BC WKG”.
* * * Smaller volumes are not permitted (except mixed sacks). * * *
Preparation sequence and labeling: * * *
d. Mixed (required); labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “PSVC NONSTD WKG”.
Preparation sequence and labeling: * * *
b. Mixed (required); labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “PSVC MACH WKG”.
c. Are placed in a sack or on a pallet that is labeled to the DSCF/LPC/RPDC or labeled to a destination within its service area.
Presorted flats and automation flats in sacks for the 5-digit, 3-digit, and SCF sort levels or on pallets at the 5-digit scheme, 5-digit, 3-digit, and SCF sort levels may have DSCF prices. * * *
Carrier route flats in sacks at all sort levels or on pallets at the 5-digit scheme carrier routes, 5-digit carrier routes, 3-digit, and SCF sort levels may claim DSCF prices. * * *
Unless otherwise excepted, mailers of mailpieces not meeting the requirements for using a unique IMpb and IMmb, as outlined in 204.2.1.6 and Publication 199,
If electronic option USPS Tracking is requested for all parcels in a USPS Marketing Mail mailing and the pieces are of identical weight, then postage may be paid only with metered postage or permit imprint under 244.2.0. Heavy Printed Matter postage may be paid only with permit imprint. Electronic-option USPS Tracking may be purchased for USPS Marketing Mail parcels and Heavy Printed Matter parcels by mailers using privately printed forms or labels, or Label 888, and who establish an electronic link with the USPS to exchange acceptance and delivery data. * * *
Undeliverable-as-addressed (UAA) USPS Marketing Mail pieces are treated as described in Exhibit 1.5.3, with these additional conditions: * * *
f. * * * USPS Marketing Mail pieces, except for Marketing and Heavy Printed Matter parcels, with USPS Tracking must be endorsed “Address Service Requested,” “Forwarding Service Requested,” “Return Service Requested,” or “Change Service Requested”. * * *
Address correction service for classes other than Periodicals under 4.1.4 is provided as follows:
a. When possible, “on-piece” address correction is provided for the following mailpieces: * * *
5. USPS Marketing Mail (including Heavy Printed Matter); * * *
USPS Tracking Plus service is available for scan data retention on mailpieces shipped via the following products: * * *
h. USPS Marketing Mail, Nonprofit USPS Marketing Mail, and Heavy Printed Matter parcels with purchased USPS Tracking and Nonprofit USPS Marketing Mail parcels with a trackable extra service.
Premium Forwarding Service Residential shipments are dispatched weekly (on Wednesday) as Priority Mail with USPS Tracking service. Regardless of any mailer`s ancillary service endorsement on a mailpiece, and provided it fits within the shipment container, all mail is included in the weekly Priority Mail shipment, except as follows: * * *
3. Heavy Printed Matter, Bound Printed Matter, Media Mail, and Library Mail pieces are rerouted separately and the mailer charged postage due at the appropriate single-piece price for the class or subclass of mail in which the piece was originally shipped.
* * * A catalog mailpiece may be letter-shaped, flat-shaped or parcel-shaped, and is mailed at USPS Marketing Mail (including Heavy Printed Matter) or Bound Printed Matter rates. * * *
b. USPS Marketing Mail flats (except EDDM flats) and parcels (including Heavy Printed Matter), and Bound Printed Matter pieces must be paid by permit imprint, which must appear on each DAL.
A mailer may be authorized to mail material without affixing postage when payment is made at the time of mailing from a permit-imprint advance-deposit account established with USPS. The following apply:
a. This payment method is not available for Periodicals, but may be used for postage and extra-service fees for the following types of mailpieces: * * *
5. USPS Marketing Mail (including Heavy Printed Matter); * * *
An application fee is required only when a permit imprint is used as the payment method for First-Class Mail, USPS Marketing Mail (including Heavy Printed Matter), Bound Printed Matter Flats and international mail, and the mailer does not use the Electronic Verification System (eVS). If a customer pays a permit imprint application fee, it is accepted for domestic and/or international outbound mailings.
A USPS Marketing Mail, Parcel Select, or Package Services permit imprint indicia must contain the same information required in 5.3.6, except that the USPS Marketing Mail (Standard Mail), Heavy Printed Matter, Parcel Select, or applicable Package Services (Bound Printed Matter, Media Mail or Library Mail) marking must be used instead of “First-Class Mail”. * * *
A loose enclosure may be mailed with a bound Periodicals publication only if: * * *
b. For USPS Marketing Mail matter, the total weight of all enclosed material does not exceed 20 ounces.
a. First-Class Mail:
a. USPS Marketing Mail (letters only):
a. If postage-affixed, bear postage or have additional postage affixed to equal a price no lower than: * * *
2. For USPS Marketing Mail, the correct 5-Digit or 3-Digit (as applicable) Presorted USPS Marketing Mail price for letters.
[Revise the introductory text of 6.1.1 to read as follows:]
USPS Marketing Mail (includes Heavy Printed Matter) parcels, Package Services parcels, and Parcel Select parcels in combined mailings must meet the following standards: * * *
Combination requirements for specific discounts and prices are as follows:
a. When the mailer pays DSCF prices, Parcel Select, USPS Marketing Mail (including Heavy Printed Matter) and Bound Printed Matter parcels may be combined under 6.2.
b. All USPS Marketing Mail (including Heavy Printed Matter) parcels may be combined with Package Services and Parcel Select parcels prepared for DDU prices under 6.2.
Combined parcels must be prepared as follows:
a.
b. Parcel Select or Bound Printed Matter Qualifying for DSCF Prices. Mailers must prepare the combined mailings under the applicable 5-digit scheme and 5-digit sack requirements in 255.4.2 or the applicable 5-digit scheme and 5-digit pallet requirements in 8.0 for the Parcel Select DSCF prices. All other requirements for Parcel Select DSCF prices, and USPS Marketing Mail (including Heavy Printed Matter) prices, as applicable, must be met.
1. If sacked under 255.4.2, the minimum requirement of seven pieces per sack must be met with only Package Services and Parcel Select parcels. After the minimum sack volume has been met, USPS Marketing Mail (including Heavy Printed Matter) parcels may be included in the sack or in overflow sacks.
2. * * * After the minimum pallet volume has been met, USPS Marketing Mail (including Heavy Printed Matter) parcels may be included on the pallet or in overflow sacks.
3. If palletized under the alternate pallet preparation where no pallet may contain less than 35 pieces and 200 pounds, provided the average number of pieces on pallets qualifying for the DSCF price is at least 50, USPS Marketing Mail (including Heavy Printed Matter) parcels may not be combined with Package Services and Parcel Select parcels.
4. If palletized under the option to prepare 5-digit scheme or 5-digit pallets under the 36-inch-high (mail only) pallet minimum, any combination of
6. USPS Marketing Mail (including Heavy Printed Matter) parcels are eligible for presorted prices according to 243.
c. Package Services, Parcel Select and USPS Marketing Mail (including Heavy Printed Matter) parcels qualifying for DDU prices: * * *
Parcel Select and Bound Printed Matter machinable parcels, and USPS Marketing Mail (including Heavy Printed Matter) parcels may be prepared for entry at designated SCFs/RPDCs under these standards: * * *
c. USPS Marketing Mail, nonstandard Marketing parcels (regular and Nonprofit), Nonprofit nonstandard-priced, and nonstandard Heavy Printed Matter (regular and Nonprofit) parcels are eligible for the 3-digit presort-level DSCF price.
The following apply: * * *
d. For sacks, trays, or machinable parcels on pallets, the mailer must prepare all required pallet levels before any mixed pallets are prepared for a mailing or job.
The standards for bundle reallocation to protect the SCF/LPC (letters, flats)/RPDC (parcels) pallet (8.11, 8.13, and 8.13) are optional methods of pallet preparation designed to retain as much mail as possible at the SCF/LPC (letters, flats)/RPDC (parcels) level.
The following standards apply to Periodicals, USPS Marketing Mail (including Heavy Printed Matter), Parcel Select, and Package Services, except Parcel Select mailed at DSCF and DDU prices: * * *
b. For bundles of flat-size mailpieces or bundles of nonstandard parcels on pallets, after preparing all possible pallets under 8.5.2a, when 250 or more pounds of bundles remain for an SCF mailers must prepare the SCF/LPC (letters, flats)/RPDC (parcels) or Mixed pallet, as applicable for the class of mail.
c. Bundles that cannot be placed on an SCF/LPC (letters, flats)/RPDC (parcels) pallet may be placed on a mixed pallet or be placed in sacks or flat trays (when applicable) (see 8.9.1).
The following minimum-load standards apply to mail prepared on pallets:
a. For Periodicals, USPS Marketing Mail (including Heavy Printed Matter), and Package Services (see 8.5.3b for Parcel Select mailed at DSCF and DDU prices): * * *
3. A pallet may contain a minimum of 100 pounds of nonletter-size mail or 12 linear feet of letter trays if it is:
(a) An SCF/LPC (letters, flats)/RPDC (parcels) pallet entered at the destination SCF/LPC (letters, flats)/RPDC (parcels); or
(b) The only pallet entered at an individual destination SCF/LPC (letters, flats)/RPDC (parcels) facility.
These standards apply to mail on pallets: * * *
b. When two or more Periodicals mailings, two or more USPS Marketing Mail (including Heavy Printed Matter) mailings, or two or more Bound Printed Matter mailings are placed together on pallets, the mailer must keep records for each mailing as required by the standards for the class of mail.
g. For sacks or flat trays of Periodicals, USPS Marketing Mail (including Heavy Printed Matter), and Bound Printed Matter flats or nonstandard parcels, carrier-route-price mail must be prepared on separate 5-digit pallets from automation-price and/or Presorted-price mail.
Pallet labels must be pink for Periodicals and white for First-Class Mail, USPS Marketing Mail (including Heavy Printed Matter), Package Services, and Parcel Select.
Line 1 (destination line) must meet these standards: * * *
b.
Line 2 (content line) must meet these standards: * * *
a.
Extraneous information is permitted on pallet labels if: * * *
c. * * *Exception: For combined mailings of USPS Marketing Mail (including Heavy Printed Matter) and Package Services machinable parcels, mailer codes and extraneous information may appear between the content line and the office of mailing or mailer information line.
b. 5-digit and 3-digit automation price bundles; and
c. 5-digit and 3-digit Presorted price bundles.
These types of mail may be palletized: * * *
g. Combined mailings of machinable parcels (USPS Marketing Mail [including Heavy Printed Matter] and Package Services), subject to 6.0.
Presort destination bundles of Periodicals, USPS Marketing Mail (including Heavy Printed Matter), and Bound Printed Matter flats and nonstandard parcels may be placed directly on pallets under 8.9.2 through 8.9.5 and 8.10. * * *
Bundle preparation for Periodicals, USPS Marketing Mail (including Heavy Printed Matter), and Bound Printed Matter mailpieces must meet the applicable standards for each class or subclass of mail. Bundles may be sorted onto pallets under 8.10 and 10.0, 12.0, and 13.0.
a. USPS Marketing Mail bundle size: 10-piece or 15-piece minimum as applicable; 20-pound maximum, except that:
a. All pieces for the same presort destination must be in one bundle if they weigh less than 10 pounds. Otherwise, bundles must weigh from 10 to 20 pounds each.
b. The last bundle to a presort destination may contain less than 10 pounds.
b. Heavy Printed Matter minimum bundle size: 10 pieces or 10 pounds, whichever comes first. Only presorted and carrier route nonstandard parcels that weigh less than 10 pounds each may be prepared as bundles on pallets. The following also applies:
1. Presorted price pieces that weigh 10 or more pounds each must be prepared and palletized as machinable parcels under
2. Carrier-route pieces that individually weigh 10 or more pounds each must either be prepared and palletized as machinable parcels under
Mailers may palletize First-Class Mail according to a local customer/supplier agreement or under 8.10.1. First-Class Mail palletization is optional, but mailers using this option must prepare pallets in the sequence listed below and complete each required level before preparing the next optional or required level. Pallets must contain at least 72 linear feet of letter trays (six full layers) or 24 linear feet of flats trays (three full layers). Maximum pallet height is 12 layers or 77 inches of letter trays (whichever occurs first) or 77 inches of flats trays. When available and with approval by the plant manager of the origin facility, mailers may use all-purpose containers (APCs) or other USPS-approved containers. Mailers approved to use APCs must prepare containers when they have a minimum of 48 linear feet of letter trays or 16 linear feet of flats trays to a presort destination. Preparation, sequence, and labeling:
a. 5-digit. Optional. Pallet may contain trays only for the same 5-digit ZIP Code (for non-automation letters and flats) or 5-digit scheme ZIP codes (automation letters only). Place 5-digit scheme trays on 5-digit pallets according to the destination shown in the current City State Product. Labeling:
1. Line 1: city, state, and 5-digit ZIP Code destination.
2. Line 2: “FCM LTRS” or “FCM FLTS”, followed by “5D”.
b. SCF/LPC. Required; no minimum for origin SCF/LPC. For destinations listed in L005 for letters and L016 for flats based on origin ZIP Code. Pallets contain trays destined for the 3-digit ZIP Codes in L005 for letters and L016 for flats. Labeling:
1. Line 1: L005 for letters, L016 for flats, Column B.
2. Line 2: “FCM LTRS” or “FCM FLTS”, followed by “SCF”.
c. Mixed. Required; no minimum. Labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “FCM LTRS” or “FCM FLTS”, followed by “WKG”.
h.
1. Line 1: L005 for letters, L016 for flats, L051 for parcels.
2. Line 2: “PER” or “NEWS”, as applicable; followed by “FLTS”, “NONSTD”, or “LTRS”, as applicable; followed by “SCF”; followed by “BARCODED” (or “BC”) if pallet contains automation-price mail; followed by “NONBARCODED” (or “NBC”) if pallet contains carrier-route-price mail and/or Presorted-price mail.
i. Mixed, optional for sacks and trays; allowed with no minimum and required at 100 pounds of mail for bundles of flats. Bundles of flats totaling less than 100 pounds in weight must be trayed if not palletized. The pallet may contain carrier-route mail, automation-price mail, or Presorted-price mail. Labeling:
1. Line 1:” “MXD WKG”.
2. Line 2: “PER” or “NEWS,” as applicable; followed by “FLTS”, “NONSTD”, or “LTRS”, as applicable; followed by “BARCODED” (or “BC”) if pallet contains automation price mail; followed by “NONBARCODED” (or “NBC”) if pallet contains carrier route and/or Presorted price mail; followed by “WKG”.
* * * For parcels, including Heavy Printed Matter, mailers must use this preparation only for nonstandard parcels in sacks.* * *
d.
* * * For HPM nonstandard parcels, use “HPM NONSTD 5D”.
f. SCF/LPC (letters, flats)/RPDC (parcels), required, permitted for bundles, trays, and sacks (nonstandard parcels only). The pallet may contain carrier-route, automation-price, and/or presorted-price mail for the 3-digit ZIP Code groups in L005 for letters, L016 for flats, L051 for parcels. Labeling:
1. Line 1: Use L005 for letters, L016 for flats, L051 for parcels.
2. Line 2: For flats and nonstandard parcels, “STD” followed by “FLTS” or “NONSTD”, as applicable; followed by “SCF”; followed by “BARCODED” (or “BC”) if pallet contains automation price mail; followed by “NONBARCODED” (or “NBC”) if pallet contains carrier route and/or Presorted price mail. For letters, “STD LTRS SCF”; followed by “BC” if pallet contains barcoded letters; followed by “MACH” if pallet contains machinable letters; followed by “MAN” if pallet contains nonmachinable letters. For HPM nonstandard parcels, use “HPM NONSTD SCF”.
g. Mixed, optional, permitted for bundles, trays, and sacks (nonstandard parcels only). Allowed with no minimum and required at 100 pounds of mail for bundles of flats. Flats totaling less than 100 pounds in weight must be trayed if not palletized. The pallet may contain carrier route, automation, and/or Presorted mail. Mailers must place trays and sacks containing pieces paid at the single-piece price on the mixed pallet (unless required to be presented separately by special postage payment authorization). Labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “STD” followed by “FLTS” or “NONSTD”, as applicable; followed by “BARCODED” (or “BC”) if pallet contains automation price mail; followed by “NONBARCODED” (or “NBC”) if pallet contains carrier route and/or Presorted price mail; followed by “WKG”. For letters, “STD LTRS”; followed by “BC” if pallet contains barcoded letters; followed by “MACH” if pallet contains machinable letters; followed by “MAN” if pallet contains nonmachinable letters; followed by “WKG”. For HPM nonstandard parcels, use “HPM NONSTD WKG”.
Prepare pallets under 8.0 in the sequence below. Unless indicated as optional, all sort levels are required. Combined mailings of USPS Marketing Mail Marketing parcels, USPS Marketing Mail (including Heavy Printed Matter), Parcel Select, and Package Services machinable parcels also must meet the standards in 6.0 or 21.0. Label pallets according to Line 1 and Line 2 information below and under applicable standards 8.6. Preparation sequence and labeling: * * *
Mailers who palletize machinable parcels must make pallets or pallet boxes when there are 250 pounds or more for the destination levels below for DSCF or DDU prices. Prepare pallets under
a.
1. Line 1: Use
2. Line 2: “STD MACH 5D” or “HPM MACH 5D”; followed by “SCHEME” or (“SCH”).
b.
1. Line 1: city, state, and 5-digit ZIP Code destination (see
2. Line 2: “STD MACH 5D” or “HPM MACH 5D”.
c.
1. Line 1: Use
2. Line 2: “STD MACH SCF” or “HPM MACH SCF”.
d.
1. Line 1: “MXD WKG”.
2. Line 2: “STD MACH WKG” or “HPM MACH WKG”.
Mailers who palletize unbundled or unsacked nonstandard parcels must make pallets or pallet boxes when there are 250 pounds or more for the destination levels below for DDU prices. Mailers must prepare pallets or pallet boxes of nonstandard parcels (except tubes, rolls, and similar pieces) weighing 2 ounces or more under 8.0 and in the sequence listed below. Mailers must label pallets or pallet boxes according to the Line 1 and Line 2 information listed below and under 8.6. Mailers may not prepare tubes, rolls, and similar pieces or pieces that weigh less than 2 ounces on pallets or in pallet boxes, except for pieces in carrier-route bundles or in sacks under 8.10.3. Preparation sequence and labeling:
a.
1. Line 1: Use L606.
2. Line 2: “STD NONSTD 5D” or “HPM NONSTD 5D”; followed by “SCHEME” (or “SCH”).
b.
1. Line 1: city, state, and 5-digit ZIP Code destination (see 8.6.4c for overseas military mail).
2. Line 2: “STD NONSTD 5D” or “HPM NONSTD 5D”.
c.
1. Line 1: Use L051.
2. Line 2: Use “STD NONSTD SCF” or “HPM NONSTD SCF”.
d.
1. Line 1: “MXD WKG”
2. Line 2: “STD NONSTD WKG” or “HPM NONSTD WKG”.
The following apply: * * *
c. Reallocation is performed only when there is mail for the SCF/LPC (letters, flats)/RPDC (parcels) service area that would fall beyond the SCF/LPC (letters, flats)/RPDC (parcels) pallet level.
Reallocation rules are as follows: * * *
d. * * * Mail that falls beyond the SCF/RPDC pallet level must be placed on the next appropriate pallet or in the next appropriate sack (nonstandard parcels) or flat tray.
Reallocation rules are as follows: * * *
b. * * * Mail that falls beyond the SCF/RPDC pallet level must be placed on the next appropriate pallet or in the next appropriate sack (nonstandard parcels) or flat tray.
Additional standards are as follows: * * *
c. Documentation meeting the basic standard in 203.3.0 must be provided with each mailing. Before copalletizing, the mailer must obtain the written approval of the director, Business Acceptance Solutions. Approval is based on the mailer's demonstrated ability to provide documentation meeting these standards:* * *
4. Documentation showing that 5-digit, 3-digit, and SCF/LPC pallets are prepared when the applicable minimum volume is developed in the copalletized mailing for these destinations.
The following apply: * * *
b. Mailers of pieces in low-volume bundles must claim the applicable mixed price (Outside-County) or basic price (In-County).
d. Mailers of pieces in low-volume bundles must claim the applicable mixed price (Outside-County) or basic price (In-County).
See 207.20.0 for using flat trays. For machinable pieces meeting the criteria in 201.6.0, mailers must bundle or group all pieces as specified in 207.25.0 and 207.22.0 for each 5-digit scheme, 5-digit, 3-digit scheme, 3-digit, and SCF destination. Bundling in flat trays is optional when no mail in that tray would have been more finely sorted, if bundled. Bundles must be trayed and labeled separately from loose flats prepared in flat trays. Tray preparation, sequence, and labeling:
a.
1. Line 1: L007, Column B.
2. Line 2: “PER” or “NEWS” as applicable; followed by “FLTS”; followed by “5D SCH BC/NBC”.
b.
1. Line 1: city, state, and 5-digit ZIP Code on mail (see 204.3.2.2 for overseas military mail).
2. Line 2: “PER” or “NEWS” as applicable; followed by “FLTS”; followed by “5D BC/NBC”.
c.
1. Line 1: L002, Column A.
2. Line 2: “PER” or “NEWS” as applicable; followed by “FLTS”; followed by “3D BC/NBC”.
d.
1. Line 1: L016, Column B.
2. Line 2: “PER” or “NEWS” as applicable; followed by “FLTS”; followed by “SCF BC/NBC”.
e. Mixed (required), no minimum, labeling:
1. Line 1: “MXD WKG”.
2. Line 2: “PER” “NEWS” as applicable; followed by “FLTS”; followed by “BC/NBC WKG”.
d.
1. Line 1: “MXD WKG”.
2. Line 2: “PSVC FLTS BC/NBC WKG”.
g. * * * Mailers may combine firm bundles with 5-digit scheme, 3-digit scheme, and other presort destination bundles in carrier route, 5-digit, 3-digit, SCF, and mixed flat trays. * * *
* * * Pieces in these low-volume bundles must be claimed at the applicable mixed price (Outside-County) or basic price (In-County).* * *
i.
g.
Carrier route bundles from a carrier route price mailing may be placed on the same pallet as 5-digit bundles from an automation price mailing and 5-digit bundles from a Presorted price mailing (including pieces cobundled under 11.0) under the following conditions:
a. A carrier route mailing must be part of the mailing job.
b. The pieces in the carrier route price mailing, the automation price mailing, and the Presorted price mailing must be part of the same mailing job, and all three mailings must be reported on the same postage statement.
c. Pieces in the automation price mailing must meet the criteria for a flat under 201.6.0. Pieces in the Presorted price mailing and the carrier route mailing must meet the criteria for a flat under 201.4.0.
d. Mailers must use the Carrier Route Indicators field in the City State Product to prepare the mailing and enter the mailing no later than 90 days after the release date of the City State Product used.
e. Carrier route bundles may be copalletized with automation price 5-digit bundles, Presorted price 5-digit bundles, and cobundled 5-digit bundles only for those 5-digit ZIP Codes that have an “A” or “C” indicator in the Carrier Route Indicators field in the City State Product indicating eligibility for such copalletization. Containers of mail sorted in this manner are called “merged 5-digit” pallets. Containers of mail sorted in this manner for which scheme (L001) sortation is also performed are called “merged 5-digit scheme” pallets. Pieces in 5-digit scheme (L007) bundles may not be placed in merged 5-digit containers.
f. If sortation under this section is performed, merged 5-digit pallets must be prepared for all 5-digit ZIP Codes with an “A” or “C” indicator in the City State Product that permits such preparation when there is enough volume for the 5-digit ZIP Code to prepare that pallet.
g. The pieces in each separate mailing must bear the applicable markings required under 245.5.0, 245.6.0, or 245.7.0 and under 202.
h. For palletized mailings, the prices are based on the level of bundle that the pieces are contained in under 243.6.0 and 243.7.0.
i. The bundles from each separate mailing must be sorted together on pallets (copalletized) under 10.2.5 using presort software that is PAVE-certified.
j. A complete postage statement, using the correct USPS form, must accompany each mailing job prepared under these procedures.
k. In addition to the applicable postage statement, documentation produced by PAVE-certified software must be submitted with each copalletized mailing job that describes for each pallet sortation level and pallet, the number of pieces qualifying for each applicable carrier route price, each applicable automation price, and each applicable Presorted price.
Bundles placed on pallets must be prepared under the standards in 8.0.
Mailers must prepare pallets of bundles in the manner and sequence listed below and under 8.0. When sortation under this option is performed, after completing required or optional carrier route pallets (if any), mailers must prepare all merged 5-digit scheme and merged 5-digit pallets that are possible in the mailing based on the volume of mail to the destination using L001 and/or the City State Product. Mailers must label pallets according to the Line 1 and Line 2 information listed below and under 8.6.
a.
1. Line 1: use L001, Column B.
2. Line 2: “STD FLTS CR-RTS SCHEME” followed by “HD/HD+” if the pallet contains High Density/High Density Plus flats.
b.
1. Line 1: use L001, Column B.
2. Line 2: “STD FLTS CR/5D SCHEME” followed by “HD/HD+” if the pallet contains High Density/High Density Plus flats.
c.
1. Line 1: use city, state, and 5-digit ZIP Code destination (see 8.6.4 for military mail).
2. Line 2: “STD FLTS,” followed by “CARRIER ROUTES” or “CR-RTS” followed by “HD/HD+” if the pallet contains High Density/High Density Plus flats.
d.
1. Line 1: use city, state, and 5-digit ZIP Code destination (see 8.6.4 for military mail).
2. Line 2: “STD FLTS CR/5D” followed by “HD/HD+” if the pallet contains High Density/High Density Plus flats.
e.
1. Line 1: use city, state, and 5-digit ZIP Code destination (see 8.6.4 for military mail).
2. Line 2: “STD FLTS 5D”; followed by “BARCODED” or “BC” if the pallet contains automation price mail; followed by “NONBARCODED” or “NBC” if the pallet contains Presorted price mail.
f.
1. Line 1: use L002, Column A.
2. Line 2: “STD FLTS 3D”; followed by “BARCODED” or “BC” if the pallet contains automation price mail; followed by “NONBARCODED” or “NBC” if the pallet contains Presorted price mail and/or carrier route price mail.
g.
1. Line 1: use L016, Column B.
2. Line 2: “STD FLTS SCF”; followed by “BARCODED” or “BC” if the pallet contains automation price mail; followed by “NONBARCODED” or “NBC” if the pallet contains Presorted price mail and/or carrier route price mail.
h.
1. Line 1: “MXD WKG”.
2. Line 2: “STD” followed by “FLTS”; followed by “BARCODED” (or “BC”) if pallet contains automation price mail; followed by “NONBARCODED” (or “NBC”) if pallet contains carrier route and/or Presorted price mail; followed by “WKG”.
f.
g.
* * * Pieces in these low-volume bundles must be claimed at the applicable mixed price (Outside-County) or basic price (In-County). * * *
Mailers may choose to cobundle (see 245.1.4y) automation price and nonautomation price flat-size pieces as an option to the basic bundling requirements in 245.8.0 and 245.10.0. All pieces in the same bundle must meet the standards in 201.6.0. 5-digit scheme and 3-digit scheme bundles must meet the additional standards in 245.1.4h and 245.1.4p. Mailing jobs prepared using the 5-digit scheme and/or 3-digit scheme bundle preparation (for flats meeting the criteria in 201.6.0) must be palletized under 10.0, 12.0, or 13.0. All bundles are subject to the following conditions:* * *
f.
Preparation sequence, bundle size, and labeling: * * *
e.
f.
* * * Pieces in these low-volume bundles must be claimed at the applicable mixed price (Outside-County) or basic price (In-County).
e. For the purpose of determining the 5% threshold, addressed pieces in low-volume carrier route bundles count as carrier route sorted pieces, and addressed pieces in low-volume 5-digit bundles count as 5-digit sorted pieces, even though the mixed price (Outside-County) or basic price (In-County) is paid for such pieces.
h. SCF/LPC and mixed, use 8.10.2h and 8.10.2i, as applicable, to prepare and label these pallet levels.
Carrier route and 5-digit bundles may contain fewer than six pieces when the publisher determines that such preparation improves service. Pieces in these low-volume bundles must be claimed at the applicable mixed price (Outside-County) or basic price (In-County).
e. For the purpose of determining the 5% threshold, addressed pieces in low-volume carrier route bundles count as carrier route sorted pieces, and addressed pieces in low-volume 5-digit bundles count as 5-digit sorted pieces, even though the mixed price (Outside-County) or basic price (In-County) is paid for such pieces.
h.
h.
1. Line 1: “MXD WKG”.
2. Line 2: “STD” followed by “FLTS”; followed by “BARCODED” (or “BC”) if pallet contains automation price mail; followed by “NONBARCODED” (or “NBC”) if pallet contains carrier route and/or Presorted price mail; followed by “WKG”.
Authorized mailers may combine USPS Marketing Mail flats, Bound Printed Matter flats, and Periodicals flats in a single mailing as follows: * * *
h. Bound Printed Matter flats must not weigh more than 20 ounces when combined in applicable bundles, and must be entered at a destination sectional center facility (DSCF)/local processing center (LPC) on 5-digit or 3-digit/sectional center facility (SCF) level pallets, or at a destination delivery unit (DDU)/sorting and delivery center (S&DC).
i. USPS Marketing Mail flat-sized pieces must not exceed 20 ounces if prepared in the CR-level bundle with certain Periodicals pieces that may weigh more than 20 ounces.
USPS Marketing Mail flats and Periodicals flats may be combined in carrier route, 5-digit (scheme), 3-digit, SCF, and mixed bundles when prepared according to 207.19.0 and these additional standards: * * *
h. Mixed, required, 100 pound minimum. Pallet may contain carrier-route, automation or presorted mail. Unless authorized by the processing and distribution manager, pallet must be entered at the facility serving the 3-digit ZIP Code of the entry Post Office. Labeling:
1. Line 1: Use “MXD WKG”.
2. Line 2: “STD/BPM/PER FLTS;” followed by “BARCODED” (or “BC”); “NONBARCODED” (or “NBC”) for Presorted mail, or “BARCODED/NONBARCODED” (or “BC/NBC”) for mixed pallets; followed by “WKG”; followed by “MIX COMAIL”.
For plant-loaded shipments of First-Class Mail, if there is enough mail for the same SCF/LPC service area to fill 60 percent or more of a vehicle by weight or by cube (a minimum of 28,000 pounds or 2,000 cubic feet), the mailer must prepare a direct vehicle for that SCF/LPC.
For plant-loaded shipments of Periodicals:
a. If there is enough mail for the same SCF/LPC (letters, flats)/RPDC (parcels) service area to fill 60 percent or more of a vehicle by weight or by cube, the mailer must prepare a direct vehicle for that SCF/LPC (letters, flats)/RPDC (parcels).
After loading all possible SCF/LPC (letters, flats)/RPDC (parcels) vehicles, if there is enough mail for the same transfer hub service area to fill 60 percent or more of a vehicle by weight or by cube, the mailer must prepare a direct vehicle for that transfer hub.
Two or more mailings, which independently have sufficient volume to require destination vehicles to be prepared, must meet these standards when combined:
a. For First-Class Mail, if there is enough mail for the same SCF service area to fill 60 percent or more of a vehicle by weight or by cube, the mailer must prepare a direct vehicle for the SCF.
The basis of price for Priority Mail Express and Priority Mail Open and Distribute is as follows:
a. Priority Mail Express postage is based on the zone and weight of the contents of the Open and Distribute shipment. Do not include the tare weight of the external container. Do not apply Priority Mail Express dimensional weight pricing to the external container. The maximum weight for each container is 70 pounds.
Package Services parcels, Parcel Select parcels, and USPS Marketing Mail (including Heavy Printed Matter) parcels in a combined parcel mailing must meet the following standards: * * *
d. Combined mailings must meet the following minimum volume requirements:
1. USPS Marketing Mail (including Heavy Printed Matter)—Minimum 200 pieces or 50 pounds of parcels per class.
3. If claiming Presorted BPM prices—Minimum 300 parcels.
Combined parcels may be eligible for USPS Marketing Mail (including single-piece and presorted Heavy Printed Matter), Parcel Select, single-piece Media Mail, single-piece Library Mail, and destination entry prices and discounts as applicable.
Apply prices based on the criteria in 201 and the following standards: * * *
a. USPS Marketing Mail (including Heavy Printed Matter) and Parcel Select
b. Bound Printed Matter (BPM) parcels qualify for single-piece prices or Presorted Bound Printed Matter prices as follows:
1. Presorted prices for BPM pieces prepared in other than MXD containers when the combined mailing contains at least 300 pieces of BPM.
2. Nonpresorted prices for pieces prepared in MXD containers, and when the combined mailing contains less than 300 pieces of BPM.
3. Destination entry prices based on entry.
c. Media Mail parcels qualify for single-piece prices for pieces prepared in MXD containers, and when the combined mailing contains less than 300 pieces of Media Mail.
d. Library Mail parcels qualify for single-piece prices for pieces in MXD containers, and when the combined mailing contains less than 300 pieces of Library Mail.
Prepare combined mailings as follows:
a. Different parcel types must be prepared separately for combined parcel mailings as indicated below:
1. USPS Marketing Mail (including Heavy Printed Matter), Parcel Select, and Package Services machinable parcels: Use “STD/PSVC MACH” for line 2 content labeling.
2. USPS Marketing Mail (including Heavy Printed Matter), Parcel Select, and Package Services nonstandard parcels, except for tubes, rolls, triangles, and other similarly nonstandard-shaped pieces: Use “STD/PSVC” for line 2 content labeling.
3. USPS Marketing Mail (including Heavy Printed Matter), Parcel Select, and Package Services tubes, rolls, triangles, and similarly nonstandard-shaped parcels: Use “STD/PSVC NONSTD” for line 2 content labeling.
Prepare and enter USPS Marketing Mail (including Heavy Printed Matter), Parcel Select, and Package Services machinable parcels, and USPS Marketing Mail Marketing parcels 6 ounces or more, as combined machinable parcels as shown in the table below.
The mailer must prepare and enter USPS Marketing Mail (including Heavy Printed Matter), Parcel Select, and Package Services nonstandard parcels, that are not tubes, rolls, triangles, or similarly nonstandard-shaped parcels, as combined APPS-machinable parcels based on the minimums in the table below.
The mailer must prepare and enter USPS Marketing Mail (including Heavy Printed Matter), Parcel Select, and Package Services parcels, and USPS Marketing Mail Marketing parcels under 2 ounces, as combined not-APPS-machinable parcels based on the minimums in the table below.
Delete entry “Network Distribution Center (NDC)/Regional Processing & Distribution Center (RPDC) acceptance”:]
Centers for Medicare & Medicaid Services (CMS) and Department of Health and Human Services (HHS).
Proposed rule.
This proposed rule would revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals; make changes relating to Medicare graduate medical education (GME) for teaching hospitals; update the payment policies and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs); update and make changes to requirements for certain quality programs; and make other policy-related changes.
To be assured consideration, comments must be received at one of the addresses provided in the
In commenting, please refer to file code CMS-1849-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.
Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):
1.
2.
Please allow sufficient time for mailed comments to be received before the close of the comment period.
3.
For information on viewing public comments, we refer readers to the beginning of the
Donald Thompson, and Michele Hudson, (410) 786-4487 or
Emily Lipkin, Jim Mildenberger and Michael Raftery,
Lily Yuan,
Mady Hue,
David O'Reilly,
Jeris Smith,
Lang Le,
Ngozi Uzokwe,
Julia Venanzi,
Melissa Hager,
John Green,
Kristina Rabarison,
Ariel Cress,
Jessica Warren,
Katherine McDonald,
The IPPS tables for this fiscal year (FY) 2027 proposed rule are available on the CMS website at
Readers who experience any problems accessing any of the tables that are posted on the CMS websites, as previously identified, should contact Michael Treitel,
This FY 2027 IPPS/LTCH PPS proposed rule would make payment and policy changes under the Medicare inpatient prospective payment system (IPPS) for operating and capital-related costs of acute care hospitals as well as for certain hospitals and hospital units excluded from the IPPS. In addition, it would make payment and policy changes for inpatient hospital services provided by long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). This proposed rule also would make policy changes to programs associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs. We are also proposing to make changes relating to Medicare graduate medical education (GME) and nursing and allied health (NAH) education payments.
We are proposing to adopt the Advance Care Planning electronic clinical quality measure (eCQM) in the Hospital Inpatient Quality Reporting, PPS-Exempt Cancer Hospital (PCH) Quality Reporting, and Medicare Promoting Interoperability Programs. We are proposing to adopt five modified claims-based, risk-standardized mortality measures in the Hospital Inpatient Quality Reporting Program and subsequently modify these measures in the Hospital Value-Based Purchasing Program.
Other than these cross-program proposals, we are not proposing any updates for the Hospital Value-Based Purchasing Program or the Hospital Acquired-Conditions Reduction Program.
In the Hospital Readmissions Reduction Program, we are proposing to adopt the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure.
In addition to the cross-program proposals previously listed, in the Hospital Inpatient Quality Reporting Program, we are proposing to adopt two new quality measures, remove three measures, and modify three current measures. We are also proposing to modify the data reporting and submission requirements for electronic clinical quality measures (eCQMs) and the Maternal Morbidity structural measure.
In addition to the cross-program proposal previously listed in the PCH Quality Reporting Program, we are proposing to adopt one new measure and remove one measure. We are also proposing to adopt data reporting and submission requirements for eCQMs.
In addition to the cross-program proposal previously listed, in the Medicare Promoting Interoperability Program, we propose to remove two measures and two attestations; adopt a measure; modify one measure; adopt one additional eCQM in alignment with the Hospital Inpatient Quality Reporting Program; and remove three eCQMs in alignment with the Hospital Inpatient Quality Reporting Program.
In the LTCH Quality Reporting Program (QRP), we are proposing to remove two measures, beginning with the FY 2028 LTCH QRP. We also propose the revision of the LTCH QRP Data Submission Deadlines beginning with the FY 2029 LTCH QRP. Finally, we are soliciting public comments on one Request for Information (RFI) on future measure concepts for the LTCH QRP.
The Transforming Episode Accountability Model (TEAM), a mandatory alternative payment model that was finalized in the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986), aims to improve beneficiary care through financial accountability for episodes categories that begin with one of the following procedures: coronary artery bypass graft (CABG), lower extremity joint replacement (LEJR), major bowel procedure, surgical hip/femur fracture treatment (SHFFT), and spinal fusion. TEAM tests whether financial accountability for these episode categories reduces Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries. In this proposed rule, we propose updates to TEAM that would modify policies affecting episode category triggers, quality measure assessment, and the construction of target prices. Additionally, we are soliciting public feedback on two Request for Information (RFIs) regarding ambulatory surgical center episodes and voluntary participation of hospitals with physician ownership.
The Comprehensive Care for Joint Replacement CJR Expanded (CJR-X) Model builds upon the CJR Model test that ran from April 1, 2016 to December 31, 2024. Based on the strength of evidence from the CJR Model, the CMS Innovation Center is proposing to expand the model nationally, including U.S. Territories in FY 2028. The model would continue to focus on improving care and reducing spending for Medicare beneficiaries undergoing lower extremity joint replacement (LEJR) procedures. Participating hospitals would be held accountable for spending and quality of care during an inpatient stay or hospital outpatient procedure and for the 90 days following hospital discharge. If finalized, the CJR-X Model would be mandatory for acute care hospitals, except for those participating in TEAM, and acute care hospitals located in Maryland. CJR-X would include some modifications to the CJR Model. Some quality measures and payment methodology policies have been updated in response to CJR Model evaluation results, stakeholder feedback, and changes to national care delivery patterns among both CJR and non-CJR hospitals.
Under various statutory authorities, we either discuss continued program implementation or propose changes to the Medicare IPPS, the LTCH PPS, other related payment methodologies and programs for FY 2027 and subsequent fiscal years, and other policies and provisions included in this proposed rule. These statutory authorities include, but are not limited to, the following:
• Section 1886(d) of the Social Security Act (the Act), which sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires that, instead of paying for capital-related costs of inpatient hospital services on a reasonable cost basis, the Secretary use a prospective payment system (PPS).
• Section 1886(d)(1)(B) of the Act, which specifies that certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: rehabilitation hospitals and units; LTCHs; psychiatric hospitals and units; children's hospitals; cancer hospitals; extended neoplastic disease care hospitals; and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa). Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS.
• Sections 123(a) and (c) of the Balanced Budget Refinement Act of 1999 (BBRA) (Public Law (Pub. L.) 106-113) and section 307(b)(1) of the Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554) (as codified under section 1886(m)(1) of the Act), which provide for the development and implementation of a prospective payment system for payment for inpatient hospital services of LTCHs described in section 1886(d)(1)(B)(iv) of the Act.
• Section 1814(l)(4) of the Act requires, beginning with FY 2015, that CAHs that do not successfully demonstrate meaningful use of certified electronic health record technology (CEHRT) for an EHR reporting period for a cost reporting period shall be paid 100 percent of reasonable costs rather than 101 percent of reasonable costs.
• Section 1886(a)(4) of the Act, which specifies that costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. Hospitals paid under the IPPS with approved GME programs are paid for the indirect costs of training residents in accordance with section 1886(d)(5)(B) of the Act.
• Section 1886(d)(5)(F) of the Act provides for additional Medicare IPPS payments to subsection (d) hospitals that serve a significantly disproportionate number of low-income patients. These payments are known as the Medicare disproportionate share hospital (DSH) adjustment. Section 1886(d)(5)(F) of the Act specifies the methods under which a hospital may qualify for the DSH payment adjustment.
• Section 1886(b)(3)(B)(viii) of the Act, which requires the Secretary to reduce the applicable percentage increase that would otherwise apply to the standardized amount applicable to a subsection (d) hospital for discharges occurring in a fiscal year if the hospital does not submit data on measures in a form and manner, and at a time, specified by the Secretary.
• Section 1886(r) of the Act, as added by section 3133 of the Affordable Care Act, which provides for a reduction to DSH payments under section 1886(d)(5)(F) of the Act and for an additional uncompensated care payment to eligible hospitals. Specifically, section 1886(r) of the Act requires that, for fiscal year 2014 and each subsequent fiscal year, subsection (d) hospitals that would otherwise receive a DSH payment made under section 1886(d)(5)(F) of the Act will receive two separate payments: (1) 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act if subsection (r) did not apply (“the empirically justified amount”); and (2) an additional payment for the DSH hospital's proportion of uncompensated care, determined as the product of three factors. These three factors are: (1) 75 percent of the payments that would otherwise be made under section 1886(d)(5)(F) of the Act, in the absence of section 1886(r) of the Act; (2) 1 minus the percent change in the percent of individuals who are uninsured; and (3) the hospital's uncompensated care amount relative to the uncompensated care amount of all DSH hospitals expressed as a percentage.
• Section 1886(m)(6) of the Act, as added by section 1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), which provided for the establishment of site neutral payment rate criteria under the LTCH PPS, with implementation beginning in FY 2016. Section 51005(b) of the Bipartisan Budget Act of 2018 amended section 1886(m)(6)(B) by adding new clause (iv), which specifies that the IPPS comparable amount defined in clause (ii)(I) shall be reduced by 4.6 percent for FYs 2018 through 2027.
• Section 1899B of the Act, which provides for the establishment of standardized data reporting for certain post-acute care providers, including LTCHs.
• Section 1886(b)(3)(B)(viii) of the Act, which establishes the Hospital Inpatient Quality Reporting Program, requires the Secretary to reduce the applicable percentage increase that would otherwise apply to the standardized amount applicable to a subsection (d) hospital for discharges occurring in a fiscal year if the hospital does not submit data on measures in a form and manner, and at a time, specified by the Secretary.
• Section 1886(b)(3)(B)(ix) of the Act, which establishes payment adjustments under the Medicare Promoting Interoperability Program by requiring downward adjustments to the applicable percentage increase, beginning with FY 2015 (and beginning with FY 2022 for subsection (d) Puerto Rico hospitals), for eligible hospitals that do not successfully demonstrate meaningful use of CEHRT for an EHR reporting period for a payment adjustment year. Additionally, Section 1886(n) of the Act establishes the requirements for an eligible hospital to be treated as a meaningful EHR user of CEHRT for an EHR reporting period for a payment adjustment year or, for purposes of subsection (b)(3)(B)(ix) of the Act, for a fiscal year.
• Section 1866(k) of the Act, which provides for the establishment of a quality reporting program for hospitals described in section 1886(d)(1)(B)(v) of the Act, referred to as “PPS—exempt cancer hospitals.”
• Section 1886(o) of the Act, which requires the Secretary to establish a Hospital Value-Based Purchasing (VBP) Program, under which value-based incentive payments are made in a fiscal year to hospitals based on their performance on measures established for a performance period for such fiscal year.
• Section 1886(p) of the Act, which establishes a Hospital-Acquired Condition (HAC) Reduction Program, under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospital-acquired conditions.
• Section 1886(q) of the Act, as amended by section 15002 of the 21st Century Cures Act, which establishes the Hospital Readmissions Reduction Program. Under the program, payments for discharges from an applicable hospital as defined under section 1886(d) of the Act will be reduced to account for certain excess readmissions. Section 15002 of the 21st Century Cures Act directs the Secretary to compare hospitals with respect to the number of their Medicare-Medicaid dual-eligible beneficiaries in determining the extent of excess readmissions.
• Section 1886(m)(5) of the Act, which requires the Secretary to reduce by 2 percentage points the annual update to the standard Federal rate for discharges for a long-term care hospital (LTCH) during the rate year for LTCHs that do not submit data on quality
• Section 1115A of the Act authorizes the testing of innovative payment and service delivery models that preserve or enhance the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program (CHIP) beneficiaries while reducing program expenditures.
The following is a summary of the major provisions in this proposed rule. In general, these major provisions are being proposed as part of the annual update to the payment policies and payment rates, consistent with the applicable statutory provisions. A general summary of the changes in this proposed rule is presented in section I.D. of the preamble of this proposed rule.
In section V.F.2. of the preamble of this proposed rule, we discuss our proposal to require that, in addition to meeting other applicable requirements, an approved medical residency training program must not discriminate, or promote or encourage discrimination, on the basis of race, color, national origin, sex, age, disability, or religion, including the use of those characteristics or intentional proxies for those characteristics as a selection criterion for employment, program participation, resource allocation, or similar activities, opportunities, or benefits. In V.G.3. of the preamble of this proposed rule, we discuss similar proposals with respect to approved nursing and allied health education programs and accreditors.
In section V.F.3. of the preamble of this proposed rule, we discuss our proposed modifications to the criteria for identifying new residency programs under 42 CFR 413.79(l). We propose that, in addition to receiving initial accreditation by the appropriate accrediting body, for a residency program to be considered new, at least 90 percent of the individual residents must not have previous experience training in another program in the same specialty. The proposed requirement includes exceptions for small residency programs, displaced residents, and residents admitted via a binding third-party matching program. In determining whether a program is genuinely new for cap-building purposes, we would also no longer consider the previous employment of the program director or faculty.
In this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing to adopt the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure beginning with an early look for the FY 2028 program year, and use beginning with the FY 2029 program year.
In this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing modifications to five condition-specific and procedure-specific mortality measures beginning with the FY 2032 program year: (1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization measure; (2) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure Hospitalization measure; (3) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization measure; (4) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization measure; and (5) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Coronary Artery Bypass Graft (CABG) Surgery measure. We also include requests for information on two topics: (1) measuring emergency room access and timeliness in Hospital Inpatient Quality Reporting and Value-Based Purchasing Programs; (2) potential future use of the Adult Community-Onset Sepsis Standardized Mortality Ratio measure in the Hospital Inpatient Quality Reporting Program.
In this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing several changes to the Hospital Inpatient Quality Reporting Program. We are proposing to adopt three new measures: (1) Excess Days in Acute Care After Hospitalization for Diabetes measure beginning with the FY 2029 payment determination; (2) Advance Care Planning eCQM beginning with the FY 2030 payment determination; (3) Hospital Harm-Postoperative Venous Thromboembolism eCQM beginning with the FY 2030 payment determination. We are also proposing to adopt five modified mortality measures in the Hospital Inpatient Quality Reporting Program beginning with the FY 2028 payment determination before subsequently modifying them in the Hospital Value-Based Purchasing Program: (1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization measure; (2) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure Hospitalization measure; (3) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization measure; (4) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization measure; and (5) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Coronary Artery Bypass Graft (CABG) Surgery measure. We are proposing modifications to three claims-based measures beginning with the FY 2028 payment determination: (1) Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction; (2) Excess Days in Acute Care after Hospitalization for Heart Failure; and (3) Excess Days in Acute Care after Hospitalization for Pneumonia. We are proposing to remove three measures: (1) Venous Thromboembolism Prophylaxis (VTE-1) eCQM; (2) Intensive Care Unit Venous Thromboembolism Prophylaxis (VTE-2) eCQM; and (3) Discharged on Antithrombotic Therapy (STK-02) eCQM beginning with the FY 2030 payment determination. We are also proposing changes to data reporting and submission requirements for eCQMs and structural measures: (1) mandatory reporting for the Malnutrition Care Score eCQM beginning with the FY 2030 payment determination; (2) mandatory reporting for the Hospital Harm eCQMs after 2 years of self-selected reporting beginning with the FY 2030 payment determination; and (3) an update to the reporting of the Maternal Morbidity Structural measure beginning with the FY 2028 payment determination. We also include requests for information on three topics: (1) measuring emergency room access and timeliness in Hospital Inpatient Quality Reporting and Value-Based Purchasing Programs; (2) potential future use of the Adult Community-Onset Sepsis Standardized Mortality Ratio measure in the Hospital Inpatient Quality Reporting Program; and (3) Birthing-Friendly Hospital designation modification to expand designation criteria.
In this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing to adopt two new measures: (1) Advance Care Planning eCQM beginning with the FY 2030 program year; and (2) Malnutrition Care Score eCQM beginning with the FY 2030 program year. We are also proposing to remove the COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP COVID-19 Vaccination) measure beginning with the FY 2028 program year. In addition, we propose establishing reporting and submission requirements for eCQMs in this program.
In the LTCH QRP, we are proposing to remove two measures, beginning with the FY 2028 LTCH QRP. We also propose the revision of the LTCH QRP Data Submission Deadlines beginning with the FY 2029 LTCH QRP. We are also soliciting public comments on one Request for Information (RFI) on future measure concepts for the LTCH QRP.
We are proposing several changes to the Medicare Promoting Interoperability Program. Specifically, we are proposing: (1) to revise the definition of certified EHR technology (CEHRT) for the Medicare Promoting Interoperability Program based on Assistant Secretary for Technology Policy and Office of the National Coordinator for Health Information Technology (ASTP/ONC) proposals to update the ONC Health IT Certification Program; (2) to remove attestations related to ONC Direct Review and ONC-Authorized Certification Body (ONC-ACB) Surveillance; (3) to remove the Support Electronic Referral Loops by Sending Health Information measure and the Support Electronic Referral Loops by Receiving and Reconciling Health Information measure; (4) to modify the Electronic Prior Authorization measure; (5) to adopt the Unique Device Identifiers (UDIs) for Implantable Medical Devices measure within the Public Health and Clinical Data Exchange objective; (6) to adopt two new eCQMs in alignment with the Hospital Inpatient Quality Reporting Program; and (7) to remove three eCQMs in alignment with the Hospital Inpatient Quality Reporting Program.
In section X.A. of the preamble of this proposed rule, we discuss the changes we propose for the Transforming Episode Accountability Model (TEAM). TEAM is a 5-year mandatory model tested under the authority of section 1115A of the Act, that started on January 1, 2026, and will end on December 31, 2030. We propose changes to a few areas of the model, including: (1) adding X Medicare Severity Diagnosis Related Groups (MS-DRGs) that would initiate a spinal fusion anchor hospitalization; (2) clarifying quality measure performance periods for certain quality measures; (3) using a rolling historical Composite Quality Score (CQS) baseline period for certain quality measures; (4) adding an Ambulatory Payment Classification (APC) and MS-DRG update factor to target prices; and (5) using the full baseline period to construct the prospective normalization factor. We are also soliciting feedback on two Request for Information (RFIs) for ambulatory surgical center episodes and potential voluntary participation of physician owned hospitals in future years of the model.
In section X.C. of the preamble of this proposed rule, we propose expansion of the CJR Model. The CJR-X Model would be a mandatory model that would be tested under the authority of section 1115A of the Act, beginning on October 1, 2027 for acute care hospitals paid under the IPPS and OPPS with limited exclusions. Participating hospitals would be accountable for the cost and quality of care for LEJR episodes from the hospital inpatient or hospital outpatient admission through 90 days after the beneficiary is discharged from the hospital or hospital outpatient procedure. We propose multiple policies for CJR-X, including: (1) an October 1, 2027 start date; (2) acute care hospitals as the participant and accountable entity; (3) LEJR as the episode of care; (4) five quality measures and a composite quality score (CQS) to assess quality performance; (5) regional risk-adjusted target prices that include capped normalization and trend factors; (6) pricing-specific policies for certain hospitals, such as low volume hospitals and high duals hospitals; (7) provider and beneficiary overlap permitted with most models; (8) allowing participant hospitals to have financial arrangements; (9) waiving certain Medicare Program requirements; (10) permitting beneficiary-identifiable and regional aggregated data sharing; and (11) options for Alternative Payment Model (APM) participation.
The following table provides a summary of the costs, savings, and benefits associated with the major provisions described in section I.A.2. of the preamble of this proposed rule.
Section 1886(d) of the Act sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to use a prospective payment system (PPS) to pay for the capital-related costs of inpatient hospital services for these “subsection (d) hospitals.” Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs).
The base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-living adjustment (COLA) factor. This base payment rate is multiplied by the DRG relative weight.
If the hospital treats a high percentage of certain low-income patients, it receives a percentage add-on payment applied to the DRG-adjusted base payment rate. This add-on payment, known as the disproportionate share hospital (DSH) adjustment, provides for a percentage increase in Medicare payments to hospitals that qualify under either of two statutory formulas designed to identify hospitals that serve a disproportionate share of low-income patients. For qualifying hospitals, the amount of this adjustment varies based on the outcome of the statutory calculations. The Affordable Care Act revised the Medicare DSH payment methodology and provides for an additional Medicare payment beginning on October 1, 2013, that considers the amount of uncompensated care furnished by the hospital relative to all other qualifying hospitals.
If the hospital is training residents in an approved residency program(s), it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds.
Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. In general, to qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. In addition, certain transformative new devices and certain antimicrobial products may qualify under an alternative inpatient new technology add-on payment pathway by demonstrating that, absent an add-on payment, they would be inadequately paid under the regular DRG payment.
The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments and, beginning in FY 2023 for IHS and Tribal hospitals and hospitals located in Puerto Rico, the new supplemental payment.
Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospital-specific rate, which is determined from their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. SCHs are the sole source of care in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as an isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs.
With the recent enactment of section 6202 of the Consolidated Appropriations Act (CAA), 2026 (Pub. L. 119-75), under current law, the Medicare-dependent, small rural hospital (MDH) program is effective through December 31, 2026. For discharges occurring on or after October 1, 2007, but before January 1, 2027, an MDH receives the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major source of care for Medicare beneficiaries in their areas. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area (or, as amended by the Bipartisan Budget Act of 2018, a hospital located in a State with no rural area that meets certain statutory criteria), has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years). As section 6202 of the CAA, 2026 extended the MDH program through December 31, 2026, beginning on January 1, 2027, the MDH program will no longer be in effect absent a change in law. Because the MDH program is not authorized by statute beyond December 31, 2026, beginning January 1, 2027, all hospitals that previously qualified for MDH status under section 1886(d)(5)(G) of the Act will no longer have MDH status and will be paid based on the IPPS Federal rate.
Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services in accordance with a prospective payment system established by the Secretary. The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. In addition, hospitals may receive outlier payments for those cases that have unusually high costs. The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR part 412, subparts A through M.
Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Inpatient rehabilitation facility (IRF) hospitals and units; long-term care hospitals (LTCHs); Inpatient psychiatric hospitals (IPF) and units; children's hospitals; cancer hospitals; extended neoplastic disease care hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the
The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR parts 412 and 413.
The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of sections 123 of the BBRA and section 307(b) of the BIPA (as codified under section 1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) established the site neutral payment rate under the LTCH PPS, which made the LTCH PPS a dual rate payment system beginning in FY 2016. Under this statute, effective for LTCH's cost reporting periods beginning in FY 2016 cost reporting period, LTCHs are generally paid for discharges at the site neutral payment rate unless the discharge meets the patient criteria for payment at the LTCH PPS standard Federal payment rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR part 412, subpart O. Beginning October 1, 2009, we issue the annual updates to the LTCH PPS in the same documents that update the IPPS.
Under sections 1814(l), 1820, and 1834(g) of the Act, payments made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services are generally based on 101 percent of reasonable cost. Reasonable cost is determined under the provisions of section 1861(v) of the Act and existing regulations under 42 CFR part 413.
Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. The amount of payment for direct GME costs for a cost reporting period is based on the hospital's number of residents in that period and the hospital's costs per resident in a base year. The existing regulations governing payments to the various types of hospitals are located in 42 CFR part 413. Section 1886(d)(5)(B) of the Act provides that prospective payment hospitals that have residents in an approved GME program receive an additional payment for each Medicare discharge to reflect the higher patient care costs of teaching hospitals relative to non-teaching hospitals. The additional payment is based on the indirect medical education (IME) adjustment factor, which is calculated using a hospital's ratio of residents to beds and a multiplier, which is set by Congress. Section 1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges occurring during FY 2008 and fiscal years thereafter, the IME formula multiplier is 1.35. The regulations regarding the indirect medical education (IME) adjustment are located at 42 CFR 412.105.
Section 6201 of the Consolidated Appropriations Act (CAA), 2026 extended through the portion of FY 2027 occurring on October 1, 2026, through December 31, 2026, the modified definition of a low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals that had been in effect for FYs 2019 through 2025. Specifically, under section 1886(d)(12)(C)(i) of the Act, as amended, for FYs 2019 through 2026 and the portion of FY 2027 occurring on October 1, 2026 through December 31, 2026, a subsection (d) hospital qualifies as a low-volume hospital if it is more than 15 road miles from another subsection (d) hospital and has less than 3,800 total discharges during the fiscal year. Under section 1886(d)(12)(D) of the Act, as amended, for discharges occurring in FYs 2019 through December 31, 2026, the Secretary determines the applicable percentage increase using a continuous, linear sliding scale ranging from an additional 25 percent payment adjustment for low-volume hospitals with 500 or fewer discharges to a zero percent additional payment for low-volume hospitals with more than 3,800 discharges in the fiscal year.
Section 6202 of the CAA, 2026 amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to provide for an extension of the MDH program through the first quarter of FY 2027 (that is, through December 31, 2026).
In this proposed rule, we set forth proposed payment and policy changes to the Medicare IPPS for FY 2027 operating costs and capital-related costs of acute care hospitals and certain hospitals and hospital units that are excluded from IPPS. In addition, we set forth proposed changes to the payment rates, factors, and other payment and policy-related changes to programs associated with payment rate policies under the LTCH PPS for FY 2027.
The following is a general summary of the changes that we are proposing to make:
In section II. of the preamble of the proposed rule, we included the following:
• Proposed changes to MS-DRG classifications based on our yearly review for FY 2027.
• Proposed recalibration of the MS-DRG relative weights.
• A discussion of the proposed FY 2027 status of new technologies approved for add-on payments for FY 2026, a presentation of our evaluation and analysis of the FY 2027 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by
• A proposal to repeal the alternative pathway for new technology add-on payment and OPPS device pass-through applications, and require all applicants for new technology add-on payments and OPPS device pass-through payments to demonstrate that they meet all eligibility requirements to receive add-on payments and/or pass-through payments (as discussed in section II.E.7. of the preamble of this proposed rule).
In section III of the preamble of the proposed rule, we proposed revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include, but are not limited to, the following:
• The proposed FY 2027 wage index update using wage data from cost reporting periods beginning in FY 2023.
• Calculation, analysis, and implementation of the proposed occupational mix adjustment to the wage index for acute care hospitals for FY 2027 based on the 2022 Occupational Mix Survey.
• Proposed application of the rural, imputed and frontier State floors, and proposed transition for the discontinuation of the low wage index hospital policy.
• Proposed revisions to the wage index for acute care hospitals, based on hospital redesignations and reclassifications under sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
• Proposed adjustment to the wage index for acute care hospitals for FY 2027 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index.
• The proposed transition for the discontinuation of the low wage index hospital policy.
• Proposed labor-related share for applying the FY 2027 wage index.
In section IV. of the preamble of the proposed rule, we discuss the following:
• Proposed calculation of Factor 1 and Factor 2 of the uncompensated care payment methodology.
• Proposed methodology for determining Factor 3 of the uncompensated care payment for FY 2027, which is the same methodology that was used for FY 2026.
• Proposed methodology for determining the amount of interim uncompensated care payments, using the average of the most recent 3 years of discharge data.
In section V. of the preamble of the proposed rule, we discussed proposed changes or clarifications of a number of the provisions of the regulations in 42 CFR parts 412 and 413, including the following:
• Proposed inpatient hospital market basket update for FY 2027.
• Proposed updated national and regional case-mix values and discharges for purposes of determining RRC status.
• Proposed conforming amendments to reflect the statutory extension of the temporary changes to the low-volume hospital payment adjustment through December 31, 2026.
• Proposed conforming amendments to reflect the statutory extension of the MDH program through December 31, 2026.
• Proposed requirements to prohibit unlawful discrimination by graduate medical education programs and nursing and allied health education programs.
• Proposed modifications to the criteria for identifying new residency programs for purposes of direct graduate medical education (GME) and indirect medical education (IME) payments; proposed clarifications of the methodology for calculating direct GME and IME payments following a teaching hospital merger; and a notice of closure of two teaching hospitals and opportunities to apply for available slots.
• Proposed nursing and allied health (NAH) education program Medicare Advantage (MA) add-on rates and direct GME MA percent reductions for CY 2024; and proposed changes to the regulations for determining net costs of approved NAH education programs and changes to the procedures for allocating indirect NAH costs.
• Proposed update to and revision to the payment adjustment for certain immunotherapy cases.
• Proposed changes to the requirements of the Hospital Readmissions Reduction Program—Updating the proposed estimate of the financial impacts for the FY 2027 Hospital Readmissions Reduction Program.
• Proposed changes to the requirements of the Hospital Value-Based Purchasing Program—Updating the proposed estimate of the financial impacts for the FY 2027 Hospital Value-Based Purchasing Program.
• Proposed changes to the requirements of the Hospital-Acquired Condition Reduction Program—Updating the proposed estimate of the financial impacts for the FY 2027 Hospital-Acquired Conditions Reduction Program.
• Discussion of and proposed changes relating to the implementation of the Rural Community Hospital Demonstration Program in FY 2027.
In section VI. of the preamble of the proposed rule, we discuss the proposed payment policy requirements for capital-related costs and capital payments to hospitals for FY 2027.
In section VIII. of the preamble of the proposed rule, we discuss the following:
• Proposed changes to payments to certain excluded hospitals for FY 2027.
• Proposed continued implementation of the Frontier Community Health Integration Project (FCHIP) Demonstration.
In section VIII. of the preamble of the proposed rule, we set forth proposed changes to the LTCH PPS Federal payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2027.
In section IX. of the preamble of the proposed rule, we addressed the following:
• Proposed changes to the requirements for the Hospital Inpatient Quality Reporting Program.
• Proposed changes to the requirements for the PCH Quality Reporting Program.
• Proposed changes to the requirements for the Long-Term Care Hospital Quality Reporting Program.
• Proposed changes to requirements pertaining to eligible hospitals and CAHs participating in the Medicare Promoting Interoperability Program.
Section X.A. of the preamble of this proposed rule includes proposed changes to TEAM that would affect episodes, quality measure assessment, and pricing methodology. We are also soliciting comment on an ambulatory surgical center episode RFI and a voluntary hospitals with physician ownership RFI.
Section X.B. of the preamble of the proposed rule, includes a proposed revision to the provider-based location criteria regulations applicable to off-campus facilities or organizations (§ 413.65).
Section X.C. of the preamble of the proposed rule includes proposals for the CJR-X Model with policies affecting participation, episodes, quality measure and assessment, pricing methodology, model overlap, financial arrangements, waivers of Medicare Program requirements, data sharing, and APM options.
In section X.D. of the preamble of this proposed rule, we are proposing the following:
• To reconcile non-renal organ acquisition costs for independent organ procurement organizations (IOPOs) and histocompatibility laboratories (HCLs), and to require the Medicare Administrative Contractor to establish, adjust if necessary, and publish the IOPO non-renal standard acquisition charges (SACs) and the HCL testing rates.
• To change certain existing policy and proposing to codify certain longstanding Medicare reasonable cost reimbursement policies, applicable to all providers reimbursed for all or for some of their services on a reasonable cost basis.
• To clarify and codify cost allocation principles.
• To codify the discretionary Administrator review of CMS reviewing official determinations with respect to appeals under § 413.420(g) for IOPOs and HCLs.
Section X.A. of the preamble of the proposed rule includes our discussion of the MedPAC Recommendations.
Section X.B. of the preamble of the proposed rule includes a descriptive listing of the public use files associated with the proposed rule.
Section XI. of the preamble of the proposed rule includes the collection of information requirements for entities based on our proposals.
In sections II. and III. of the Addendum of this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2027 prospective payment rates for operating costs and capital-related costs for acute care hospitals, including cost-of-living adjustment (COLA) factors for IPPS hospitals located in Alaska and Hawaii. We propose to establish the threshold amounts for outlier cases. In addition, in section V. of the Addendum of the proposed rule, we address the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2027 for certain hospitals excluded from the IPPS.
In section V. of the Addendum of this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2027 LTCH PPS standard Federal payment rate and other factors used to determine LTCH PPS payments under both the LTCH PPS standard Federal payment rate and the site neutral payment rate in FY 2027. We propose to establish the adjustments for the wage index, labor -related share, the cost-of-living adjustment, and high-cost outliers, including the applicable fixed-loss amounts and the LTCH cost-to-charge ratios (CCRs) for both payment rates.
In Appendix A of this proposed rule, we set forth an analysis of the impact the proposed changes would have on affected acute care hospitals, LTCHs, and other entities.
In Appendix B of this proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the appropriate percentage changes for FY 2027 for the following:
• A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs and MDHs).
• Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS.
• The LTCH PPS standard Federal payment rate and the site neutral payment rate for hospital inpatient services provided for LTCH PPS discharges.
Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 15 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC's March 2026 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and capital-related costs for hospitals under the IPPS. We address these recommendations in Appendix B of the proposed rule. For further information relating specifically to the MedPAC March 2026 report or to obtain a copy of the report, contact MedPAC at (202) 220-3700 or visit MedPAC's website at
Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as diagnosis-related groups (DRGs)) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. Therefore, under the IPPS, Medicare pays for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary's stay is assigned. The formula used to calculate payment for a specific case multiplies an individual hospital's payment rate per case by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG, relative to the average resources used to treat cases in all DRGs.
Section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually to account for changes in resource consumption. These
For information on the adoption of the MS-DRGs in FY 2008, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 through 47189).
For general information about the MS-DRG system, including yearly reviews and changes to the MS-DRGs, we refer readers to the previous discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43764 through 43766) and the FYs 2011 through 2026 IPPS/LTCH PPS final rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR 53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through 56872; 82 FR 38010 through 38085; 83 FR 41158 through 41258; 84 FR 42058 through 42165; 85 FR 58445 through 58596; 86 FR 44795 through 44961; 87 FR 48800 through 48891; 88 FR 58654 through 58787; 89 FR 69000 through 69109; 90 FR 36549 through 36649, respectively).
For discussion regarding our previously finalized policies (including our historical adjustments to the payment rates) relating to the effect of changes in documentation and coding that do not reflect real changes in case mix, we refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 48799 through 48800).
Providers use the International Classification of Diseases, 10th Revision (ICD-10) coding system to report diagnoses and procedures for Medicare hospital inpatient services under the MS-DRG system. The ICD-10 coding system includes the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as well as the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and Reporting.
The deadline for interested parties to submit MS-DRG classification change requests for FY 2027 was October 20, 2025. All requests are submitted to CMS via Medicare Electronic Application Request Information System
Within MEARIS
We note that the burden associated with this information collection requirement is the time and effort required to collect and submit the data in the request for MS-DRG classification changes to CMS. The aforementioned burden is subject to the Paperwork Reduction Act (PRA) of 1995 and approved under OMB control number 0938-1431 and has an expiration date of 01/31/2029.
As we have discussed in prior rulemaking, we may not be able to fully consider all of the requests that we receive for the upcoming fiscal year. We have found that, with the implementation of ICD-10, some types of requested changes to the MS-DRG classifications require more extensive research to identify and analyze all of the data that are relevant to evaluating the potential change.
As discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36550), beginning with FY 2027 rulemaking we are no longer summarizing in the proposed and final rules those requests that are not able to be considered for the upcoming FY. As noted, requests that require more extensive analysis may include those involving multiple MS-DRGs, overlapping logic across multiple Major Diagnostic Categories (MDCs), special logic such as diagnosis codes combined with procedure codes, and/or complex logic including code clusters or multiple logic lists. In December 2025, we informed requestors via MEARIS
Interested parties should submit any MS-DRG classification change requests, including any comments and suggestions for FY 2028 consideration by October 20, 2026 via MEARIS
As we did for the FY 2026 IPPS/LTCH PPS proposed rule, for this FY 2027 IPPS/LTCH PPS proposed rule we are providing a test version of the ICD-10 MS-DRG GROUPER Software, Version 44, so that the public can better analyze and understand the impact of the proposals included in this FY 2027 IPPS/LTCH PPS proposed rule. We note that this test software reflects the proposed GROUPER logic for FY 2027. Therefore, it includes the new diagnosis and procedure codes that are effective for FY 2027 as reflected in Table 6A.—New Diagnosis Codes—FY 2027 and Table 6B.—New Procedure Codes—FY 2027 associated with this FY 2027 IPPS/LTCH PPS proposed rule and does not include the diagnosis codes that are invalid beginning in FY 2027 as reflected in Table 6C.—Invalid Diagnosis Codes—FY 2027 and Table 6D.—Invalid Procedure Codes—FY 2027 associated with this FY 2027 IPPS/LTCH PPS proposed rule. These tables are not published in the Addendum to this FY 2027 IPPS/LTCH PPS proposed rule, but are available on the CMS website at:
The MCE manual is comprised of two chapters:
The test version of the ICD-10 MS-DRG GROUPER Software, Version 44, the draft version of the ICD-10 MS-DRG Definitions Manual, Version 44, the draft version of the Definitions of Medicare Code Edits Manual, Version 44, and the supplemental mapping files in Tables 6P.1a and 6P.1b of the FY 2026 and FY 2027 ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes are available at
The following are the changes that we are proposing to the MS-DRGs for FY 2027. We are inviting public comments on each of the MS-DRG classification proposed changes, as well as our proposals to maintain certain existing MS-DRG classifications discussed in this FY 2027 IPPS/LTCH PPS proposed rule. In some cases, we are proposing changes to the MS-DRG classifications based on our analysis of claims data and clinical appropriateness. In other cases, we are proposing to maintain the existing MS-DRG classifications based on our analysis of claims data and clinical appropriateness. For this FY 2027 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2025 update of the FY 2025 MedPAR file, which contains hospital bills received from October 1, 2024 through September 30, 2025. In our discussion of the proposed MS-DRG reclassification changes, we refer to these claims data as the “September 2025 update of the FY 2025 MedPAR file.”
In deciding whether to propose to make further modifications to the MS-DRGs for particular circumstances brought to our attention, we consider whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients represented in the MS-DRG. We evaluate patient care costs using average costs and lengths of stay and rely on clinical factors to determine whether patients are clinically distinct or similar to other patients represented in the MS-DRG. In evaluating resource costs, we consider both the absolute and percentage differences in average costs between the cases we select for review and the remainder of cases in the MS-DRG. We also consider variation in costs within these groups; that is, whether observed average differences are consistent across patients or attributable to cases that are extreme in terms of costs or length of stay, or both. Further, we consider the number of patients who will have a given set of characteristics and generally prefer not to create a new MS-DRG unless it would include a substantial number of cases.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58448), we finalized our proposal to expand our existing criteria to create a new complication or comorbidity (CC) or major complication or comorbidity (MCC) subgroup within a base MS-DRG. Specifically, we finalized the expansion of the criteria to include the NonCC subgroup for a three-way severity level split. We stated we believed that applying these criteria to the NonCC subgroup would better reflect resource stratification as well as promote stability in the relative weights by avoiding low volume counts for the NonCC level MS-DRGs. We noted that in our analysis of MS-DRG classification requests for FY 2021 that were received by November 1, 2019, as well as any additional analyses that were conducted in connection with those requests, we applied these criteria to each of the MCC, CC, and NonCC subgroups.
As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661), we continue to apply the criteria to create subgroups, including application of the NonCC subgroup criteria, in our annual analysis of MS-DRG classification requests, consistent with our approach since FY 2021 when we finalized the expansion of the criteria to include the NonCC subgroup for a three-way severity level split. Accordingly, in our analysis of the MS-DRG classification requests for FY 2027 that we received by October 20, 2025, as well as any additional analyses that were conducted in connection with those requests, we applied these criteria to each of the MCC, CC, and NonCC subgroups, as described in the following table.
In general, once the decision has been made to propose to make further modifications to the MS-DRGs as described previously, such as creating a new base MS-DRG, or in our evaluation of a specific MS-DRG classification request to split (or subdivide) an existing base MS-DRG into severity levels, all five criteria must be met for the base MS-DRG to be split (or subdivided) by a CC subgroup. We note that in our analysis of requests to create a new MS-DRG, we typically evaluate the most recent year of MedPAR claims data available. For example, we stated earlier that for this FY 2027 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data from the September 2025 update of the FY 2025 MedPAR file. However, in our evaluation of requests to split an existing base MS-DRG into severity levels, as noted in prior rulemaking (80 FR 49368), we typically analyze the most recent two years of data. This analysis includes two years of MedPAR claims data to compare the data results from one year to the next to avoid making determinations about whether additional severity levels are warranted based on an isolated year's data fluctuation and also, to validate that the established severity levels within a base MS-DRG are supported. The first step in our process of evaluating if the creation of a new CC subgroup within a base MS-DRG is warranted is to determine if all the criteria is satisfied for a three-way split. In applying the criteria for a three-way split, a base MS-DRG is initially subdivided into the three subgroups: MCC, CC, and NonCC. Each subgroup is then analyzed in relation to the other two subgroups using the volume (Criteria 1 and 2), average cost (Criteria 3 and 4), and reduction in variance (Criteria 5). If the criteria fail, the next step is to determine if the criteria are satisfied for a two-way split. In applying the criteria for a two-way split, a base MS-DRG is initially subdivided into two subgroups: “with MCC” and “without MCC” (1_23) or “with CC/MCC” and “without CC/MCC” (12_3). Each subgroup is then analyzed in relation to the other using the volume (Criteria 1 and 2), average cost (Criteria 3 and 4), and reduction in variance (Criteria 5). If the criteria for both of the two-way splits fail, then a split (or CC subgroup) would generally not be warranted for that base MS-DRG. If the three-way split fails on any one of the five criteria and all five criteria for both two-way splits (1_23 and 12_3) are met, we would apply the two-way split with the highest R2 value. We note that if the request to split (or subdivide) an existing base MS-DRG into severity levels specifies the request is for either one of the two-way splits (1_23 or 12_3), in response to the specific request, we will evaluate the criteria for both of the two-way splits; however, we do not also evaluate the criteria for a three-way split.
For this FY 2027 IPPS/LTCH PPS proposed rule, we received a request to reassign cases reporting procedure codes describing the insertion of a short-term external heart assist device from MDC 04 MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively) to MDC 05 (Diseases and Disorders of the Circulatory System) MS-DRG 215 (Other Heart Assist System Implant). According to the requestor, when patients are admitted with pulmonary conditions, such as pulmonary embolism, and have Impella® Ventricular Support Systems inserted for cardiac support during a thrombectomy procedure, MS-DRGs 163, 164, or 165 are assigned. The requestor stated that cases reporting procedure codes describing the insertion of Impella® Ventricular Support Systems that are assigned to MS-DRGs 163, 164, or 165 require resources similar to cases that are assigned to MS-DRG 215. The requestor further requested that if CMS does not reassign cases reporting procedure codes describing the insertion of a short-term external heart assist device to MS-DRG 215, in the alternative, CMS should consider creating new MS-DRGs for cases reporting procedure codes describing the insertion of a short-term external heart assist device and major chest procedures.
In reviewing this request, we note that acute massive pulmonary embolism can lead to right ventricular (RV) failure and cardiogenic shock, requiring urgent treatment. Thrombolytic therapy is the standard treatment for high-risk pulmonary embolism in hemodynamically unstable patients. However, in cases where thrombolytics are contraindicated or ineffective, mechanical circulatory support can serve as a rescue therapy. While extracorporeal membrane oxygenation (ECMO) is commonly utilized, Impella® Ventricular Support Systems can offer right ventricular support in patients with pulmonary embolism-induced cardiogenic shock.
The requestor identified cases reporting procedure codes describing the insertion of a short-term external heart assist device as reporting ICD-10-PCS codes 02HA3RZ (Insertion of short-term external heart assist system into the heart, percutaneous approach) and 5A0221D (Assistance with cardiac output using impeller pump, continuous). While we agree with the requestor that procedure code 02HA3RZ describes the insertion of a short-term external heart assist device, we note that there are additional ICD-10-PCS codes in the classification that also describe the insertion of a short-term external heart assist device. Therefore, in reviewing this request, we identified the five additional ICD-10-PCS procedure codes that also describe the insertion of a short-term external heart assist device listed in the following table and included these codes in our analysis.
To begin our analysis, we examined claims data from the September 2025 update of the FY 2025 MedPAR file for MS-DRGs 163, 164, and 165 to identify cases reporting ICD-10-PCS codes 02HA0RS, 02HA0RZ, 02HA3RS, 02HA3RZ, 02HA4RS, or 02HA4RZ. We agree with the requestor that when a patient is admitted and has an Impella® external heart assist device inserted, two ICD-10-PCS codes are assigned: a code that describes the insertion of the short-term external heart assist device and code 5A0221D that describes assistance with an impeller pump. Because the assistance with an Impella® is always coded with ICD-10-PCS code 5A0221D, we did not include this code in our analysis as the presence of the code would be expected to be identified in all cases. Our findings are shown in the following table.
As shown in the table, we identified a total of 13,396 cases within MS-DRG 163 with an average length of stay of 8.2 days and average costs of $40,641. Of these 13,396 cases, there were 17 cases that reported a procedure code describing the insertion of a short-term external heart assist device with an average length of stay of 8.4 days and average costs of $81,960. There were zero cases reporting a procedure code describing the insertion of a short-term external heart assist device in MS-DRGs 164 and 165. The data analysis shows that for the cases in MS-DRG 163 reporting a procedure code describing the insertion of a short-term external heart assist device, the average length of stay is longer, and the average costs are higher when compared to all cases in that MS-DRG.
To further review the consumption of hospital resources for cases reporting a procedure code describing the insertion of a short-term external heart assist device with a principal diagnosis of a pulmonary condition, we reviewed the claims data to identify cases reporting ICD-10-PCS codes 02HA0RS, 02HA0RZ, 02HA3RS, 02HA3RZ, 02HA4RS, or 02HA4RZ in other MS-DRGs in MDC 04 (Diseases and Disorders of the Respiratory System), specifically MS-DRGs 166, 167, and 168 (Other Respiratory System O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) and MS-DRG 173 (Ultrasound Accelerated and Other Thrombolysis with Principal Diagnosis Pulmonary Embolism). We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 43.1 (available on the CMS website at:
We then reviewed the claims data to further identify the principal diagnoses that were reported to determine what factors may also be contributing to the
As reflected in the table, all 17 cases reported a principal diagnosis of pulmonary embolism. While the results of the claims analysis as previously summarized indicate that the average costs of cases that reported a procedure code describing the insertion of a short-term external heart assist device are higher compared to the average costs for all cases in MS-DRG 163, we cannot ascertain from the claims data the additional resource use specifically attributable to the insertion of the short-term external heart assist device during the hospital stay as compared to the severity of illness of the patient and other circumstances of the admission. These data show that while cases that reported a procedure code describing the insertion of a short-term external heart assist device and a principal diagnosis of pulmonary embolism required greater resource utilization, there is a wide variance in average costs and average length of stay depending on the ICD-10-CM code reported as principal diagnosis. For example, the three cases that reported a principal diagnosis of I26.02 (Saddle embolus of pulmonary artery with acute cor pulmonale) had an average length of stay of 7.3 days and average costs of $61,956, while the two cases that reported a principal diagnosis of I26.92 (Saddle embolus of pulmonary artery without acute cor pulmonale) had an average length of stay of 11.5 days and average costs of $111,452. When reviewing consumption of hospital resources for this subset of cases, it is unclear to what degree the higher average costs for these cases are attributable to the severity of illness of the patient and other circumstances of the admission as opposed to the insertion of a short-term external heart assist device. There may have been other factors contributing to the higher costs.
During our review of this issue and the examination of the cases reporting procedure codes describing the insertion of a short-term external heart assist device found in MS-DRG 163, as noted previously, we found these cases all reported principal diagnosis of pulmonary embolism. The ICD-10-codes that describe pulmonary embolism are currently assigned to MDC 04 (Diseases and Disorders of the Respiratory System). The diagnoses assigned to MDC 04 reflect conditions associated with the respiratory system. In ICD-10 the body or organ system is the axis of the classification, and diagnosis codes are classified by the body or organ system affected. The concept of clinical coherence generally requires that the patient characteristics included in the definition of each MS-DRG relate to a common organ system or etiology and that a specific medical specialty should typically provide care to the patients in the DRG. These diagnosis codes would require reassignment to MDC 05 (Diseases and Disorders of the Circulatory System) to group to MDC 05 MS-DRG 215.
Although MDC 04 diagnoses such as pulmonary embolism can lead to RV failure and cardiogenic shock, which might be reasonable indications for the insertion of a short-term external heart assist device, it would not be appropriate to move these diagnoses into MDC 05 because it could inadvertently cause cases reporting these same MDC 04 diagnoses with a respiratory system procedure to be assigned to an “unrelated” MS-DRG because whenever there is a surgical procedure reported on the claim that is unrelated to the MDC to which the case was assigned based on the principal diagnosis, it results in a MS-DRG assignment to a surgical class referred to as “unrelated operating room procedures”.
To further examine the impact of moving the diagnosis codes describing pulmonary embolism into MDC 05, we analyzed claims data for cases reporting a respiratory system O.R. procedure and a principal diagnosis of pulmonary embolism. Our findings are reflected in the following table.
As shown in the table, we identified 8,652 cases reporting a respiratory system O.R. procedure and a principal diagnosis of pulmonary embolism. If we were to move the diagnosis codes describing pulmonary embolism to MDC 05, these cases would be assigned to the surgical class referred to as “unrelated operating room procedures” as an unintended consequence because the surgical procedure reported on the claim would be considered unrelated to the MDC to which the case was assigned based on the principal diagnosis. The data also indicates that there were more cases that reported an O.R. procedure assigned to MDC 04 with a principal diagnosis describing pulmonary embolism than there were cases that reported a procedure code describing the insertion of a short-term external heart assist device, and a principal diagnosis of pulmonary embolism in MDC 04 (8,652 cases versus 17 cases) demonstrating that inpatient admissions for pulmonary embolism more typically have an O.R. procedure assigned to MDC 04 performed and do not report a procedure code describing the insertion of a short-term external heart assist device.
We also reviewed the cases reporting an O.R. procedure assigned to MDC 04 and a principal diagnosis describing pulmonary embolism to identify the top ten O.R. procedures assigned to MDC 04 that were reported within the claims data for these cases. Our findings are shown in the following table:
As noted previously, if we were to move the diagnosis codes describing pulmonary embolism to MDC 05, cases reporting one of the O.R. procedures assigned to MDC 04 shown in the table would be assigned to the surgical class referred to as “unrelated operating room procedures” as an unintended consequence. Based on the results of our analysis, we believe that the diagnosis codes describing pulmonary embolism are most clinically aligned with the other diagnosis codes assigned to MDC 04 (where they are currently assigned). Considering the impact that moving the diagnoses describing pulmonary embolism to MDC 05 from MDC 04 would have, we also believe it would not be appropriate to move these diagnoses into MDC 05 because it would inadvertently cause cases reporting pulmonary embolism with O.R. procedures assigned to MDC 04 to be assigned to an unrelated MS-DRG.
We then explored alternative options, as was requested. We noted that the 17 cases reporting a procedure code describing the insertion of a short-term external heart assist device had an average length of stay of 8.4 days and average costs of $81,960, as compared to the 13,396 cases in MS-DRG 163 that had an average length of stay of 8.2 days and average costs of $40,641. While these cases reporting a procedure code describing the insertion of a short-term external heart assist device had average costs that were $41,319 higher than the average costs of all cases in MS-DRG 163 (the highest severity level “with MCC” MS-DRG), there were only a total of 17 cases. The results of the claims analysis demonstrate that there is not sufficient claims data in the MedPAR file on which to assess the resource use of cases reporting a procedure code describing the insertion of a short-term external heart assist device with a principal diagnosis from MDC 04 to consider the creation of a new MS-DRG. As noted previously, we cannot ascertain from the claims data the resource use specifically attributable to the insertion of a short-term external heart assist device during the hospital stay. Accordingly, we do not believe that the small subset of cases reporting a procedure code describing the insertion of a short-term external heart assist device with a principal diagnosis from MDC 04 warrants the creation of a new MS-DRG for these cases at this time.
Lastly, we explored reassigning cases reporting a procedure code describing the insertion of a short-term external heart assist device with an O.R. procedure assigned to MDC 04 and a principal diagnosis from MDC 04 to other MS-DRGs within MDC 04. However, our review did not support reassignment of these cases to any other
While the data analysis reflects that cases that report a procedure code describing the insertion of a short-term external heart assist device with an O.R. procedure assigned to MDC 04 and a principal diagnosis from MDC 04 demonstrate higher average costs in their respective MS-DRGs, as discussed in prior rulemaking (86 FR 44878), the MS-DRG system is a system of averages and it is expected that within the diagnostic related groups, some cases may demonstrate higher than average costs, while other cases may demonstrate lower than average costs. We further note that section 1886(d)(5)(A) of the Act provides for Medicare payments to Medicare-participating hospitals in addition to the basic prospective payments for cases incurring extraordinarily high costs. We will continue to evaluate the clinical coherence and resource consumption costs that impact this subset of cases and their current MS-DRG assignment.
Therefore, for the reasons stated previously, we are not proposing to reassign cases reporting procedure codes describing the insertion of a short-term external heart assist device from MDC 04 MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively) to MDC 05 MS-DRG 215 (Other Heart Assist System Implant) for FY 2027.
CYTALUX® (pafolacianine) is a folate receptor-targeted fluorescent optical imaging agent used as an adjunct for the identification of malignant and non-malignant pulmonary lesions in adult patients with known or suspected lung cancer. CYTALUX® binds to the folate receptors on these cancer cells and is endocytosed into folate receptor positive cancer cells. CYTALUX® is administered intravenously prior to thoracic resection procedures and requires use of a near-infrared imaging (NIR) system to illuminate, thereby making cancer visible within the surgical field. CYTALUX® received FDA approval and is indicated as an adjunct for intraoperative identification of malignant and non-malignant pulmonary lesions in adult patients with known or suspected cancer in the lung. We note that CYTALUX® for the lung indication was approved for new technology add-on payments for FY 2024 (88 FR 58810 through 58818), FY 2025 (89 FR 69120 through 69126), and FY 2026 (90 FR 36668). We refer readers to section II.E.5 of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule for a discussion regarding the proposed FY 2027 status of technologies approved for FY 2026 new technology add-on payments, including CYTALUX® for the lung indication.
We received a request from the manufacturer of CYTALUX® to modify the GROUPER logic of MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with CC, and without CC/MCC, respectively) by reassigning cases with an ICD-10-PCS code that describes fluorescence guided surgery using CYTALUX® (pafolacianine) for the lung indication that currently map to the lower severity level MS-DRG 165 (without CC/MCC) to the higher severity level MS-DRG 163 (with MCC) or MS-DRG 164 (with CC). According to the requestor, the utilization of CYTALUX® does not change the surgical procedure but adds significant value and cost to the procedure by improving the surgeon's ability to identify and completely resect malignant tissue. The requestor performed their own analysis of Medicare claims data from 10/1/2023-3/31/2025 and stated they found approximately 135 cases that used CYTALUX® in thoracic resections and that they expect adoption to accelerate as NIR systems become more widely available. Additionally, the requestor stated they found 35% of the cases using CYTALUX® within MS-DRG 165, and the average costs of these cases exceeded the average costs of cases that did not report the usage of CYTALUX®. When controlling for procedural and facility variation, the requestor stated they found that CYTALUX cases in MS-DRG 165 were $1,515 (8%) higher in cost and that 60% of the cases using CYTALUX® in MS-DRG DRG 165 received new technology add-on payments averaging approximately $2,300. The requestor further asserted that their review of the Inpatient Standard Analytical Files (SAF) indicated underreporting of CYTALUX® costs due to unclear inpatient drug billing guidance. The requestor stated they found that 64% of cases reporting an ICD-10-PCS code that describes fluorescence guided surgery using CYTALUX® (pafolacianine) for the lung indication fall into MS-DRGs 163 or 164. Additionally, the requestor stated while they found that the average length of stay for cases reporting CYTALUX® in MS-DRG 165 is lower (1.9 vs. 2.3 days), the cost profile of these cases aligns more closely with the higher-severity MS-DRGs 164 and 163. According to the requestor, this misalignment leads to underpayment when CYTALUX® cases are grouped into MS-DRG 165, therefore CMS should reassign cases with an ICD-10-PCS code that describes fluorescence guided surgery using CYTALUX® (pafolacianine) for the lung indication from MS-DRG 165 to MS-DRGs 163 or 164 to prevent barriers to hospital adoption of CYTALUX® as NIR system availability expands nationwide.
The following ICD-10-PCS procedure codes describe fluorescence guided surgery using CYTALUX® (pafolacianine) for the lung indication.
In the ICD-10 MS-DRGs Definitions Manual Version 43.1, procedure codes 8E0W0EN, 8E0W3EN, 8E0W4EN, 8E0W7EN and 8E0W8EN are designated as non-O.R. procedures for purposes of MS-DRG assignment, therefore when CYTALUX® is utilized during a procedure for the lung indication, the ICD-10-PCS code describing the surgical procedure will determine the surgical MS-DRG assignment based on the principal diagnosis reported.
We examined claims data from the September 2025 update of the FY 2025 MedPAR file for MS-DRGs 163, 164, and 165 to identify cases reporting one of the five procedure codes listed previously that describe fluorescence guided surgery using CYTALUX® (pafolacianine). Our findings are shown in the following table:
As shown in the table, in MS-DRG 163, we identified a total of 13,396 cases with an average length of stay of 8.2 days and average costs of $40,641. Of those 13,396 cases, there were 14 cases reporting one of five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine), with average costs lower than the average costs in the FY 2025 MedPAR file for MS-DRG 163 ($30,818 compared to $40,641) and a shorter average length of stay (4.6 days compared to 8.2 days). In MS-DRG 164, we identified a total of 14,384 cases with an average length of stay of 4 days and average costs of $23,393. Of those 14,384 cases, there were 87 cases reporting one of five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine), with average costs lower than the average costs in the FY 2025 MedPAR file for MS-DRG 164 ($22,426 compared to $23,393) and a shorter average length of stay (2.7 days compared to 4 days). In MS-DRG 165, we identified a total of 6,431 cases with an average length of stay of 2.3 days and average costs of $17,981. Of those 6,431 cases, there were 58 cases reporting one of five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine), with average costs higher than the average costs in the FY 2025 MedPAR file for MS-DRG 165 ($20,854 compared to $17,981), and a shorter average length of stay (1.9 days compared to 2.3 days).
The 58 cases in MS-DRG 165 reporting one of five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine), without a secondary diagnosis code designated as a CC or MCC, have a shorter average length of stay (1.9 days versus 4 days) and lower average costs ($20,854 versus $23,393) when compared to all the cases in MS-DRG 164. Similarly, the 58 cases in MS-DRG 165 reporting one of five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine) have a shorter average length of stay (1.9 days versus 8.2 days) and lower average costs ($20,854 versus $40,641) when compared to all the cases in MS-DRG 163. While the data analysis reflects that cases that report one of five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine), without a secondary diagnosis code designated as a CC or MCC, demonstrate slightly higher average costs compared to all the cases in MS-DRG 165, we believe these cases are more suitably grouped to MS-DRG 165, where they are currently assigned, based on the closer similarities in resource utilization compared to all the cases in their respective MS-DRG. As discussed in prior rulemaking (86 FR 44878), the MS-DRG system is a system of averages and it is expected that within the diagnostic related groups, some cases may demonstrate higher than average costs, while other cases may demonstrate lower than average costs. We further note that section 1886(d)(5)(A) of the Act provides for Medicare payments to Medicare-participating hospitals in addition to the basic prospective payments for cases
Therefore, for the reasons stated, for FY 2027, we are proposing to maintain the current structure of MS-DRGs 163, 164, and 165.
The WiSE® CRT System is an implantable cardiac pacing system that delivers left ventricular endocardial pacing (LVEP) specifically for cardiac resynchronization therapy (CRT) without the use of wires or leads going into the heart. The WiSE® CRT System was designed to stimulate the endocardial surface of the left ventricle (LV) without a transvenous LV lead. Working in conjunction with previously implanted standard commercially available pacemakers or defibrillators, the WiSE® CRT System utilizes a wireless ultrasound-based energy transmission to a small, implanted electrode in the LV endocardium, which converts the ultrasound signal into pacing energy. According to the requestor, the WiSE® CRT System is engineered to benefit patients with heart failure who were previously untreatable with conventional CRT or who are considered at high risk for placement of a coronary sinus (CS) lead for CRT upgrades. The WiSE® CRT system consists of four components: the receiver, also known as the receiver electrode or electrode (implanted via catheter), delivery sheath, battery and transmitter. An external programmer is used to adjust parameters of the battery. The WiSE® CRT System was approved for new technology add-on payments for FY 2026 (90 FR 36821 through 36823). We refer readers to section II.E.4.a of the preamble of this proposed rule for a discussion regarding the proposed FY 2027 status of technologies approved for FY 2026 new technology add-on payments, including the WiSE® CRT System.
In support of the new technology add-on payment application that was submitted for FY 2026 consideration, we received a request to create new ICD-10-PCS codes to differentiate cardiac procedures that involve the insertion of an implantable endocardial pacing system, such as the WiSE® CRT System, and a code proposal was displayed in association with the Spring 2025 ICD-10 Coordination and Maintenance Committee Update. As a result, effective October 1, 2025 (FY 2026), we implemented the following ICD-10-PCS procedure codes to identify the insertion of the WiSE® CRT System: X2HN37B (Insertion of endocardiac pacing electrode into left ventricle, percutaneous approach, new technology group 11) in combination with XHH80HB (Insertion of ultrasound transmitter and battery for endocardiac pacing electrode into chest subcutaneous tissue and fascia, open approach, new technology group 11). In the ICD-10 MS-DRGs Version 43.1, this procedure code combination is assigned to MS-DRGs 242, 243, and 244 (Permanent Cardiac Pacemaker Implant with MCC, with CC, without MCC respectively) in a logic list referred to as “CARDIAC PACEMAKER DEVICE” that includes 720 other ICD-10-PCS procedure code combinations that identify the insertion of cardiac pacemakers. When reported as standalone procedures, ICD-10-PCS code X2HN37B is assigned to MDC 05 MS-DRGs 264 (Other Circulatory System O.R. Procedures) and ICD-10-PCS code XHH80HB is assigned to MDC 05 MS-DRGs 258 and 259 (Cardiac Pacemaker Device Replacement with and without MCC, respectively). We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 43.1, which is available on the CMS website at:
For this FY 2027 IPPS/LTCH PPS proposed rule, we received a request to reassign the ICD-10-PCS procedure codes that describe the insertion of the WiSE® CRT System from MS-DRGs 242, 243, and 244 to MS-DRGs 228 and 229 (Other Cardiothoracic Procedures with and without MCC, respectively). The requestor stated that insertion of the WiSE® CRT System electrode, which is described by ICD-10-PCS code X2HN37B, is similar both clinically and in terms of resource utilization, to the procedure codes that describe the insertion of leadless pacemakers that are currently assigned to MS-DRGs 228 and 229. The requestor further stated that the cases assigned to MS-DRGs 242, 243, and 244 involve traditional pacemaker devices with leads and are dissimilar to the WiSE® CRT System. According to the requestor, based on clinical function, implant methodology, and patient profile, the WiSE® CRT System more closely aligns with leadless pacemaker technology than with traditional pacemaker procedures as the use of multi-modality imaging, arterial navigation, and ultrasound-guided transmitter placement adds to both time and resource utilization, paralleling the procedural profile of leadless pacemaker implantation rather than traditional pacemaker surgery. Therefore, the requestor suggested that CMS reassign ICD-10-PCS code X2HN37B that describes the insertion of the electrode of the WiSE® CRT System to MS-DRGs 228 and 229 to appropriately group the procedure with the leadless pacemaker cases.
To begin our analysis, we reviewed the procedure codes. As noted previously, a code proposal was displayed as part of the ICD-10 Coordination and Maintenance Committee Spring 2025 update process to create unique ICD-10-PCS codes to describe the insertion of an implantable endocardial pacing system such as the WiSE® CRT System. As discussed in prior rulemaking (86 FR 44805), we used our established process to examine the MS-DRG assignment for the predecessor codes to determine the most appropriate MS-DRG assignment of new procedure codes X2HN37B and XHH80HB for FY 2026. Specifically, we review the predecessor code and MS-DRG assignment most closely associated with the new procedure code, and in the absence of claims data, we consider other factors that may be relevant to the MS-DRG assignment, including the severity of illness, treatment difficulty, complexity of service and the resources utilized in the diagnosis and/or treatment of the condition. We have noted in prior rulemaking that this process does not automatically result in the new procedure code being assigned to the same MS-DRG or to have the same designation (O.R. versus Non-O.R.) as the predecessor code.
Because the codes that describe the insertion of the WiSE® CRT System were effective October 1, 2025 (FY 2026), we would not expect the codes to be reported in the FY 2025 claims data used for this proposed rule. We examined claims data from the September 2025 update of the FY 2025
We reviewed this issue and note the requestor is correct that the ICD-10-PCS codes that describe the insertion of intracardiac pacemakers, also known as “leadless” pacemakers, are currently assigned to MS-DRGs 228 and 229. In leadless pacemakers, the components are combined into a single device implanted within a heart chamber. They do not require a chest incision, a subcutaneous pocket or a tunneled lead. These devices are implanted via a femoral vein transcatheter approach and then advanced into the heart chamber, fixed to the chamber wall, and released. Conventional pacemakers are comprised of a metal generator (battery + electronics) placed under the skin in the upper chest, connected by one or more insulated wires (leads) threaded into the heart. We agree that leadless pacemakers and the WiSE® CRT System electrode are clinically coherent in that both eliminate the need for traditional, wire-based leads that run from the device to the heart muscle to transmit electrical impulses to the heart. We believe that the electrode of the WiSE® CRT System is more closely aligned with the leadless pacemakers assigned to MS-DRGs 228 and 229 as compared to the insertion of conventional pacemakers assigned to MS-DRGs 242, 243, and 244. While our analysis did not identify any cases reporting the procedure code that describes the insertion of the electrode of the WiSE® CRT System, based on our review of the clinical issues, and recognizing that it is expected that some Medicare patients will receive the WiSE® CRT System on an inpatient basis, we believe reassigning ICD-10-PCS code X2HN37B that describes the insertion of the endocardiac pacing electrode into the left ventricle from MS-DRG 264 to MDC 05 MS-DRGs 228 and 229 would improve clinical coherence in these MS-DRGs.
For these reasons, for FY 2027, we are proposing to reassign procedure code X2HN37B (Insertion of endocardiac pacing electrode into left ventricle, percutaneous approach, new technology group 11) from MS-DRG 264 to MS-DRGs 228 and 229 for clinical coherence and to better account for the anticipated resources required. We are also proposing to delete the procedure code combination of X2HN37B and XHH80HB from the GROUPER logic of MS-DRGs 242, 243, and 244. Under this proposal, procedure code X2HN37B will not need to be reported as part of a procedure code combination or procedure code “cluster” to satisfy the logic for assignment to MS-DRGs 228 and 229. When reported as a standalone procedure, ICD-10-PCS code XHH80HB (Insertion of ultrasound transmitter and battery for endocardiac pacing electrode into chest subcutaneous tissue and fascia, open approach, new technology group 11) will be assigned to proposed new MDC 05 MS-DRG 210 (Cardiac Pacemaker Revision or Device Replacement with MCC) and proposed new MS-DRG 211 (Cardiac Pacemaker Revision or Device Replacement without MCC), which are discussed later in this section.
Consistent with our annual review of the MS-DRGs, we consider changes in resource consumption, treatment patterns, technology, and any other factors that may change the relative use of hospital resources. In our review of the claims data from the September 2025 update of the FY 2025 MedPAR file for this request, we identified a low volume of cases for MS-DRGs 258 and 259 (Cardiac Pacemaker Device Replacement with MCC and without MCC, respectively), where procedure code XHH80HB is assigned when reported as a standalone procedure in Version 43.1. Our findings are shown in the following table.
In light of the initial findings of only 35 cases for MS-DRG 258 and 68 cases in MS-DRG 259, we further reviewed the MedPAR claims data for cases assigned to MS-DRGs 258 and 259 for the past 5 fiscal years. As reflected in the following tables, these data indicate that the number of cases grouping to MS-DRGs 258 and 259 has generally declined.
We note that, if, during our annual MS-DRG analysis we identify that there are only a few patients in a respective MS-DRG, consistent with our established process in deciding whether to propose to make further modifications, we consider if there have been potential changes in the clinical characteristics of the patients, treatment patterns, or resource utilization. A principle of the MS-DRGs and the characteristics of a meaningful DRG classification scheme is the ability to detect such changes and accordingly, propose clinically appropriate modifications that are also consistent with resource utilization. We have noted in prior rulemaking that we prefer to have a substantial number of cases in an MS-DRG because having larger clinically cohesive groups within an MS-DRG provides greater stability for annual updates to the relative payment weights. In light of these considerations, and the low volume of cases in MS-DRGs 258 and 259, we believed it was appropriate to further analyze how to potentially reclassify these cases.
Accordingly, using the September 2025 update of the FY 2025 MedPAR file, we examined whether there were other MS-DRGs to which these cases could appropriately be reassigned. We note that surgical MS-DRGs 260, 261, and 262 (Cardiac Pacemaker Revision Except Device Replacement with MCC, with CC, and without CC/MCC, respectively) also include procedure codes related to cardiac pacemakers. A cardiac pacemaker device replacement (generator change) is a procedure to change an old battery (generator) for a new one. A cardiac pacemaker revision is a procedure that may involve replacing, moving, or adding leads, or fixing the pocket of the generator. While the terms are distinct, both cardiac pacemaker revision and cardiac pacemaker replacement procedures are performed in order to improve the way the cardiac pacemaker system works.
As such, we reviewed the claims data from the September 2025 update of the FY 2025 MedPAR file for MS-DRGs 260, 261, and 262 to examine the resource utilization associated with cases assigned to these MS-DRGs. Our findings are shown in the following table.
As part of this analysis, we also reviewed the MS-DRGs for cases reporting ICD-10-PCS codes describing cardiac pacemaker device replacement procedures by severity claims data for MS-DRG 259 because this MS-DRG includes cases reporting a CC as well as cases reporting a NonCC. Therefore, we analyzed the claims data to determine the number of cases, the average length of stay, and average costs for the cases in MS-DRG 258 and 259 by severity level (1=MCC, 2=CC, and 3=NonCC). Our findings are shown in the following table.
As shown in the data, the 35 cases reporting an MCC in MS-DRG 258 have an average length of stay of 7 days with average costs of $28,275, which is comparable to the cases in MS-DRG 260 reporting an MCC that have an average length of stay of 7.5 days with average costs of $29,313. The 42 cases reporting a CC in MS-DRG 259 have an average length of stay of 4 days with average costs of $18,246, which is comparable to the cases in MS-DRG 261 reporting an CC that have an average length of stay of 3.5 days with average costs of $17,151. The 26 cases not reporting a CC or an MCC in MS-DRG 259 have an average length of stay of 2 days with average costs of $14,552, which is comparable to the cases in MS-DRG 262 not reporting a CC or an MCC that have an average length of stay of 2.5 days with average costs of $15,119.
We reviewed these findings and believe that it may no longer be necessary to subdivide these MS-DRGs based on the cardiac pacemaker revision or device replacement procedure codes reported. We note that DRGs that differentiate cases reporting procedure codes describing cardiac pacemaker device replacement from cases reporting procedure codes describing cardiac pacemaker revisions have existed since 1983 (48 FR 39878) when Congress amended the Social Security Act to include a national DRG-based hospital prospective payment system for all Medicare patients.
Our analysis of claims data from the September 2025 update of the FY 2025 MedPAR file shows that in the 43 years since the DRGs for cases reporting cardiac pacemaker revision procedures and cases reporting cardiac pacemaker device replacement procedures were created, the resource utilization appears to now be aligned, and the cases are clinically coherent, and therefore we believe it is appropriate to now restructure these MS-DRGs accordingly. Specifically, we believe it would be appropriate to delete MS-DRGs 258, 259, 260, 261, and 262, and to create new MS-DRGs for cases reporting ICD-10-PCS codes describing cardiac pacemaker revision or device replacement procedures, based on our analysis and review of the cases grouping to these MS-DRGs.
The following table illustrates our simulation of the proposal.
Consistent with our established process as discussed in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, once the decision has been made to propose to make further modifications to the MS-DRGs, such as creating a new base MS-DRG, all five criteria to create subgroups must be met for the base MS-DRG to be split (or subdivided) by a CC subgroup. Therefore, we applied the criteria to create subgroups in a base MS-DRG as discussed in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule. As shown, a three-way split of the proposed new MS-DRG failed to meet the criterion that there be at least a 20% difference in average costs between the CC and NonCC subgroup.
As discussed in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, if the criteria for a three-way split fail, the next step is to determine if the criteria are satisfied for a two-way split. We therefore applied the criteria for a two-way split for the “with MCC” and “without MCC” subgroups and found that all five criteria were met. The following table illustrates our findings.
For the proposed new MS-DRGs for cases reporting procedure codes describing cardiac pacemaker revision or device replacement, there is at least (1) 500 cases in the MCC group and 500 cases in the without MCC group; (2) 5 percent of the cases in the MCC group and 5 percent in the without MCC group; (3) a 20 percent difference in average costs between the MCC group and the without MCC group; (4) a $2,000 difference in average costs between the MCC group and the without MCC group; and (5) a 3-percent reduction in cost variance, indicating that the proposed severity level splits increase the explanatory power of the base MS-DRG in capturing differences in expected cost between the proposed MS-DRG severity level splits by at least 3 percent and thus improve the overall accuracy of the IPPS payment system.
Therefore, for FY 2027, we are proposing to delete MS-DRGs 258, 259, 260, 261, and 262 and to create two new MS-DRGs with a two-way severity level split for cases reporting procedure codes describing cardiac pacemaker revision or device replacement in MDC 05. These proposed new MS-DRGs are proposed new MS-DRG 210 (Cardiac Pacemaker Revision or Device Replacement with MCC) and proposed new MS-DRG 211 (Cardiac Pacemaker Revision or Device Replacement without MCC). We refer the reader to Table 6P.2a associated with this FY 2027 IPPS/LTCH PPS proposed rule (which is available on the CMS website at:
In our evaluation of this MS-DRG classification request, we also noted that we identified 7,772 cases in base MS-DRG 264 (Other Circulatory System O.R. Procedures) with an average length of stay of 9.4 days and average costs of $29,545. Accordingly, in connection with our analysis we applied the five criteria as described in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule to determine if it would be appropriate to subdivide cases currently assigned to base MS-DRG 264 into severity levels. This analysis includes two years of MedPAR claims data to compare the data results from one year to the next to avoid making determinations about whether additional severity levels are warranted based on an isolated year's data fluctuation and also to validate that the established severity levels within a base MS-DRG are supported. Therefore, we reviewed the claims data for base MS-DRG 264 using the September 2024 update of the FY 2024 MedPAR file and the September 2025 update of the FY 2025 MedPAR file, which were used in our analysis of claims data for MS-DRG reclassification requests for FY 2026 and FY 2027, respectively. Our findings are shown in the following table:
First, we applied the criteria to create subgroups for the three-way severity level split. We found that the criterion that there be at least 5% of the patients are in each of the MCC, CC, and NonCC subgroups failed based on the data in both the FY 2024 and FY 2025 MedPAR files. The criterion that there be at least 500 cases for each subgroup also was
As discussed in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, if the criteria for a three-way split fail, the next step is to determine if the criteria are satisfied for a two-way split. We therefore applied the criteria for a two-way split for the “with MCC” and “without MCC” subgroups and found that all five criteria were met for both years. For both years, there are at least (1) 500 cases in the MCC group and 500 cases in the without MCC group; (2) 5 percent of the cases in the MCC group and 5 percent in the without MCC group; (3) a 20 percent difference in average costs between the MCC group and the without MCC group; (4) a $2,000 difference in average costs between the MCC group and the without MCC group; and (5) a 3-percent reduction in cost variance, indicating that a “with MCC” and “without MCC” severity level split increases the explanatory power of the base MS-DRG in capturing differences in expected cost between the MS-DRG severity level splits by at least 3 percent and thus improves the overall accuracy of the IPPS payment system.
As the claims data supports a two-way severity level split for cases reporting other circulatory system O.R. Procedures, for FY 2027, we are proposing to delete base MS-DRG 264 and proposing to create two new MS-DRGs with a two-way severity level split for cases reporting other circulatory system O.R. Procedures in MDC 05. These proposed new MS-DRGs are proposed new MS-DRG 361 (Other Circulatory System O.R. Procedures with MCC) and proposed new MS-DRG 362 (Other Circulatory System O.R. Procedures without MCC). Under this proposal, we would reassign the 1,447 listed procedure codes in the GROUPER logic of MS-DRG 264 to new MS-DRGs 361 and 362. We refer the reader to the ICD-10 MS-DRG Version 43.1 Definitions Manual (which is available via the internet on the CMS website at:
As discussed in the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18012 through 108013) and final rule (90 FR 36550 through 36552), we received a request to modify the GROUPER logic of new MS-DRG 426 (Multiple Level Combined Anterior and Posterior Spinal Fusion Except Cervical with MCC or Custom-Made Anatomically Designed Interbody Fusion Device), new MS-DRG 427 (Multiple Level Combined Anterior and Posterior Spinal Fusion Except Cervical with CC), and new MS-DRG 428 (Multiple Level Combined Anterior and Posterior Spinal Fusion Except Cervical without CC/MCC); new MS-DRG 447 (Multiple Level Spinal Fusion Except Cervical with MCC or Custom-Made Anatomically Designed Interbody Fusion Device) and new MS-DRG 448 (Multiple Level Spinal Fusion Except Cervical without MCC); and MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with Spinal Curvature, Malignancy, Infection or Extensive Fusions with MCC, with CC, and without CC/MCC, respectively) by reassigning cases with an ICD-10-PCS code that describes fusion of a sacroiliac joint using an internal fixation device with tulip connector or insertion of an internal fixation device with tulip connector into a pelvic bone with another spinal fusion procedure code that currently map to the lower severity level MS-DRG to the highest severity level (with MCC) MS-DRG.
In the FY 2026 IPPS/LTCH PPS final rule (90 FR 36552), we noted that we would continue to consider the request in connection with future rulemaking. We stated that the logic for MS-DRGs 456, 457, and 458 is defined by extensive fusions, in addition to specific diagnosis code logic and that MS-DRGs 426, 427, 428, 447, and 448 had recently become effective October 1, 2024, which we were continuing to monitor. We also stated that the data analysis necessary to examine the intricate logic within the spinal fusion MS-DRGs outlined in the request is complex and would require additional time for careful consideration of case redistribution and potential relative weight impacts, in connection with other related spinal fusion procedure requests that may be discussed in future rulemaking.
For this FY 2027 IPPS/LTCH PPS proposed rule, we received another request from the same manufacturer to reassign cases reporting the use of the iFuse Bedrock
The requestor stated that historically, the junction between the lumbar spine and the sacrum (the L5-S1 spinal level), has been the most challenging level in which to achieve fusion. One of the primary reasons is because of our upright posture and normal spinal curvature that causes the L5-S1 intervertebral disc to become significantly inclined (tilted forward). The requester indicated that this results in significant shear load at this level, making this the level most likely to break down, and the level most challenging to stabilize during a fusion procedure. Per the requestor, the L5-S1 level is the junction between the mobile spine above and the much more rigid sacrum/pelvis below, leading to stress concentration at this level. The L5-S1 level experiences the most axial load as it is the base of the spine supporting the weight of the entire torso. Finally, the L5-S1 level experiences progressively more stress/load with more levels of the spine that are fused. The requestor stated that including additional levels in the fusion construct results in additional lengthening of the lever arm and increasing the loads acting at the L5-S1 level.
The requestor stated that anchorage of spinal instrumentation into the sacrum is also challenging. The sacrum is narrow in the posterior to anterior dimension, resulting in the need to place shorter screws. The pedicles are larger diameter which results in diminished cortical engagement of the screws. According to the requestor, the bone structure of the sacrum is also suboptimal for screw anchorage as the density of the sacrum is frequently diminished, particularly in older adults, and especially in those with osteoporosis. The requestor stated that the problem also exists for older adults without osteoporosis.
The requestor indicated that historically, surgeons added additional spinal instrumentation fixation anchor points into the pelvis (ilium and sacrum) to try and help solve the biomechanical and anatomic challenges previously described. These anchors (typically longer, larger diameter
According to the requestor, although pelvic fixation strategies and implants have evolved since they were first introduced in the 1970s, including the development of sacro-alar-iliac (SAI) screws in 2007,
The requestor stated that currently, greater biomechanical loads are being placed on spinopelvic constructs and surgeons are performing an increasing number of multilevel fusions. Evolving surgical techniques and instrumentation now allow for treatment of more severe deformities, as well as the performance of surgery on patients with a higher BMI and poor bone quality. According to the requestor, the iFuse Bedrock
The requestor asserted the iFuse Bedrock
The ICD-10-PCS codes that may be reported to describe the iFuse Bedrock
The previously listed procedure codes describing “Insertion” (ICD-10-PCS codes XNH6058, XNH6358, XNH7058, and XNH7358) are assigned to MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and Connective Tissue O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) and the procedure codes describing “Fusion” (ICD-10-PCS codes XRGE058, XRGE358, XRGF058, and XRGF358) are assigned to MS-DRGs 028 (Spinal Procedures with MCC), MS-DRG 029 (Spinal Procedures with CC or Spinal Neurostimulators), and MS-DRG 030 (Spinal Procedures without CC/MCC) under MDC 01 (Diseases and Disorders of the Nervous System) and MS-DRGs 402, 426, 427, 428, 447, 448, 450, 451, 456, 457, and 458 under MDC 08. We note that because the ICD-10-PCS codes describing “Insertion” of internal fixation device with tulip connector are not assigned to one of the spinal fusion MS-DRGs as a standalone procedure, another ICD-10-PCS code describing a spinal fusion procedure would need to be reported on the same claim to group to one of the previously listed spinal fusion MS-DRGs. We refer the reader to the ICD-10 MS-DRG Definitions Manual, Version 43.1, which is available on the CMS website at:
For this FY 2027 IPPS/LTCH PPS proposed rule, we also received a separate, but related request, from another manufacturer of devices used in the performance of a spinal fusion procedure. Specifically, we received a request to reassign cases reporting the use of the aprevo® Intervertebral Body Fusion Device (hereafter referred to as aprevo®) from MS-DRG 402 (Single Level Combined Anterior and Posterior Spinal Fusion Except Cervical) to MS-DRG 450 (Single Level Spinal Fusion Except Cervical with MCC or Custom-Made Anatomically Designed Interbody Fusion Device) or alternatively, to reassign cases reporting the use of aprevo® from MS-DRG 402 to MS-DRG 428, and separately, to reassign cases reporting the use of aprevo® from MS-DRG 428 to the higher severity level (with MCC) MS-DRG 426. We note that we have previously discussed the reassignment of cases reporting the use of the aprevo® technology in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26726 through 26729) and final rule (88 FR 58731through 58735, as corrected in the FY 2024 final rule correction notice at 88 FR 77211), and in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 35971 through 39585) and final rule (89 FR 69034 through 69061). We also note that the aprevo® technology was approved for new technology add-on payments for FY 2022 (86 FR 45127 through 45133), FY 2023 (87 FR 49468 through 49469) and FY 2024 (88 FR 58802). We refer the reader to those rulemaking discussions for additional detailed information regarding the aprevo® technology.
The ICD-10-PCS codes that may be reported to describe lumbar fusion procedures that use the aprevo® device are:
We note that for the Spring 2026 ICD-10-PCS code update, the manufacturer of the aprevo® custom-made anatomically designed interbody fusion device submitted a request to revise the descriptions for the procedure codes that describe use of the aprevo® device. The manufacturer requested that the description of the previously listed codes (and nine other procedure codes that describe a cervical fusion using a custom-made anatomically designed interbody fusion device) be revised to specifically identify that the technology is designed from a virtual anatomic model. The agenda and related meeting materials for these specific topics are available on the CMS website at:
Each of the previously listed procedure codes is currently assigned to MDC 01 in MS-DRGs 028, 029, and 030, and to MDC 08 in MS-DRGs 402, 426, 427, 428, 447, 448, 450, 451, 456, 457, and 458.
As previously discussed, in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36552), we noted that we would continue to consider the request to modify the GROUPER logic of MS-DRGs 426, 427, and 428 (with regard to the reassignment of cases with an ICD-10-PCS code that describes fusion of a sacroiliac joint using an internal fixation device with tulip connector or insertion of an internal fixation device with tulip connector into a pelvic bone with another spinal fusion procedure code that currently map to the lower severity level MS-DRG to the highest severity level (with MCC) MS-DRG) in connection with future rulemaking and stated that the logic for MS-DRGs 456, 457, and 458 is defined by extensive fusions. Under ICD-10-PCS, an extensive fusion procedure is defined as a spinal fusion procedure involving 8 or more thoracic vertebral joint levels. For example, ICD-10-PCS code 0RG8070 (Fusion of 8 or more thoracic vertebral joints with autologous tissue substitute, anterior approach, anterior column, open approach) describes an extensive fusion procedure. An extensive fusion procedure may also be reported with a combination of codes (cluster) that includes at least one code describing fusion at the thoracic vertebral joint levels and at least one code describing fusion at the lumbar vertebral joint levels, such as ICD-10-PCS code 0RG7070 (Fusion of 2 to 7 thoracic vertebral joints with autologous tissue substitute, anterior approach, anterior column, open approach) and ICD-10-PCS code 0SG1070 (Fusion of 2 or more lumbar vertebral joints with autologous tissue substitute, anterior approach, anterior column, open approach). We refer the reader to Table 6P. 3a that is publicly available in association with this FY 2027 IPPS/LTCH PPS proposed rule on the CMS website at:
In review of these requests, we first analyzed claims data from the September 2025 update of the FY 2025 MedPAR file for MS-DRGs 028, 029, and 030 and for cases reporting a spinal fusion procedure with a custom-made anatomically designed interbody fusion device, cases reporting an SI joint fusion or spinal fusion procedure with insertion of an internal fixation device with tulip connector, and cases reporting an extensive fusion. We found zero cases reporting either technology across MS-DRGs 028, 029, and 030. We found 4 cases reporting an extensive fusion in MS-DRG 028, 4 cases reporting an extensive fusion in MS-DRG 029, and zero cases reporting an extensive fusion in MS-DRG 030. Findings from our analysis are shown in the following table.
As shown in the table, for MS-DRG 028, the four cases reporting an extensive fusion had a longer average length of stay (16.8 days versus 12.2 days) and higher average costs ($122,802 versus $54,697) compared to the average length of stay and average costs of all the cases in MS-DRG 028. After further review of the data we considered three of the four cases to be outlier cases (that is, unusually expensive cases) because the costs for each of the three cases exceeded $100,000 and the length of stay for each of the three cases was twice as long or longer than the average length of stay of all the cases in MS-DRG 028. For MS-DRG 029, the four cases reporting an extensive fusion had a comparable average length of stay (6.8 days versus 6.1 days) and lower average costs ($31,250 versus $32,288) compared to the average length of stay and average costs of all the cases in MS-DRG 029.
We note that although the logic for case assignment to MS-DRGs 028, 029, and 030 includes procedure codes that describe a spinal fusion procedure with a custom-made anatomically designed interbody fusion device and procedure codes that describe an SI joint fusion with insertion of an internal fixation device with tulip connector, as well as procedure codes that describe an extensive fusion procedure, the MS-DRG assigned is based on an MDC 01 principal diagnosis code that describes a disease or disorder of the nervous system, therefore, we would not expect to see a significant volume of cases reporting the procedure codes that describe a spinal fusion procedure with a custom-made anatomically designed interbody fusion device, an SI joint fusion with insertion of an internal fixation device with tulip connector, or an extensive fusion procedure in the data. Additionally, we note that the indications for the aprevo® custom-made anatomically designed interbody fusion device include adults with spinal deformities and degenerative conditions and the indications for the iFuse Bedrock
We then analyzed claims data for MS-DRGs 402, 426, 427, 428, 447, 448, 450, 451, 456, 457, and 458 and for: (1) cases reporting a spinal fusion procedure with a custom-made anatomically designed interbody fusion device, (2) cases reporting an SI joint fusion or spinal fusion procedure with insertion of an internal fixation device with tulip connector, (3) cases reporting a fusion procedure with both technologies (that is, a single case reporting a procedure code describing a spinal fusion procedure with a custom-made anatomically designed interbody fusion device and another procedure code(s) describing an SI joint fusion or a spinal fusion procedure with insertion of an internal fixation device with tulip connector, (4) cases reporting an extensive fusion without either technology (that is, aprevo® or iFuse Bedrock
We note that the logic for case assignment to MS-DRGs 402, 447, 448, 450 and 451 does not include the procedure codes or the procedure code clusters that describe an extensive fusion; therefore, no data for extensive fusion cases are reflected in the table that follows for those MS-DRGs. There were also zero cases found reporting both technologies in MS-DRG 402. In addition, because the logic for case assignment to MS-DRGs 426, 447, and 450 includes the reporting of a custom-made anatomically designed interbody fusion device to group to the respective MCC severity level MS-DRG, no data for cases reporting a custom-made anatomically designed interbody fusion device are reflected in the table that follows for MS-DRGs 427, 448, and 451. Findings from our analysis are shown in the following table.
The findings show that the cases reporting a spinal fusion procedure with the custom-made anatomically designed interbody fusion device, cases reporting an SI joint fusion or spinal fusion procedure with an internal fixation device with tulip connector, and cases reporting both technologies generally had higher average costs with variation in the average length of stay in comparison to the average costs and average length of stay of all the cases in their respective MS-DRG. The findings also show that cases reporting an extensive spinal fusion procedure with or without either of the technologies had average costs that are higher in
With regard to the request to reassign cases reporting a spinal fusion procedure with the custom-made anatomically designed interbody fusion device from MS-DRG 402 to MS-DRG 450 and the alternative request to reassign cases reporting a spinal fusion procedure with the custom-made anatomically designed interbody fusion device from MS-DRG 402 to MS-DRG 428, we note that MS-DRG 402 is a base MS-DRG and therefore is not subdivided into severity level subgroups. Additionally, the logic for MS-DRG 402 is defined by single level combined anterior and posterior spinal fusion procedures (except cervical) and the logic for MS-DRG 428 is defined by multiple level combined anterior and posterior spinal fusion procedures. Therefore, the reassignment of cases reporting the use of a custom-made anatomically designed interbody fusion device from MS-DRG 402 to MS-DRG 428 would not be feasible and would not be consistent with the logic of these recently formed MS-DRGs which is intended to differentiate a single level combined anterior and posterior fusion from a multiple level combined anterior and posterior spinal fusion. As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69058 through 69059), in response to public comments, we previously reviewed a request to reassign cases from the then proposed MS-DRG 402 to the then proposed MS-DRG 428 (both subsequently finalized) from this same manufacturer.
Although the findings from our analysis show that the average costs of the cases reporting the use of a custom-made anatomically designed interbody fusion device in MS-DRG 402 are higher compared to all the cases in MS-DRG 402 ($59,906 versus $38,483) with a longer average length of stay (3.3 days versus 2.9 days), and are more similar to the average costs of all the cases in MS-DRG 450 which are $48,325 with an average length of stay of 7.9 days, we disagree with the requested reassignment of cases reporting a spinal fusion procedure with the custom-made anatomically designed interbody fusion device from MS-DRG 402 to MS-DRG 450 because MS-DRG 450 is subdivided into two severity level subgroups and defined by single level spinal fusions (except cervical), meaning either the anterior column of the spine or the posterior column of the spine is fused in a single operative episode. As previously discussed, the logic for case assignment to MS-DRG 402 reflects single level combined anterior and posterior spinal fusion procedures, meaning both the anterior column of the spine and the posterior column of the spine are fused in a single operative episode. MS-DRG 402 is also not subdivided into severity levels. As such, the logic for case assignment to MS-DRGs 402 and 450 reflects two different types of spinal fusions that are clinically distinct procedures with different resources.
As shown in our review of the requested reassignment of cases reporting the use of a custom-made anatomically designed interbody fusion device from MS-DRG 428 to MS-DRG 426, the average costs of the 51 cases in MS-DRG 428 are higher compared to all the cases in MS-DRG 428 ($75,595 versus $56,192) with a comparable average length of stay (3.2 days versus 3.0 days), and the average costs of all the cases in MS-DRG 426 are $99,235 with an average length of stay of 8.9 days. However, we also note that there are 142 cases reporting the use of a custom-made anatomically designed interbody fusion device in MS-DRG 426 with average costs of $103,797 and an average length of stay of 5.6 days. Because the logic for MS-DRG 426 includes cases that are reassigned from MS-DRG 427 reporting the use of a custom-made anatomically designed interbody fusion device with a CC, we expanded our analysis to identify how many of the 142 cases would otherwise have grouped to MS-DRG 427 in the absence of the current logic. Of the 142 cases reporting the use of a custom-made anatomically designed interbody fusion device in MS-DRG 426, we found 22 cases were reported with an MCC secondary diagnosis with average costs of $143,062 and an average length of stay of 8.8 days and 120 cases were reported with a CC secondary diagnosis with average costs of $96,598 and an average length of stay of 5.1 days. We note that, as reflected in the previously displayed table, the average costs of all the cases in MS-DRG 427 is $68,506.
As shown in our review of MS-DRG 426, the 154 cases reporting a fusion procedure with an internal fixation device with tulip connector had average costs of $134,327 with an average length of stay of 9.3 days in comparison to the average costs of all the cases in MS-DRG 426 of $99,235 with an average length of stay of 8.9 days. We also recognized a similar pattern in MS-DRGs 427, 428, 447, 448, 456, 457, and 458 where the average costs for cases reporting a fusion procedure with an internal fixation device with tulip connector had higher average costs and a longer or comparable average length of stay compared to the average costs and average length of stay of all the cases in their respective MS-DRG.
Relatedly, our findings for cases reporting an extensive fusion without either technology and our findings for cases reporting an extensive fusion with either or both technologies for MS-DRGs 426, 427, and 428 and MS-DRGs 456, 457, and 458 demonstrate higher average costs in comparison to the average costs of all the cases in their respective MS-DRG, including at the MCC level. Specifically, our data analysis shows that cases reporting an extensive fusion without either technology currently grouping to MS-DRGs 426, 427, and 428 have higher average costs ($128,537, $103,226, and $81,054, respectively) compared to the average costs of all the cases in their respective MS-DRG ($99,235, $68,506, and $56,192, respectively). Similarly, cases reporting an extensive fusion without either technology currently grouping to MS-DRGs 456, 457, and 458 have higher average costs ($92,132, $66,745, and $57,964, respectively) compared to the average costs of all the cases in their respective MS-DRG ($79,972, $56,069, and $40,771, respectively). Our data analysis also shows that cases reporting an extensive fusion with either or both technologies currently grouping to MS-DRGs 426, 427, and 428 have higher average costs compared to the average costs of all the cases in their respective MS-DRG. Overall, the 229 cases (65 + 151 + 13 = 229) in MS-DRG 426 reporting an extensive fusion with either or both technologies have average costs of $153,092 and an average length of stay of 10.3 days compared to the average cost and average length of stay of all the cases in MS-DRG 426 ($99,235 and 8.9 days, respectively). The 247 cases in MS-DRG 427 reporting an extensive fusion with either or both technologies have costs of $129,777 and a length of stay of 7.0 days compared to the average cost and average length of stay of all the cases in MS-DRG 427 ($68,506 and 4.7 days, respectively). The 26 cases (2 + 22 + 2 = 26) in MS-DRG 428 reporting an extensive fusion with either or both technologies have average costs of $91,261 and an average length of stay of 6.1 days compared to the average cost and average length of stay of all the cases in MS-DRG 428 ($56,192 and 3.0 days, respectively). Additionally, cases reporting an extensive fusion with either or both technologies currently grouping to MS-DRGs 456, 457, and 458
Based on our review and analysis, we disagree with the requested reassignment of cases from the lower severity level to the higher severity level MS-DRG for cases reporting use of the aprevo® custom-made anatomically designed interbody fusion device, as well as for cases reporting use of the iFuse Bedrock
We also believe that extensive spinal fusion procedures, with or without the use of either or both technologies, also demonstrate increased resource utilization because extensive spinal fusion procedures address various spinal deformities across multiple spinal vertebral joint levels.
As such, to address the differences in resource utilization and additional treatment options for the patients whose spinal condition requires an extensive fusion procedure or a complex spinal fusion procedure that uses either the aprevo® custom-made anatomically designed interbody fusion device or the iFuse Bedrock
Consistent with our established process as discussed in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, once the decision has been made to propose to make further modifications to the MS-DRGs, such as creating a new base MS-DRG, all five criteria to create subgroups must be met for the base MS-DRG to be split (or subdivided) by a CC subgroup. Therefore, we applied the criteria to create subgroups in a base MS-DRG. We note that, as shown in the table that follows, a three-way split of this proposed new base MS-DRG was met.
For the proposed new MS-DRGs for cases reporting an extensive fusion or a complex spinal fusion procedure with either the aprevo® custom-made anatomically designed interbody fusion device or the iFuse Bedrock
Therefore, for FY 2027, we are proposing to create new MS-DRGs 523, 524, and 525 (Extensive or Complex Spinal Fusion Procedures Except Cervical with MCC, with CC, and without CC/MCC, respectively). Specifically, we are proposing to reassign cases reporting an extensive spinal fusion procedure from MS-DRGs 426, 427, 428, 456, 457 and 458 and to reassign cases reporting a spinal fusion procedure with use of the aprevo® custom-made anatomically designed interbody fusion device or the iFuse Bedrock
In the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18049 through 18052) and final rule (90 FR 36606 through 36610), we discussed a request we received to reassign cases reporting a hip or knee procedure with a principal diagnosis of periprosthetic joint infection (PJI) from the lower severity level “without CC/MCC” MS-DRG to the higher severity level “with CC” MS-DRG when there is no major complication or comorbidity (MCC) or complication or comorbidity (CC) reported for the following MS-DRGs; MS-DRGs 463, 464, and 465 (Wound Debridement and Skin Graft Except Hand for Musculoskeletal and Connective Tissue Disorders with MCC, with CC, and without CC/MCC, respectively), MS-DRGs 466, 467, and 468 (Revision of Hip or Knee Replacement with MCC, with CC, and without CC/MCC, respectively), MS-DRGs 474, 475, and 476 (Amputation for Musculoskeletal System and Connective Tissue Disorders with MCC, with CC, and without CC/MCC, respectively), MS-DRGs 480, 481, and 482 (Hip and Femur Procedures Except Major Joint with MCC, with CC, and without CC/MCC, respectively) and MS-DRG 485, 486, and 487 (Knee Procedures with Principal Diagnosis of Infection with MCC, with CC, and without CC/MCC, respectively). We stated that, based on our review and analysis of the data, we disagreed with the request to reassign PJI cases from the lower severity “without CC/MCC” level MS-DRG to the higher severity “with CC” level MS-DRG suggested by the requestor as the
As discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36608 through 36610), several commenters expressed support for the proposal to create proposed new MS-DRGs 403 and 404, however, a commenter stated they encountered inconsistencies when grouping cases using the Version 43 test GROUPER that was made publicly available in association with the FY 2026 IPPS/LTCH PPS proposed rule on the CMS website at:
We acknowledged the commenter's findings and noted that under the GROUPER software program, some collections of ICD-10-PCS procedure codes have a different set of attributes, independent of those of the codes that make them up (that is, their “components”). We stated that these collections of ICD-10-PCS procedure codes are called clusters and that a routine program in the GROUPER, upstream of the MS-DRG assignment logic, searches the claim for clusters. We noted that when a cluster is found, it is added to the list of procedures found on the claim. We stated that clusters may be “restricted” by Major Diagnostic Category (MDC) and a restricted cluster inhibits the use of its procedure code component attributes for the MDC's MS-DRG assignment logic. We provided the example that procedure code cluster 0SPC0JZ (Removal of synthetic substitute from right knee joint, open approach) and 0SRT0JZ (Replacement of right knee joint, femoral surface with synthetic substitute, open approach) may be recognized on a claim if both codes appear (in any order) and the reporting of these codes creates a new procedure code cluster “@0045”. We stated that the cluster @0045 has a different set of attributes than either code 0SPC0JZ or 0SRT0JZ by itself and is further “restricted” for MDC 08. We noted that when the GROUPER logic determines that the MDC is 08, it ignores the attributes of procedure codes 0SPC0JZ and 0SRT0JZ individually, only using those of @0045. We indicated in that example how the logic results in assignment of the claim to MS-DRGs 466, 467, and 468 rather than MS-DRGs 463, 464, and 465. We stated that if the principal diagnosis reported is not assigned under MDC 08, the cluster would not restrict the interpretation of the component codes and their individual attributes could be relevant as well as those of @0045.
As also discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36610), following publication of the FY 2026 IPPS/LTCH PPS proposed rule, we identified that the intended grouping of cases to the proposed new MS-DRGs 403 and 404 was impacted because of these cluster restrictions under MDC 08; therefore, we removed the restrictions and performed additional analysis. As a result of removing the restrictions, and due to the existing overlapping procedure code logic among a subset of the MDC 08 MS-DRGs, our analysis showed that further redistribution of the cases under MDC 08 occurred, impacting the remaining number of cases in MS-DRGs 466, 467, and 468 and MS-DRGs 485, 486, and 487, such that, those MS-DRGs no longer satisfied the criteria for a 3-way split. We noted that under our established process for applying the criteria to create subgroups within a base MS-DRG, existing MS-DRGs 466, 467, and 468 would be deleted and a new base MS-DRG for Revision of Hip or Knee Replacement would be established. Additionally, we noted that under this established process, existing MS-DRGs 485, 486, and 487 would be deleted and new MS-DRGs (2-way split) for Knee Procedures with Principal Diagnosis of Infection with and without MCC, respectively, would be established. Because these findings associated with removal of the MDC 08 restrictions on the procedure code clusters for existing MS-DRGs 466, 467, and 468 and MS-DRGs 485, 486, and 487 were not identified until after publication of the proposed rule, in addition to having an updated test Grouper that reflected these potential changes, we did not finalize the creation of proposed new MS-DRGs 403 and 404 for FY 2026. We stated that we may further consider these potential MS-DRG changes for future rulemaking. We refer the reader to the FY 2026 IPPS/LTCH PPS proposed and final rulemaking discussions for additional detailed information.
As also discussed in the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18012 through 18013) and final rule (90 FR 36550 through 36552), we received a request to modify the GROUPER logic of MS-DRGs 463, 464, and 465; MS-DRGs 466, 467, and 468; and MS-DRGs 492, 493, and 494 (Lower Extremity and Humerus Procedures Except Hip, Foot and Femur with MCC, with CC, and without CC/MCC, respectively) by reassigning cases with ICD-10-PCS code XW0V0P7 (Introduction of antibiotic-eluting bone void filler into bones, open approach, new technology group 7) that currently map to the lower severity level MS-DRG to the highest severity level (with MCC) MS-DRG. We noted that the procedure to insert a bone void filler is designated as a non-operating room (Non-O.R.) procedure and stated our belief that the key factor that would contribute to resource utilization in these cases is the fact that the patients have an infection(s) which require additional resources. We further noted that, as discussed in section II.C.5.a. of the preamble of the FY 2026 IPPS/LTCH PPS proposed rule (90 FR 18049 through 18052), we received an MS-DRG request related to cases reporting a hip or knee procedure with
As we discuss further in this section, based on our analysis of the September 2025 update of the FY 2025 MedPAR file for this FY 2027 IPPS/LTCH PPS proposed rule, we continue to believe it is appropriate to propose new MS-DRGs 403 and 404 to better differentiate and reflect the complexity of services, resource utilization, and severity of illness for patients diagnosed with a PJI. For purposes of our analysis for this FY 2027 IPPS/LTCH PPS proposed rule, in connection with the FY 2026 IPPS/LTCH PPS final rule discussion related to the findings about the restriction logic and overlap of procedure codes, for proposed new MS-DRGs 403 and 404 for FY 2027, we removed the restriction logic under MDC 08 for the procedure code clusters within MS-DRGs 466, 467, and 468, and within MS-DRGs 485, 486, and 487. These changes are reflected in the test version of the ICD-10 MS-DRG GROUPER Software, Version 44, and the draft version of the ICD-10 MS-DRG Definitions Manual, Version 44, available in association with this FY 2027 IPPS/LTCH PPS proposed rule (available on the CMS website at:
Additionally, for this FY 2027 IPPS/LTCH PPS proposed rule, in connection with the FY 2026 IPPS/LTCH PPS final rule discussion related to the request for reassignment of cases with ICD-10-PCS code XW0V0P7 that currently map to the lower severity level MS-DRG to the highest severity level (with MCC) MS-DRG, the requestor submitted a revised request. Specifically, in addition to the previously listed MS-DRGs identified for CMS' consideration for FY 2026, the requestor added MDC 08 MS-DRGs 474, 475, and 476 and MS-DRGs 480, 481, and 482, that are also the subject of the request to reassign cases reporting a hip or knee procedure with a principal diagnosis of PJI from the lower severity level “without CC/MCC” MS-DRG to the higher severity level “with CC” MS-DRG, and further added MDC 08 MS-DRGs 477, 478, and 479 (Biopsies of Musculoskeletal System and Connective Tissue with MCC, with CC, and without CC/MCC, respectively). We also note that separately, this same requestor submitted a request for the reassignment of cases reporting ICD-10-PCS code XW0V0P7 that currently map to the lower severity level MS-DRG to the highest severity level (with MCC) MS-DRG within MDC 10 for MS-DRGs 616, 617, and 618 (Amputation of Lower Limb for Endocrine, Nutritional and Metabolic Disorders with MCC, with CC, without CC/MCC, respectively) and MS-DRGs 628, 629, and 630 (Other Endocrine, Nutritional and Metabolic O.R. Procedures with MCC, with CC, without CC/MCC, respectively) that is discussed separately in section II.C.5 of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule.
Effective October 1, 2021, ICD-10-PCS code XW0V0P7 was created in association with a new technology add-on payment application for CERAMENT® G, a combination device-drug product intended to treat bone infections (for example, osteomyelitis). It is an implantable bone void filler that consists of hydroxyapatite and calcium sulfate, as well as gentamicin sulfate, which is an antibacterial agent. We refer the reader to the September 8, 2020 ICD-10 Coordination and Maintenance Committee meeting materials available on the CMS website at:
For the Spring 2026 ICD-10-PCS code update, the manufacturer of CERAMENT® G submitted a request for a new code to describe another antibiotic-eluting bone void filler product, CERAMENT® V, in association with a new technology add-on payment application for FY 2027. We refer the reader to section II.E.6. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule for additional discussion regarding CERAMENT® V in association with the new technology add-on payment policy. The manufacturer also requested a revision to the existing code, ICD-10-PCS code XW0V0P7, that is reported to identify the administration of CERAMENT® G. CERAMENT® V is an injectable synthetic bone void filler that consists of hydroxyapatite, calcium sulfate, and the antibiotic vancomycin hydrochloride. The manufacturer requested that the description of existing ICD-10-PCS code XW0V0P7 be revised to specifically identify gentamicin and that a new code be created to specifically identify vancomycin in association with the new technology add-on payment application. The agenda and related materials for these specific topics are available on the CMS website at:
Accordingly, to continue our analysis of cases reporting a hip or knee procedure with a principal diagnosis of
The findings show that with removal of the restriction logic from MS-DRGs 466, 467, and 468 there are zero cases reporting a principal diagnosis of PJI with a hip or knee procedure in MS-DRGs 466, 467, and 468. With removal of the restriction logic, the cases that previously grouped to MS-DRGs 466, 467, and 468 are redistributed to MS-DRGs 463, 464, and 465 based on the proposed Version 44 GROUPER logic and the surgical hierarchy. Under the current ICD-10 MS-DRGs Version 43.1, procedure code 0SP90JZ (Removal of synthetic substitute from right hip joint, open approach) is listed in the logic for case assignment to MS-DRGs 463, 464, and 465 and is also listed as part of a code cluster with procedure code 0SR9019 (Replacement of right hip joint with metal synthetic substitute, cemented, open approach) in the logic for case assignment to MS-DRGs 466, 467, and 468. With removal of the cluster restriction logic in MS-DRGs 466, 467, and 468, cases reporting procedure code 0SP90JZ with a principal diagnosis assigned to MDC 08 will group to MS-DRGs 463, 464, and 465 under the proposed ICD-10 MS-DRGs, Version 44. The findings also show that with removal of the restriction logic from MS-DRGs 485, 486, and 487 further redistribution of the cases occurs. Specifically, cases that previously grouped to MS-DRGs 485, 486, and 487 now group or “shift” to other MS-DRGs. As a result, the remaining number of cases in MS-DRGs 466, 467, and 468 and MS-DRGs 485, 486, and 487 is reduced and those MS-DRGs no longer satisfy the criteria for a 3-way split under application of our established criteria for subgroups consistent with the discussion in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36610).
The findings show that for the cases reporting a principal diagnosis of PJI with a hip or knee procedure in MS-DRGs 463, 464, 465, 474, 475, 476, 480, 481, 482, 485, 486, 487, 492, and 493, the average length of stay is generally comparable or longer compared to the average length of stay of all the cases in their respective MS-DRG. Findings from our analysis also show that the average costs of the cases reporting a principal diagnosis of PJI with a hip or knee procedure in MS-DRGs 464, 465, 474, 475, 476, 480, 481, 482, 485, 486, 487, 492, and 493 are higher compared to the average costs of all the cases in their respective MS-DRG. We note that the average length of stay and the average costs of the 5 cases reporting a PJI with a hip or knee procedure in MS-DRG 494 are shorter than (2.6 days versus 3.3 days) the average length of stay and lower than ($15,251 versus $18,846) the average costs of all the cases in MS-DRG 494. We also note that the average costs of the 3,262 cases reporting a principal diagnosis of PJI with a hip or knee procedure in MS-DRG 463 are approximately $49 less than the average costs of all the cases in MS-DRG 463 ($44,259 versus $44,308). For the cases reporting procedure code XW0V0P7 without a principal diagnosis of PJI in
Lastly, for the cases reporting both a principal diagnosis of PJI with a hip or knee procedure and ICD-10-PCS code XW0V0P7 in MS-DRGs 463, 464, 465, 474, 475, 485, and 486, we found that the average length of stay is longer and the average costs are comparable or higher compared to the average length of stay and average costs of the cases reporting a principal diagnosis of PJI with a hip or knee procedure without ICD-10-PCS code XW0V0P7, as well as compared to all the cases in their respective MS-DRG.
Based on our review and analysis of the data, we believe the data support proposing a new base MS-DRG for the cases reporting a PJI with a hip or knee procedure to better differentiate and reflect the complexity of services, resource utilization, and severity of illness of these patients. In connection with our review and analysis of the data, we note that under the current ICD-10 MS-DRGs Version 43.1, diagnosis codes T84.53XA (Infection and inflammatory reaction due to internal right knee prosthesis, initial encounter) and T84.54XA (Infection and inflammatory reaction due to internal left knee prosthesis, initial encounter) are listed in the logic for case assignment to MS-DRGs 485, 486, and 487, and are also listed in Table 6P.3b in association with this FY 2027 IPPS/LTCH PPS proposed rule as they describe a PJI of the knee and were included in our analysis previously discussed. Therefore, we believe it is appropriate to propose to remove these codes from the logic for case assignment to MS-DRGs 485, 486, and 487 in association with the removal of the restriction logic so that cases reporting a PJI with a knee procedure from those MS-DRGs appropriately group to the proposed new base MS-DRG.
We also note that, as previously described, procedure code XW0V0P7 is currently designated as a non-O.R. procedure. Because our analysis of the data supports the reassignment of cases reporting procedure code XW0V0P7 without a principal diagnosis of PJI from the lower severity level (without CC/MCC or with CC) to the higher (with MCC) severity level, we are proposing to redesignate procedure code XW0V0P7 from a non-O.R. procedure to a non-O.R. procedure affecting the MS-DRG assignment at the higher with MCC severity level for MS-DRGs 463, 474, 477, 480, and 492. We further note that because the data show that the cases reporting both a principal diagnosis of PJI with a hip or knee procedure and ICD-10-PCS code XW0V0P7 in MS-DRGs 463, 464, 465, 474, 475, 485, and 486 have a longer average length of stay and higher average costs compared to the average length of stay and average costs of the cases reporting a principal diagnosis of PJI with a hip or knee procedure alone (without ICD-10-PCS code XW0V0P7), with the proposed redesignation of code XW0V0P7 from non-O.R. to non-O.R. affecting the MS-DRG, these cases reporting ICD-10-PCS code XW0V0P7 would also be reassigned at the highest severity level in connection with a new base MS-DRG proposal and consistent with the proposal for assignment to MS-DRGs 463, 474, 477, 480, and 492 previously discussed. As such, the data support proposing a new base MS-DRG for cases reporting a principal diagnosis of PJI with a hip or knee procedure with or without procedure code XW0V0P7.
Consistent with our established process as discussed in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, once the decision has been made to propose to make further modifications to the MS-DRGs, such as creating a new base MS-DRG, all five criteria to create subgroups must be met for the base MS-DRG to be split (or subdivided) by a CC subgroup. Therefore, we applied the criteria to create subgroups in a base MS-DRG. We note that, as shown in the table that follows, a three-way split of this proposed new base MS-DRG failed to meet the criterion that there is at least a 20% difference in average costs in the without CC/MCC group. The following table illustrates our findings.
As discussed in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, if the criteria for a three-way split fail, the next step is to determine if the criteria are satisfied for a two-way split. We therefore applied the criteria for a two-way split for the “with MCC and without MCC” subgroups and found that all five criteria were met. The following table illustrates our findings and reflects a simulation of the proposed new MS-DRG 403 (Hip or Knee Procedures with Principal Diagnosis of Periprosthetic Joint Infection with MCC or Insertion of Antibiotic-eluting Bone Void Filler) and MS-DRG 404 (Hip or Knee Procedures with Principal Diagnosis of Periprosthetic Joint Infection without MCC).
For the proposed new MS-DRGs to identify cases reporting a PJI with a hip or knee procedure with or without procedure code XW0V0P7, there is at least (1) 500 cases in the MCC group and 500 cases in the without MCC group; (2) 5 percent of the cases in the MCC group and 5 percent in the without MCC group; (3) a 20 percent difference in average costs between the MCC group and the without MCC group; (4) a $2,000 difference in average costs between the MCC group and the without MCC group; and (5) a 3-percent reduction in cost variance, indicating that the proposed severity level splits increase the explanatory power of the base MS-DRG in capturing differences in expected cost between the proposed MS-DRG severity level splits by at least 3-percent and thus improve the overall accuracy of the IPPS payment system.
As also previously discussed, in connection with the proposed removal of the restriction logic and findings from our analysis, existing MS-DRGs 466, 467, and 468 and MS-DRGs 485, 486, and 487 would no longer meet the criteria for a 3-way split under our established process for applying the criteria to create subgroups within a base MS-DRG. We note that, as shown in the table that follows, a three-way split for MS-DRGs 466, 467, and 468 failed to meet the criterion that there be at least 500 cases in the MCC group and that there is at least a 20% difference in average cost between the CC and NonCC group. The following table illustrates our findings.
As discussed in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, if the criteria for a three-way split fail, the next step is to determine if the criteria are satisfied for a two-way split. We therefore applied the criteria for a two-way split for the “with MCC and without MCC” subgroups and found that a two-way split for these MS-DRGs failed to meet the criterion that there be at least 500 cases in the MCC group. The following table illustrates our findings.
We then applied the criteria for a two-way split for the “with CC/MCC” and “without CC/MCC” subgroups. As shown in the table that follows, a two-way split of this base MS-DRG failed to meet the criterion that there be at least a 20% difference in average cost between the with CC/MCC and the without CC/MCC group.
We are therefore proposing to delete MS-DRGs 466, 467, and 468 and proposing to create new base MS-DRG 449 (Revision of Hip or Knee Replacement). We also note that following our analysis previously described that reflects removal of the restriction logic for MS-DRGs 466, 467, and 468, we identified 20 procedure codes that are listed individually in the logic for case assignment to MS-DRGs 466, 467, and 468 that are also listed separately in the logic with another procedure code as a code cluster. For example, procedure code 0SPE0JZ (Removal of synthetic substitute from left hip joint, acetabular surface, open approach) is listed individually and is also listed separately with procedure code 0SRB019 (Replacement of left hip joint with metal synthetic substitute, cemented, open approach) as a code cluster. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 43.1, which is available on the CMS website at:
The following table illustrates our simulation of proposed new MS-DRG 449.
We then applied the criteria to MS-DRGs 485, 486, and 487 in connection with the proposed removal of the restriction logic. We note that, as shown in the table that follows, a three-way split for MS-DRGs 485, 486, and 487 failed to meet the criterion that there be at least 500 cases in the MCC group. The following table illustrates our findings.
As discussed in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, if the criteria for a three-way split fail, the next step is to determine if the criteria are satisfied for a two-way split. We therefore applied the criteria for a two-way split for the “with MCC and without MCC” groups. We note that, as shown in the table that follows, a two-way split for these MS-DRGs failed to meet the criterion that there be at least 500 cases in the MCC group. The following table illustrates our findings.
We are therefore proposing to delete MS-DRGs 485, 486, and 487 and proposing to create new base MS-DRG 400 (Knee Procedures with Principal Diagnosis of Infection). The following table illustrates our simulation of the proposal.
In summary, for FY 2027, we are proposing to (1) remove the restriction logic for MS-DRGs 466, 467, and 468 and MS-DRGs 485, 486, and 487, (2) remove ICD-10-CM diagnosis codes T84.53XA and T84.54XA from the logic for case assignment to MS-DRGs 485, 486, and 487, (3) delete MS-DRGs 466, 467, and 468 and MS-DRGs 485, 486, and 487, (4) create new base MS-DRG 449 and new base MS-DRG 400 with the logic lists as reflected in Tables 6P.3c and 6P.3d, respectively, that is available in association with this FY 2027 IPPS/LTCH PPS proposed rule, (5) redesignate procedure code XW0V0P7 from non-O.R. to non-O.R. affecting specified MS-DRGs as discussed in this section of this FY 2027 IPPS/LTCH PPS proposed rule, (6) create new MS-DRG 403 (Hip or Knee Procedures with Principal Diagnosis of Periprosthetic Joint Infection with MCC or Insertion of Antibiotic-eluting Bone Void Filler) to reflect cases reporting a hip or knee procedure with a principal diagnosis of PJI and the reassignment of cases reporting ICD-10-PCS code XW0V0P7 from the lower severity level to the higher (with MCC) severity level and create new MS-DRG 404 (Hip or Knee Procedures with Principal Diagnosis of Periprosthetic Joint Infection without MCC) with the logic lists as reflected in Table 6P.3b, and (7) reassign cases reporting ICD-10-PCS code XW0V0P7 from the lower severity level (without CC/MCC or with CC) to the higher (with MCC) severity level and revise the titles to the following MS-DRGs to reflect the proposed reassignment.
We note that discussion of the surgical hierarchy for the proposed modification is discussed in section II.C.14. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule.
We also note that the titles for MS-DRGs 463, 464, and 465 reflect “Wound Debridement and Skin Graft Except Hand for Musculoskeletal and Connective Tissue Disorders with MCC, with CC, and without CC/MCC”, respectively. We believe the term “and” in these MS-DRG titles may be misleading as it implies that both a wound debridement and skin graft need to be reported to satisfy the logic for case assignment to these MS-DRGs. However, the logic for case assignment to MS-DRGs 463, 464, and 465 is satisfied when either a procedure code describing a wound debridement or a procedure code describing a skin graft (except hand) from the logic list is reported. Therefore, we are proposing to revise the term “and” to “or” for the titles for MS-DRGs 463, 464, and 465. These proposed title changes are reflected in the test version of the ICD-10 MS-DRG GROUPER Software, Version 44, and the draft version of the ICD-10 MS-DRG Definitions Manual, Version 44, available in association with this FY 2027 IPPS/LTCH PPS proposed rule (available on the CMS website at:
As discussed in the preamble of section II.C.4. of this FY 2027 IPPS/LTCH PPS proposed rule, we received a request to reassign cases reporting ICD-10-PCS code XW0V0P7 (Introduction of antibiotic-eluting bone void filler into bones, open approach, new technology group 7) from the lower severity level MS-DRG to the highest severity level (with MCC) MS-DRG within MDC 10 for MS-DRGs 616, 617, and 618 (Amputation of Lower Limb for Endocrine, Nutritional and Metabolic Disorders with MCC, with CC, without CC/MCC, respectively) and MS-DRGs 628, 629, and 630 (Other Endocrine,
As also discussed in the preamble of section II.C.4 of this FY 2027 IPPS/LTCH PPS proposed rule, ICD-10-PCS code XW0V0P7 was created effective October 1, 2021, in association with a new technology add-on payment application for CERAMENT® G, a combination device-drug product intended to treat bone infections (for example, osteomyelitis). It is an implantable bone void filler that consists of hydroxyapatite and calcium sulfate, as well as gentamicin sulfate, which is an antibacterial agent. We refer the reader to the September 8, 2020 ICD-10 Coordination and Maintenance Committee meeting materials available on the CMS website at:
In the preamble of section II.C.4 of this FY 2027 IPPS/LTCH PPS proposed rule we also noted that for the Spring 2026 ICD-10-PCS code update, the manufacturer of CERAMENT® G submitted a request for a new code to describe another antibiotic-eluting bone void filler product, CERAMENT® V, in association with a new technology add-on payment application for FY 2027. We refer the reader to section II.E.6. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule for additional discussion regarding CERAMENT® V in association with the new technology add-on payment policy. The manufacturer also requested a revision to the existing code, ICD-10-PCS code XW0V0P7, that is reported to identify the administration of CERAMENT® G. CERAMENT® V is an injectable synthetic bone void filler that consists of hydroxyapatite, calcium sulfate, and the antibiotic vancomycin hydrochloride. The manufacturer requested that the description of existing ICD-10-PCS code XW0V0P7 be revised to specifically identify gentamicin and that a new code be created to specifically identify vancomycin in association with the new technology add-on payment application. The agenda and related meeting materials for these specific topics are available on the CMS website at:
The requestor (the manufacturer) stated that the occurrence and economic burden of osteomyelitis is significant and diabetes has been driving the increase in osteomyelitis incidence over time, with the incidence of diabetes-related osteomyelitis rising from 2.3 to 10.5 cases per 100,000 person-years from the 1970s to the 1990s as reported by the Mayo Clinic. The requestor reported that the incidence of foot osteomyelitis among patients with diabetes mellitus is estimated to be approximately 0.3% per year, with a lifetime risk of 4%, and 68% of patients with diabetes-related foot osteomyelitis needing an amputation. Studies indicate many individuals are readmitted to the hospital within 1 year of the amputation due to complications of the affected limb.
In addition to diabetic foot ulcers, the requestor stated that the incidence of fracture-associated osteomyelitis varies from 1.8% to 27% depending on the bone involved and the grade/type of fracture. According to the requestor, clinical trials demonstrate that the overall incidence of osteomyelitis may continue to rise due to multiple factors including improved diagnosis, increasing patient risk factors such as-diabetes, and increased needs for arthroplasties. Per the requestor, re-hospitalization and treatment for osteomyelitis has significant costs to both the individual and healthcare systems, impacting quality of life and the ability to work.
The requestor stated that the antimicrobial properties of CERAMENT® G combat antimicrobial resistance, thereby effectively reducing the recurrence of infection. The requestor also stated that these antimicrobial properties have been shown to achieve good infection prevention with a shortened course of systemic antibiotics that does not extend beyond seven days.
The requestor performed its own analysis using Medicare claims data across a subset of MS-DRGs for cases reporting the use of CERAMENT® G with ICD-10-PCS code XW0V0P7 and acknowledged that the volume of cases is small, however, it also stated that its findings reflected that claims reporting the use of CERAMENT® G have higher resource utilization compared to claims that did not report the use of CERAMENT® G. Of the MS-DRGs analyzed, the requestor stated the cases reporting ICD-10-PCS code XW0V0P7 in the lower severity level MS-DRG had standardized costs that were more aligned with the costs of the higher severity level MS-DRG sequenced above it. The requestor stated its belief that the data demonstrate cases reporting ICD-10-PCS code XW0V0P7 should be reassigned to the higher MCC level MS-DRG within the MS-DRG groupings requested.
We reviewed claims data from the September 2025 update of the FY 2025 MedPAR file for MS-DRGs 616, 617, 618, 628, 629, and 630 and for cases reporting ICD-10-PCS code XW0V0P7. Findings from our analysis are shown in the following table.
The findings show that the cases reporting ICD-10-PCS code XW0V0P7 in MS-DRGs 616, 617, 628, and 629 have a longer average length of stay and higher average costs compared to all the cases in their respective MS-DRGs. We note there were zero cases reporting ICD-10-PCS code XW0V0P7 in MS-DRGs 618 and 630.
Based on our review and analysis of the data, we agree with the requestor that the average costs of the cases reporting ICD-10-PCS code XW0V0P7 at the lower severity level are more aligned with the average costs of the cases at the higher MCC severity level. To better reflect the resource utilization and severity of illness of patients with diabetic osteomyelitis, we are proposing to reassign cases reporting ICD-10-PCS code XW0V0P7 from the lower severity (without CC/MCC and with CC) MS-DRGs to the higher severity (MCC) level MS-DRG.
As previously discussed, there were no cases found in our analysis reporting ICD-10-PCS code XW0V0P7 in MS-DRGs 618 and 630 at the “without CC/MCC” level, however, if any cases reporting ICD-10-PCS code XW0V0P7 potentially grouped to MS-DRGs 618 or 630 in the future, we would anticipate those cases also demonstrating higher average costs compared to all the cases in their respective MS-DRG.
Therefore, for FY 2027, we are proposing to reassign cases reporting procedure code XW0V0P7 from the lower severity level MS-DRGs 617 and 618 to the higher severity (MCC) level MS-DRG 616 and from the lower severity level MS-DRGs 629 and 630 to the higher severity (MCC) level MS-DRG 628. We are also proposing to revise the title of MS-DRG 616 from “Amputation of Lower Limb for Endocrine, Nutritional and Metabolic Disorders with MCC” to “Amputation of Lower Limb for Endocrine, Nutritional and Metabolic Disorders with MCC or Insertion of Antibiotic-eluting Bone Void Filler” and to revise the title of MS-DRG 628 from “Other Endocrine, Nutritional and Metabolic O.R. Procedures with MCC” to “Other Endocrine, Nutritional and Metabolic O.R. Procedures with MCC or Insertion of Antibiotic-eluting Bone Void Filler” to reflect the reassignment of cases reporting procedure code XW0V0P7.
Consistent with our annual review of the MS-DRGs, we identified that the current GROUPER logic for MDC 11 MS-DRGs 665, 666, and 667 (Prostatectomy with MCC, with CC, and without CC/MCC, respectively) contains a logic list referred to as “OPERATING ROOM PROCEDURES” that includes 14 ICD-10-PCS procedure codes describing the destruction, excision, and resection of the prostate and also includes eight ICD-10-PCS procedure code combinations or procedure code “clusters” that, when reported together, satisfy the logic for assignment to MS-DRGs 665, 666, and 667. The code combinations are represented by two ICD-10-PCS procedure codes and include one ICD-10-PCS code for the resection of the prostate with one ICD-10-PCS code for the resection of bilateral seminal vesicles.
We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 43.1, which is available on the CMS website at:
The eight ICD-10-PCS procedure code combinations currently assigned to MDC 11 MS-DRGs 665, 666, and 667 that identify the resection of the prostate with the resection of bilateral seminal vesicles are shown in the following table:
As we examined the GROUPER logic that would determine the assignment of a case to MDC 11 MS-DRGs 665, 666, and 667, we noted that ICD-10-PCS codes 0VT00ZZ, 0VT04ZZ, 0VT07ZZ and 0VT08ZZ that describe the resection of the prostate, differing only in approach, are assigned to MS-DRGs 665, 666, and 667 as standalone procedures, as well as being included in the eight procedure code combinations listed previously in these same MS-DRGs. We note that the GROUPER software program will recognize codes 0VT00ZZ, 0VT04ZZ, 0VT07ZZ and 0VT08ZZ and assign MS-DRGs 665, 666, and 667 even when a procedure code describing the resection of the bilateral seminal vesicles is not also reported, when the other parameters of the GROUPER logic are met. As procedure codes 0VT00ZZ, 0VT04ZZ, 0VT07ZZ and 0VT08ZZ are assigned to MS-DRGs 665, 666, and 667 as standalone procedures, specific assignment of these procedure codes in procedure code combinations in MS-DRGs 665, 666, and 667 is not required.
Therefore, for FY 2027, we are proposing to remove the eight ICD-10-PCS procedure code combinations listed previously from the GROUPER logic of MDC 11 MS-DRGs 665, 666, and 667 (Prostatectomy with MCC, with CC, and without CC/MCC, respectively).
As discussed in section II.C.11.b.1 of this FY 2027 IPPS/LTCH PPS proposed rule, we received a request to change the designation of ICD-10-PCS code XW033DA (Introduction of donislecel-jujn allogeneic pancreatic islet cellular suspension into peripheral vein, percutaneous approach, new technology group 10) from a non-O.R. procedure to an O.R. procedure. In the ICD-10 MS-DRGs Definitions Manual Version 43.1, procedure code XW033DA is currently designated as a non-O.R. procedure affecting assignment to MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/MCC, respectively).
In our review of the GROUPER logic of MS-DRGs 673, 674, and 675, we noted that the logic for case assignment to MS-DRGs 673, 674, and 675 as displayed in the ICD-10 MS-DRG Version 43.1 Definitions Manual (which is available on the CMS website at:
The sixth logic list entitled “or Principal Diagnosis” is defined by ICD-10-CM diagnosis codes E10.21 (Type 1 diabetes mellitus with diabetic nephropathy), E10.22 (Type 1 diabetes mellitus with diabetic chronic kidney disease) and E10.29 (Type 1 diabetes mellitus with other diabetic kidney complication) and the seventh logic list entitled “and Non-Operating Room Procedures” is defined by the 11 ICD-10-PCS procedure codes describing the introduction of pancreatic islet cells listed in the following table. These 11 procedure codes are all designated as non-O.R. procedures affecting assignment to MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/MCC, respectively).
The sixth and seventh logic lists are the components of the special logic in MS-DRGs 673, 674, and 675 for pancreatic islet cell transplantation. As discussed in the FY 2005 IPPS/LTCH PPS final rule (69 FR 48950 through 48953), the procedure codes describing islet cell transplantation were added to the GROUPER logic of DRG 315 (Other Kidney and Urinary Tract O.R. Procedures), the predecessor DRG of MS-DRGs 673, 674, and 675, to recognize the resource utilization associated with islet cell transplantation, performed to decrease or eliminate the need for insulin in patients with type 1 diabetes, in the absence of any other surgical procedure.
In the FY 2005 IPPS/LTCH PPS final rule, we acknowledged that islet cell transplants do not involve either the kidney or the urinary tract directly. Rather, the islet cells are transplanted into the patient's liver. We also acknowledged that the diagnoses are the same for islet cell and pancreas transplants, and that the patient populations involved in these two procedures are virtually identical in terms of comorbidities and the nature of their primary disease. However, we stated islet cell transplants are not exactly the same as solid organ transplants. We stated that while the patient populations requiring intervention are similar, we did not believe that one can equate an operation of the magnitude of a pancreas transplant with a less intensive islet cell transplantation in which the portal vein is accessed and islet cells infused through a catheter. It is only because the technical aspects of islet transplants are of a surgical nature that we modified surgical DRG 315 to reflect the transfusion of islet cells.
To understand the resource use for the subset of cases reporting procedure codes describing the introduction of pancreatic islet cells for this FY 2027 IPPS/LTCH PPS proposed rule, we began our analysis by examining claims data from the September 2025 update of the FY 2025 MedPAR file for cases assigned to MS-DRGs 673, 674, and 675. We found zero cases reporting procedure codes describing the introduction of pancreatic islet cells in MS-DRGs 673, 674, and 675.
Then, to evaluate the frequency with which the procedure codes describing the introduction of pancreatic islet cells are reported for different clinical scenarios, we examined claims data from the September 2025 update of the FY 2025 MedPAR file to determine the MS-DRGs reporting one of the 11 procedure codes listed previously that describe the introduction of pancreatic islet cells. Our findings are shown in the following table.
The data analysis shows a procedure code describing the introduction of pancreatic islet cells was reported in a total of ten cases across five MS-DRGs with an average length of stay of 20.2 days and average costs of $101,092. We reviewed these assignments and note that the special logic in MS-DRGs 673, 674, and 675 for pancreatic islet cell transplantation is defined by ICD-10-CM diagnosis codes E10.21 (Type 1 diabetes mellitus with diabetic nephropathy), E10.22 (Type 1 diabetes mellitus with diabetic chronic kidney disease) and E10.29 (Type 1 diabetes mellitus with other diabetic kidney complication). As noted previously, the ICD-10-PCS procedure codes describing the introduction of pancreatic islet cells are all designated as non-O.R. procedures affecting assignment only to MS-DRGs 673, 674, and 675. Therefore, when diagnosis codes E10.21, E10.22, or E10.29 are not reported as principal diagnosis, the MS-DRG assignment is determined by the principal diagnosis and other procedures reported on the claim when the ICD-10-PCS procedure codes describing the introduction of pancreatic islet cells are assigned.
Pancreatic islet cell transplantation is indicated for patients with type 1 diabetes who have attempted to control their hypoglycemic episodes medically but continue to have hypoglycemic episodes without recognizing them.
We further note in type 1 diabetes, the body's immune system attacks and destroys the beta cells. Patients with type 1 diabetes must take insulin because their bodies no longer make this hormone. In patients for whom the primary indication for transplantation is unstable glycemic control, particularly hypoglycemic unawareness, the choice is between solid-organ pancreas transplantation alone or islet transplantation.
As discussed in prior rulemaking, the MS-DRGs are a classification system intended to group together diagnoses and procedures with similar clinical characteristics and utilization of resources. We generally seek to identify sufficient sets of claims data with demonstrated clinical similarity in developing diagnosis related groups. After reviewing the indications for both whole organ pancreas transplant and pancreatic islet cell transplantation, and consideration of the intent of the MS-DRGs, we believe that for clinical coherence, the cases reporting procedure codes that describe the introduction of pancreatic islet cells should be grouped with the subset of cases that report pancreas transplant procedures. While we continue to acknowledge that islet cell transplants are not exactly the same as solid organ pancreas transplants, we believe the procedures are coherent given the similarity in clinical indication. For these reasons, we believe reassigning the 11 ICD-10-PCS procedure codes that describe the introduction of pancreatic islet cells from MS-DRGs 673, 674, and 675 to Pre-MDC MS-DRGs 008 (Simultaneous Pancreas and Kidney Transplant), MS-DRG 010 (Pancreas Transplant) and MS-DRG 019 (Simultaneous Pancreas and Kidney Transplant with Hemodialysis) would improve clinical coherence in these MS-DRGs.
The following table reflects the simulation of our proposed changes in MS-DRGs 008, 010, and 019.
We believe that this simulation supports that the resulting MS-DRG assignments would be more clinically homogeneous, coherent and better reflect hospital resource use. As the table shows, for MS-DRG 008, there were a total of 168 cases with an average length of stay of 9.3 days and average costs of $51,760. For MS-DRG 010,
In summary, for FY 2027, for clinical coherence, we are proposing to add the 11 ICD-10-PCS procedure codes that describe the introduction of pancreatic islet cells to a new “Islet Cell Transplant Procedures” logic list in MS-DRGs 008, 010, and 019. Additionally, we are also proposing to delete the sixth logic list entitled “or Principal Diagnosis” that is defined by ICD-10-CM diagnosis codes E10.21 (Type 1 diabetes mellitus with diabetic nephropathy), E10.22 (Type 1 diabetes mellitus with diabetic chronic kidney disease) and E10.29 (Type 1 diabetes mellitus with other diabetic kidney complication) and the seventh logic list entitled “and Non-Operating Room Procedures” from MS-DRGs 673, 674, and 675. Lastly, for consistency, we are proposing to change the title of MS-DRG 008 from “Simultaneous Pancreas and Kidney Transplant” to “Simultaneous Pancreas, Islet Cell and Kidney Transplant,” proposing to change the title of MS-DRG 010 from “Pancreas Transplant” to “Pancreas or Islet Cell Transplant” and proposing to change the title of MS-DRG 019 from “Simultaneous Pancreas and Kidney Transplant with Hemodialysis” to “Simultaneous Pancreas, Islet Cell and Kidney Transplant with Hemodialysis” to better reflect the assigned procedures effective October 1, 2026, for FY 2027. Under this proposal, the current “principal or secondary diagnosis” logic in MS-DRGs 008, 010, and 019 would be maintained. Additionally, to maintain stability, we propose to add logic to MS-DRG 010 to exclude cases also reporting kidney transplant procedures to ensure cases will continue to group accordingly to MS-DRGs 008 and 019.
We refer the reader to Table 6P.4a, Table 6P.4b, and Table 6P.4c associated with this FY 2027 IPPS/LTCH PPS proposed rule (which is available on the CMS website at:
Consistent with our annual review of the MS-DRGs, we identified that the current GROUPER logic for MDC 12 MS-DRGs 707 and 708 (Major Male Pelvic Procedures with MCC and without CC/MCC, respectively) contains a logic list referred to as “OPERATING ROOM PROCEDURES” that includes 51 procedure codes describing various male pelvic procedures, including procedure codes describing the destruction, or resection of the prostate, and also includes eight procedure code combinations or procedure code “clusters” that, when reported together, satisfy the logic for assignment to MS-DRGs 707 and 708. The code combinations are represented by two procedure codes and include one code for the resection of the prostate with one code for the resection of bilateral seminal vesicles.
We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 43.1, which is available on the CMS website at:
The eight ICD-10-PCS procedure code combinations currently assigned to MS-DRGs 707 and 708 that identify the resection of the prostate with the resection of bilateral seminal vesicles are shown in the following table:
As we examined the GROUPER logic that would determine an assignment of a case to MDC 12 MS-DRGs 707 and 708, we noted that ICD-10-PCS codes 0VT00ZZ (Resection of prostate, open approach) and 0VT04ZZ (Resection of prostate, percutaneous endoscopic approach) that describe the resection of the prostate, differing only in approach,
During our review of this issue, we noted that that ICD-10-PCS codes 0VT07ZZ (Resection of prostate, via natural or artificial opening) and 0VT08ZZ (Resection of prostate, via natural or artificial opening endoscopic) that describe the transurethral resection of the prostate, or removal of the prostate using an instrument inserted through the urethra, are also represented in the eight procedure code combinations in MS-DRGs 707 and 708. These codes are assigned to MDC 12 MS-DRGs 713 and 714 (Transurethral Prostatectomy with CC/MCC and without CC/MCC) when reported as standalone procedures. We refer the reader to the ICD-10 MS-DRG Definitions Manual Version 43.1, which is available on the CMS website at:
We then analyzed claims data from the September 2025 update of the September 2025 MedPAR file for all cases in MS-DRGs 707 and 708 and compared the results to cases reporting procedure codes describing transurethral prostatectomy and resection of bilateral seminal vesicles in these MS-DRGs. Our findings are shown in the following table.
As shown in the table, for MS-DRG 707, we identified a total of 1,697 cases, with an average length of stay of 3.1 days and average costs of $19,942. Of the 1,697 cases in MS-DRG 707, there were three cases reporting transurethral prostatectomy and resection of bilateral seminal vesicles with an average length of stay of 4 days and average costs of $14,896. For MS-DRG 708, we identified a total of 1,685 cases, with an average length of stay of 1.5 days and average costs of $14,075. Of the 1,685 cases in MS-DRG 708, there was one case reporting transurethral prostatectomy and resection of bilateral seminal vesicles with a length of stay of 1 day and costs of $6,726.
We also examined claims data from the September 2025 update of the September 2025 MedPAR file for MS-DRGs 713 and 714. Our findings are shown in the following table.
In MS-DRG 713, we found a total of 3,746 cases with an average length of stay of 3.4 days and average costs of $14,670. In MS-DRG 714, we found a total of 860 cases with an average length of stay of 1.7 days and average costs of $10,869.
Overall, the data analysis shows that the average costs for the cases reporting transurethral prostatectomy and resection of bilateral seminal vesicles in MS-DRGs 707 and 708 are more aligned with the average costs for all the cases in MS-DRGs 713 ($14,896 versus $14,670) and 714 ($6,726 versus $10,869), respectively.
We reviewed this issue and noted that ICD-10-PCS procedure codes 0VT07ZZ or 0VT08ZZ describe transurethral resection of the prostate, and therefore, are most clinically aligned with the procedure codes assigned to MDC 12 MS-DRGs 713 and 714, where they are currently assigned when reported as standalone procedures.
Therefore, for FY 2027, we are proposing to delete the eight ICD-10-PCS procedure code combinations listed previously from the GROUPER logic of MDC 12 MS-DRGs 707 and 708 (Major Male Pelvic Procedures with CC/MCC and without CC/MCC, respectively). Under this proposal, when the other parameters of the GROUPER logic are met, cases reporting procedure codes 0VT00ZZ (Resection of prostate, open approach) and 0VT04ZZ (Resection of prostate, percutaneous endoscopic approach) would group to MS-DRGs 707 and 708, even when a procedure code describing the resection of the bilateral seminal vesicles is not also reported. Additionally, under this proposal, when the other parameters of the GROUPER logic are met, cases reporting procedure codes 0VT07ZZ (Resection of prostate, via natural or artificial opening) or 0VT08ZZ (Resection of prostate, via natural or artificial opening endoscopic) would group to MS-DRGs 713 and 714 (Transurethral Prostatectomy with CC/MCC and without CC/MCC), even when a procedure code describing the
During our review of this issue and the examination of the MS-DRGs within MDC 12, we noted that the title of MS-DRGs 715 and 716 is “Other Male Reproductive System O.R. Procedures for Malignancy with and without CC/MCC, respectively” and the title of MS-DRGs 717 and 718 is “Other Male Reproductive System O.R. Procedures Except Malignancy with and without CC/MCC, respectively.” In examining the GROUPER logic for these MS-DRGs and reviewing the diagnoses listed under the heading of “Principal Diagnosis” in the ICD-10 MS-DRG Definitions Manual, we believe the titles for these MS-DRGs no longer accurately reflect the assigned diagnoses. The titles of DRGs 715, 716, 717, and 718 were established prior to the transition to the Medicare Severity DRGs (MS-DRGs) from the CMS DRGs (48 FR 39883). In the development of the DRGs, generally, in each MDC, a medical and a surgical class was formed and referred to as “other medical diseases” and “other surgical procedures,” respectively. The “other” medical and surgical classes are not as precisely defined from a clinical perspective and include diagnoses or procedures which are infrequently encountered. The “other” surgical class contains surgical procedures which, while infrequent, could still reasonably be expected to be performed for a patient in the particular MDC. Assignment to the “other” surgical class should only occur if no other surgical class more closely related to the diagnoses in the MDC is appropriate. As the cases in MS-DRGs 715 and 716 are further defined based on the precise principal diagnosis for which the patients were admitted to the hospital, we believe it is appropriate to propose to revise the titles of these MS-DRGs for consistency. Therefore, we are also proposing to change the title of MS-DRGs 715 and 716 from “Other Male Reproductive System O.R. Procedures for Malignancy with and without CC/MCC, respectively” to “Male Reproductive System and Other O.R. Procedures for Malignancy with and without CC/MCC, respectively” and to change the title of MS-DRGs 717 and 718 from “Other Male Reproductive System O.R. Procedures Except Malignancy with and without CC/MCC, respectively” to “Other Male Reproductive System O.R. Procedures with and without CC/MCC, respectively” to better reflect the assigned diagnoses.
As discussed in section II.C.1.b of the preamble of this proposed rule, we are providing a test version of the ICD-10 MS-DRG GROUPER Software, Version 44, so that the public can better analyze and understand the impact of the proposals included in this proposed rule. We note that at the time of the development of the test software, this issue was unable to be addressed and therefore, the test software does not reflect the proposed change to the title of MS-DRGs 715 and 716 from “Other Male Reproductive System O.R. Procedures for Malignancy with and without CC/MCC, respectively” to “Male Reproductive System and Other O.R. Procedures for Malignancy with and without CC/MCC, respectively” and the proposed change to the title of MS-DRGs 717 and 718 from “Other Male Reproductive System O.R. Procedures Except Malignancy with and without CC/MCC, respectively” to “Other Male Reproductive System O.R. Procedures with and without CC/MCC, respectively” in MDC 12 for Version 44.
CYTALUX® (pafolacianine) is a folate receptor-targeted fluorescent optical imaging agent used as an adjunct for intraoperative identification of ovarian cancer. CYTALUX® binds to the folate receptors on these cancer cells and is endocytosed into folate receptor positive cancer cells. CYTALUX® is administered intravenously prior to gynecologic oncology procedures, including ovarian cytoreduction and debulking surgeries, and requires use of a near-infrared imaging system (NIR) to illuminate, thereby making cancer visible within the surgical field. CYTALUX® received FDA approval and is indicated as an adjunct for intraoperative identification of malignant lesions in adult patients with ovarian cancer. We note that CYTALUX® for the ovarian indication was approved for new technology add-on payments for FY 2024 (88 FR 58804 through 58810) and FY 2025 (89 FR 69120 through 69126).
We received a request from the manufacturer of CYTALUX® to modify the GROUPER logic of MS-DRGs 736, 737, and 738 (Uterine and Adnexa Procedures for Ovarian or Adnexal Malignancy with MCC, with CC, and without CC/MCC, respectively) by reassigning cases with an ICD-10-PCS code that describes fluorescence guided procedures of the female reproductive system using CYTALUX® (pafolacianine) to the higher severity level MS-DRG 736 (with MCC) or MS-DRG 737 (with CC). According to the requestor, the utilization of CYTALUX® does not change the surgical procedure but adds significant cost. The requestor performed their own analysis of Medicare claims data from 10/1/2023-3/31/2025 and stated they found approximately 13 cases that used CYTALUX® in ovarian surgery and that they expect adoption to accelerate as NIR systems become more widely available. The requestor stated they found that over 50% of cases using CYTALUX® in ovarian procedures triggered new technology add-on payments averaging $2,285. The requestor also stated they found cases reporting an ICD-10-PCS code that describes fluorescence guided procedures of the female reproductive system using CYTALUX® (pafolacianine) within MS-DRG 737 exhibit higher average costs than baseline and align more closely with cases in MS-DRG 736. Additionally, the requestor stated their analysis also found cases that reported the use of CYTALUX® in MS-DRGs 739, 740, and 741 (Uterine and Adnexa Procedures for Non-Ovarian and Non-Adnexal Malignancy with MCC, with CC, and without CC/MCC, respectively) due to the reporting of diagnosis codes describing metastatic malignancies. The requestor stated their analysis found that cases reporting an ICD-10-PCS code that describes fluorescence guided procedures of the female reproductive system using CYTALUX® (pafolacianine) cases in MS-DRG 737 exhibited higher average costs than baseline ($34,735 vs. $23,538) and aligned more closely with cases in MS-DRG 736 ($39,682).
The requestor further asserted that their review of the Inpatient Standard Analytical Files (SAF) indicated there were some accounts underreporting the full cost of the vial of CYTALUX® due to inconsistent guidance for single-use inpatient drugs and that, where applicable, pharmacy costs were adjusted to account for missing costs of the single-use vial. The requestor stated they found that cases reporting an ICD-10-PCS code that describes fluorescence guided procedures of the female reproductive system using CYTALUX® (pafolacianine) in MS-DRG 737 were approximately $11,000 more expensive than non-CYTALUX cases when controlled for the underreporting of costs. Therefore, the requestor suggested that CMS reassign cases with an ICD-10-PCS code that describes fluorescence guided procedures of the female reproductive system using CYTALUX® (pafolacianine) to MS-DRGs 736 or 737 to ensure accurate payment, clinical
To begin our analysis, we reviewed the GROUPER logic for MS-DRGs 736, 737, 738, 739, 740, and 741. MS-DRGs 736, 737, 738, 739, 740 and 741 contains a logic list referred to as “OPERATING ROOM PROCEDURES” that includes 689 ICD-10-PCS procedure codes that describe uterine and adnexa procedures, a logic list referred to as “Ovarian or Adnexal Malignancy PRINCIPAL DIAGNOSIS” that includes 22 ICD-10-CM diagnosis codes that describe ovarian or adnexal malignancies and a logic list referred to as “Non-Ovarian and Non-Adnexal Malignancy PRINCIPAL DIAGNOSIS” that includes 36 ICD-10-CM diagnosis codes that describe non-ovarian and non-adnexal malignancies. We refer the reader to the ICD-10 MS-DRG Definitions Manual, Version 43.1 (available on the CMS website at:
The following five ICD-10-PCS procedure codes describe fluorescence guided procedures of the female reproductive system using pafolacianine for the ovarian indication.
In the ICD-10 MS-DRGs Definitions Manual Version 43.1, procedure codes 8E0U0EN, 8E0U3EN, 8E0U4EN, 8E0U7EN, and 8E0U8EN are designated as non-O.R. procedures for purposes of MS-DRG assignment, therefore when CYTALUX® is utilized during a uterine and adnexa procedure described by one of the 689 ICD-10-PCS procedure codes in the GROUPER logic for MS-DRGs 736, 737, 738, 739, 740, and 741, the ICD-10-PCS code describing the uterine and adnexa procedure will determine the surgical MS-DRG assignment to one of the previously listed surgical MS-DRGs based on the principal diagnosis reported.
We then examined claims data from the September 2025 update of the FY 2025 MedPAR file for MS-DRGs 736, 737, 738, 739, 740, and 741 to identify cases reporting one of the five procedure codes listed previously that describe fluorescence guided surgery using CYTALUX® (pafolacianine). Our findings are shown in the following table:
As shown in the table, in MS-DRG 736, we identified a total of 647 cases with an average length of stay of 8.5 days and average costs of $33,196. Of those 647 cases, there were two cases reporting one of the five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine), with average costs lower than the average costs in the FY 2025 MedPAR file for MS-DRG 736 ($28,068 compared to $33,196) and a shorter average length of stay (7 days compared to 8.5 days). There were zero cases reporting one of the five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine) in MS-DRGs 737 and 738.
In MS-DRG 739, we identified a total of 481 cases with an average length of stay of 8.4 days and average costs of $33,235. Of those 481 cases, there were two cases reporting one of the five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine), with average costs lower than the average costs in the FY 2025 MedPAR file for MS-DRG 739 ($11,565 compared to $33,235) and a shorter average length of stay (1.5 days compared to 8.4 days). In MS-DRG 740, we identified a total of 1,327 cases with an average length of stay of 3.2 days and average costs of $16,784. Of those 1,327 cases, there was one case reporting one of the five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine), with costs higher than the average costs in the FY 2025 MedPAR file for MS-DRG 740 ($39,154 compared to $16,784), and a longer length of stay (5 days compared to 3.2 days). In MS-DRG 741, we identified a total of 740 cases with an average length of stay of 1.7 days and average costs of $13,365. Of those 1,327 cases, there was one case reporting one of the five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine), with costs higher than the average costs in the FY 2025 MedPAR file for MS-DRG 741 ($14,036 compared to $13,365), and a shorter length of stay (1 day compared to 1.7 days).
The data reflects the six cases reporting one of the five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine) found across MS-DRGs 736, 737, 738, 739, 740, and 741 have an average length of stay of 3.8 days and average costs of $22,076. These six cases have a shorter average length of stay (3.8 days versus 8.5 days) and lower average costs ($22,076 versus $33,196) when compared to all the cases in MS-DRG 736. The six cases reporting one of the five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine) found across MS-DRGs 736, 737, 738, 739, 740, and 741 have a shorter average length of stay (3.8 days versus 4.3 days) and higher average costs ($22,076 versus $18,702) when compared to all the cases in MS-DRG 737.
After reviewing the claims data, we believe it is premature to consider a proposal for cases with an ICD-10-PCS code that describes fluorescence guided procedures of the female reproductive system using CYTALUX® (pafolacianine) for FY 2027. While the data analysis reflects that six cases that report one of the five procedure codes that describe fluorescence guided surgery using CYTALUX® (pafolacianine) across MS-DRGs 736, 737, 738, 739, 740, and 741 demonstrate slightly higher average costs compared to all the cases in MS-DRG 737, the number of cases is small across the MS-DRGs. The claims data also reflect a wide variance with regard to the average costs for these cases reporting fluorescence guided procedures of the female reproductive system using CYTALUX® (pafolacianine). We note the one case that reported a fluorescence guided procedure of the female reproductive system using CYTALUX® (pafolacianine) in MS-DRG 740 had a length of stay of 5 days and costs of $39,154, while the two cases that reported a procedure code describing a fluorescence guided procedure of the female reproductive system using CYTALUX® (pafolacianine) in MS-DRG 739 had an average length of stay of 1.5 days and average costs of $11,565.
We cannot ascertain from the claims data the resource use specifically attributable to the utilization of fluorescence guidance using CYTALUX® (pafolacianine) in procedures of the female reproductive system during inpatient admissions. We recognize the average costs of the small numbers of cases reporting an ICD-10-PCS code that describes fluorescence guided procedures of the female reproductive system using CYTALUX® (pafolacianine) can be greater when compared to the average costs of all cases in their respective MS-DRG however, the MS-DRG system is a system of averages and it is expected that within the diagnostic related groups, some cases may demonstrate higher than average costs, while other cases may demonstrate lower than average costs. We further note that section 1886(d)(5)(A) of the Act provides for Medicare payments to Medicare-participating hospitals in addition to the basic prospective payments for cases incurring extraordinarily high costs. We believe it would be advantageous to allow for more claims data to be analyzed in consideration of any future modifications to the MS-DRGs for which fluorescence guided surgeries using CYTALUX® (pafolacianine) are assigned. We will continue to evaluate the clinical coherence and resource consumption costs that impact this subset of cases and their MS-DRG assignment.
Therefore for the reasons stated, for FY 2027, we are not proposing to modify the GROUPER logic of MS-DRGs 736, 737, and 738 (Uterine and Adnexa Procedures for Ovarian or Adnexal Malignancy with MCC, with CC, and without CC/MCC, respectively) by reassigning cases reporting ICD-10-PCS codes that describes fluorescence guided procedures of the female reproductive system using CYTALUX® (pafolacianine) to the higher severity level MS-DRG 736 (with MCC) or MS-DRG 737 (with CC).
During our review of this issue, we noted that the data analysis reflects that in cases reporting uterine and adnexa procedures in MS-DRGs 736, 737, 738, 739, 740, and 741, the average costs and length of stay are generally similar without regard to the presence of diagnosis codes describing “ovarian or adnexal” malignancies or “non-ovarian or non-adnexal” malignancies. In MS-DRG 736, there were 647 cases reporting an uterine and adnexa procedures with a principal diagnosis describing an “ovarian or adnexal” malignancy and a MCC with average costs of $33,196 and an average length of stay of 8.5 days compared to 481 cases reporting an uterine and adnexa procedures with a principal diagnosis describing a “non-ovarian or non-adnexal” malignancy and a MCC with average costs of $33,235 and an average length of stay of 8.4 days in MS-DRG 739. In MS-DRG 737, there were 1,803 cases reporting an uterine and adnexa procedures with a principal diagnosis describing an “ovarian or adnexal” malignancy and a CC with average costs of $18,702 and an average length of stay of 4.3 days compared to 1,327 cases reporting an uterine and adnexa procedures with a principal diagnosis describing a “non-ovarian or non-adnexal” malignancy and a CC with average costs of $16,784 and an average length of stay of 3.2 days in MS-DRG 740. In MS-DRG 738, there were 317 cases reporting an uterine and adnexa procedures with a principal diagnosis describing an “ovarian or adnexal” malignancy without a CC or an
We reviewed these findings and believe that it may no longer be necessary to subdivide these MS-DRGs based on the diagnosis codes reported. In the FY 1987 proposed notice titled “Medicare Program; Changes to the DRG Classification System” (51 FR 8770 through 8771), we stated that our analysis of cases with a principal diagnosis of malignancy where both a hysterectomy and uterine or adnexa procedures were performed suggested that malignancies and non-malignancies should be classified in different DRGs, and that ovarian and adnexa cancers were the most resource intensive of the malignancies in the DRGs reviewed. We further stated that, among the cases examined in the DRGs, the diagnosis had consistently greater explanatory power with respect to resource intensity than did the procedure performed, therefore we stated that cases with a principal diagnosis of malignancy would be further subdivided. Therefore, for FY 1987, DRG 357 (Non-Radical Hysterectomy, Uterus and Adnexa Procedures, for Ovarian and Adnexal Malignancy) and DRGs 354 and 355 (Non-Radical Hysterectomy, Uterus and Adnexa Procedures for Malignancy Except Ovarian/Adnexal Malignancy; Age over 69 and/or C.C., and Age under 70 without C.C., respectively) were created to “increase homogeneity and thus more accurately reflect resource intensity of cases assigned to these DRGs” (51 FR 31571).
Our analysis of claims data from the September 2025 update of the FY 2025 MedPAR file shows that in the 39 years since the DRGs for cases reporting uterine and adnexa procedures split based on the presence of diagnosis codes describing “ovarian or adnexal” malignancies or “non-ovarian or non-adnexal” malignancies were created, the resource utilization appears to now be more related to the procedures performed rather than the diagnoses describing malignancies reported on the claim, and therefore we believe it is appropriate to restructure these MS-DRGs accordingly. In our direct comparison of the cases reporting diagnosis codes describing “ovarian or adnexal” malignancies or “non-ovarian or non-adnexal” malignancies in these MS-DRGs, we believe the distinction is no longer meaningful with regard to resource consumption. Clinically, a principal diagnosis of an “ovarian or adnexal” or a “non-ovarian or non-adnexal” malignancy in association with a uterine and adnexa procedure requires a commensurate level of patient care, including managing pain, monitoring for complications, ensuring proper wound and drain care, preventing blood clots, managing bowel function, and facilitating recovery through gradual activity, diet, and mobility. Decisions on potential further treatment like chemotherapy or radiation therapy for these diagnoses are based on the cancer's stage.
We note that, as discussed in prior rulemaking, the MS-DRGs are a classification system intended to group together diagnoses and procedures with similar clinical characteristics and utilization of resources. We generally seek to identify sufficient sets of claims data with demonstrated clinical similarity in developing diagnosis related groups. As a result of our analysis and review of this issue, and consideration of the intent of the MS-DRGs, we believe the findings support restructuring the six MS-DRGs by proposing to create new MS-DRGs for uterine and adnexa procedures for female reproductive system malignancies and eliminating the logic that differentiates cases by reporting principal diagnoses describing “ovarian or adnexal” and “non-ovarian or non-adnexal” malignancies.
For these reasons, we are proposing the deletion of MS-DRGs 736, 737, 738, 739, 740, and 741, and the creation of a base MS-DRG for cases reporting uterine and adnexa procedures and a principal diagnosis describing a female reproductive system malignancy, split by a three-way severity level subgroup. The following table illustrates our simulation of the proposal.
Consistent with our established process as discussed in section II.C.1.b. of the preamble of this proposed rule, once the decision has been made to propose to make further modifications to the MS-DRGs, all five criteria to create subgroups must be met for the base MS-DRG to be split (or subdivided) by a CC subgroup. Therefore, we applied the criteria to create subgroups in a base MS-DRG as discussed in section II.C.1.b. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule. We note that, as shown in the table that follows, a three-way split of this proposed new base MS-DRG was met. The following table illustrates our findings.
For the proposed new MS-DRGs, there is (1) at least 500 cases in the MCC subgroup, the CC subgroup, and in the without CC/MCC subgroup; (2) at least 5 percent of the cases are in the MCC subgroup, the CC subgroup, and in the without CC/MCC subgroup; (3) at least a 20 percent difference in average costs between the MCC subgroup and the CC subgroup and between the CC group and NonCC subgroup; (4) at least a $2,000 difference in average costs between the MCC subgroup and the with CC subgroup and between the CC subgroup and NonCC subgroup; and (5) at least a 3-percent reduction in cost variance, indicating that the proposed severity level splits increase the explanatory power of the base MS-DRG in capturing differences in expected cost between the proposed MS-DRG severity level splits by at least 3 percent and thus improve the overall accuracy of the IPPS payment system.
Therefore, for FY 2027, we are proposing to delete MS-DRGs 736, 737, 738, 739, 740, and 741 and proposing to create new MS-DRGs 731 (Uterine and Adnexa Procedures for Malignancy with MCC), MS-DRG 732 (Uterine and Adnexa Procedures for Malignancy with CC), and MS-DRG 733 (Uterine and Adnexa Procedures for Malignancy without CC/MCC). We are proposing to include the current list of 689 ICD-10-PCS procedure codes in the logic for MS-DRGs 736, 737, 738, 739, 740, and 741 for case assignment of uterine and adnexa procedures for the proposed new MS-DRGs. We refer the reader to Table 6P.5a and Table 6P.5b associated with this FY 2027 IPPS/LTCH PPS proposed rule (which are available on the CMS website at:
Under the ICD-10 IPPS MS-DRGs, each of the 25 MDCs generally reflect a major organ system or etiology. Within each MDC, there is a list of all the possible ICD-10-CM diagnoses or conditions that correspond to the specific organ system(s) or etiology reflected by the respective MDC title to ensure clinical coherence. When one of the listed conditions for a designated MDC is reported as a principal or secondary diagnosis, the ICD-10-CM diagnosis code informs the resulting MS-DRG assignment from within that MDC.
The logic for case assignment under MDC 25 (Human Immunodeficiency Virus Infections) is comprised of ICD-10-CM diagnosis code B20 (Human immunodeficiency virus [HIV] disease) when reported as a principal diagnosis or when reported as a secondary diagnosis with a principal diagnosis of a significant HIV related condition and the logic for case assignment specifically to MS-DRGs 974, 975, and 976 (HIV with Major Related Condition with MCC, with CC, without CC/MCC, respectively) under MDC 25 is comprised of ICD-10-CM diagnosis code B20 when reported as a principal or secondary diagnosis with a principal or secondary diagnosis of a major related condition as displayed in the ICD-10 MS-DRG Definitions Manual, Version 43.1 (available on the CMS website at:
We also identified a subset of diagnoses listed under the header “AND PRINCIPAL DIAGNOSIS OF SIGNIFICANT HIV RELATED CONDITION” that do not appear to describe a significant HIV related condition. For example, ICD-10-CM diagnosis code A09 Infectious gastroenteritis and colitis, unspecified, and ICD-10-CM diagnosis code A74.9 Chlamydial infection, unspecified, are listed under the current significant HIV header list of diagnoses; however, these same diagnoses are not listed as a major condition under MS-DRG 974, 975, and 976. We do not believe these conditions are clinically appropriate to be included as a significant HIV related condition. We intend to perform additional review and analysis of the diagnoses listed in the logic for case assignment to MDC 25 as well as specifically, the logic for case assignment to MS-DRGs 974, 975, and 976 in consideration of any potential modifications that may be warranted. Any discussion regarding proposed changes will be discussed in future rulemaking.
Therefore, for FY 2027, we are proposing to remove the term “SIGNIFICANT” under the header for MDC 25 and revise it to reflect, “AND PRINCIPAL DIAGNOSIS OF HIV RELATED CONDITION”.
We annually conduct a review of procedures producing assignment to MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-DRGs 987 through 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) on the basis of volume, by procedure, to see if it would be appropriate to move cases reporting these procedure codes out of these MS-DRGs into one of the surgical MS-DRGs for the MDC into which the principal diagnosis falls. The data are arrayed in two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by volume of procedure codes within each MDC. We use this information to determine which procedure codes and diagnosis codes to examine.
We identify those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical MS-DRGs for the MDC in which the diagnosis falls. We also consider whether it would be more appropriate to move the principal diagnosis codes into the MDC to which the procedure is currently assigned.
Based on the results of our review of the claims data from the September 2025 update of the FY 2025 MedPAR file of cases found to group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, we did not identify any cases for reassignment and are not proposing to move any cases from MS-DRGs 981 through 983 or MS-DRGs 987 through 989 into a surgical MS-DRG for the MDC into which the principal diagnosis or procedure is assigned.
In addition to the internal review of procedures producing assignment to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, we also consider requests that we receive to examine cases found to group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989 to determine if it would be appropriate to add procedure codes to one of the surgical MS-DRGs for the MDC into which the principal diagnosis falls or to move the principal diagnosis to the surgical MS-DRGs to which the procedure codes are assigned. We did not receive any requests suggesting reassignment.
We also review the list of ICD-10-PCS procedure codes that, when in combination with their principal diagnosis code, result in assignment to MS-DRGs 981 through 983, or 987 through 989, to ascertain whether any of those procedure codes should be reassigned from one of those two groups of MS-DRGs to the other group of MS-
Additionally, we also consider requests that we receive to examine cases found to group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989 to determine if it would be appropriate for the cases to be reassigned from one of the MS-DRG groups to the other. Based on the results of our review of the claims data from the September 2025 update of the FY 2025 MedPAR file we did not identify any cases for reassignment. We also did not receive any requests suggesting reassignment. Therefore, for FY 2027 we are not proposing to move any cases reporting procedure codes from MS-DRGs 981 through 983 to MS-DRGs 987 through 989 or vice versa.
Under the IPPS MS-DRGs (and former CMS MS-DRGs), we have a list of procedure codes that are considered operating room (O.R.) procedures. Historically, we developed this list using physician panels that classified each procedure code based on the procedure and its effect on consumption of hospital resources. For example, generally the presence of a surgical procedure which required the use of the operating room would be expected to have a significant effect on the type of hospital resources (for example, operating room, recovery room, and anesthesia) used by a patient, and therefore, these patients were considered surgical. Because the claims data generally available do not precisely indicate whether a patient was taken to the operating room, surgical patients were identified based on the procedures that were performed.
Generally, if the procedure was not expected to require the use of the operating room, the patient would be considered medical (non-O.R.). Currently, each ICD-10-PCS procedure code has designations that determine whether and in what way the presence of that procedure on a claim impacts the MS-DRG assignment. First, each ICD-10-PCS procedure code is either designated as an O.R. procedure for purposes of MS-DRG assignment (“O.R. procedures”) or is not designated as an O.R. procedure for purposes of MS-DRG assignment (“non-O.R. procedures”). Second, for each procedure that is designated as an O.R. procedure, that O.R. procedure is further classified as either extensive or non-extensive. Third, for each procedure that is designated as a non-O.R. procedure, that non-O.R. procedure is further classified as either affecting the MS-DRG assignment or not affecting the MS-DRG assignment. We refer to these designations that do affect MS-DRG assignment as “non-O.R. affecting the MS-DRG.” For new procedure codes that have been finalized through the ICD-10 Coordination and Maintenance Committee code update process and are proposed to be classified as O.R. procedures or non-O.R. procedures affecting the MS-DRG, we recommend the MS-DRG assignment which is then made available in association with the proposed rule (Table 6B.—New Procedure Codes) and subject to public comment. These proposed assignments are generally based on the assignment of predecessor codes or the assignment of similar codes. For example, we generally examine the MS-DRG assignment for similar procedures, such as the other approaches for that procedure, to determine the most appropriate MS-DRG assignment for procedures proposed to be newly designated as O.R. procedures. As discussed in section II.C.15 of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, we are making Table 6B.—New Procedure Codes—FY 2027 available on the CMS website at
In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19230), we stated that, given the long period of time that has elapsed since the original O.R. (extensive and non-extensive) and non-O.R. designations were established, the incremental changes that have occurred to these O.R. and non-O.R. procedure code lists, and changes in the way inpatient care is delivered, we plan to conduct a comprehensive, systematic review of the ICD-10-PCS procedure codes. This will be a multiyear project during which we will also review the process for determining when a procedure is considered an operating room procedure. For example, we may restructure the current O.R. and non-O.R. designations for procedures by leveraging the detail that is now available in the ICD-10 claims data. We refer readers to the discussion regarding the designation of procedure codes in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38066) where we stated that the determination of when a procedure code should be designated as an O.R. procedure has become a much more complex task. This is, in part, due to the number of various approaches available in the ICD-10-PCS classification, as well as changes in medical practice. While we have typically evaluated procedures on the basis of whether or not they would be performed in an operating room, we believe that there may be other factors to consider with regard to resource utilization, particularly with the implementation of ICD-10.
We discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19230) that, as a result of this planned review and potential restructuring, procedures that are currently designated as O.R. procedures may no longer warrant that designation, and conversely, procedures that are currently designated as non-O.R. procedures may warrant an O.R. designation. We intend to consider the resources used and how a procedure should affect the MS-DRG assignment. We may also consider the effect of certain surgical approaches to evaluate whether to subdivide a subset of MS-DRGs based on a specific surgical approach. We stated we plan to utilize our available MedPAR claims data as a basis for this review and the input of our clinical advisors. As part of this comprehensive review of the procedure codes, we also intend to evaluate the MS-DRG assignment of the procedures and the current surgical hierarchy because both of these factor into the process of refining the ICD-10 MS-DRGs to better recognize complexity of service and resource utilization.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58540 through 58541), we provided a summary of the comments we had received in response to our request for feedback on what factors or criteria to consider in determining whether a procedure is designated as an O.R. procedure in the ICD-10-PCS classification system for future consideration. We also stated that in consideration of the PHE, we believed it
For this FY 2027 IPPS/LTCH PPS proposed rule, we continue to believe additional time is necessary as we continue to develop our process and methodology. As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58749), we have signaled in prior rulemaking that the designation of an O.R. procedure encompasses more than the physical location of the hospital room in which the procedure may be performed; in other words, the performance of a procedure in an operating room is not the sole determining factor we will consider as we examine the designation of a procedure in the ICD-10-PCS classification system. We are exploring alternatives on how we may restructure the current O.R. and non-O.R. designations for procedures by leveraging the detail that is available in the ICD-10 claims data. We are considering the feedback received on what factors and/or criteria to consider in determining whether a procedure is designated as an O.R. procedure in the ICD-10-PCS classification system as we continue to develop our process and methodology and will provide more detail on this analysis and the methodology for conducting this comprehensive review in future rulemaking. We encourage the public to continue to submit feedback and comments on any other factors in consideration of our refinement efforts to recognize and differentiate consumption of resources under the ICD-10 MS-DRGs.
For this FY 2027 IPPS/LTCH PPS proposed rule, we received requests regarding changing the designation of specific ICD-10-PCS procedure codes from non-O.R. to O.R. procedures. In this section of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, we detail and respond to those requests. In this section of the preamble of this proposed rule, we also discuss any proposals we are making based on our internal review and analysis and the process that was utilized for evaluating each procedure code. For each procedure, we consider—
• Whether the procedure would typically require the resources of an operating room;
• Whether it is an extensive or a non-extensive procedure; and
• To which MS-DRGs the procedure should be assigned.
We note that many MS-DRGs require the presence of any O.R. procedure. As a result, cases with a principal diagnosis associated with a particular MS-DRG would, by default, be grouped to that MS-DRG. Therefore, we do not list these MS-DRGs in our discussion in this section of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule. Instead, we only discuss MS-DRGs that require explicitly adding the relevant procedure codes to the GROUPER logic in order for those procedure codes to affect the MS-DRG assignment as intended.
For procedures that would not typically require the resources of an operating room, we determined if the procedure should affect the MS-DRG assignment. In cases where we are proposing to change the designation of procedure codes from non-O.R. procedures to O.R. procedures, we also are proposing one or more MS-DRGs with which these procedures are clinically aligned and to which the procedure code would be assigned.
In addition, cases that contain O.R. procedures will map to MS-DRGs 981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-DRGs 987, 988, or 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, respectively) when they do not contain a principal diagnosis that corresponds to one of the MDCs to which that procedure is assigned. These procedures need not be assigned to MS-DRGs 981 through 989 in order for this to occur. Therefore, we do not specifically address that aspect in summarizing the request and our response to that request or the proposals we make based on our internal review and analysis in this section of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule.
For this FY 2027 IPPS/LTCH PPS proposed rule, we received a request to change the designation of ICD-10-PCS code XW033DA (Introduction of donislecel-jujn allogeneic pancreatic islet cellular suspension into peripheral vein, percutaneous approach, new technology group 10) from a non-O.R. procedure to a O.R. procedure.
Donislecel-jujn (Lantidra
In the ICD-10 MS-DRGs Definitions Manual Version 43.1, procedure code XW033DA is currently designated as a non-O.R. procedure affecting assignment to MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/MCC, respectively). We refer the reader to the ICD-10 MS-DRG Version 43.1 Definitions Manual (which is available on the CMS website at:
According to the requestor, the clinical characteristics and costs of cases assigned to MS-DRGs 673 through 675 are significantly different from those associated with the administration of donislecel-jujn (Lantidra
We reviewed this issue and note a proposal to create a procedure code that describes the administration of donislecel-jujn was presented and discussed at the March 19-20, 2024 ICD-10 Coordination and Maintenance Committee meeting and subsequently finalized. For new procedure codes that have been finalized through the ICD-10 Coordination and Maintenance Committee code update process, we recommend the O.R. designation, which is generally based on the assignment of predecessor codes or the assignment of similar codes. Consistent with our annual process of assigning new procedure codes to MDCs and MS-
We analyzed claims data from the September 2025 update of the FY 2025 MedPAR file for MS-DRGs 673, 674, and 675 for cases reporting procedure code XW033DA and did not find any cases. We then extended our analysis to all MS-DRGs and again did not find any cases. We note that these procedures do not typically require the resources of an operating room and are not surgical in nature. As such, we disagree with designating procedure code XW033DA, which describes the intravenous portal vein administration of donislecel-jujn, as an O.R. procedure.
In reviewing this request, we note the underlying intent of this request is to change the MS-DRG assignment of procedure code XW033DA from MS-DRGs 673, 674, and 675 to MS-DRG 018. In regard to the reassignment of procedure code XW033DA to MS-DRG 018, we note that the category of cell and gene therapies continues to evolve. As discussed in prior rulemaking (90 FR 36554 through 36560), we are in the process of carefully considering the feedback we have previously received about ways in which we can continue to appropriately reflect resource utilization associated with cell and gene therapies while maintaining clinical coherence and stability in the relative weights under the IPPS MS-DRGs. We continue to examine these complex issues in consideration for future rulemaking. We acknowledge that there may be distinctions to account for as we continue to gain more experience in the use of these therapies and have additional claims data to analyze. We believe this topic, relating to the administration of donislecel-jujn (Lantidra
Therefore, for the reason discussed, we are proposing to maintain the current designation of procedure code XW033DA as “non-O.R. affecting the MS-DRG” for FY 2027. We refer the reader to the discussion in section II.C.6.b. of this FY 2027 IPPS/LTCH PPS proposed rule, regarding the proposed modifications for cases currently mapping to MS-DRGs 673, 674, and 675, effective October 1, 2026, for FY 2027.
One requestor identified ICD 10-PCS procedure code XW0V3WA (Introduction of AGN1 bone void filler into bones, percutaneous approach, new technology group 10) that the requestor stated is currently not recognized as an O.R. procedure for purposes of MS-DRG assignment. The requestor noted that the Local Osteo-Enhancement Procedure (LOEP) is an investigational surgical procedure designed to mechanically strengthen the proximal femur to reduce the risk of hip fractures in patients who are known to have weakened bones or other factors leading to a high risk of hip fracture. According to the requestor, the AGN1 LOEP Kit is expected to be indicated to reduce the risk of hip fracture in patients at risk of fragility fracture and require access to specialized equipment only available in the operating room (including anesthesia, C-arm, operating table, etc.). The requestor stated that FDA approval of the AGN1 LOEP Kit is anticipated in late 2027. According to the requestor, there may be situations where the procedure could be performed as a standalone procedure. The requestor noted the procedure may be performed under any one of the following three clinical scenarios (1) unilateral, standalone cases: a patient has one hip treated in a scheduled procedure, (2) bilateral, standalone cases: a patient has both hips treated in a scheduled procedure, or (3) concomitant to an index hip fragility fracture in the unfractured, contralateral hip: a patient has their index hip fracture repaired and then the procedure utilizing the LOEP kit is performed to treat the unfractured, contralateral hip during the same operative session. Therefore, the requestor stated that this procedure should be recognized as an O.R. procedure for purposes of MS-DRG assignment.
We agree with the requestor that in the ICD-10 MS-DRGs Definitions Manual Version 43.1, procedure code XW0V3WA is designated as a non-O.R. procedure for purposes of MS-DRG assignment; therefore, when the introduction of AGN1 bone void filler is reported with a procedure code that describes a surgical procedure, the ICD-10-PCS code describing the surgical procedure will determine the surgical MS-DRG assignment based on the principal diagnosis reported.
We reviewed this issue and note a proposal to create a procedure code that describes the percutaneous introduction of AGN1 bone void filler into bones was presented and discussed at the September 12-13, 2023 ICD-10 Coordination and Maintenance Committee meeting and subsequently finalized. For new procedure codes that have been finalized through the ICD-10 Coordination and Maintenance Committee code update process, we recommend the O.R. designation, which is generally based on the assignment of predecessor codes or the assignment of similar codes. Consistent with our annual process of assigning new procedure codes to MDCs and MS-DRGs and designating a procedure as an O.R. or non-O.R. procedure, we reviewed the predecessor procedure code assignment. The predecessor code for procedure code XW0V3WA is procedure code 3E0V3GC (Introduction of other therapeutic substance into bones, percutaneous approach) which is designated as a non-O.R. procedure.
To evaluate the frequency with which procedure code XW0V3WA is reported for different clinical scenarios, we examined claims data from the September 2025 update of the FY 2025 MedPAR file to determine the MS-DRGs reporting procedure code XW0V3WA. Our findings are shown in the following table.
There were four cases reporting the percutaneous introduction of AGN1 bone void filler into bones with procedure code XW0V3WA. Overall, the data indicate that the percutaneous introduction of AGN1 bone void filler into bones was not the underlying reason for, or main driver of, resource utilization for those cases. As shown in the table, when the procedure code XW0V3WA is reported, the MS-DRGs assigned are classified as surgical MS-DRGs which indicates that at least one procedure code designated as an O.R. procedure was also reported in these cases. We refer the reader to the ICD-10 MS-DRG Version 43.1 Definitions Manual (which is available on the CMS website at
After reviewing the claims data, we believe it is premature to consider a proposal to change the designation of the procedure code that describes the percutaneous introduction of AGN1 bone void filler into bones. While the September 2025 update of the FY 2025 MedPAR file does contain claims reporting the percutaneous introduction of AGN1 bone void filler into bones, the number of cases is small across the MS-DRGs. Additionally, as stated previously, when the procedure code XW0V3WA is reported, the MS-DRGs assigned are classified as surgical MS-DRGs, which indicates that at least one procedure code designated as an O.R. procedure was also reported in these cases. We do not have claims data to further examine the impact of the percutaneous introduction of AGN1 bone void filler into bones when performed as a standalone procedure. The claims data also reflect a wide variance with regard to the average costs and average lengths of stay for the cases reporting the percutaneous introduction of AGN1 bone void filler into bones. As such, we disagree with designating the procedure code that describes the percutaneous introduction of AGN1 bone void filler into bones as an O.R. procedure for FY 2027.
As noted previously, the Local Osteo-Enhancement Procedure (LOEP) is an investigational surgical procedure. In the absence of additional data, we believe that more time is needed to consider the clinical characteristics and resource utilization associated with this procedure before considering changing the designation of the procedure code to an O.R. procedure. In future years, we expect we will have additional data that could be used to evaluate the O.R. designation of procedure code XW0V3WA.
Therefore, for the reasons discussed, we are proposing to maintain the designation of procedure code XW0V3WA as non-O.R. for FY 2027.
Under the IPPS MS-DRG classification system, we have developed a standard list of diagnoses that are considered CCs. Historically, we developed this list using physician panels that classified each diagnosis code based on whether the diagnosis, when present as a secondary condition, would be considered a substantial complication or comorbidity. A substantial complication or comorbidity was defined as a condition that, because of its presence with a specific principal diagnosis, would cause an increase in the length-of-stay by at least 1 day in at least 75 percent of the patients. However, depending on the principal diagnosis of the patient, some diagnoses on the basic list of complications and comorbidities may be excluded if they are closely related to the principal diagnosis. In FY 2008, we evaluated each diagnosis code to determine its impact on resource use and to determine the most appropriate CC subclassification (NonCC, CC, or MCC) assignment. We refer readers to sections II.D.2. and 3. of the preamble of the FY 2008 IPPS final rule with comment period for a discussion of the refinement of CCs in relation to the MS DRGs we adopted for FY 2008 (72 FR 47152 through 47171).
In the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described our process for establishing three different levels of CC severity into which we would subdivide the diagnosis codes. The categorization of diagnoses as an MCC, a CC, or a NonCC was accomplished using an iterative approach in which each diagnosis was evaluated to determine the extent to which its presence as a secondary diagnosis resulted in increased hospital resource use. We refer readers to the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159) for a complete discussion of our approach. Since the comprehensive analysis was completed for FY 2008, we have evaluated diagnosis codes individually when assigning severity levels to new codes and when receiving requests to change the severity level of specific diagnosis codes.
We noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235 through 19246) that with the transition to ICD-10-CM and the significant changes that have occurred to diagnosis codes since the FY 2008 review, we believed it was necessary to conduct a comprehensive analysis once again. Based on this analysis, we proposed changes to the severity level designations for 1,492 ICD-10-CM diagnosis codes and invited public comments on those proposals. As summarized in the FY 2020 IPPS/LTCH PPS final rule, many commenters expressed concern with the proposed severity level designation changes overall and recommended that CMS conduct further analysis prior to finalizing any proposals. After careful consideration of the public comments we received, as discussed further in the FY 2020 IPPS/LTCH PPS final rule, we generally did not finalize our proposed changes to the severity designations for the ICD-10-CM diagnosis codes, other than the changes to the severity level designations for the diagnosis codes in category Z16 (Resistance to antimicrobial drugs) from a NonCC to a CC. We stated that postponing adoption of the proposed comprehensive changes in the severity level designations would allow further opportunity to provide additional background to the public on the methodology utilized and clinical rationale applied across diagnostic categories to assist the public in its review. We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42150 through 42152) for a complete discussion of our response to public comments regarding the proposed severity level designation changes for FY 2020.
As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32550), to provide the public with more information on the CC/MCC comprehensive analysis discussed in the FY 2020 IPPS/LTCH PPS proposed and final rules, CMS hosted a listening session on October 8, 2019. The listening session included a review of this methodology utilized to mathematically measure the impact on resource use. We refer readers to
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58550 through 58554), we discussed our plan to continue a comprehensive CC/MCC analysis, using a combination of mathematical analysis of claims data as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) and the application of nine guiding principles and plan to present the findings and proposals in future rulemaking. The nine guiding principles are as follows:
• Represents end of life/near death or has reached an advanced stage associated with systemic physiologic decompensation and debility.
• Denotes organ system instability or failure.
• Involves a chronic illness with susceptibility to exacerbations or abrupt decline.
• Serves as a marker for advanced disease states across multiple different comorbid conditions.
• Reflects systemic impact.
• Post-operative/post-procedure condition/complication impacting recovery.
• Typically requires higher level of care (that is, intensive monitoring, greater number of caregivers, additional testing, intensive care unit care, extended length of stay).
• Impedes patient cooperation or management of care or both.
• Recent (last 10 years) change in best practice, or in practice guidelines and review of the extent to which these changes have led to concomitant changes in expected resource use.
We refer readers to the FY 2021 IPPS/LTCH PPS final rule for a complete summation of the comments we received for each of the nine guiding principles and our responses to those comments.
In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25175 through 25180), as another interval step in our comprehensive review of the severity designations of ICD-10-CM diagnosis codes, we requested public comments on a potential change to the severity level designations for “unspecified” ICD-10-CM diagnosis codes that we were considering adopting for FY 2022. Specifically, we noted we were considering changing the severity level designation of “unspecified” diagnosis codes to a NonCC where there are other codes available in that code subcategory that further specify the anatomic site. As summarized in the FY 2022 IPPS/LTCH PPS final rule, many commenters expressed concern with the potential severity level designation changes overall and recommended that CMS delay any possible change to the designation of these codes to give hospitals and their physicians time to prepare. After careful consideration of the public comments we received, we maintained the severity level designation of the “unspecified” diagnosis codes currently designated as a CC or MCC where there are other codes available in that code subcategory that further specify the anatomic site for FY 2022. We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 44916 through 44926) for a complete discussion of our response to public comments regarding the potential severity level designation changes. Instead, for FY 2022, we finalized a new MCE code edit for “unspecified” codes, effective with discharges on and after April 1, 2022. We stated we believe finalizing this new edit would provide additional time for providers to be educated while not affecting the payment the provider is eligible to receive. We refer the reader to section II.D.14.e. of the preamble of the FY 2022 IPPS/LTCH PPS final rule (86 FR 44940 through 44943) for the complete discussion.
As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48866), we stated that as the new unspecified edit became effective beginning with discharges on and after April 1, 2022, we believed it was appropriate to not propose to change the designation of any ICD-10-CM diagnosis codes, including the unspecified codes that are subject to the “Unspecified Code” edit, as we continue our comprehensive CC/MCC analysis to allow interested parties the time needed to become acclimated to the new edit.
In the FY 2023 IPPS/LTCH proposed rule (87 FR 28177 through 28181), we also requested public comments on how the reporting of diagnosis codes in categories Z55-Z65 might improve our ability to recognize severity of illness, complexity of illness, and/or utilization of resources under the MS-DRGs. We stated we were also interested in receiving feedback on how we might otherwise foster the documentation and reporting of the diagnosis codes describing social and economic circumstances to more accurately reflect each health care encounter and improve the reliability and validity of the coded data.
In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58755 through 58759), based on our analysis of the impact on resource use for the ICD-10-CM Z codes that describe homelessness and after consideration of public comments, we finalized changes to the severity levels for diagnosis codes Z59.00 (Homelessness, unspecified), Z59.01 (Sheltered homelessness), and Z59.02 (Unsheltered homelessness), from NonCC to CC. In the FY 2025 proposed rule (89 FR 35995), we noted that since the FY 2021 IPPS/LTCH PPS final rule we have continued to solicit feedback regarding the nine guiding principles, as well as other possible ways we can incorporate meaningful indicators of clinical severity. We stated we had encouraged the public to provide a detailed explanation of how applying a suggested concept or principle would ensure that the severity designation appropriately reflects resource use for any diagnosis code when providing feedback or comments. We also noted in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26748 through 26750) we illustrated how the nine guiding principles might be applied in evaluating changes to the severity designations of diagnosis codes in our discussion of our proposed changes to the severity level designation for certain diagnosis codes that describe homelessness. After consideration of the ongoing feedback and comments we had received, we proposed to finalize the nine guiding principles. After consideration of the public comments received, and for the reasons discussed, we finalized the nine guiding principles as listed previously in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69076 through 69078). Accordingly, we stated that our evaluations to determine the extent to which the presence of a diagnosis code as a secondary diagnosis results in increased hospital resource use will include a combination of mathematical analysis of claims data as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) and the application of the nine guiding principles.
Additionally, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69079 through 69084), based on our analysis of the impact on resource use for the ICD-10-CM diagnosis codes that describe inadequate housing and housing instability, and after consideration of public comments, we finalized changes to the severity levels for seven diagnosis codes for FY 2025. We refer the reader to the following section of this proposed rule for our proposed changes to the severity level designation for the
We have updated the Impact on Resource Use Files on the CMS website so that the public can review the mathematical data for the impact on resource use generated using claims from the FY 2019 through the FY 2025 MedPAR files. These files are posted on the CMS website at
For new diagnosis codes approved for FY 2027, consistent with our annual process for designating a severity level (MCC, CC, or NonCC) for new diagnosis codes, we first review the predecessor code designation, followed by review and consideration of other factors that may be relevant to the severity level designation, including the severity of illness, treatment difficulty, complexity of service and the resources utilized in the diagnosis or treatment of the condition. We note that this process does not automatically result in the new diagnosis code having the same designation as the predecessor code. We refer the reader to section II.C.13 of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule for the discussion of the proposed changes to the ICD-10-CM and ICD-10-PCS coding systems for FY 2027.
As discussed earlier in this section, in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58755 through 58759), we finalized changes to the severity levels for diagnosis codes Z59.00 (Homelessness, unspecified), Z59.01 (Sheltered homelessness), and Z59.02 (Unsheltered homelessness), from NonCC to CC. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69079 through 69084), we finalized changes to the severity levels for seven diagnosis codes that describe inadequate housing and housing instability from NonCC to CC. We stated CMS would further examine the claims data and consider future changes to the designation of the SDOH Z codes when reported as a secondary diagnosis. We further stated CMS would continue to monitor and evaluate the reporting of the diagnosis codes describing social and economic circumstances.
In continuation of our examination of the SDOH Z codes, for this FY 2027 IPPS/LTCH PPS proposed rule, we reviewed the mathematical data on the impact on resource use for the ICD-10-CM Z codes that describe homelessness, inadequate housing, and housing instability. The following table reflects the impact on resource use data generated using claims from the September 2025 update of the FY 2025 MedPAR file. We refer readers to the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159) for a complete discussion of our historical approach to mathematically evaluate the extent to which the presence of an ICD-10-CM code as a secondary diagnosis resulted in increased hospital resource use, and a more detailed explanation of the columns in the table.
We reviewed the findings from these data. As reflected in the table, the C1 findings ranged from a low of 1.02 to a high of 2.03. A value close to 2.0 in the C1 field suggests that the condition is more like a CC than a non-CC but not as significant in resource usage as an MCC. Because the C1 values in the table are generally close to 2, the mathematical data suggest that when these SDOH Z codes are reported as a secondary diagnosis increased resources are involved in caring for patients experiencing these circumstances, however we note that these SDOH Z codes describe social circumstances and not medical conditions or illnesses.
As previously noted, in the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described our process for establishing three different levels of CC severity into which we would subdivide the diagnosis codes. The categorization
We stated in the FY 2008 IPPS/LTCH PPS final rule (72 FR 47153) that certain diagnoses, such as chronic illness diagnoses, do not cause a significant increase in hospital resource use unless there is an acute exacerbation present or there is a significant deterioration in the underlying chronic condition. Therefore, in the revised CC list, we removed chronic diseases without a significant acute manifestation. We stated that recognition of the impact of the chronic disease is accomplished by separately coding the acute manifestation.
In our further examination of the claims data and the current designation of the ICD-10-CM Z codes that describe homelessness, inadequate housing, and housing instability when reported as a secondary diagnosis, we now believe that similar to our analysis of the chronic illness diagnoses, change of designation from NonCC to CC should be based on the expected resource use associated with the treatment of an underlying medical condition or illness rather than social circumstances. Specifically, we believe that recognition of the contribution that patient social and economic circumstances, such as homelessness, inadequate housing, and housing instability, add to the complexity of acute hospital care should be accomplished by separately coding those diagnoses that describe an acute exacerbation or deterioration of an underlying medical condition or illness, similar to the approach we undertook in categorizing chronic illness diagnoses as stated in the FY 2008 IPPS/LTCH PPS final rule. While we continue to include a mathematical analysis of claims data in evaluating the extent to which the presence of a diagnosis code as a secondary diagnosis results in increased hospital resource use, as previously described, we believe that in the context of the ICD-10-CM Z codes that describe social circumstances, it is more appropriate to align our analysis with our intent as stated in the FY 2008 IPPS/LTCH PPS final rule with respect to chronic illness diagnoses (that is, recognition of the contribution to the complexity of hospital care would be accomplished by separately coding those diseases on the CC list that are associated with an acute exacerbation or deterioration of the underlying medical condition or illness (72 FR 47154)). Accordingly, we believe that categorization of a diagnosis code as an MCC, a CC, or a NonCC should recognize the clinical complexity and expected resource consumption for the treatment of an underlying medical condition or illness, and not social circumstances. Therefore, we are proposing to change the severity level designation of diagnosis codes Z59.00 (Homelessness, unspecified), Z59.01 (Sheltered homelessness), Z59.02 (Unsheltered homelessness), Z59.10 (Inadequate housing, unspecified), Z59.11 (Inadequate housing environmental temperature), Z59.12 (Inadequate housing utilities), Z59.19 (Other inadequate housing), Z59.811 (Housing instability, housed, with risk of homelessness), Z59.812 (Housing instability, housed, homelessness in past 12 months) and Z59.819 (Housing instability, housed unspecified) from CC to NonCC for FY 2027.
For this FY 2027 IPPS/LTCH PPS proposed rule, we received a request to change the severity level designations of the ICD-10-CM diagnosis codes P01.7 (Newborn affected by malpresentation before labor) and P03.0 (Newborn affected by breech delivery and extraction) from NonCC to CC. The requestor did not provide additional rationale for this request.
To evaluate this request, we analyzed the claims data in the September 2025 update of the FY 2025 MedPAR file. The following table shows the analysis for each of the diagnosis codes identified by the requestor.
As reflected in the table, we found zero instances where diagnosis codes P01.7 or P03.0 were reported as secondary diagnoses. In considering the nine guiding principles, as summarized previously, we note that fetal malpresentation is any position of the fetus at birth where the head is not the presenting part. Common types include breech (bottom/feet first), transverse (sideways), or oblique lie. While normal in early pregnancy, most babies turn; however, if still malpresenting at term, management often involves external cephalic version (ECV) to turn the baby or a planned C-section due to risks like cord prolapse during vaginal delivery. A higher level of care for the mother (that is, intensive monitoring, greater number of caregivers, additional testing, intensive care unit care, extended length
Based on the lack of claims data to evaluate to consider a severity level change, we believe that the ICD-10-CM diagnosis codes P01.7 and P03.0 should remain designated as NonCCs. Therefore, we are proposing to maintain the severity level designation of codes P01.7 and P03.0 as NonCCs for FY 2027. We will continue to monitor the claims data in consideration of any future modifications to the severity level designation of diagnosis codes P01.7 and P03.0.
For this FY 2027 IPPS/LTCH PPS proposed rule, we received a request to change the severity level designation of ICD-10-CM diagnosis code R53.2 (Functional quadriplegia) from MCC to NonCC. According to the requestor, code R53.2 describes patients who are unable to move any of their extremities, not because of a spinal cord or focal brain dysfunction, but because of global dysfunction such as severe dementia or contractures. The requestor further stated that the definition of functional quadriplegia does not exist in medical literature; therefore, the vagueness of the condition described by code R53.2 leads to the code being overused. The requestor also questioned whether an immobile patient during an inpatient stay utilizes more resources than other patients with very limited mobility.
We agree that that diagnosis code R53.2 (Functional quadriplegia) is currently designated as an MCC. We refer the reader to Appendix H of the ICD-10 MS-DRG Version 43.1 Definitions Manual (available on the CMS website at:
To evaluate this request, we analyzed the claims data in the September 2025 update of the FY 2025 MedPAR file. The following table shows the analysis for diagnosis code R53.2.
We analyzed these data as described in FY 2008 IPPS final rule (72 FR 47158 through 47161). The table shows that the C1 values of the diagnosis code that describes causally functional quadriplegia is 2.05. A C1 value close to 2.0 suggests the condition is more like a CC than a non-CC but not as significant in resource usage as an MCC. The C2 finding of diagnosis code R53.2 is 2.58. C2 values close to 3.0 suggests the condition is more similar to an MCC than a CC or non-CC. The C2 findings support maintaining the code R53.2 as an MCC. The data are clearly mixed between the C1 and C2 findings and does not consistently support a change in the severity level.
In considering the nine guiding principles, as summarized previously, we note that functional quadriplegia is the inability to move due to another condition (
After considering the C1, and C2 values of ICD-10-CM diagnosis code R53.2, the lack of consistent claims data to support a severity level change, and consideration of the nine guiding principles, we believe R53.2 should remain designated as an MCC. Therefore, we are proposing to maintain the severity level designation of ICD-10-CM diagnosis code R53.2 as an MCC for FY 2027.
For this FY 2027 IPPS/LTCH PPS proposed rule, we received a request to change the severity level designation of the following diagnosis codes from MCC to NonCC:
According to the requestor, the criteria for the ICD-10-CM diagnosis codes that describe malnutrition are vague. The requestor stated that nutritional assessment is the standard of care for all hospital admissions, and the short-term weight loss that often occurs in the hospital as a result of keeping patients with an empty stomach (
We agree that diagnosis codes E40, E41, E42, and E43 are currently designated as MCCs. We refer the reader to Appendix H of the ICD-10 MS-DRG Version 43.1 Definitions Manual (available on the CMS website at:
To evaluate this request, we analyzed the claims data in the September 2025 update of the FY 2025 MedPAR file. The following table shows the analysis for
We analyzed these data as described in FY 2008 IPPS final rule (72 FR 47158 through 47161). The table above shows that the C1 findings ranged from a low of 0.73 to a high of 2.07. As stated earlier, a C1 value close to 2.0 suggests the condition is more like a CC than a non-CC but not as significant in resource usage as an MCC. The C1 findings suggest that these codes are more like a CC than an MCC. However, the C2 findings ranged from a low of 2.38 to a high of 3.21. Values close to 3.0 suggests the conditions are more similar to an MCC than a CC or non-CC. The C2 findings support maintaining the malnutrition codes identified by the requestor as MCCs. The data are clearly mixed between the C1 and C2 findings and does not consistently support a change in the severity level.
In considering the nine guiding principles, as summarized previously, we note that the World Health Organization (WHO) defines malnutrition as “deficiencies, excesses or imbalances in a person's intake of energy and/or nutrients.” Protein-calorie malnutrition is observed most frequently in developing countries but has been described with increasing frequency in hospitalized and chronically ill children in the United States. The distinction between the two forms of protein-calorie malnutrition is based on the presence of edema (kwashiorkor) or absence of edema (marasmus). Marasmus involves inadequate intake of protein and calories, whereas kwashiorkor involves fair-to-normal calorie intake with inadequate protein intake. In developed countries such as the United States, inadequate food intake is a less common cause of malnutrition. Instead, diseases and, in particular, chronic illnesses play an important role in the etiology of malnutrition. As such, the conditions described by the ICD-10-CM diagnosis codes identified by the requestor reflect systemic impact and serve as a marker for advanced disease states across multiple different comorbid conditions.
After considering the C1, and C2 values of ICD-10-CM diagnosis codes E40, E41, E42, and E43, the lack of consistent claims data to support a severity level change, and consideration of the nine guiding principles, we believe E40, E41, E42, and E43 should remain designated as MCCs. Therefore, we are proposing to maintain the severity level designation of ICD-10-CM diagnosis codes E40, E41, E42, and E43 as MCCs for FY 2027.
For this FY 2027 IPPS/LTCH PPS proposed rule, we received a request to change the severity level designation of ICD-10-CM diagnosis code O63.0 (Prolonged first stage (of labor)) from NonCC to CC. According to the requestor, prolonged labor increases length of stay by up to two days and significantly increases resources required to care for these patients. The requestor performed their own analysis of the Impact on Resource Use File on the CMS website generated using claims from the FY 2024 MedPAR file and found that when reported as a secondary diagnosis, O63.0 had a C1 value higher than 2, and C2 and C3 values of at least close to 2, which suggests the code should be designated as a CC. Additionally, in their own analysis of the Impact on Resource Use File on the CMS website generated using claims from the FY 2024 MedPAR file, the requestor found that, in comparison, when reported as a secondary diagnosis, ICD-10-CM diagnosis code O63.9 (Long labor, unspecified), which is designated as a CC, had a C1 value of only 0.88. The requestor also performed an analysis of claims at their healthcare facility to identify cases where prolonged labor in either the latent phase or second phase likely occurred and found that the C1 value was approximately 1.35 for diagnosis code O63.0. The requestor did not state if the analysis of cases at their facility was limited to Medicare cases.
We agree that that diagnosis code O63.0 (Prolonged first stage (of labor)) is currently designated as a NonCC and diagnosis code O63.9 (Long labor, unspecified) is currently designated as a CC. We refer the reader to Appendix G of the ICD-10 MS-DRG Version 43.1 Definitions Manual (available on the CMS website at:
To evaluate this request, we analyzed the claims data in the September 2025 update of the FY 2025 MedPAR file. The following table shows the analysis for diagnosis codes O63.0 and O63.9.
We analyzed these data as described in the FY 2008 IPPS final rule (72 FR 47158 through 47161). The table shows that the C1 value of the diagnosis code that describes prolonged first stage of labor is 2.14. As stated earlier, a C1 value close to 2.0 suggests the condition is more like a CC than a non-CC but not as significant in resource usage as an MCC. The C2 finding of diagnosis code O63.0 is 3.54. C2 values close to 3.0 suggests the condition is more similar to an MCC than a CC or non-CC. The C1 and C2 findings reflect increased resource utilization when prolonged labor is reported as a secondary diagnosis however the data are clearly mixed between the C1 and C2 findings, and there was a low volume of cases (17) reporting this code as a secondary diagnosis.
The table also shows there were zero cases that reported diagnosis code O63.9 with no other secondary diagnosis or with all other secondary diagnoses that are non-CCs. The C2 finding of diagnosis code O63.9 is 1.54. C2 values close to 2.0 suggest the condition is more similar to a CC than a non-CC. The C2 findings support maintaining diagnosis code O63.9 as a CC. Similar to diagnosis code O63.0, there was a low volume of cases (6) reporting this code as a secondary diagnosis.
In considering the nine guiding principles, as summarized previously, we note that the first stage of labor is defined as the interval between the onset of labor and complete or 10 cm cervical dilation. Prolonged first stage of labor refers to a slow initial dilation (0-6 cm), or a stalled active phase, lasting over 16-20 hours, whereas “long labor” describes the entire birth process exceeding 20-25 hours. Long labor is monitored closely for risks like infection or fetal distress. While a prolonged first stage is rarely dangerous, a prolonged first stage of labor can sometimes require a higher level of care. Management of prolonged first stage of labor can sometimes involve amniotomy for patients undergoing augmentation or induction of labor to reduce the duration of labor, administration of oxytocin and/or the use intrauterine pressure catheters to determine adequacy of uterine contractions. If labor fails to progress or fetal distress occurs, a cesarean section or instrumental delivery (forceps/vacuum) may be necessary.
After considering the C1, and C2 values of ICD-10-CM diagnosis codes O63.0 and O63.9, the lack of sufficient claims data to support a severity level change, and consideration of the nine guiding principles, we believe diagnosis code O63.0 should remain designated as a NonCC and diagnosis code O63.9 should remain designated as a CC. Therefore, we are proposing to maintain the severity level designations of ICD-10-CM diagnosis codes O63.0 and O63.9 for FY 2027. We will continue to monitor the claims data in consideration of any future modifications to the severity level designation of diagnosis codes O63.0 and O63.9.
The following tables identify the proposed additions to the diagnosis code MCC severity level list and the proposed additions and deletions to the diagnosis code CC severity levels list for FY 2027 and are available on the CMS website at:
In the September 1, 1987 final notice (52 FR 33143) concerning changes to the DRG classification system, we modified the GROUPER logic so that certain diagnoses included on the standard list of CCs would not be considered valid CCs in combination with a particular principal diagnosis. We created the CC Exclusions List for the following reasons: (1) to preclude coding of CCs for closely related conditions; (2) to preclude duplicative or inconsistent coding from being treated as CCs; and (3) to ensure that cases are appropriately classified between the complicated and uncomplicated DRGs in a pair.
In the May 19, 1987 proposed notice (52 FR 18886) and the September 1, 1987 final notice (52 FR 33154), we explained that the excluded secondary diagnoses were established using the following five principles:
• Chronic and acute manifestations of the same condition should not be considered CCs for one another;
• Specific and nonspecific (that is, not otherwise specified (NOS)) diagnosis codes for the same condition should not be considered CCs for one another;
• Codes for the same condition that cannot coexist, such as partial/total, unilateral/bilateral, obstructed/unobstructed, and benign/malignant, should not be considered CCs for one another;
• Codes for the same condition in anatomically proximal sites should not be considered CCs for one another; and
• Closely related conditions should not be considered CCs for one another.
The creation of the CC Exclusions List was a major project involving hundreds of codes. We have continued to review the remaining CCs to identify additional exclusions and to remove diagnoses from the master list that have been shown not to meet the definition of a CC. We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 through 50544) for detailed information regarding revisions that were made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
The ICD-10 MS-DRGs Version 43.1 CC Exclusion List is included as Appendix C in the ICD-10 MS-DRG Definitions Manual (available on the CMS website at:
We are proposing changes to the ICD-10 MS-DRGs Version 44 CC Exclusion List based on the diagnosis code updates as discussed in section II.C.13. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule. Therefore, we have developed Table 6G.1.—Proposed Secondary Diagnosis Order Additions to the CC Exclusions List—FY 2027; Table 6G.2.—Proposed Principal Diagnosis Order Additions to the CC Exclusions List—FY 2027; Table 6H.1.—Proposed Secondary Diagnosis Order Deletions to the CC Exclusions List—FY 2027; and Table 6H.2.—Proposed Principal Diagnosis Order Deletions to the CC Exclusions List—FY 2027. For Table 6G.1, each secondary diagnosis code proposed for addition to the CC Exclusion List is shown with an asterisk and the principal diagnoses proposed to exclude the secondary diagnosis code are provided in the indented column immediately following it. For Table 6G.2, each of the principal diagnosis codes for which there is a CC exclusion is shown with an asterisk and the conditions proposed for addition to the CC Exclusion List that will not count as a CC are provided in an indented column immediately following the affected principal diagnosis. For Table 6H.1, each secondary diagnosis code proposed for deletion from the CC Exclusion List is shown with an asterisk followed by the principal diagnosis codes that currently exclude it. For Table 6H.2, each of the principal diagnosis codes is shown with an asterisk and the proposed deletions to the CC Exclusions List are provided in an indented column immediately following the affected principal diagnosis. Tables 6G.1., 6G.2., 6H.1., and 6H.2. associated with this FY 2027 IPPS/LTCH PPS proposed rule are available on the CMS website at:
To identify new, revised, and deleted diagnosis and procedure codes, for FY 2027, we have developed Table 6A.-New Diagnosis Codes, Table 6B.-New Procedure Codes, Table 6C.-Invalid Diagnosis Codes, Table 6D.-Invalid Procedure Codes, and Table 6E.-Revised Diagnosis Code Titles for this FY 2027 IPPS/LTCH PPS proposed rule.
These tables are not published in the Addendum to this FY 2027 IPPS/LTCH PPS proposed rule, but are available on the CMS website at:
We are proposing the MDC and MS-DRG assignments for the new diagnosis codes and procedure codes as set forth in Table 6A.-New Diagnosis Codes and Table 6B.-New Procedure Codes. In addition, the proposed severity level designations for the new diagnosis codes are set forth in Table 6A. and the proposed O.R. status for the new procedure codes are set forth in Table 6B. Consistent with our established process, we examined the MS-DRG assignment and the attributes (severity level and O.R. status) of the predecessor diagnosis or procedure code, as applicable, to inform our proposed assignments and designations.
Specifically, we review the predecessor code and MS-DRG assignment most closely associated with the new diagnosis or procedure code, and in the absence of claims data, we consider other factors that may be relevant to the MS-DRG assignment, including the severity of illness, treatment difficulty, complexity of service and the resources utilized in the diagnosis and/or treatment of the condition. We note that this process does not automatically result in the new diagnosis or procedure code being proposed for assignment to the same MS-DRG or to have the same designation as the predecessor code.
We are making available on the CMS website at
• Table 6A.—New Diagnosis Codes-FY 2027;
• Table 6B.—New Procedure Codes-FY 2027;
• Table 6C.—Invalid Diagnosis Codes-FY 2027;
• Table 6D.—Invalid Procedure Codes-FY 2027;
• Table 6E.—Revised Diagnosis Code Titles-FY 2027;
• Table 6G.1.—Proposed Secondary Diagnosis Order Additions to the CC Exclusions List-FY 2027;
• Table 6G.2.—Proposed Principal Diagnosis Order Additions to the CC Exclusions List-FY 2027;
• Table 6H.1.—Proposed Secondary Diagnosis Order Deletions to the CC Exclusions List-FY 2027;
• Table 6H.2.—Proposed Principal Diagnosis Order Deletions to the CC Exclusions List—FY 2027;
• Table 6I.1.—Proposed Additions to the MCC List-FY 2027;
• Table 6J.1.—Proposed Additions to the CC List-FY 2027; and
• Table 6J.2.—Proposed Deletions to the CC List-FY 2027.
Some inpatient stays entail multiple surgical procedures, each one of which, occurring by itself, could result in assignment of the case to a different MS-DRG within the MDC to which the principal diagnosis is assigned. Therefore, it is necessary to have a decision rule within the GROUPER by which cases with multiple surgical procedures are assigned to a single MS-DRG. The surgical hierarchy, an ordering of surgical classes from most resource-intensive to least resource-intensive, performs that function. Application of this hierarchy ensures that cases involving multiple surgical procedures are assigned to the MS-DRG associated with the most resource-intensive surgical class.
A surgical class can be composed of one or more MS-DRGs. For example, in MDC 11, the surgical class “kidney transplant” consists of a single MS-DRG (MS-DRG 652) and the class “major bladder procedures” consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on more than one MS-DRG. The
This methodology may occasionally result in assignment of a case involving multiple procedures to the lower-weighted MS-DRG (in the highest, most resource-intensive surgical class) of the available alternatives. However, given that the logic underlying the surgical hierarchy provides that the GROUPER search for the procedure in the most resource-intensive surgical class, in cases involving multiple procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a few instances when a surgical class with a lower average cost is ordered above a surgical class with a higher average cost. For example, the “other O.R. procedures” surgical class is uniformly ordered last in the surgical hierarchy of each MDC in which it occurs, regardless of the fact that the average costs for the MS-DRG or MS-DRGs in that surgical class may be higher than those for other surgical classes in the MDC. The “other O.R. procedures” class is a group of procedures that are only infrequently related to the diagnoses in the MDC but are still occasionally performed on patients with cases assigned to the MDC with these diagnoses. Therefore, assignment to these surgical classes should only occur if no other surgical class more closely related to the diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average costs for two surgical classes is very small. We have found that small differences generally do not warrant reordering of the hierarchy because, as a result of reassigning cases on the basis of the hierarchy change, the average costs are likely to shift, such that the higher-ordered surgical class has lower average costs than the class ordered below it.
Based on the changes that we are proposing to make for FY 2027, as discussed in section II.C. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, our proposal for Appendix D MS-DRG Surgical Hierarchy by MDC and MS-DRG of the proposed ICD-10 MS-DRG Definitions Manual Version 44 to modify the existing surgical hierarchy in the Pre-MDC, MDC 05, MDC 08, MDC 10, MDC 11, MDC 12, and MDC 13 MS-DRGs for FY 2027 is illustrated in the following tables. We note that because the current methodology involves weighing the average costs of each MS-DRG in the surgical class by frequency (that is, by the number of cases in the MS-DRG) to determine average resource consumption for the surgical class, that the surgical hierarchy of other MS-DRGs in the MDC may need to be adjusted based on the MS-DRG classification changes that are proposed to ensure that the average weighted cost for each base MS-DRG in each MDC are monotonically decreasing. We further note that the proposed Version 44 surgical hierarchy as illustrated in the following tables may be subject to further modifications based on the finalized changes to the MS-DRG classifications for FY 2027.
For issues pertaining to the surgical hierarchy, as with other MS-DRG related requests, we encourage interested parties to submit comments no later than October 20, 2026, via MEARIS
In September 1985, the ICD-9-CM Coordination and Maintenance Committee was formed. This is a Federal interdepartmental committee, co-chaired by the Centers for Disease Control and Prevention's (CDC) National Center for Health Statistics (NCHS) and CMS, charged with maintaining and updating the ICD-9-CM system. The final update to ICD-9-CM codes was made on October 1, 2013. Thereafter, the name of the Committee was changed to the ICD-10 Coordination and Maintenance Committee, effective with the March 19-20, 2014 meeting. The ICD-10 Coordination and Maintenance Committee addresses updates to the ICD-10-CM and ICD-10-PCS coding systems. The Committee is jointly responsible for approving coding changes, and developing errata, addenda, and other modifications to the coding systems to reflect newly identified diseases and newly
The official list of ICD-9-CM diagnosis and procedure codes by fiscal year can be found on the CMS website at:
The official list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS website at:
The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM diagnosis codes included in the Tabular
The Committee encourages health-related organizations to participate in the previously mentioned process. In this regard, the Committee makes code request materials and proposed coding changes publicly available. These materials provide an opportunity for representatives of recognized organizations in the coding field, such as the American Health Information Management Association (AHIMA), the American Hospital Association (AHA), and various physician specialty groups, as well as individual physicians, health information management professionals, and other members of the public, to contribute ideas on coding matters. Members of the public may submit comments on the proposed procedure code topics to CMS at:
The Committee presented proposals for ICD-10-CM diagnosis code changes for implementation in FY 2027 at the virtual public meetings held on September 9-10, 2025 and finalized the coding changes after consideration of comments received during the meetings and in writing by November 14, 2025.
In lieu of CMS holding its Fall 2025 meeting, the Committee solicited comments on the Fall 2025 ICD-10-PCS procedure code topics. The deadline to submit comments on the procedure code proposals considered for an April 1, 2026 implementation was October 10, 2025, and the deadline to submit comments on the procedure code proposals being considered for an October 1, 2026 implementation was November 14, 2025.
The Committee presented proposals for ICD-10-CM diagnosis code changes for implementation in FY 2027 and FY 2028 at the virtual public meetings held on March 17-18, 2026 and will finalize the coding changes after consideration of comments received during the meetings and in writing by May 15, 2026.
In lieu of CMS holding its Spring 2026 meeting, the Committee solicited comments on the Spring 2026 ICD-10-PCS procedure code topics. The deadline for submitting public comments on these code proposals is April 17, 2026. The Committee will review the public comments submitted and identify whether there is a consensus of support for any new diagnosis and procedure codes. The Committee will also determine those new procedure codes for which complete tabular and indexing changes can be made by June 2026 and will include those in the October 1, 2026 update to the ICD-10-CM diagnosis and ICD-10-PCS procedure code sets. As discussed in earlier sections of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, there are new, revised, and deleted ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes that are captured in Table 6A.—New Diagnosis Codes, Table 6B.—New Procedure Codes, Table 6C.—Invalid Diagnosis Codes, Table 6D.—Invalid Procedure Codes, and Table 6E.—Revised Diagnosis Code Titles for this FY 2027 IPPS/LTCH PPS proposed rule, which are available on the CMS website at:
The code titles are adopted as part of the ICD-10 Coordination and Maintenance Committee process. As previously noted, although we make the code titles available in association with the IPPS proposed rule, they are not subject to comment in the proposed rule. Because of the length of these tables, they are not published in the Addendum to the proposed rule. Rather, they are available on the CMS website as discussed in section VI. of the Addendum to the proposed rule.
Recordings and materials for the virtual meeting discussions of the diagnosis codes at the Committee's September 9-10, 2025 meeting can be found at:
We encourage commenters to submit questions and comments on coding issues involving diagnosis codes to CDC/NCHS via Email to:
Questions and comments concerning the procedure codes should be submitted to CMS via Email to:
CMS implemented 80 new procedure codes including codes to describe the insertion of cardiac devices, (
The 80 procedure codes are also reflected in Table 6B.- New Procedure Codes, which is available on the CMS website at:
We note that Change Request (CR) 14337, Transmittal 13562, titled “April 2026 Update to the Medicare Severity-Diagnosis Related Group (MS-DRG) Grouper and Medicare Code Editor (MCE) Version V43.1” was issued on December 23, 2025 (available on the CMS website at:
In the September 7, 2001 Medicare Program: Payments for New Medical Services and New Technologies Under the Acute Care Hospital Inpatient Prospective Payment System final rule implementing the IPPS new technology add-on payments (66 FR 46902), we indicated our intention to include proposals for procedure codes that would describe new technology discussed and approved at the Spring meeting as part of the code revisions effective the following October.
Section 503(a) of the Medicare Modernization Act (Pub. L. 108-173) included a requirement for updating diagnosis and procedure codes twice a year instead of a single update on October 1 of each year. This requirement was included as part of the amendments to the Act relating to recognition of new technology under the IPPS. Section 503(a) of Public Law 108-173 amended section 1886(d)(5)(K) of the Act by adding a clause (vii) which states that the Secretary shall provide for the addition of new diagnosis and procedure codes on April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis-related group classification) until the fiscal year that begins after such date. This requirement improves the recognition of new technologies under the IPPS by providing information on these new technologies at an earlier date. Data will be available six months earlier than would be possible with updates occurring only once a year on October 1.
In the FY 2005 IPPS final rule, we implemented section 1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 108-173, by developing a mechanism for approving, in time for the April update, diagnosis and procedure code revisions needed to describe new technologies and medical services for purposes of the new technology add-on payment process. We also established the following process for making these determinations. Topics considered during the Fall ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee meeting were considered for an April 1 update if a strong and convincing case was made by the requestor during the Committee's public meeting. The request needed to identify the reason why a new code was needed in April for purposes of the new technology process. Meeting participants and those reviewing the Committee meeting materials were provided with the opportunity to comment on the expedited request. We refer the reader to the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950) for further discussion of the implementation of this prior April 1 update for purposes of the new technology add-on payment process.
As discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950 through 44956), we adopted an April 1 implementation date, in addition to the annual October 1 update, beginning with April 1, 2022. We noted that the intent of this April 1 implementation date was to allow flexibility in the ICD-10 code update process. CMS uses the same process for consideration of all requests for an April 1 implementation date, including for purposes of the new technology add-on payment process (that is, the prior process for consideration of an April 1 implementation date only if a strong and convincing case was made by the requestor during the meeting no longer applies). We implement new codes through the April 1 code update, which includes displaying proposals for April 1 consideration in association with the Fall ICD-10 Coordination and Maintenance Committee code update, requesting public comments, reviewing the public comments, finalizing codes, and announcing the new codes with their assignments consistent with the new GROUPER release information. We note that under our established process, requestors indicate whether they are submitting their code request for consideration for an April 1 implementation date or an October 1 implementation date. The ICD-10 Coordination and Maintenance Committee makes reasonable efforts to accommodate the requested implementation date for each request submitted. However, the Committee ultimately determines which requests are to be presented for consideration for an April 1 implementation date or an October 1 implementation date. The ICD-10 Coordination and Maintenance Committee may not be able to consider all requests received for the next Committee code update and will determine if it would be appropriate to postpone consideration of any code requests to a future update. As discussed earlier in this section of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, there were procedure code proposals considered for an April 1, 2026 implementation for the Fall 2025 procedure code update. Following the receipt of public comments, the code proposals were approved and finalized, therefore, new codes were implemented on April 1, 2026.
Consistent with the process we outlined for the April 1 implementation date, we announced the new codes in November 2025 and provided the updated code files in December 2025. The NCHS provided the ICD-10-CM
ICD-9-CM addendum and code title information are published on the CMS website at
For FY 2026, there are currently 74,719 diagnosis codes and 79,193 procedure codes. As displayed in Table 6A.—New Diagnosis Codes and in Table 6B.—New Procedure Codes associated with this FY 2027 IPPS/LTCH PPS proposed rule (and available on the CMS website at
In the FY 2008 IPPS final rule with comment period (72 FR 47246 through 47251), we discussed the topic of Medicare payment for devices that are replaced without cost or where credit for a replaced device is furnished to the hospital. We implemented a policy to reduce a hospital's IPPS payment for certain MS-DRGs where the implantation of a device that subsequently failed or was recalled determined the base MS-DRG assignment. At that time, we specified that we will reduce a hospital's IPPS payment for those MS-DRGs where the hospital received a credit for a replaced device equal to 50 percent or more of the cost of the device.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 51557), we clarified this policy to state that the policy applies if the hospital received a credit equal to 50 percent or more of the cost of the replacement device and issued instructions to hospitals accordingly.
As discussed in section II.C.3. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, for FY 2027, under MDC 05, we are proposing to delete MS-DRGs 258 and 259 (Cardiac Pacemaker Device Replacement with and without MCC, respectively) and MS-DRGs 260, 261, and 262 (Cardiac Pacemaker Revision Except Device Replacement with MCC, with CC, and without CC/MCC, respectively) and create new MS-DRGs 210 and 211 (Cardiac Pacemaker Revision or Device Replacement with and without MCC, respectively). The procedures currently assigned to MS-DRGs 258, 259, 260, 261, and 262 are being proposed for assignment to proposed new MS-DRGs 210 and 211.
Additionally, as discussed in section II.C.4. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, for FY 2027, under MDC 08, we are proposing to delete MS-DRGs 466, 467, and 468 (Revision of Hip or Knee Replacement with MCC, with CC, and without CC/MCC, respectively) and create new MS-DRG 449 (Revision of Hip or Knee Replacement). The procedures currently assigned to MS-DRGs 466, 467, and 468 are being proposed for assignment to proposed new MS-DRG 449.
As stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24409), we generally map new MS-DRGs onto the list when they are formed from procedures previously assigned to MS-DRGs that are already on the list. Currently, MS-DRGs 258, 259, 260, 261, 262, 466, 467, and 468 are on the list of MS-DRGs subject to the policy for payment under the IPPS for replaced devices offered without cost or with a credit. Therefore, we are proposing that if the applicable proposed MS-DRG changes are finalized, we also would add proposed new MS-DRGs 210 and 211 and proposed new MS-DRG 449 to the list of MS-DRGs subject to the policy for payment under the IPPS for replaced devices offered without cost or with a credit as reflected in the following table. We also propose to continue to include the existing MS-DRGs currently subject to the policy as displayed in the following table.
The final list of MS-DRGs subject to the IPPS policy for replaced devices offered without cost or with a credit will be included in the FY 2027 IPPS/LTCH PPS final rule and also will be issued to providers in the form of a Change Request (CR).
Consistent with our established policy, in developing the MS-DRG
The FY 2025 MedPAR file used in calculating the relative weights includes data for approximately 6,936,972 Medicare discharges from IPPS providers. Discharges for Medicare beneficiaries enrolled in a Medicare Advantage managed care plan are excluded from this analysis. These discharges are excluded when the MedPAR “GHO Paid” indicator field on the claim record is equal to “1” or when the MedPAR DRG payment field, which represents the total payment for the claim, is equal to the MedPAR “Indirect Medical Education (IME)” payment field, indicating that the claim was an “IME only” claim submitted by a teaching hospital on behalf of a beneficiary enrolled in a Medicare Advantage managed care plan. In addition, the December 2025 update of the FY 2025 MedPAR file complies with version 5010 of the X12 HIPAA Transaction and Code Set Standards, and includes a variable called “claim type.” Claim type “60” indicates that the claim was an inpatient claim paid as fee-for-service. Claim types “61,” “62,” “63,” and “64” relate to encounter claims, Medicare Advantage IME claims, and HMO no-pay claims. Therefore, the calculation of the relative weights for FY 2027 also excludes claims with claim type values not equal to “60.” The data exclude CAHs, including hospitals that subsequently became CAHs after the period from which the data were taken. In addition, the data exclude Rural Emergency Hospitals (REHs), including hospitals that subsequently became REHs after the period from which the data were taken. We note that the proposed FY 2027 relative weights are based on the ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes from the FY 2025 MedPAR claims data, grouped through the ICD-10 version of the proposed FY 2027 GROUPER (Version 44).
The second data source used in the cost-based relative weighting methodology is the Medicare cost report data files from the Healthcare Cost Report Information System (HCRIS). In general, we use the HCRIS dataset that is 3 years prior to the IPPS fiscal year. Specifically, for this proposed rule, we used the December 2025 update of the FY 2024 HCRIS for calculating the FY 2027 cost-based relative weights. Consistent with our historical practice, for this FY 2027 proposed rule, we are providing the version of the HCRIS from which we calculated these 19 cost-to charge-ratios (CCRs) on the CMS website at
We calculated the proposed FY 2027 relative weights based on 19 CCRs. The methodology we are proposing to use to calculate the FY 2027 MSDRG cost-based relative weights based on claims data in the FY 2025 MedPAR file and data from the FY 2024 Medicare cost reports is as follows:
• To the extent possible, all the claims were regrouped using the proposed FY 2027 MS-DRG classifications discussed in sections II.B. and II.C. of the preamble of this proposed rule.
• The transplant cases that were used to establish the relative weights for heart and lung, liver and/or intestinal, and lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) were limited to those Medicare-approved transplant centers that have cases in the FY 2025 MedPAR file. (Medicare coverage for heart, heart-lung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.)
• Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis.
Because these acquisition costs are paid separately from the prospective payment rate, it is necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average cost for each MS-DRG and before eliminating statistical outliers.
Section 108 of the Further Consolidated Appropriations Act, 2020 provides that, for cost reporting periods beginning on or after October 1, 2020, costs related to hematopoietic stem cell acquisition for the purpose of an allogeneic hematopoietic stem cell transplant shall be paid on a reasonable cost basis. We refer the reader to the FY 2021 IPPS/LTCH PPS final rule for further discussion of the reasonable cost basis payment for cost reporting periods beginning on or after October 1, 2020 (85 FR 58835 through 58842). For FY 2022 and subsequent years, we subtract the hematopoietic stem cell acquisition charges from the total charges on each transplant bill that showed hematopoietic stem cell acquisition charges before computing the average cost for each MS-DRG and before eliminating statistical outliers.
• Claims with total charges or total lengths of stay less than or equal to zero were deleted. Claims that had an amount in the total charge field that differed by more than $30.00 from the sum of the routine day charges, intensive care charges, pharmacy charges, implantable devices charges, supplies and equipment charges, therapy services charges, operating room charges, cardiology charges, laboratory charges, radiology charges, other service charges, labor and delivery charges, inhalation therapy charges, emergency room charges, blood and blood products charges, anesthesia charges, cardiac catheterization charges, CT scan charges, and MRI charges were also deleted.
• At least 92.5 percent of the providers in the MedPAR file had charges for 14 of the 19 cost centers. All claims of providers that did not have charges greater than zero for at least 14 of the 19 cost centers were deleted. In other words, a provider must have no more than five blank cost centers. If a provider did not have charges greater than zero in more than five cost centers, the claims for the provider were deleted.
• Statistical outliers were eliminated by removing all cases that were beyond 3.0 standard deviations from the geometric mean of the log distribution of both the total charges per case and the total charges per day for each MS-DRG.
• Effective October 1, 2008, because hospital inpatient claims include a Present on Admission (POA) field for each diagnosis present on the claim, only for purposes of relative weight-setting, the POA indicator field was reset to “Y” for “Yes” for all claims that otherwise have an “N” (No) or a “U” (documentation insufficient to determine if the condition was present at the time of inpatient admission) in the POA field.
Under current payment policy, the presence of specific HAC codes, as
To avoid these problems, we reset the POA indicator field to “Y” only for relative weight-setting purposes for all claims that otherwise have an “N” or a “U” in the POA field. This resetting “forced” the more costly HAC claims into the higher severity MS-DRGs as appropriate, and the relative weights calculated for each MS-DRG more closely reflect the true costs of those cases.
The charges for each of the 19 cost groups for each claim were standardized to remove the effects of differences in area wage levels, IME and DSH payments, and for hospitals located in Alaska and Hawaii, the proposed applicable cost-of-living adjustment. Because hospital charges include charges for both operating and capital costs, we standardized total charges to remove the effects of differences in geographic adjustment factors, proposed cost-of-living adjustments, and DSH payments under the capital IPPS as well. Charges were then summed by MS-DRG for each of the 19 cost groups so that each MS-DRG had 19 standardized charge totals. Statistical outliers were then removed. These charges were then adjusted to cost by applying the proposed national average CCRs developed from the FY 2024 cost report data.
The 19 cost centers that we used in the relative weight calculation are shown in a supplemental data file, Cost Center HCRIS Lines Supplemental Data File, posted via the internet on the CMS website for this proposed rule and available at
Consistent with historical practice, we account for rare situations of non-monotonicity in a base MS-DRG and its severity levels, where the mean cost in the higher severity level is less than the mean cost in the lower severity level, in determining the relative weights for the different severity levels. If there are initially non-monotonic relative weights in the same base DRG and its severity levels, then we combine the cases that group to the specific non-monotonic MS-DRGs for purposes of relative weight calculations. For example, if there are two non-monotonic MS-DRGs, combining the cases across those two MS-DRGs results in the same relative weight for both MS-DRGs. The relative weight calculated using the combined cases for those severity levels is monotonic, effectively removing any non-monotonicity with the base DRG and its severity levels. For this FY 2027 proposed rule, this calculation was applied to address non-monotonicity for cases that grouped to the following: MS-DRG 217 and MS-DRG 218, MS-DRG 504 and MS-DRG 505, and MS-DRG 582 and 584. In the supplemental file titled AOR/BOR File, we include statistics for the affected MS-DRGs both separately and with cases combined.
We are inviting public comments on our proposals related to recalibration of the proposed FY 2027 relative weights and the changes in relative weights from FY 2026.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58451 through 58453), we created MS-DRG 018 for cases that include procedures describing CAR T-cell therapies. We also finalized our proposal to modify our existing relative weight methodology to ensure that the relative weight for MS-DRG 018 appropriately reflects the relative resources required for providing CAR T-cell therapy outside of a clinical trial, while still accounting for the clinical trial cases in the overall average cost for all MS-DRGs (85 FR 58599 through 58600). Specifically, we stated that clinical trial claims that group to new MS-DRG 018 would not be included when calculating the average cost for MS-DRG 018 that is used to calculate the relative weight for this MS-DRG, so that the relative weight reflects the costs of the CAR T-cell therapy drug. We stated that we identified clinical trial claims as claims that contain ICD-10-CM diagnosis code Z00.6 or contain standardized drug charges of less than $373,000, which was the average sales price of KYMRIAH and YESCARTA, the two CAR T-cell biological products licensed to treat relapsed/refractory large B-cell lymphoma as of the time of the development of the FY 2021 final rule. In addition, we stated that (a) when the CAR T-cell therapy product is purchased in the usual manner, but the case involves a clinical trial of a different product, the claim will be included when calculating the average cost for new MS-DRG 018 to the extent such cases can be identified in the historical data, and (b) when there is expanded access use of immunotherapy, these cases will not be included when calculating the average cost for new MS-DRG 018 to the extent such cases can be identified in the historical data.
We also finalized our proposal to calculate an adjustment to account for the CAR T-cell therapy cases identified as clinical trial cases in calculating the national average standardized cost per case that is used to calculate the relative weights for all MS-DRGs and for purposes of budget neutrality and outlier simulations. We calculate this adjustor by dividing the average cost for cases that we identify as clinical trial cases by the average cost for cases that we identify as non-clinical trial cases, with the additional refinements that (a) when the CAR T-cell therapy product is purchased in the usual manner, but the case involves a clinical trial of a different product, the claim will be included when calculating the average cost for cases not determined to be
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58842), we also finalized an adjustment to the payment amount for applicable clinical trial and expanded access use immunotherapy cases that group to MS-DRG 018, and indicated that we would provide instructions for identifying these claims in separate guidance. Following the issuance of the FY 2021 IPPS/LTCH PPS final rule, we issued guidance
In the FY 2022 IPPS/LTCH PPS final rule, we revised MS-DRG 018 to include cases that report the procedure codes for CAR T-cell and non-CAR T-cell therapies and other immunotherapies (86 FR 44798 through 44806). We also finalized our proposal to continue to use the proxy of standardized drug charges of less than $373,000 (86 FR 44965) to identify clinical trial claims. We also finalized use of this same proxy for the FY 2023 IPPS/LTCH PPS final rule (87 FR 48894).
Following the issuance of the FY 2023 IPPS/LTCH PPS final rule, we issued guidance
In the FY 2024 IPPS/LTCH PPS final rule, we explained that the MedPAR claims data now includes a field that identifies whether or not the claim includes expanded access use of immunotherapy. We stated that for the FY 2022 MedPAR claims data, this field identifies whether or not the claim includes condition code ZB, and for the FY 2023 MedPAR data and subsequent years, this field will identify whether or not the claim includes condition code 90. We further noted that the MedPAR files now also include a variable that indicates whether the claim includes the payer-only condition code “ZC”, which identifies a case involving the clinical trial of a different product where the CAR T-cell, non-CAR T-cell, or other immunotherapy product is purchased in the usual manner.
Accordingly, and as discussed further in the FY 2024 IPPS/LTCH PPS final rule, we finalized two modifications to our methodology for identifying clinical trial claims and expanded access use claims in MS-DRG 018 (88 FR 58791). First, we finalized to exclude claims with the presence of condition code “90” (or, for FY 2024 ratesetting, which was based on the FY 2022 MedPAR data, the presence of condition code “ZB”) and claims that contain ICD-10-CM diagnosis code Z00.6 without payer-only code “ZC” that group to MS-DRG 018 when calculating the average cost for MS-DRG 018. Second, we finalized to no longer use the proxy of standardized drug charges of less than $373,000 to identify clinical trial claims and expanded access use cases when calculating the average cost for MS-DRG 018. Accordingly, we finalized that in calculating the relative weight for MS-DRG 018 for FY 2024, only those claims that group to MS-DRG 018 that (1) contain ICD-10-CM diagnosis code Z00.6 and do not include payer-only code “ZC” or (2) contain condition code “ZB” (or, for subsequent fiscal years, condition code “90”) would be excluded from the calculation of the average cost for MS-DRG 018. Consistent with this, we also finalized modifications to our calculation of the adjustment to account for the CAR T-cell therapy cases identified as clinical trial cases in calculating the national average standardized cost per case that is used to calculate the relative weights for all MS-DRGs. We refer readers to the FY 2024 IPPS/LTCH PPS final rule for further discussion of these modifications (88 FR 58791).
Consistent with the FY 2026 IPPS/LTCH PPS final rule, in this proposed rule, for FY 2027 we are proposing to continue to use our methodology as modified in the FY 2024 IPPS/LTCH PPS final rule for identifying clinical trial claims and expanded access use claims in MS-DRG 018, with an additional modification as discussed in this section. First, we exclude claims with the presence of condition code “90” and claims that contain ICD-10-CM diagnosis code Z00.6 without payer-only code “ZC” that group to MS-DRG 018 when calculating the average cost for MS-DRG 018. Second, we no longer use the proxy of standardized drug charges of less than $373,000 to identify clinical trial claims and expanded access use cases when calculating the average cost for MS-DRG 018.
In the FY 2026 IPPS/LTCH PPS final rule, we finalized our proposal to apply the payment adjustment for clinical trial and expanded access use immunotherapy cases to other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost. To mirror this change within our relative weight methodology, we finalized our proposal to also exclude claims with standardized drug charges below the median standardized drug charge of claims identified as clinical trials in MS-DRG 018 when we calculate the average cost for MS-DRG 018. We proposed to apply this policy for 2 years (that is, in our relative weight methodology for MS-DRG 018 for FYs 2026 and 2027), until the claims data reflects the addition of the condition code indicating that the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, which then would be able to be used to identify these cases such that they can be identified for exclusion from the calculation of the average cost of MS-DRG 018. For this proposed rule, based on the December 2025 update of the FY 2025 MedPAR file, we estimated that the median standardized drug charge of claims identified as clinical trials in MS-DRG 018 is $25,323. For the
Accordingly, we are proposing that in calculating the relative weight for MS-DRG 018 for FY 2027, in identifying clinical trial claims and expanded access use claims and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, only those claims that group to MS-DRG 018 that (1) contain ICD-10-CM diagnosis code Z00.6 and do not include payer-only code “ZC”, (2) contain condition code “90”, or (3) contain standardized drug charges below the median standardized drug charge of clinical trial cases in MS-DRG 018 would be excluded from the calculation of the average cost for MS-DRG 018.
We are also proposing to continue to use the methodology as modified in the FY 2024 IPPS/LTCH PPS final rule to calculate the adjustment to account for the CAR T-cell therapy cases identified as clinical trial cases in calculating the national average standardized cost per case that is used to calculate the relative weights for all MS-DRGs, with the same proposed modification as described previously to identify other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost:
• Calculate the average cost for cases assigned to MS-DRG 018 that (a) contain ICD-10-CM diagnosis code Z00.6 and do not contain condition code “ZC”, (b) contain condition code “90”, or (c) contain standardized drug charges below the median standardized drug charge of clinical trial cases in MS-DRG 018.
• Calculate the average cost for all other cases assigned to MS-DRG 018.
• Calculate an adjustor by dividing the average cost calculated in step 1 by the average cost calculated in step 2.
• Apply the adjustor calculated in step 3 to the cases identified in step 1 as applicable clinical trial or expanded access use cases, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, then add this adjusted case count to the non-clinical trial case count prior to calculating the average cost across all MS-DRGs.
Under our proposal to continue to apply this methodology, with the proposed modification as described, based on the December 2025 update of the FY 2025 MedPAR file used for this proposed rule, we estimate that the average costs of cases assigned to MS-DRG 018 that are identified as clinical trial cases ($71,039) were 17 percent of the average costs of the cases assigned to MS-DRG 018 that are identified as non-clinical trial cases ($412,218). Accordingly, as we did for FY 2026, we are proposing to adjust the transfer-adjusted case count for MS-DRG 018 by applying the proposed adjustor of 0.17 to the applicable clinical trial and expanded access use immunotherapy cases, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, and to use this adjusted case count for MS-DRG 018 in calculating the national average cost per case, which is used in the calculation of the relative weights. Therefore, in calculating the national average cost per case for purposes of this proposed rule, each case identified as an applicable clinical trial or expanded access use immunotherapy case, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, was adjusted by 0.17. As we did for FY 2026, we are applying the same adjustor for the applicable cases that group to MS-DRG 018 for purposes of budget neutrality and outlier simulations. We are also proposing to update the value of the adjustor based on more recent data for the final rule.
In the FY 2023 IPPS/LTCH PPS final rule, we finalized a permanent 10-percent cap on the reduction in an MS-DRG's relative weight in a given fiscal year, beginning in FY 2023. We also finalized a budget neutrality adjustment to the standardized amount for all hospitals to ensure that application of the permanent 10-percent cap does not result in an increase or decrease of estimated aggregate payments. We refer the reader to the FY 2023 IPPS/LTCH PPS final rule for further discussion of this policy. In the Addendum to this IPPS/LTCH PPS proposed rule, we present the proposed budget neutrality adjustment for reclassification and recalibration of the FY 2027 MS-DRG relative weights with application of this cap. We are also making available on the CMS website a supplemental file demonstrating the application of the permanent 10 percent cap for FY 2027. For a further discussion of the final budget neutrality adjustment for FY 2027, we refer readers to the Addendum of this proposed rule.
We developed the proposed national average CCRs as follows:
Using the FY 2024 cost report data, we removed CAHs, REHs, Indian Health Service hospitals, all inclusive rate hospitals, and cost reports that represented time periods of less than 1 year (365 days). We included hospitals located in Maryland because we include their charges in our claims database. Then we created CCRs for each provider for each cost center (see the supplemental data file for line items used in the calculations) and removed any CCRs that were greater than 10 or less than 0.01. We normalized the departmental CCRs by dividing the CCR for each department by the total CCR for the hospital for the purpose of trimming the data. Then we took the logs of the normalized cost center CCRs and removed any cost center CCRs where the log of the cost center CCR was greater or less than the mean log plus/minus 3 times the standard deviation for the log of that cost center CCR. Once the cost report data were trimmed, we calculated a Medicare-specific CCR. The Medicare-specific CCR was determined by taking the Medicare charges for each line item from Worksheet D-3 and deriving the Medicare-specific costs by applying the hospital-specific departmental CCRs to the Medicare- specific charges for each line item from Worksheet D-3. Once each hospital's Medicare-specific costs were established, we summed the total Medicare-specific costs and divided by the sum of the total Medicare-specific charges to produce national average, charge-weighted CCRs.
After we multiplied the total charges for each MS-DRG in each of the 19 cost centers by the corresponding national average CCR, we summed the 19 “costs” across each MS-DRG to produce a total standardized cost for the MS-DRG. The average standardized cost for each MS-DRG was then computed as the total standardized cost for the MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The average cost for each MS-DRG was then divided by the national average standardized cost per case to determine the relative weight. The proposed FY 2027 cost-based relative weights were then normalized by an adjustment factor of 1.944557 so that the average case weight after recalibration was equal to the average case weight before recalibration. The normalization adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act. We then applied the permanent 10-percent cap on the reduction in a MS-DRG's relative weight in a given
The 19 proposed national average CCRs for FY 2027 are as follows:
Since FY 2009, the relative weights have been based on 100 percent cost weights based on our MS-DRG grouping system.
When we recalibrated the DRG weights for previous years, we set a threshold of 10 cases as the minimum number of cases required to compute a reasonable weight. We are proposing to use that same case threshold in recalibrating the proposed MS-DRG relative weights for FY 2027. Using data from the FY 2025 MedPAR file, there are 8 MSDRGs that contain fewer than 10 cases. For FY 2027, because we do not have sufficient MedPAR data to set accurate and stable cost relative weights for these low-volume MS-DRGs, we are proposing to compute relative weights for the low volume MS-DRGs by adjusting their final FY 2026 relative weights by the percentage change in the average weight of the cases in other MS-DRGs from FY 2026 to FY 2027. The crosswalk table is as follows.
Effective for discharges beginning on or after October 1, 2001, section 1886(d)(5)(K)(i) of the Act requires the Secretary to establish a mechanism to recognize the costs of new medical services and technologies (sometimes collectively referred to in this section as “new technologies”) under the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered new if it meets criteria established by the Secretary after notice and opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that a new medical service or technology may be considered for new technology add-on payment if, based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges under this subsection is inadequate. The regulations at 42 CFR 412.87 implement these provisions and § 412.87(b) specifies three criteria for a new medical service or technology to receive the additional payment: (1) the medical service or technology must be new; (2) the medical service or technology must be costly such that the DRG rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate; and (3) the service or technology must demonstrate a substantial clinical improvement over existing services or technologies. In addition, certain transformative new devices and antimicrobial products may qualify under an alternative inpatient new technology add-on payment pathway, as set forth in the regulations at § 412.87(c) and (d).
We note that section 1886(d)(5)(K)(i) of the Act requires the Secretary to establish a mechanism to recognize the costs of new medical services and technologies under the payment system established under that subsection, which establishes the system for paying for the operating costs of inpatient hospital services. The system of payment for capital costs is established under section 1886(g) of the Act. Therefore, as discussed in prior rulemaking (72 FR 47307 through 47308), we do not include capital costs in the add-on payments for a new medical service or technology or make new technology add-on payments under the IPPS for capital-related costs.
In this proposed rule, we highlight some of the major statutory and regulatory provisions relevant to the new technology add-on payment criteria, as well as other information. For further discussion on the new technology add-on payment criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51572 through 51574), the FY 2020 IPPS/LTCH PPS final rule (84 FR 42288 through 42300), and the FY 2021 IPPS/LTCH PPS final rule (85 FR 58736 through 58742).
Under the first criterion, as reflected in § 412.87(b)(2), a specific medical service or technology will no longer be considered “new” for purposes of new medical service or technology add-on payments after CMS has recalibrated the MS-DRGs, based on available data, to reflect the cost of the technology. We note that we do not consider a service or technology to be new if it is substantially similar to one or more existing technologies. That is, even if a medical product receives a new FDA marketing authorization, it may not necessarily be considered “new” for purposes of new technology add-on payments if it is “substantially similar” to another medical product that was market authorized by FDA and has been on the market for more than 2 to 3 years. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 through 43814), we established criteria for evaluating whether a new technology is substantially similar to an existing technology, specifically whether: (1) a product uses the same or a similar mechanism of action to achieve a therapeutic outcome; (2) a product is assigned to the same or a different MS-DRG; and (3) the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population. If a technology meets all three of these criteria, it would be considered substantially similar to an existing technology and would not be considered “new” for purposes of new technology add-on payments. For a detailed discussion of the criteria for substantial similarity, we refer readers to the FY 2006 IPPS final rule (70 FR 47351 through 47352) and the FY 2010 IPPS/LTCH PPS final rule (74 FR 43813 through 43814).
Under the second criterion, § 412.87(b)(3) further provides that, to be eligible for the add-on payment for new medical services or technologies, the MS-DRG prospective payment rate otherwise applicable to discharges involving the new medical service or technology must be assessed for adequacy. Under the cost criterion, consistent with the formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, to assess the adequacy of payment for a new technology paid under the applicable MS-DRG prospective payment rate, we evaluate whether the charges of the cases involving a new medical service or technology will exceed a threshold amount that is the lesser of 75 percent of the standardized amount (increased to reflect the difference between cost and charges) or 75 percent of one standard deviation beyond the geometric mean standardized charge for all cases in the MS-DRG to which the new medical service or technology is assigned (or the case-weighted average of all relevant MS-DRGs if the new medical service or technology occurs in many different MS-DRGs). The MS-DRG threshold amounts generally used in evaluating new technology add-on payment applications for FY 2027 are presented in a data file that is available, along with the other data files associated with the FY 2026 IPPS/LTCH PPS final rule on the CMS website at:
We note that, under the policy finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58603 through 58605), beginning with FY 2022, we use the proposed threshold values associated with the proposed rule for that fiscal year to evaluate the cost criterion for all applications for new technology add-on payments and previously approved technologies that may continue to receive new technology add-on payments, if those technologies would be assigned to a proposed new MS-DRG for that same fiscal year.
As finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41275), beginning with FY 2020, we include the thresholds applicable to the next fiscal year (previously included in Table 10 of the annual IPPS/LTCH PPS proposed and final rules) in the data files associated with the prior fiscal year. Accordingly, the proposed thresholds for applications for new technology add-on payments for FY 2028 are presented in a data file that is available on the CMS website, along with the other data files associated with this FY 2027 proposed rule, by clicking on the FY 2027 IPPS Proposed Rule Home Page at:
In the September 7, 2001, final rule that established the new technology add-on payment regulations (66 FR 46917), we discussed that applicants should submit a significant sample of data to demonstrate that the medical service or technology meets the high-cost threshold. Specifically, applicants should submit a sample of sufficient size to enable us to undertake an initial validation and analysis of the data. We also discussed in the September 7, 2001, final rule (66 FR 46917) the issue of whether the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule at 45 CFR part 160 and subparts A and E of 45 CFR part 164, applies to claims information that providers submit with applications for new medical service or technology add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51573) for further information on this issue.
Under the third criterion at § 412.87(b)(1), a medical service or technology must represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42288 through 42292), we prospectively codified in our regulations at § 412.87(b) the following aspects of how we evaluate substantial clinical improvement for purposes of new technology add-on payments under the IPPS:
• The totality of the circumstances is considered when making a determination that a new medical service or technology represents an advance that substantially improves, relative to services or technologies previously available, the diagnosis or treatment of Medicare beneficiaries.
• A determination that a new medical service or technology represents an advance that substantially improves, relative to services or technologies previously available, the diagnosis or treatment of Medicare beneficiaries means—
++ The new medical service or technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments;
++ The new medical service or technology offers the ability to diagnose a medical condition in a patient population where that medical condition is currently undetectable, or offers the ability to diagnose a medical condition earlier in a patient population than allowed by currently available methods, and there must also be evidence that use of the new medical service or technology to make a diagnosis affects the management of the patient;
++ The use of the new medical service or technology significantly improves clinical outcomes relative to services or technologies previously available as demonstrated by one or more of the following: a reduction in at least one clinically significant adverse event, including a reduction in mortality or a clinically significant complication; a decreased rate of at least one subsequent diagnostic or therapeutic intervention; a decreased number of future hospitalizations or physician visits; a more rapid beneficial resolution of the disease process treatment including, but not limited to, a reduced length of stay or recovery time; an improvement in one or more activities of daily living; an improved quality of life; or, a demonstrated greater medication adherence or compliance; or
++ The totality of the circumstances otherwise demonstrates that the new medical service or technology substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.
• Evidence from the following published or unpublished information sources from within the United States or elsewhere may be sufficient to establish that a new medical service or technology represents an advance that substantially improves, relative to services or technologies previously available, the diagnosis or treatment of Medicare beneficiaries: clinical trials, peer reviewed journal articles; study results; meta-analyses; consensus statements; white papers; patient surveys; case studies; reports; systematic literature reviews; letters from major healthcare associations; editorials and letters to the editor; and public comments. Other appropriate information sources may be considered.
• The medical condition diagnosed or treated by the new medical service or technology may have a low prevalence among Medicare beneficiaries.
• The new medical service or technology may represent an advance that substantially improves, relative to services or technologies previously available, the diagnosis or treatment of a subpopulation of patients with the medical condition diagnosed or treated by the new medical service or technology.
We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42288 through 42292) for additional discussion of the evaluation of substantial clinical improvement for purposes of new technology add-on payments under the IPPS.
We note, consistent with the discussion in the FY 2003 IPPS final rule (67 FR 50015), that while FDA has regulatory responsibility for decisions related to marketing authorization (for example, approval, clearance, etc.), we do not rely upon FDA criteria in our evaluation of substantial clinical improvement for purposes of determining what services and technologies qualify for new technology add-on payments under Medicare. This criterion does not depend on the standard of safety and effectiveness on which FDA relies but on a demonstration of substantial clinical improvement in the Medicare population.
Beginning with applications for FY 2021 new technology add-on payments, under the regulations at § 412.87(c), a medical device that is part of FDA's Breakthrough Devices Program may qualify for the new technology add-on payment under an alternative pathway. Additionally, under the regulations at § 412.87(d) for certain antimicrobial products, beginning with FY 2021, a drug that is designated by FDA as a Qualified Infectious Disease Product (QIDP), and, beginning with FY 2022, a drug that is approved by FDA under the Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD), may also qualify for the new technology add-on payment under an alternative pathway. We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297) and the FY 2021 IPPS/LTCH PPS final rule (85 FR 58737 through 58739) for further discussion on this policy. We note that CMS reviews the application based on the information provided by the applicant only under the alternative pathway specified by the applicant at the time of application submission. To receive approval for the new technology add-on payment under that alternative pathway, the technology must have the applicable FDA designation and meet all other requirements in the regulations in § 412.87(c) and (d), as applicable. We note, in section II.E.7. of this proposed rule, we are proposing to repeal the alternative pathway for new technology add-on payment beginning with applications received for new technology add-on payments for FY
For applications received for new technology add-on payments for FY 2021 and subsequent fiscal years, a medical device designated under FDA's Breakthrough Devices Program
For applications received for new technology add-on payments for certain antimicrobial products, beginning with FY 2021, if a technology is designated by FDA as a QIDP and received FDA marketing authorization, and, beginning with FY 2022, if a drug is approved under FDA's LPAD pathway and used for the indication approved under the LPAD pathway, it will be considered not substantially similar to an existing technology for purposes of new technology add-on payments and will not need to meet the requirement that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. Under this alternative pathway for QIDPs and LPADs, a medical product that has received FDA marketing authorization and is designated by FDA as a QIDP or approved under the LPAD pathway will need to meet the requirements of § 412.87(d). We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297) and FY 2021 IPPS/LTCH PPS final rule (85 FR 58737 through 58739) for further discussion on this policy.
We note that, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58737 through 58739), we clarified that a new medical product seeking approval for the new technology add-on payment under the alternative pathway for QIDPs must receive FDA marketing authorization for the indication covered by the QIDP designation. We also finalized our policy to expand our alternative new technology add-on payment pathway for certain antimicrobial products to include products approved under the LPAD pathway and used for the indication approved under the LPAD pathway.
The new medical service or technology add-on payment policy under the IPPS provides additional payments for cases with relatively high costs involving eligible new medical services or technologies, while preserving some of the incentives inherent under an average-based prospective payment system. The payment mechanism is based on the cost to hospitals for the new medical service or technology. As noted previously, we do not include capital costs in the add-on payments for a new medical service or technology or make new technology add-on payments under the IPPS for capital-related costs (72 FR 47307 through 47308).
For discharges occurring before October 1, 2019, under § 412.88, if the costs of the discharge (determined by applying operating cost-to-charge ratios (CCRs) as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), CMS made an add-on payment equal to the lesser of: (1) 50 percent of the costs of the new medical service or technology; or (2) 50 percent of the amount by which the costs of the case exceed the standard DRG payment.
Beginning with discharges on or after October 1, 2019, for the reasons discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 through 42300), we finalized an increase in the new technology add-on payment percentage, as reflected at § 412.88(a)(2)(ii). Specifically, for a new technology other than a medical product designated by FDA as a QIDP, beginning with discharges on or after October 1, 2019, if the costs of a discharge involving a new technology (determined by applying CCRs as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: (1) 65 percent of the costs of the new medical service or technology; or (2) 65 percent of the amount by which the costs of the case exceed the standard DRG payment. For a new technology that is a medical product designated by FDA as a QIDP, beginning with discharges on or after October 1, 2019, if the costs of a discharge involving a new technology (determined by applying CCRs as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: (1) 75 percent of the costs of the new medical service or technology; or (2) 75 percent of the amount by which the costs of the case exceed the standard DRG payment. For a new technology that is a medical product approved under FDA's LPAD pathway, beginning with discharges on or after October 1, 2020, if the costs of a discharge involving a new technology (determined by applying CCRs as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: (1) 75 percent of the costs of the new medical service or technology; or (2) 75 percent of the amount by which the costs of the case exceed the standard DRG payment. As set forth in § 412.88(b)(2), unless the discharge qualifies for an outlier payment, the additional Medicare payment will be limited to the full MS-DRG payment plus 65 percent (or 75 percent for certain antimicrobial products (QIDPs and LPADs)) of the estimated costs of the new technology or medical service. We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 through 42300) for further discussion on the increase in the new technology add-on payment beginning with discharges on or after October 1, 2019.
As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69245 through 69252), we finalized an increase in the new technology add-on payment percentage, reflected at § 412.88(a)(2)(ii)(C) and (b)(2)(iv), that for certain gene therapies approved for new technology add-on payments in the FY 2025 IPPS/LTCH PPS final rule that are indicated and used specifically for the treatment of sickle cell disease (SCD), effective with discharges on or after October 1, 2024 and concluding at the end of the 2- to 3-year newness period for such therapy, if the costs of a discharge (determined by applying CCRs as described in § 412.84(h)) involving the use of such therapy for the treatment of SCD exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: (1) 75 percent of the costs of the new medical service or technology; or (2) 75 percent of the amount by which the costs of the case exceed the standard DRG payment. We noted that these payment amounts would only apply to Casgevy
We note that, consistent with the prospective nature of the IPPS, we finalize the new technology add on payment amount for technologies approved or conditionally approved for new technology add-on payments in the final rule for each fiscal year and do not make mid-year changes to new technology add-on payment amounts. Updated cost information may be submitted and included in rulemaking to be considered for the following fiscal year.
Section 503(d)(2) of the MMA (Pub. L. 108-173) provides that there shall be no reduction or adjustment in aggregate payments under the IPPS due to add-on payments for new medical services and technologies. Therefore, in accordance with section 503(d)(2) of the MMA, add-on payments for new medical services or technologies for FY 2005 and subsequent years have not been subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we modified our regulation at § 412.87 to codify our longstanding practice of how CMS evaluates the eligibility criteria for new medical service or technology add-on payment applications. That is, we first determine whether a medical service or technology meets the newness criterion, and only if so, do we then make a determination as to whether the technology meets the cost threshold and represents a substantial clinical improvement over existing medical services or technologies. We specified that all applicants for new technology add-on payments must have FDA approval or clearance by July 1 of the year prior to the beginning of the fiscal year for which the application is being considered. In the FY 2021 IPPS/LTCH PPS final rule, to more precisely describe the various types of FDA approvals, clearances and classifications that we consider under our new technology add-on payment policy, we finalized a technical clarification to the regulation to indicate that new technologies must receive FDA marketing authorization
Additionally, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58739 through 58742), we finalized our proposal to provide conditional approval for new technology add-on payment for a technology for which an application is submitted under the alternative pathway for certain antimicrobial products at § 412.87(d) that does not receive FDA marketing authorization by July 1 prior to the particular fiscal year for which the applicant applied for new technology add-on payments, provided that the technology otherwise meets the applicable add-on payment criteria. Under this policy, cases involving eligible antimicrobial products would begin receiving the new technology add-on payment sooner, effective for discharges the quarter after the date of FDA marketing authorization, provided that the technology receives FDA marketing authorization before July 1 of the fiscal year for which the applicant applied for new technology add-on payments. As noted, in section II.E.7. of this proposed rule, we are proposing to repeal the alternative pathway for new technology add-on payment, such that beginning with applications received for new technology add-on payments for FY 2028, in order to be eligible for consideration for the new technology add on payment for the upcoming fiscal year, all applicants would need to receive FDA marketing authorization by May 1 prior to the particular fiscal year for which the application is being considered.
As discussed in the FY 2024 and FY 2025 IPPS/LTCH PPS final rules (88 FR 58948 through 58958 and 89 FR 69242 through 69245, respectively), beginning with the new technology add-on payment applications for FY 2025, for technologies that are not already FDA market authorized for the indication that is the subject of the new technology add-on payment application, applicants must have a complete and active FDA market authorization request at the time of new technology add-on payment application submission and must provide documentation of FDA acceptance (for a 510(k) or De Novo Classification request submission) or filing (for a PMA, NDA, or BLA) to CMS at the time of application submission, consistent with the type of FDA marketing authorization application the applicant has submitted to FDA. See § 412.87(e) and further discussion in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958) and the FY 2025 IPPS/LTCH PPS final rule (89 FR 69242 through 69245). As we have discussed in prior rulemaking, we consider the application to be complete when the full application has been submitted to FDA and FDA has provided documentation to the applicant indicating that FDA has determined that the application is sufficiently complete to allow for substantive review by FDA. We further stated in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36661 through 36662) that we recognize that FDA processes and documentation may change over time, and the acceptance or filing documentation may vary depending on the type of FDA marketing authorization application the applicant has submitted to FDA. For example, we understand that FDA considers submission of a 510(k) or De Novo Classification request
In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958), we also finalized that, beginning with FY 2025 applications, in order to be eligible for consideration for the new technology add-on payment for the upcoming fiscal year, an applicant for new technology add-on payments must have received FDA marketing authorization by May 1 (rather than July 1) of the year prior to the beginning of the fiscal year for which the application is being considered (except for an application that is submitted under the alternative pathway for certain antimicrobial products), as reflected at § 412.87(f)(2) and (3), as amended and redesignated in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958, 88 FR 59331). As noted, in section II.E.7. of this proposed rule, we are proposing to repeal the alternative pathway for new technology add-on payment, such that beginning with the FY 2028 new technology add-on payment applications, in order to be eligible for consideration for the new technology add on payment for the upcoming fiscal year, all applicants would need to receive FDA marketing authorization by May 1 of the year prior to the beginning of the fiscal year for which the application is being considered.
Many interested parties (including device/biologic/drug developers or manufacturers, industry consultants, others) engage with CMS for coverage, coding, and payment questions or concerns. In order to streamline engagement by centralizing the different innovation pathways within CMS including new technology add-on payments, CMS utilizes the Pharmaceutical & Technology Ombudsman as an initial resource for interested parties. This Ombudsman is available to assist with all of the following:
• Help to point interested parties to or provide information and resources where possible regarding process, requirements, and timelines.
• As necessary, coordinate and facilitate opportunities for interested parties to engage with various CMS components.
• Serve as a primary point of contact for interested parties and provide updates on developments where possible or appropriate.
We receive many questions from parties interested in pursuing new technology add-on payments who may not be entirely familiar with working with CMS. While we encourage interested parties to first review our resources available at
Applicants for add-on payments for new medical services or technologies for FY 2028 must submit a formal request, including a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement (unless the application is under one of the alternative pathways as previously described, if the proposal in section II.E.7. of this proposed rule to repeal the alternative pathway for new technology add-on payment beginning with FY 2028 new technology add-on payment applications is not finalized), along with a significant sample of data to demonstrate that the medical service or technology meets the high-cost threshold. If the proposal in section II.E.7. of this proposed rule to repeal the alternative pathway is not finalized, CMS will continue to review applications under the pathway specified by the applicant at the time of application submission. Complete application information, along with final deadlines for submitting a full application, will be posted as it becomes available on the CMS website at:
To allow interested parties to identify the new medical services or technologies under review before the publication of the proposed rule for FY 2028, once the application deadline has closed, CMS will post on its website a list of the applications submitted, along with a brief description of each technology as provided by the applicant.
As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48986 through 48990), we finalized our proposal to publicly post online new technology add-on payment applications, including the completed application forms, certain related materials, and any additional updated application information submitted subsequent to the initial application submission (except certain volume, cost and other information identified by the applicant as confidential), beginning with the application cycle for FY 2024, at the time the proposed rule is published. We also finalized that with the exception of information included in a confidential information section of the application, cost and volume information, and materials identified by the applicant as copyrighted or not otherwise releasable to the public, the contents of the application and related materials may be posted publicly, and that we will not post applications that are withdrawn prior to publication of the proposed rule. We refer the reader to the FY 2023 IPPS/LTCH PPS final rule (87 FR 48986 through 48990) for further information regarding this policy. In addition, as discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36663 through 36664), beginning with the new technology add-on payment applications submitted for FY 2027, the public posting includes the applicant's explanation of the cost analysis methodology, including the step-by-step explanation of the columns used in the cost analysis spreadsheet attachment, any optional comments provided by the applicant, and information about the case weighted threshold and final inflated case weighted standardized charge per case, as is currently subject to discussion in the cost criterion analysis for each eligible application in the proposed rule. The cost analysis spreadsheet attachment and other cost or charge values that may have been provided in the applicant's responses in the cost criterion section are not included in the public posting. Certain cost and volume information may still be summarized and discussed in the proposed rule, but we are providing more succinct information as part of the summaries in the proposed and final rules regarding the applicant's assertions as to how the medical service or technology meets the cost criterion.
We note that the burden associated with this information collection requirement is the time and effort required to collect and submit the data in the formal request for add-on payments for new medical services and technologies to CMS. The aforementioned burden is subject to the PRA and approved under OMB control number 0938-1347 and has an expiration date of December 31, 2026.
Section 1886(d)(5)(K)(viii) of the Act, as amended by section 503(b)(2) of the MMA, provides for a mechanism for public input before publication of a notice of proposed rulemaking regarding whether a medical service or technology represents a substantial clinical improvement. The process for evaluating new medical service and technology applications requires the Secretary to do all of the following:
• Provide, before publication of a proposed rule, for public input regarding whether a new service or technology represents an advance in medical technology that substantially improves the diagnosis or treatment of Medicare beneficiaries.
• Make public and periodically update a list of the services and technologies for which applications for add-on payments are pending.
• Accept comments, recommendations, and data from the public regarding whether a service or technology represents a substantial clinical improvement.
• Provide, before publication of a proposed rule, for a meeting at which organizations representing hospitals, physicians, manufacturers, and any other interested party may present comments, recommendations, and data regarding whether a new medical service or technology represents a substantial clinical improvement to the clinical staff of CMS.
In order to provide an opportunity for public input regarding add-on payments for new medical services and technologies for FY 2027 prior to publication of the FY 2027 IPPS/LTCH PPS proposed rule, we published a notice in the
Approximately 190 individuals attended the virtual town hall meeting. We posted the recordings of the virtual town hall on the CMS web page at:
We considered each applicant's presentation made at the town hall meeting, as well as written comments received by the December 15, 2025 deadline, in our evaluation of the new technology add-on payment applications for FY 2027 in the development of the FY 2027 IPPS/LTCH PPS proposed rule. In response to the published notice and the New Technology Town Hall meeting, we received written comments regarding the applications for FY 2027 new technology add-on payments. As explained earlier and in the
As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434), the ICD-10-PCS includes a new section containing the new Section “X” codes, which began being used with discharges occurring on or after October 1, 2015. Decisions regarding changes to ICD-10-PCS Section “X” codes will be handled in the same manner as the decisions for all of the other ICD-10-PCS code
In this section of the proposed rule, we discuss the proposed FY 2027 status of the 54 new technology add-on payments approved for FY 2026, as set forth in the tables that follow. Specifically, we present our proposals to continue the new technology add-on payments for FY 2027 for those technologies that were approved for the new technology add-on payment for FY 2026, and which would still be considered “new” for purposes of new technology add-on payments for FY 2027. We also present our proposals to discontinue new technology add-on payments for FY 2027 for those technologies that were approved for the new technology add-on payment for FY 2026, and which would no longer be considered “new” for purposes of new technology add-on payments for FY 2027.
Our policy is that a medical service or technology may continue to be considered “new” for purposes of new technology add-on payments within 2 or 3 years after the point at which data begin to become available reflecting the inpatient hospital code assigned to the new service or technology. Our practice has been to begin and end new technology add-on payments on the basis of a fiscal year, and, for technologies that were first approved for new technology add-on payments prior to FY 2025, we have generally followed a guideline that uses a 6-month window before and after the start of the fiscal year to determine whether to extend the new technology add-on payment for an additional fiscal year, and, in general, we have extended new technology add-on payments for these technologies for an additional year only if the 3-year anniversary date of the product's entry onto the U.S. market occurs in the latter half of the fiscal year (70 FR 47362).
As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69238 through 69242), we finalized that, beginning with new technology add-on payments for FY 2026, in assessing whether to continue the new technology add-on payments for those technologies that are first approved for new technology add-on payments in FY 2025 or a subsequent year, we will extend new technology add-on payments for an additional fiscal year when the 3-year anniversary date of the product's entry onto the U.S. market occurs on or after October 1 of that fiscal year. This change is effective beginning with those technologies that are initially approved for new technology add-on payments in FY 2025 or a subsequent year. For technologies that were first approved for new technology add-on payments prior to FY 2025, including for technologies we determine to be substantially similar to those technologies, we continue to use the midpoint of the upcoming fiscal year (April 1) when determining whether a technology would still be considered “new” for purposes of new technology add-on payments.
Table II.E-01 lists the technologies that were first approved for new technology add-on payments in FY 2025 or a subsequent year, for which we are proposing to continue making new technology add-on payments for FY 2027 because they are still considered “new” for purposes of new technology add-on payments because the 3-year anniversary date of the product's entry onto the U.S. market occurs on or after October 1, 2026. This table also presents the newness start date, new technology add-on payment start date, 3-year anniversary date of the product's entry onto the U.S. market, relevant final rule citations from prior fiscal years, proposed maximum add-on payment amount, and coding assignments for each technology. We refer readers to the cited final rules in the table for a complete discussion of the new technology add-on payment application, coding, and payment amount for these technologies, including the applicable indications and discussion of the newness start date.
We note that we conditionally approved CONTEPO
As discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36666 through 36671), in response to comments from the applicant for ZEVTERA® requesting that CMS consider the beginning of the newness period for ZEVTERA® to commence on May 20, 2025, which it stated was the date on which ZEVTERA® became commercially available on the U.S. market, we noted that that date occurred after new technology add-on payments for ZEVTERA® began, as it was approved for new technology add-on payment for FY 2025 (starting October 1, 2024). While we agreed that per our policy, we may consider a documented delay in a technology's market availability in our determination of newness, we noted that the new technology add-on payment for claims reporting ICD-10-PCS procedure codes for ZEVTERA® (XW0335A (Introduction of ceftobiprole medocaril anti-infective into peripheral vein, percutaneous approach) and XW0435A (Introduction of ceftobiprole medocaril anti-infective into central vein, percutaneous approach)) was available beginning October 1, 2024.
Furthermore, we noted that beginning with new technology add-on payments for FY 2026, in assessing whether to continue the new technology add-on payments for those technologies that are first approved for new technology add-on payments in FY 2025 or a subsequent year, we will extend new technology add-on payments for an additional fiscal year when the 3-year anniversary date of the product's entry onto the U.S. market occurs on or after October 1 of that fiscal year. We stated that if we were to consider the beginning of the newness period to commence on May 20, 2025, the date on which the applicant states ZEVTERA® became commercially available on the U.S. market, under our policy, the technology would potentially be eligible for new technology add-on payment for up to four years. Although the applicant stated that CMS had delayed the newness start dates for other technologies when market availability was significantly later than the FDA approval date, and that like these other products, ZEVTERA®'s newness period should commence on the date on which the technology became commercially
We also noted that applicants may assert a delay in commercial availability due to business decisions made by the applicant. We were concerned that a delay in commercial availability extending beyond the implementation date for the new technology add-on payment would potentially allow applicants to postpone commercial availability for an indefinite period of time while the technology (and other technologies reported using the same codes) remains eligible for new technology add-on payment.
Therefore, we questioned whether, where the applicant asserts a date of commercial availability that occurred after the new technology add-on payment for the technology began, it would be appropriate to instead consider the beginning of the newness period to commence with the start of the technology's new technology add-on payment. We noted that regardless of whether we considered the beginning of the newness period to commence for ZEVTERA® on May 20, 2025, April 3, 2024, or a date in between, the three-year anniversary date would occur after April 1, 2026, and, therefore, the technology was considered new for FY 2026.
After further review, we believe that it would be most appropriate to no longer consider commercial delays once a technology's new technology add-on payment becomes effective. We have discussed in prior rulemaking (89 FR 36136) that, generally, we use the FDA marketing authorization date as the indicator of the time when a technology begins to become available on the market and data reflecting the costs of the technology begin to become available for recalibration of the DRG weights. In specific circumstances, we have recognized a date later than the FDA marketing authorization date as the appropriate starting point for the 2- to 3-year newness period. For example, we have recognized a later date where an applicant could prove a delay in actual availability of a product after FDA approval or clearance. However, due to the increasing volume and complexity of circumstances in which applicants assert a delay in commercial availability, we believe that a delay that extends to after implementation of a new technology add-on payment should no longer be considered. For example, as discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36667), we are concerned that a delay in commercial availability extending beyond the implementation date for the new technology add-on payment would potentially allow applicants to postpone commercial availability for an indefinite period of time while the technology (and other technologies reported using the same codes) remain eligible for new technology add-on payment. We have also noted that applicants may be asserting a delay in commercial availability due to business decisions made by the applicant. In addition, because we now extend new technology add-on payments for an additional fiscal year when the 3-year anniversary date of a product's entry onto the U.S. market occurs on or after October 1 of that fiscal year (89 FR 69238 through 69242), commercial delays as asserted by manufacturers that extend to after the new technology add-on payment becomes effective could now have a bigger impact, as they could lead to new technology add-on payments being effective for four or more years under our current policy.
Therefore, while we have considered no longer recognizing a date later than the FDA marketing authorization date as the appropriate starting point for the 2- to 3-year newness period, we are proposing that we may consider a documented delay in the beginning of a technology's newness period due to commercial availability only until the new technology add-on payment becomes effective for the fiscal year for which the applicant applied for new technology add-on payments. Under this proposal, for a technology that is not yet available for sale when its new technology add-on payment becomes effective, we would consider the newness period to begin on September 30 preceding the start of the new technology add-on payment for the technology.
As such, consistent with this proposal, because the new technology add-on payment for ZEVTERA® became effective on October 1, 2024, we consider the beginning of the newness period for ZEVTERA® to commence on September 30, 2024.
We are inviting public comments on our proposals to continue new technology add-on payments for FY 2027 for the technologies listed in Tables II.E.-01 of this proposed rule.
Table II.E.-02 lists twelve technologies that were first approved for new technology add-on payments prior to FY 2025, including technologies
We note that while we are proposing to discontinue new technology add-on payments for FY 2027 for the Ceribell Status Epilepticus Monitor, Ceribell, Inc. is seeking new technology add-on payments for the Ceribell Delirium Monitor System for FY 2027 (as discussed in section II.E.6. of the preamble of this proposed rule), which is also identified by the ICD-10-PCS procedure code XX20X89 (Monitoring of brain electrical activity, computer-aided detection and notification, new technology group 9). In order to identify cases using the ICD-10-PCS procedure code XX20X89 related to the Ceribell Delirium Monitor System and not the Ceribell Status Epilepticus Monitor, which would no longer be new, we are proposing to exclude cases that report the ICD-10-CM diagnosis codes that we believe would identify patients with status epilepticus in combination with the ICD-10-PCS procedure code XX20X89. Please see Table 10.2.— Ceribell Delirium Monitor System, associated with this proposed rule, for the list of ICD-10-CM diagnosis codes that we believe would identify patients with status epilepticus, which we propose to exclude from new technology add-on payment when reported in combination with ICD-10-PCS procedure code XX20X89. We are inviting public comments on our proposal to exclude cases reporting these ICD-10-CM diagnosis codes in combination with the ICD-10-PCS procedure code XX20X89, for purposes of the new technology add-on payment for FY 2027, if approved.
As discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36666 through 36671), in response to public comments, including from the applicant for the SAINT Neuromodulation System, that requested that CMS recognize a delay in commercial availability of the technology to April 5, 2024, and subsequently extend new technology add-on payment for the SAINT Neuromodulation System for FY 2026, we questioned whether, where the applicant asserts a date of commercial availability that occurred after the new technology add-on payment for the technology began, it would be appropriate to instead consider the beginning of the newness period to commence with the start of the technology's new technology add-on payment. We noted that regardless of whether we considered the beginning of the newness period to commence for SAINT Neuromodulation System on April 5, 2024; a date that reflects the start of the technology's new technology add-on payment in FY 2024; or a date in between, the three-year anniversary date would occur after April 1, 2026, and, therefore, the technology was considered new for FY 2026.
As discussed in greater detail previously in this section, after further consideration, we are proposing that we may consider a documented delay in the beginning of a technology's newness period due to commercial availability only until the new technology add-on payment becomes effective. Specifically, for a technology that is not yet available for sale when its new technology add-on payment becomes effective, we would consider the newness period to begin on September 30 preceding the start of the new technology add-on payment for the technology.
As such, consistent with this proposal, because the new technology add-on payment for SAINT Neuromodulation System became effective on October 1, 2023, we consider the beginning of the newness period for SAINT Neuromodulation System to commence on September 30, 2023. As the SAINT Neuromodulation System was first approved for new technology add-on payments in FY 2024, we continue to use the midpoint of the upcoming fiscal year (April 1) when determining whether this technology would still be considered “new” for purposes of new technology add-on payments. Because we consider the beginning of the newness period to commence on September 30, 2023, the three-year anniversary date would occur before April 1, 2027, and the technology would no longer be considered new for FY 2027.
We are inviting public comments on our proposals to discontinue new technology add-on payments for FY 2027 for the technologies listed in Table II.E.-02 of the preamble of this proposed rule.
As discussed previously, as finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48986 through 48990) and subsequently updated in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36662 through 36664), we publicly post online applications for new technology add-on payment beginning with FY 2024 applications. As noted in these final rules, while we are continuing to provide discussion of the concerns or issues we identified with respect to applications submitted under the traditional pathway, we are providing more succinct information as part of the summaries in the proposed and final rules regarding the applicant's assertions as to how the medical service or technology meets the newness, cost, and substantial clinical improvement criteria. We refer readers to
We received 15 applications for new technology add-on payments for FY 2027 under the new technology add-on payment traditional pathway. In accordance with the regulations under § 412.87(f), applicants for FY 2027 new technology add-on payments must have received FDA marketing authorization by May 1 of the year prior to the beginning of the fiscal year for which the application is being considered. As previously discussed, beginning with the new technology add-on payment applications for FY 2025, for technologies that are not already FDA market authorized for the indication that is the subject of the new technology add-on payment application, applicants must have a complete and active FDA market authorization request at the time of new technology add-on payment application submission and must provide documentation of FDA acceptance or filing to CMS at the time of application submission, consistent with the type of FDA marketing authorization application the applicant has submitted to FDA. See § 412.87(e) and further discussion in the FY 2024 and FY 2025 IPPS/LTCH PPS final rules (88 FR 58948 through 58958; 89 FR 69242 through 69245). Of the 15 applications received under the traditional pathway, 3 applicants were not eligible for consideration for new technology add-on payment because they did not meet these requirements, and 4 applicants withdrew their applications prior to the issuance of this proposed rule. We are addressing the remaining 8 applications.
Typically, in the annual proposed rule, we provide a summary of each traditional pathway application and describe any concerns we may have regarding whether the technology meets a specific new technology add-on payment criterion. In this proposed rule, for technologies that have already received FDA marketing authorization, we are making a proposal to approve or disapprove each of these applications for new technology add-on payment. We have stated in prior rulemaking that we do not believe it is appropriate for CMS to determine whether a medical service or technology represents a substantial clinical improvement over existing technologies before the FDA makes a determination as to whether the medical service or technology is safe and effective (86 FR 45047). Therefore, we are not making a proposal approve or disapprove applications for technologies that have not yet received FDA marketing authorization for new technology add-on payment.
Bristol Myers Squibb submitted a FY 2027 application for new technology add-on payments for COBENFY
The following table provides an overview of the new technology add-on payment application for COBENFY
Regarding substantial similarity, based on information available at the time of this proposed rule and as previously stated in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36697), we agree with the applicant that COBENFY
We are inviting public comments on whether COBENFY
Regarding the cost criterion, we agree with the applicant that the technology meets the cost criterion. We are inviting public comments on whether COBENFY
Regarding substantial clinical improvement, we also received a public comment in response to the New Technology Town Hall meeting notice published in the
With regard to a question asking how quickly COBENFY
With regard to a question inquiring whether the clinical trials included case management or patient support to ensure compliance or if there was qualitative evidence that efficacy alone drives compliance, the applicant stated that clinical trials typically provide a more controlled environment with additional patient support, which often leads to higher compliance compared to adherence and persistence observed in real-world settings; a pattern, the applicant noted, that is likely true for COBENFY
In support of its assertions that COBENFY
After review of this information, we continue to question whether COBENFY
With regards to a new claim in its FY 2027 new technology add-on payment application that COBENFY
As discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36702), after consideration of public comments, we continued to have concerns as to whether COBENFY
With respect to the assertion that COBENFY
Finally, we note that in support of its assertion of improved clinical outcomes compared to previously available therapies, the applicant also provided four claims in its FY 2027 new technology add-on payment application that were similar to the claims provided in its FY 2026 new technology add-on payment application. We note the only additional evidence submitted for these claims in the applicant's FY 2027 new technology add-on payment application was Horan et al. (2024), a post-hoc analysis of pooled data from the three 5-week EMERGENT studies, which was also the only evidence provided for the claim regarding long-term reduction in symptoms and a persistently well-tolerated side effect profile. However, the studies included in this analysis compared COBENFY
After review of the information provided by the applicant and the public comment received in response to the New Technology Town Hall meeting, we are unable to determine that COBENFY
We are inviting public comments on whether COBENFY
Glytec, LLC submitted a FY 2027 application for new technology add-on payments for Command Center Electronic Glycemic Management System (Command Center). According to the applicant, Command Center is an electronic medical record (EMR)-integrated cloud-based software designed to maintain blood glucose in hospitalized patients by recommending personalized insulin dosing. According to the applicant, the technology utilizes inputs collected from EMRs to direct ongoing insulin dosage management and daily monitoring related glycemic variables (such as labs and diet) during an inpatient stay until insulin is discontinued or the patient is sent home. Per the applicant, direct per-patient charge for the use of Command Center follows a subscription model.
The following table provides an overview of the new technology add-on payment application for Command Center and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
Regarding the newness date, the applicant provided an FDA 510(k) clearance letter for Glytec Glucommander (K152300), dated August 4, 2017, to support its new technology add-on payment application for Command Center. Per the 510(k) summary, the predicate device for Glytec Glucommander is Glucommander
In addition, regarding substantial similarity, we question whether Command Center has the same or similar mechanism of action as existing technologies that manage glycemic dosing. The applicant stated that Command Center differs from other insulin management methods because it is an intelligent, algorithm-based analytic technology that uses multiple administrative, technical, and clinical inputs to develop an optimized insulin and glycemic management system to control glucose metabolism while minimizing hyper- and hypoglycemic episodes. Per the applicant, glycemic management is typically performed by nurses and doctors using a paper and pencil sliding scale algorithm to estimate the amount of insulin needed based on blood glucose values. According to the applicant, while other digital glycemic management systems can be built into EMR tables or in stand-alone systems, none are as sophisticated or as well-documented as Command Center. However, we note that there are several existing software-based, EMR-integrated glycemic management systems. For example, the 2012 Glucommander
Regarding the cost criterion, we note the following concerns with the cost analysis provided by the applicant. We note that the applicant did not remove any charges or indirect charges for prior technology. We are interested in additional information regarding whether Command Center would replace any prior technology, such as existing electronic glycemic management tools. We also note that the average standardized charges per case were not calculated according to the instructions in Appendix A—Standardizing Charges.
We did not receive any written comments in response to the New Technology Town Hall meeting notice published in the
After reviewing the information provided by the applicant, we have the following concerns regarding whether Command Center meets the substantial clinical improvement criterion. We note that it appears that the applicant submitted studies using its predicate device (K113853) to support its assertions as to why Command Center represents a substantial clinical improvement. However, the applicant did not present any clinical data comparing Command Center to its predicate device. With respect to the applicant's claims that Command Center offers a treatment option for patients unresponsive to, or ineligible for, currently available treatments, we note that the applicant compared its predicate device to paper-based insulin infusion protocol,
With respect to the assertion that Command Center offers the ability to diagnose a medical condition where it is currently undetectable or earlier than allowed by currently available methods, and that the use of Command Center to make a diagnosis affects the management of the patient, the applicant provided a study showing that patients who relied on the predicate 2012 Glucommander
Similarly, with regard to the applicant's assertion that Command Center significantly improves clinical outcomes for a patient population compared to currently available treatments, we note that one of the two pieces of evidence provided by the applicant mentioned the features and functionalities of Command Center, like real-time glycemic insights, benchmarking, predictive analytics, and system-wide supporting.
After review of the information provided by the applicant, we are unable to determine that Command Center represents a substantial clinical improvement over existing technologies, and therefore, we are proposing to disapprove new technology add-on payments for Command Center for FY 2027.
We are inviting public comments on whether Command Center meets the substantial clinical improvement criterion and our proposal to disapprove new technology add-on payments for Command Center for FY 2027.
Sobi, Inc. submitted an FY 2027 application for new technology add-on payments for GAMIFANT®. According to the applicant, GAMIFANT® is an interferon gamma (IFNγ)-blocking antibody that targets and neutralizes IFNγ to stop the hyperinflammatory feedback loop of macrophage activation syndrome (MAS). Per the applicant, GAMIFANT® is an intravenous infusion consisting of a 6 mg/kg loading dose or a 3 mg/kg treatment dose administered over 1 hour. The applicant stated that in the GAMIFANT® studies, adults received 10 infusions (1 loading dose of 6 mg/kg and 9 treatment doses of 3 mg/kg) over a median 29 days in the inpatient setting. We note that the applicant is seeking new technology add-on payments for GAMIFANT® for its indication for the treatment of adult and pediatric (newborn and older) patients with hemophagocytic lymphohistiocytosis (HLH)/MAS in known or suspected Still's disease, including systemic Juvenile Idiopathic Arthritis (sJIA), with an inadequate response or intolerance to glucocorticoids, or with recurrent MAS.
The following table provides an overview of the new technology add-on payment application for GAMIFANT® and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we believe the relevant ICD-10-CM diagnosis codes to identify the indication of the treatment of adult and pediatric (newborn and older) patients with HLH/MAS in known or suspected Still's disease, including sJIA, with an inadequate response or intolerance to glucocorticoids, or with recurrent MAS are:
We are inviting public comments on the use of these ICD-10-CM diagnosis codes to identify this indication for purposes of the new technology add-on payment, if approved.
Regarding substantial similarity, based on the information available at the time of this proposed rule, we agree with the applicant that GAMIFANT® has a new mechanism of action and treats a new type of disease or patient population compared to existing technology, because it is the only FDA-approved treatment for HLH/MAS in known or suspected Still's disease. We note that the applicant did not provide an explanation for why GAMIFANT® would not map to the same MS-DRGs as other therapies for HLH/MAS in Still's disease. Therefore, based on information available at the time of this proposed rule, we believe that GAMIFANT® is not substantially similar to existing technology and meets the newness criterion. We consider the beginning of the newness period to commence on June 27, 2025, the date on which GAMIFANT® received FDA market authorization for this indication.
We are inviting public comments on whether GAMIFANT® is substantially similar to existing technologies and whether GAMIFANT® meets the newness criterion.
Regarding the cost criterion, we agree with the applicant that the technology meets the cost criterion. We are inviting public comments on whether GAMIFANT® meets the cost criterion.
We did not receive any written comments in response to the New Technology Town Hall meeting notice published in the
After review of the information provided by the applicant, we have the following concerns regarding whether GAMIFANT® meets the substantial clinical improvement criterion. The applicant asserted GAMIFANT® offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments since GAMIFANT® is the first and only FDA-approved treatment for HLH/MAS in known or suspected Still's disease with an inadequate response or intolerance to glucocorticoids, or with recurrent MAS. However, we question whether GAMIFANT® offers a treatment option for patients unresponsive to, or ineligible for, currently available treatments, because several second- and third-line therapies, including cyclosporine, etoposide, anakinra, and intravenous immunoglobulin, can also treat patients with an inadequate response or intolerance to glucocorticoids or with recurrent MAS.
Furthermore, we are unable to assess the applicant's assertion that GAMIFANT® significantly improves clinical outcomes relative to other available services or technologies without a comparison of outcomes to other therapies for patients with an inadequate response or intolerance to glucocorticoids or with recurrent MAS. In addition, while the applicant stated that GAMIFANT® achieves substantially improved clinical outcomes with a clear and positive benefit:risk profile in treating HLH/MAS patients who had an inadequate response to glucocorticoids and that GAMIFANT® initiation results in a clinically meaningful reduction of glucocorticoid dosing and contributes to the positive benefit:risk profile for the treatment of patients with HLH/MAS, we question whether having a positive benefit:risk profile is a relevant outcome under § 412.87(b)(1)(ii)(C) because it does not address how GAMIFANT® improves clinical outcomes relative to other therapies that may be used to treat HLH/MAS patients who had an inadequate response to glucocorticoids or with recurrent MAS.
We also note that to support its assertion regarding improved clinical outcomes, the applicant provided results from two clinical studies, NI-0501-06 and NI-0501-14. We note that all patients in the studies responded inadequately to high-dose
While the applicant claims a positive benefit:risk profile for GAMIFANT®, the submitted clinical information does not clearly explain how it was determined whether serious adverse events were related to GAMIFANT®, nor does it provide sufficient detail on the reported serious adverse events. Specifically, we note that while De Benedetti et al. (2023) states that there were 9 serious adverse events in NI-0501-06 and the long-term follow-up, which appear to include one cytomegalovirus reactivation, one SJIA flare, one edema of the ankle, one MAS episode, one cardiopulmonary failure, and one severe neutropenia, it is unclear what the other three reactions were and which were related to GAMIFANT®. Grom et al. (2025) also stated there were 7 serious adverse events in NI-0501-14, but it is unclear what these events were and which were related to GAMIFANT®.
Furthermore, we would appreciate more detail on the visual analogue scale (VAS) scoring system used in the clinical trials in order to fully assess the efficacy outcome data. We also note that the long-term clinical trials included up to 12 months of follow-up, and we question if this is enough time to assess for MAS recurrence.
After review of the information provided by the applicant, we are unable to determine whether GAMIFANT® represents a substantial clinical improvement over existing technologies, and therefore, we are proposing to disapprove new technology add-on payments for GAMIFANT® for FY 2027.
We are inviting public comments on whether GAMIFANT® meets the substantial clinical improvement criterion and our proposal to disapprove FY 2027 new technology add-on payments for GAMIFANT®.
Orca Bio submitted an FY 2027 application for new technology add-on payments for Orca-T. According to the applicant, Orca-T is an allogeneic stem cell and T-cell immunotherapy derived from a human leukocyte antigen (HLA)-matched donor for the curative treatment of hematologic malignancies, including acute myeloid leukemia (AML), acute lymphoblastic leukemia (ALL), high-risk myelodysplastic syndrome (MDS), and mixed-phenotype acute leukemia (MPAL), in adults. Orca-T is administered as four single-dose, patient-specific infusions composed of purified hematopoietic stem and progenitor cells (HSPC), regulatory T cells (Treg), and conventional T cells (Tcon) along with a diluent from an HLA-matched donor blood apheresis product.
The following table provides an overview of the new technology add-on payment application for Orca-T and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
Regarding substantial similarity, the applicant stated that Orca-T does not have the same or similar mechanism of action as any therapies that are currently used in potentially curative hematologic malignancy treatments mapped to Pre-MDC MS-DRG 018 (Chimeric Antigen Receptor [CAR] T-cell and Other Immunotherapies). While the applicant asserted that Orca-T's engineered product is novel in composition of HSPC, Treg, and Tcon fractions derived from an allograft and administered in a specific sequence, we note that the cell lines isolated in Orca-T already exist in an unmanipulated allograft administered as part of an allogeneic hematopoietic stem cell transplantation (alloHSCT) after cytoreductive conditioning. However, we agree with the applicant that Orca-T is not substantially similar to alloHSCT because it maps to a different MS-DRG than alloHSCTs, which are mapped to Pre-Major Diagnostic Category (MDC) MS-DRG 014 (Allogeneic Bone Marrow Transplant). Therefore, based on information available at the time of this proposed rule, we believe that Orca-T is not substantially similar to existing technologies and meets the newness criterion. We are inviting public comments on whether Orca-T is substantially similar to existing technologies and whether Orca-T meets the newness criterion.
Regarding the cost criterion, we agree with the applicant that the technology meets the cost criterion. We are inviting public comments on whether Orca-T meets the cost criterion.
Regarding substantial clinical improvement, we received a public comment in response to the New Technology Town Hall meeting notice published in the
We are concerned about the lack of technology-specific evidence in support of the applicant's assertion that Orca-T provides a treatment option for patients unresponsive to, or ineligible for, currently available treatments. The applicant claimed that Orca-T is favorable to patients at risk of severe toxicities and mortality with standard of care (SoC) alloHSCT. We note that the supporting evidence for this claim is comprised of background literature about the impact of graft-versus-host disease (GVHD) on patients with hematologic malignancies in general, but does not identify a patient population that is unresponsive to, or ineligible for, alloHSCT, nor does it demonstrate that Orca-T can treat such a patient population. We remain unclear if there is a group of patients who can be treated with Orca-T, but cannot receive existing treatments for hematologic malignancies such as alloHSCT, CAR T-cell therapies, and chemotherapies.
We are also concerned that we are unable to assess whether Orca-T significantly improves clinical outcomes relative to services or technologies previously available without evidence comparing outcomes for Orca-T to other therapies available for patients with hematologic malignancies, including CAR T-cell therapies. While the evidence compared Orca-T to conventional MAC-alloHSCT approaches using standard GVHD prophylaxis regimens, it did not include comparisons to other therapeutic modalities such as CAR-T cell therapies which are available for the treatment of patients with hematologic malignancies and may not be associated with the risk of GVHD. We also note that the supporting evidence for this claim does not include comparisons to other treatment options used in this patient population outside the unmanipulated allo-HSCT setting, such as chemotherapies, nor does it compare the effects of Orca-T with reduced-toxicity or reduced-intensity conditioning on regimen-related toxicity and other clinical outcomes. As a result, we question whether Orca-T results in improved clinical outcomes relative to existing hematologic malignancy treatments.
We are inviting public comments on whether Orca-T meets the substantial clinical improvement criterion.
AOP Health US LLC submitted a FY 2027 application for new technology add-on payments for RAPIBLYK
The following table provides an overview of the new technology add-on payment application for RAPIBLYK
Regarding commercial availability, the applicant stated that, after its NDA approval on November 22, 2024, RAPIBLYK
Regarding substantial similarity, we disagree with the applicant that RAPIBLYK
Additionally, we disagree with the applicant that RAPIBLYK
Accordingly, as it appears that RAPIBLYK
We note that, per our policy, if technologies are substantially similar to each other, we use the earliest market availability date as the beginning of the
We are inviting public comments on whether RAPIBLYK
Regarding the cost criterion, we agree with the applicant that the technology meets the cost criterion. We are inviting public comments on whether RAPIBLYK
Regarding substantial clinical improvement, we also received a few public comments in response to the New Technology Town Hall meeting notice published in the
The applicant also discussed a review article that was already submitted (Floria et al., 2024) to support its claims that RAPIBLYK
In addition, the applicant discussed Perrett et al. (2024), a systematic review and meta-analysis evaluating the efficacy and safety of intravenous (IV) beta blockers in acute AF and AFL, focusing on the role of β-1 receptor selectivity, to support its claim that RAPIBLYK
A few commenters expressed support for new technology add-on payments for RAPIBLYK
A few commenters asserted that RAPIBLYK
While the applicant asserted that RAPIBLYK
Regarding the assertion that RAPIBLYK
Similarly, we question whether the provided evidence is sufficient to demonstrate that RAPIBLYK
After review of the information provided by the applicant and the public comments received in response to the New Technology Town Hall meeting, we are unable to determine that RAPIBLYK
We are inviting public comments on whether RAPIBLYK
Fondazione Telethon submitted an FY 2027 application for new technology add-on payments for WASKYRA
The following table provides an overview of the new technology add-on payment application for WASKYRA
The applicant stated that the technology would not be commercially available until March 31, 2026, due to the applicant's need to establish commercial infrastructure, finalize import logistics, and plan for U.S. market compliance. We are interested in additional information regarding when the technology first became available for sale and the cause of any delay in the technology's commercial availability, such as additional details regarding the establishment of commercial infrastructure.
Regarding substantial similarity, the applicant asserted that WASKYRA
We are inviting public comments on whether WASKYRA
Regarding the cost criterion, we agree with the applicant that the technology meets the cost criterion. We are inviting
We did not receive any written comments in response to the New Technology Town Hall meeting notice published in the
After review of the information provided by the applicant, we have the following concerns regarding whether WASKYRA
Furthermore, with respect to the applicant's claims, we note that the applicant asserted that WASKYRA
After review of the information provided by the applicant, we are unable to determine that WASKYRA
We are inviting public comments on whether WASKYRA
Omeros Corporation submitted an FY 2027 application for new technology add-on payments for YARTEMLEA® (narsoplimab-wuug). According to the applicant, YARTEMLEA® is a fully human monoclonal antibody designed to treat and alleviate the detrimental consequences of hematopoietic stem cell transplant-associated thrombotic microangiopathy (TA-TMA) by targeting and inhibiting mannan-binding lectin-associated serine protease 2 (MASP-2), an effector enzyme that activates the lectin pathway of the complement system. YARTEMLEA® is administered as a 30-minute intravenous infusion once weekly, and the recommended dose is 370 mg for patients greater than or equal to 50 kg and is 4 mg/kg for patients weighing less than 50 kg. The applicant estimated that patients receive an average total dosage of 4,218 mg per inpatient stay. We note that the applicant submitted an application for new technology add-on payments for this technology for FY 2022 (86 FR 25282 through 25286; 86 FR 44979) and FY 2023 (87 FR 28274 through 28279; 87 FR 48920).
The following table provides an overview of the new technology add-on payment application for YARTEMLEA® and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
Regarding substantial similarity, based on the information available at the time of this proposed rule, we agree with the applicant that YARTEMLEA® has a new mechanism of action and treats a new type of disease or patient population compared to existing technology, because YARTEMLEA® is the only FDA-approved therapy indicated for the treatment of adult and pediatric patients 2 years of age and older with hematopoietic stem cell TA-TMA. We note that we disagree with the applicant that YARTEMLEA® is assigned to a different MS-DRG compared to existing technology because patients diagnosed with TA-TMA, including those treated with YARTEMLEA®, map to MS-DRGs 545-547. Therefore, based on information available at the time of this proposed rule, we believe that YARTEMLEA® is not substantially similar to existing technology and meets the newness criterion. We consider the beginning of the newness period to commence on December 23, 2025, the date on which YARTEMLEA® received FDA market authorization for this indication.
We are inviting public comments on whether YARTEMLEA® is substantially similar to existing technologies and whether YARTEMLEA® meets the newness criterion.
Regarding the cost criterion, we agree with the applicant that the technology meets the cost criterion. We are inviting public comments on whether YARTEMLEA® meets the cost criterion.
We did not receive any written comments in response to the New Technology Town Hall meeting notice published in the
After review of the information provided by the applicant, we agree with the applicant that YARTEMLEA® is the first and only FDA-approved treatment option for patients who develop TA-TMA and offers a treatment option for patients who have failed prior treatment with other available therapies including C5 inhibitors and other TA-TMA directed therapies with a one-year overall survival (OS) of 42.7 percent (95% CI: 19.7, 65.8) in adult patients.
We are inviting public comments on whether YARTEMLEA® meets the substantial clinical improvement criterion and on our proposal to approve YARTEMLEA® for new technology add-on payments.
Abeona Therapeutics®, Inc. submitted an FY 2027 application for new technology add-on payments for ZEVASKYN
The following table provides an overview of the new technology add-on payment application for ZEVASKYN
Regarding commercial availability, the applicant stated that ZEVASKYN
Regarding substantial similarity, based on the information available at the time of this proposed rule, we agree with the applicant that ZEVASKYN
We are inviting public comments on whether ZEVASKYN
Regarding the cost criterion, we agree with the applicant that the technology meets the cost criterion. We are inviting public comments on whether ZEVASKYN
Regarding substantial clinical improvement, we also received a public comment in response to the New Technology Town Hall meeting notice published in the
With regard to a question inquiring whether the study (Tang et al., 2025) biopsied skin as part of the co-primary endpoint, the applicant stated that the investigators did not use biopsies to evaluate the greater than or equal to 50 percent wound healing co-primary endpoint. Per the applicant, consistent with standard dermatologic practice where wound healing is assessed through clinical and visual examination rather than routine biopsies, the study used photographic and investigator assessments to evaluate the endpoint. According to the applicant, the study's investigators only performed biopsies in the early phase of the long-term follow-up study to confirm anchoring fibrils and C7 production up to 2 years after treatment with ZEVASKYN
With regard to a question about the comparison of ZEVASKYN
With regard to a question about the definition of a large, chronic wound, the applicant stated that large, chronic wounds for RDEB generally means a wound that is greater than 20 cm
The applicant also reiterated information from its application regarding the current RDEB treatment landscape, ZEVASKYN
Regarding the assertion that ZEVASKYN
In addition, while the applicant asserted that ZEVASKYN
The applicant also asserted that ZEVASKYN
Furthermore, we note that although the applicant asserted that ZEVASKYN
After review of the information provided by the applicant and the public comments received in response to the New Technology Town Hall meeting, we are unable to determine that ZEVASKYN
We are inviting public comments on whether ZEVASKYN
As discussed previously, beginning with applications for FY 2021, a medical device designated under FDA's Breakthrough Devices Program that has received marketing authorization as a Breakthrough Device, for the indication covered by the Breakthrough Device designation, may qualify for the new technology add-on payment under an alternative pathway. Additionally, beginning with FY 2021, a medical product that is designated by FDA as a Qualified Infectious Disease Product (QIDP) and has received marketing authorization for the indication covered by the QIDP designation, and, beginning with FY 2022, a medical product that is a new medical product approved under FDA's Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD) and used for the indication approved under the LPAD pathway, may also qualify for the new technology add-on payment under an alternative pathway. Under an alternative pathway, a technology will be considered not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS and will not need to meet the requirement that it represents an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. These technologies must still be within the 2-to-3-year newness period to be considered “new,” and must also still meet the cost criterion. We refer readers to section II.H.8. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297) and FY 2021 IPPS/LTCH PPS final rule (85 FR 58715 through 58733) for further discussion of the alternative new technology add-on payment pathways for these technologies. As previously noted, in section II.E.7. of this proposed rule, we are proposing to repeal the alternative pathway for new technology add-on payment beginning with applications received for new technology add-on payments for FY 2028 and require all applicants for new technology add-on payments to demonstrate that they meet all eligibility requirements to receive add-on payments. (We refer readers to section II.E.7. of this proposed rule for a complete discussion regarding this proposal.)
As discussed previously, as finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48986 through 48990) and subsequently updated in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36662 through 36664), we publicly post online applications for new technology add-on payment beginning with FY 2024 applications. As noted in those final rules, we are continuing to provide discussion of the concerns or issues we identified with respect to applications submitted under the alternative pathway, but we are providing more succinct information as part of the summaries in the proposed and final
In addition, for certain FY 2027 new technology add-on payment applications, we are making available separate tables listing the ICD-10-PCS codes or ICD-10-CM codes that would be used to identify the Breakthrough Device-designated indication, or would be appropriate to exclude for cases related to a different technology, for purposes of the new technology add-on payment, if approved, in Table 10 associated with this proposed rule, available via the internet on the CMS website at
We received 32 applications for new technology add-on payments for FY 2027 under the new technology add-on payment alternative pathway. As previously discussed, beginning with the new technology add-on payment applications for FY 2025, for technologies that are not already FDA market authorized for the indication that is the subject of the new technology add-on payment application, applicants must have a complete and active FDA market authorization request at the time of new technology add-on payment application submission and must provide documentation of FDA acceptance or filing to CMS at the time of application submission, consistent with the type of FDA marketing authorization application the applicant has submitted to FDA. See § 412.87(e) and further discussion in the FY 2024 and FY 2025 IPPS/LTCH PPS final rules (88 FR 58948 through 58958; 89 FR 69242 through 69245). Of the 32 applications received under the alternative pathway, 7 applications were not eligible for consideration for new technology add-on payment because they did not meet these requirements; and 3 applicants withdrew their applications prior to the issuance of this proposed rule. For the remaining 22 applications, all of the technologies received a Breakthrough Device designation from FDA.
In accordance with the regulations under § 412.87(f)(2), applicants for new technology add-on payments for FY 2027 for Breakthrough Devices must have FDA marketing authorization by May 1 of the year prior to the beginning of the fiscal year for which the application is being considered. Under § 412.87(f)(3), applicants for new technology add-on payments for FY 2027 for QIDPs and technologies approved under the LPAD pathway must have FDA marketing authorization by July 1 of the year prior to the beginning of the fiscal year for which the application is being considered. The policy finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58742) provides for conditional approval for a technology for which an application is submitted under the alternative pathway for certain antimicrobial products (QIDPs and LPADs) at § 412.87(d) that does not receive FDA marketing authorization by July 1 prior to the particular fiscal year for which the applicant applied for new technology add-on payments, provided that the technology receives FDA marketing authorization before July 1 of the fiscal year for which the applicant applied for new technology add-on payments. We refer the reader to the FY 2021 IPPS/LTCH final rule for a complete discussion of this policy (85 FR 58737 through 58742).
As we did in the FY 2026 IPPS/LTCH PPS proposed rule, for applications under the alternative new technology add-on payment pathway, in this proposed rule we are making a proposal to approve or disapprove each of these 22 applications for FY 2027 new technology add-on payments. Therefore, in this section of the preamble of this proposed rule, we provide an overview table of the new technology add-on payment application and CMS's preliminary assessment for each alternative pathway application, and propose whether or not each technology would be eligible for the new technology add-on payment for FY 2027.
We note that we received multiple applications for subscription-based technologies for FY 2027. As stated in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58630) and in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69207), we understand that there are unique circumstances with respect to determining a cost per case for a technology that utilizes a subscription for its cost and we will continue to consider the issues relating to calculation of the cost per unit of technologies sold on a subscription basis as we gain more experience in this area. We continue to welcome comments from the public as to the appropriate method to determine a cost per case for such technologies, including comments on whether the cost analysis should be updated based on the most recent subscriber data for each year for which the technology may be eligible for add-on payment.
Bayesian Health, Inc. submitted a FY2027 application for new technology add-on payments for the Bayesian Health Sepsis Flagging Device. According to the applicant, the Bayesian Health Sepsis Flagging Device is artificial intelligence and machine learning-based Software as a Medical Device (SaMD) intended for use in conjunction with clinical assessments and other laboratory findings to aid the early detection and/or risk prediction of sepsis within the next 4 days.
The following table provides an overview of the new technology add-on payment application for the Bayesian Health Sepsis Flagging Device and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that the Bayesian Health Sepsis Flagging Device meets the cost criterion and are therefore proposing to approve the Bayesian Health Sepsis Flagging Device for new technology add-on payments for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the Bayesian Health Sepsis Flagging Device would be $61.84 for FY 2027 (that is, 65 percent of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether the Bayesian Health Sepsis Flagging Device meets the cost criterion and our proposal to approve new technology add-on payments for the Bayesian Health Sepsis Flagging Device for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Aidoc Medical Ltd., Inc. submitted a FY2027 application for new technology add-on payments for BriefCase-Triage: CARE Multi-Triage CT Body (BriefCase-Triage). According to the applicant, BriefCase-Triage is a radiological triage device used for the analysis of contrast and non-contrast CT images that flags and communicates suspected positive findings for a wide range of clinically actionable, time-sensitive conditions in the abdominopelvic region.
The following table provides an overview of the new technology add-on payment application for BriefCase-Triage and CMS's preliminary assessment. For additional details
After review of the information provided by the applicant, we agree with the applicant that BriefCase-Triage meets the cost criterion and are therefore proposing to approve BriefCase-Triage for new technology add-on payments for FY 2027 for the FDA-cleared indication covered by the Breakthrough Device designation listed in the table. We consider the beginning of the newness period to commence on January 7, 2026, the date on which BriefCase-Triage received FDA marketing authorization.
Based on preliminary cost information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of BriefCase-Triage would be $137.53 for FY 2027 (that is, 65 percent of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether BriefCase-Triage meets the cost criterion and our proposal to approve new technology add-on payments for BriefCase-Triage: CARE Multi-Triage CT Body for FY 2027.
Cara Medical submitted a FY 2027 application for new technology add-on payments for the CARA System. According to the applicant, the CARA System software simulates the path of a patient's cardiac conduction system using anatomical landmarks identifiable on routine CT angiography (CTA) imaging to enable Conduction Guided Intervention (CGI). Per the applicant, CARA augmented fluoroscopy can be used to help the operator visualize, during the procedure, the proximity of his tools and device to the patient's conduction system.
The following table provides an overview of the new technology add-on payment application for the CARA System and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that the CARA System meets the cost criterion and are therefore proposing to approve the CARA System for new technology add-on payments for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
However, we question whether a surgical procedure done in the operating room with the CARA Atlas
We invite public comments on whether the CARA System meets the cost criterion and our proposal to approve new technology add-on payments for the CARA System for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
BONESUPPORT Inc. submitted a FY 2027 application for new technology add-on payments for CERAMENT® V. According to the applicant, CERAMENT® V is a resorbable, vancomycin-eluting ceramic bone graft substitute intended for use as a bone void filler as an adjunct to systemic antibiotic therapy and surgical debridement as part of the surgical treatment of osteomyelitis. Per the applicant, CERAMENT® V is indicated for use on vancomycin-sensitive microorganisms.
The following table provides an overview of the new technology add-on payment application for CERAMENT® V and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we note that the applicant stated that the technology is not expected to be commercially available until a few months after FDA marketing authorization because of the required time to implement the technical requirements to comply with FDA marketing authorization and to produce the first batches of CERAMENT® V for the United States. We are interested in additional information regarding the anticipated cause for any delay in the technology's market availability, as another bone graft substitute from the applicant that was first approved for new technology add-on payment for FY 2023 (87 FR
We agree with the applicant that CERAMENT® V meets the cost criterion and are therefore proposing to approve CERAMENT® V for new technology add-on payments for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of CERAMENT® V would be $5,687.50 for FY 2027 (that is, 65% of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether CERAMENT® V meets the cost criterion and our proposal to approve new technology add-on payments for CERAMENT® V for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Ceribell, Inc. submitted a FY 2027 application for new technology add-on payments for the Ceribell Delirium Monitor System. According to the applicant, the Ceribell Delirium Monitor System is a medical device system comprised of proprietary software, signal acquisition headbands and a recorder. Per the applicant, the software utilizes a machine learning model to analyze EEG signals to detect features indicative of delirium.
The following table provides an overview of the new technology add-on payment application for the Ceribell Delirium Monitor System and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we note that under the eligibility criteria for approval under the alternative pathway for certain transformative devices, only the use of the technology for the indication that corresponds to the technology's Breakthrough Device designation would be eligible for the new technology add-on payment for FY 2027. As stated by the applicant, the FDA-cleared indication is different and is not limited to adult patients aged 65 and older, as noted in the Breakthrough Device designation. Therefore, only the use of the Ceribell Delirium Monitor System for patients aged 65 and older, and the FDA Breakthrough Device designation it received for that use, would be relevant for purposes of the new technology add-on payment application for FY 2027.
In addition, as noted by the applicant, the ICD-10-PCS procedure code XX20X89 (Monitoring of brain electrical activity, computer-aided detection and notification, new technology group 9) is used for a different technology (the Ceribell Status Epilepticus Monitor) to help diagnose status epilepticus, which is not the subject of this new technology add-on payment application. Therefore, the applicant has submitted a request for ICD-10-CM codes to differentiate use of the Ceribell Delirium Monitor System from use of the Ceribell Status Epilepticus Monitor, which was approved for new technology add-on payments for FY 2024 through FY 2026 (88 FR 58927 through 58930; 89 FR 70009; 90 FR 37260) and for which we are proposing to discontinue making new technology add-on payments for FY 2027 because it will no longer be considered new (as discussed in section II.E.4. of the preamble of this proposed rule).
Furthermore, for purposes of the new technology add-on payment, if approved, we believe it would be appropriate to exclude cases reporting the ICD-10-PCS procedure code XX20X89 in patients with status epilepticus, which would instead identify use of the Ceribell Status Epilepticus Monitor. Please see Table 10.2.— Ceribell Delirium Monitor System, associated with this proposed rule, for the list of ICD-10-CM diagnosis codes that we believe would identify patients with status epilepticus, which we propose to exclude from new technology add-on payment when reported in combination with ICD-10-PCS procedure code XX20X89.
We are inviting public comments on our proposal to exclude cases reporting these ICD-10-CM diagnosis codes in combination with the ICD-10-PCS procedure code XX20X89, for purposes of the new technology add-on payment for FY 2027, if approved.
We agree with the applicant that the Ceribell Delirium Monitor System meets the cost criterion and are therefore proposing to approve the Ceribell Delirium Monitor System for new technology add-on payments for FY 2027, for the FDA-cleared indication covered by the Breakthrough Device designation listed in the table. We consider the beginning of the newness period to commence on December 8, 2025, the date on which the Ceribell Delirium Monitor System received FDA marketing authorization.
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the Ceribell Delirium Monitor System would be $2,171 for FY 2027 (that is, 65% of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether the Ceribell Delirium Monitor System meets the cost criterion and our proposal to approve new technology add-on payments for the Ceribell Delirium Monitor System for FY 2027.
Icotec ag submitted a FY 2027 application for new technology add-on payments for the CMORE® CT System. According to the applicant, the CMORE® CT System is a posterior cervico-thoracic fixation system manufactured from BlackArmor® Carbon/PEEK material for standard posterior fixation of the spinal column which features a variety of screw sizes and types, as well as rod shapes, to accommodate patient anatomy.
The following table provides an overview of the new technology add-on payment application for the CMORE® CT System and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we note that, as previously stated, under the eligibility criteria for approval under the alternative pathway for certain transformative devices, only the use of the technology for the indication that corresponds to the technology's Breakthrough Device designation would be eligible for the new technology add-on payment for FY 2027. The indication
Please see Table 10.1.—CMORE® CT System, associated with this proposed rule, for the list of relevant ICD-10-PCS procedure codes that we believe would be appropriate to report in combination with use of the CMORE® CT System to identify use of the technology for the Breakthrough Device-designated indication, as an adjunct to fusion of the cervical spine (C1 to C7) and the upper thoracic spine (T1 to T3). We are inviting public comments on the use of these ICD-10-PCS procedure codes to identify use of the technology for the Breakthrough Device-designated indication for purposes of the new technology add-on payment, if approved.
We agree with the applicant that the CMORE® CT System meets the cost criterion and are therefore proposing to approve the CMORE® CT System for new technology add-on payments for FY 2027, for the FDA-cleared indication covered by the Breakthrough Device designation listed in the table and as described previously. We consider the beginning of the newness period to commence on December 8, 2025, the date on which the CMORE® CT System became commercially available.
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the CMORE® CT System would be $60,905 for FY 2027 (that is, 65% of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether the CMORE® CT System meets the cost criterion and our proposal to approve new technology add-on payments for the CMORE® CT System for FY 2027.
W.L. Gore & Associates, Inc. submitted a FY 2027 application for new technology add-on payments for the GORE® VIABAHN® FORTEGRA Venous Stent. According to the applicant, the GORE® VIABAHN® FORTEGRA Venous Stent is an open-structure polymer lattice device providing intraluminal support in the inferior vena cava and, if clinically warranted, the common iliac veins, at the iliocaval confluence in patients with symptomatic vessel obstruction.
The following table provides an overview of the new technology add-on payment application for the GORE® VIABAHN® FORTEGRA Venous Stent and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that the GORE® VIABAHN® FORTEGRA Venous Stent meets the cost criterion and are therefore proposing to approve the GORE® VIABAHN® FORTEGRA Venous Stent for new technology add-on payments for FY 2027, for the FDA-approved indication covered by the Breakthrough Device designation listed in the table. We consider the beginning of the newness period to commence on December 19, 2025, the date on which the GORE® VIABAHN® FORTEGRA Venous Stent received FDA marketing authorization.
Based on preliminary cost information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the GORE® VIABAHN® Venous Stent would be
We invite public comments on whether the GORE® VIABAHN® Venous Stent meets the cost criterion and our proposal to approve new technology add-on payments for the GORE® VIABAHN® Venous Stent for FY 2027.
Medtronic Sofamor Danek USA, Inc. submitted a FY 2027 application for new technology add-on payments for Infuse
The following table provides an overview of the new technology add-on payment application for Infuse
After review of the information provided by the applicant, we note that Infuse
We are inviting public comments on the use of these ICD-10-PCS procedure codes to identify use of the technology for the Breakthrough Device-designated indication for purposes of the new technology add-on payment, if approved.
We agree with the applicant that Infuse
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of Infuse
We invite public comments on whether Infuse
Invision Medical Technology submitted a FY 2027 application for new technology add-on payments for InVision Precision Cardiac Amyloid (InVision PCA). According to the applicant, InVision PCA is a SaMD machine-learning disease detection algorithm to identify high suspicion of cardiac amyloidosis from routinely obtained echocardiogram videos. Per the applicant, the device assists clinicians in the diagnosis of cardiac amyloidosis.
The following table provides an overview of the new technology add-on payment application for InVision PCA and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that InVision PCA meets the cost criterion and are therefore proposing to approve InVision PCA for new technology add-on payments for FY 2027, for the FDA-cleared indication covered by the Breakthrough Device designation listed in the table. We consider the beginning of the newness period to commence on May 21, 2025, the date on which InVision PCA received FDA market authorization.
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of InVision PCA would be $162.50 for FY 2027 (that is, 65 percent of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether InVision PCA meets the cost criterion and our proposal to approve new technology add-on payments for InVision PCA for FY 2027.
MediBeacon submitted a FY 2027 application for new technology add-on payments for the MediBeacon® Transdermal GFR Measurement System (MediBeacon® TGFR). According to the applicant, the MediBeacon® TGFR provides an assessment of glomerular filtration rate (GFR) at the point of care and employs an intravenously administered fluorescent tracer agent which has been engineered to be excreted exclusively by the kidneys. Per the applicant, noninvasive transdermal fluorescence detection of the excretion rate of the agent is converted into a GFR reading. We note that the applicant submitted an application for new technology add-on payments for this technology for FY 2025 (89 FR 36128 through FR 36130; 89 FR 69204) and FY 2024 (88 FR 26954 through 26955; 88 FR 58919) under the name Transdermal GFR Measurement System Utilizing Lumitrace.
The following table provides an overview of the new technology add-on payment application for the MediBeacon® TGFR and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that the MediBeacon® TGFR meets the cost criterion and are therefore proposing to approve the MediBeacon® TGFR for new technology add-on payments for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
The applicant has not provided an estimate for the cost of the MediBeacon® TGFR at the time of this proposed rule. The applicant stated that there would be four components for the cost of the technology: the operating cost of Lumitrace®, the operating cost of the TGFR Reusable Sensor, the operating cost of the TGFR Adhesive Ring and the capital cost of the TGFR Monitor. Because section 1886(d)(5)(K)(i) of the Act requires that the Secretary establish a mechanism to recognize the costs of new medical services or technologies under the payment system established under that subsection, which establishes the system for payment of the operating costs of inpatient hospital services, we do not include capital costs in the add-on payments for a new medical service or technology or make new technology add-on payments under the IPPS for capital-related costs (86 FR 45145). Therefore, it appears that the TGFR Monitor component is not eligible for new technology add-on payment because, as discussed in prior rulemaking, we only make new technology add-on payments for operating costs (72 FR 47307 through 47308). We would be interested in additional information about the TGFR Reusable Sensor, which also appears to be a reusable, capital expenditure. We expect the applicant to submit cost information prior to the final rule, and we will provide an update regarding the new technology add-on payment amount for the technology, if approved, in the final rule. Any new technology add-on payment for the MediBeacon® TGFR would be subject to our policy under § 412.88(a)(2) where we limit new technology add-on payments to the lesser of 65 percent of the average cost of the technology, or 65 percent of the costs in excess of the MS-DRG payment for the case.
We invite public comments on whether the MediBeacon® TGFR meets the cost criterion and our proposal to approve new technology add-on payments for the MediBeacon® Transdermal GFR Measurement System for FY 2027, subject to the technology receiving FDA marketing authorization as a Breakthrough Device for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Micro Medical Solutions, Inc. submitted a FY 2027 application for new technology add-on payments for the Micro Medical Solutions MicroStent and the MicroStent XL Peripheral Vascular Stent System (MicroStent). According to the applicant, the MicroStent is a self-expanding nitinol stent system for permanent implantation to improve luminal diameter in the treatment of ischemia in the lower leg.
The following table provides an overview of the new technology add-on payment application for the MicroStent and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that the MicroStent meets the cost criterion and are therefore proposing to approve the MicroStent for new technology add-on payments for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Based on preliminary cost information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the MicroStent would be $4,550 for FY 2027 (that is, 65 percent of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether the MicroStent meets the cost criterion and our proposal to approve new technology add-on payments for the Micro Medical Solutions MicroStent and the MicroStent XL Peripheral Vascular Stent System for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Neuro Event Labs submitted a FY 2027 application for new technology add-on payments for the Nelli
The following table provides an overview of the new technology add-on payment application for the Nelli
After review of the information provided by the applicant, we agree with the applicant that the Nelli
As previously noted, we do not include capital costs in the add-on payments for a new medical service or technology or make new technology add-on payments under the IPPS for capital-related costs (86 FR 45145). As noted, the applicant included capital costs of $89 for the PRU in the total technology cost. Therefore, as it appears that these costs are not eligible for new technology add-on payment, we note that any new technology add-on payment for the Nelli
We invite public comments on whether the Nelli
ENDOSPAN submitted a FY 2027 application for new technology add-on payments for the NEXUS® Aortic Arch Stent Graft System. According to the applicant, the NEXUS® Aortic Arch Stent Graft System is a branched endovascular stent graft system designed specifically for repair of aortic arch pathologies (including aneurysms, chronic dissections, penetrating ulcers, and intramural hematoma) involving Zone 0 ascending aorta and the arch.
The following table provides an overview of the new technology add-on payment application for the NEXUS® Aortic Arch Stent Graft System and CMS's preliminary assessment. For
After review of the information provided by the applicant, we agree with the applicant that the NEXUS® Aortic Arch Stent Graft System meets the cost criterion and are therefore proposing to approve the NEXUS® Aortic Arch Stent Graft System for new technology add-on payments for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Based on preliminary cost information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the NEXUS® Aortic Arch Stent Graft System would be $35,880 for FY 2027 (that is, 65 percent of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether the NEXUS® Aortic Arch Stent Graft System meets the cost criterion and our proposal to approve new technology add-on payments for the NEXUS® Aortic Arch Stent Graft System for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Medtronic submitted a FY 2027 application for new technology add-on payments for the OmniaSecure
The following table provides an overview of the new technology add-on payment application for the OmniaSecure
After review of the information provided by the applicant, we agree with the applicant that the OmniaSecure
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the OmniaSecure
We invite public comments on whether the OmniaSecure
Cerapedics, Inc. submitted a FY 2027 application for new technology add-on payments for PearlMatrix
The following table provides an overview of the new technology add-on payment application for PearlMatrix
After review of the information provided by the applicant, we note that subsequent to the June 18, 2025 PMA as listed in the table, a supplemental PMA for PearlMatrix
We are inviting public comments on the use of these ICD-10-PCS procedure codes to identify use of the technology for the Breakthrough Device-designated indication for purposes of the new technology add-on payment, if approved.
We agree with the applicant that PearlMatrix
Based on preliminary cost information from the applicant at the time of this proposed rule, the applicant anticipated the total cost of PearlMatrix
We invite public comments on whether PearlMatrix
Powerful Medical Inc. submitted a FY 2027 application for new technology add-on payments for the PMcardio® STEMI AI ECG Model (PMcardio® STEMI AI). According to the applicant, PMcardio® STEMI AI is a stand-alone software device intended to analyze resting 12-lead ECGs of patients presenting with symptoms suspicious for acute coronary syndromes in the hospital setting. Per the applicant, the technology identifies ECG patterns of STEMI/STEMI-equivalents as an adjunctive decision support tool used by healthcare professionals.
The following table provides an overview of the new technology add-on payment application for PMcardio® STEMI AI and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that PMcardio® STEMI AI meets the cost criterion and are therefore proposing to approve PMcardio® STEMI AI for new technology add-on payments for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of PMcardio® STEMI AI would be $113.75 for FY 2027 (that is, 65% of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether PMcardio® STEMI AI meets the cost criterion and our proposal to approve new technology add-on payments for the PMcardio® STEMI AI ECG Model for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Edwards LifeSciences, LLC submitted a FY 2027 application for new technology add-on payments for the SAPIEN M3 Transcatheter Mitral Valve Replacement System (the SAPIEN M3 TMVR System). According to the applicant, the SAPIEN M3 TMVR System is a transcatheter system designed to allow for replacement of the native mitral valve in patients with symptomatic mitral valve regurgitation or symptomatic mitral stenosis.
The following table provides an overview of the new technology add-on payment application for the SAPIEN M3 TMVR System and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that the SAPIEN M3 TMVR System meets the cost criterion and are therefore proposing to approve the SAPIEN M3 TMVR System for new technology add-on payments for FY 2027, for the FDA-approved indication covered by the Breakthrough Device designation listed in the table. We consider the beginning of the newness period to commence on December 22, 2025, the date on which the SAPIEN M3 TMVR System received FDA marketing authorization.
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the SAPIEN M3 TMVR System would be $35,100 for FY 2027 (that is, 65% of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether the SAPIEN M3 TMVR System meets the cost criterion and our proposal to approve new technology add-on payments for the SAPIEN M3 Transcatheter Mitral Valve Replacement System for FY 2027.
SetPoint Medical Corporation submitted a FY 2027 application for new technology add-on payments for the SetPoint System®. According to the applicant, the SetPoint System® is a fully integrated, rechargeable, implantable vagus nerve stimulation system used to treat individuals with moderate to severe rheumatoid arthritis (RA) who have experienced a loss of efficacy, inadequate response, or intolerance to one or more biologic or targeted synthetic disease modifying antirheumatic drugs (DMARDs).
The following table provides an overview of the new technology add-on payment application for the SetPoint System® and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that the SetPoint System® meets the cost criterion and are therefore proposing to approve the SetPoint System® for new technology add-on payments for FY 2027, for the FDA approved indication covered by the Breakthrough Device designation listed in the table. We consider the beginning of the newness period to commence on August 21, 2025, the date on which the SetPoint System® became commercially available.
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the SetPoint System® would be $38,675 for FY 2027 (that is, 65% of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether the SetPoint System® meets the cost criterion and our proposal to approve new technology add-on payments for the SetPoint System® for FY 2027.
Reflow Medical, Inc. submitted a FY 2027 application for new technology add-on payments for the Spur® Peripheral Retrievable Stent System. According to the applicant, the Spur® Peripheral Retrievable Stent System is used as an adjunct to percutaneous transluminal angioplasty (PTA) to dilate stenoses in infrapopliteal arteries ranging in diameter from 2.5 mm to 4.5 mm. We note that the applicant submitted an application for new technology add-on payments for this technology for FY 2026 (90 FR 18203 through 18205; 90 FR 36770).
The following table provides an overview of the new technology add-on payment application for the Spur® Peripheral Retrievable Stent System and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that the Spur® Peripheral Retrievable Stent System meets the cost criterion and are therefore proposing to approve the Spur® Peripheral Retrievable Stent System for new technology add-on payments for FY 2027, for the FDA-approved indication covered by the Breakthrough Device designation listed in the table. We consider the beginning of the newness period to commence on May 29, 2025, the date on which the Spur® Peripheral Retrievable Stent System received FDA marketing authorization.
Based on preliminary cost information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the Spur® Peripheral Retrievable Stent System would be $2,596.75 for FY 2027 (that is, 65 percent of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We invite public comments on whether the Spur® Peripheral Retrievable Stent System meets the cost criterion and our proposal to approve new technology add-on payments for the Spur® Peripheral Retrievable Stent System for FY 2027.
JenaValve submitted a FY 2027 application for new technology add-on payments for the Trilogy
The following table provides an overview of the new technology add-on payment application for the Trilogy
After review of the information provided by the applicant, we agree with the applicant that the Trilogy
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of the Trilogy
We invite public comments on whether the Trilogy
CardioVia Ltd. submitted a FY 2027 application for new technology add-on payments for the ViaOne
The following table provides an overview of the new technology add-on payment application for ViaOne
After review of the information provided by the applicant, we note that, regarding commercial availability, the applicant stated that the technology would not be available for sale until April 27, 2026. The applicant stated that the original manufacturing partner permanently ceased operations, requiring the applicant to engage a new qualified manufacturer and conduct full verification and validation testing. The applicant also stated that delays in completion of the required FDA establishment registration and device listing process, and current aviation and international shipping constraints related to regional security developments are expected to further delay initial U.S. availability. We are interested in confirmation regarding the first date of availability for sale of ViaOne
We agree with the applicant that ViaOne
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of ViaOne
We invite public comments on whether ViaOne
VUNO Med Inc. submitted a FY 2027 application for new technology add-on payments for VUNO Med-DeepCARS® (DeepCARS®). According to the applicant, DeepCARS® is an artificial intelligence based technology that monitors and assesses the risk of impending cardiac arrest within a 24-hour period among inpatients in general hospital wards.
The following table provides an overview of the new technology add-on payment application for DeepCARS® and CMS's preliminary assessment. For additional details provided by the applicant, please refer to the online application posting at
After review of the information provided by the applicant, we agree with the applicant that DeepCARS® meets the cost criterion and are therefore proposing to approve DeepCARS® for new technology add-on payments for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
Based on preliminary information from the applicant at the time of this proposed rule, we are proposing that the maximum new technology add-on payment for a case involving the use of DeepCARS® would be $236.66 for FY 2027 (that is, 65% of the average cost of the technology). We note that the cost information for this technology may be updated in the final rule based on
We invite public comments on whether DeepCARS® meets the cost criterion and our proposal to approve new technology add-on payments for VUNO Med-DeepCARS® for FY 2027, subject to the technology receiving FDA marketing authorization for the indication corresponding to the Breakthrough Device designation by May 1, 2026.
As discussed previously, in the FY 2020 and FY 2021 IPPS/LTCH PPS final rules (84 FR 42292 through 42297; 85 FR 58737 through 58739), we finalized a policy to establish an alternative inpatient new technology add-on payment pathway for certain transformative new devices and certain antimicrobial products. Under this pathway, FDA-designated Breakthrough Devices and QIDPs, and drugs approved under FDA's Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD) pathway (sometimes collectively referred to in this section as “alternative pathway designations”) are considered to be not substantially similar to existing technology for purposes of the new technology add-on payment, and do not need to meet the requirement under § 412.87(b)(1) that the technology represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. We also finalized a policy in the CY 2020 OPPS/ASC final rule to establish an alternative transitional pass-through payment pathway for devices that are part of the FDA's Breakthrough Devices Program and have received FDA marketing authorization for the indication covered by the Breakthrough Device designation (84 FR 61295 through 61296). Under this alternative pathway, FDA-designated Breakthrough Devices are not evaluated for substantial clinical improvement under § 419.66(c)(2) for the purposes of determining device pass-through payment status. We refer readers to the CY 2026 OPPS/ASC final rule (90 FR 53632 through 53636) for additional background on the OPPS Pass-Through Payment for Devices.
We note that the Breakthrough Devices Program is intended to help patients have more timely access to designated medical devices by expediting their development, assessment, and review.
As discussed in the FY 2020 IPPS/LTCH PPS rulemaking (84 FR 42292 through 42297) and in the CY 2020 OPPS/ASC rulemaking (84 FR 61295 through 61296), we stated that we believed that the benefits of addressing barriers to healthcare innovation and ensuring Medicare beneficiaries have access to critical and life-saving new cures and technologies that improve beneficiary health outcomes supported establishing the alternative pathway for new technology add-on payments and OPPS device pass-through payments. We also stated that we believed it was prudent to gain experience under this new alternative pathway for certain transformative new devices before expanding it to other special designations to allow us to evaluate the benefits of this proposed alternative pathway to facilitate beneficiary access to transformative new medical devices as well as any other considerations that may come to light after application of this new pathway (84 FR 42296).
As we have gained experience, we have concerns with the limited evaluation process for alternative pathway applications for new technology add-on and OPPS device pass-through payments, and after further consideration, we believe it is in the best interest of Medicare patients to refine our approach, to ensure that all new technologies approved for new technology add-on payment have demonstrated that the technology is not substantially similar to existing technologies and represents an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. Similarly, we believe it is in the best interest of Medicare patients that new technologies approved for OPPS device pass-through payment status have demonstrated a substantial clinical improvement, that is, they substantially improve the diagnosis or treatment of an illness or injury or improve the functioning of a malformed body part, compared to the benefits of a device or devices in a previously established category or other available treatment. Therefore, we are proposing to repeal the alternative pathway for new technology add-on payment and OPPS device pass-through applications, and require all applicants for new technology add-on payments and OPPS
Therefore, we are proposing that for all applications received for new technology add-on payments for FY 2028 and subsequent fiscal years, including applications for FDA-designated Breakthrough Devices and QIDPs, or drugs approved under FDA's LPAD pathway, we would evaluate whether the technology is new and not substantially similar to an existing technology, and the technology must demonstrate that it meets the requirements under § 412.87(b) that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. That is, beginning with applications received for new technology add-on payments for FY 2028 and subsequent fiscal years, all applicants would need to meet all three of the criteria as specified at § 412.87(b) and described earlier in this section in order to receive the additional payment: (1) the medical service or technology must be new; (2) the medical service or technology must be costly such that the DRG rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate; and (3) the service or technology must demonstrate a substantial clinical improvement over existing services or technologies. Technologies that are currently under review for FY 2027 new technology add-on payments under the alternative pathway will remain eligible for consideration for add-on payment under the alternative pathway. Technologies that have previously been approved for add-on payments under the alternative pathway will remain eligible for add-on payment under the alternative pathway. Consistent with our proposal to remove the alternative pathway for certain antimicrobial products currently at § 412.87(d), we would also remove the conditional approval process for a technology for which an application is submitted under the alternative pathway for certain antimicrobial products that does not receive FDA marketing authorization by July 1 prior to the fiscal year for which the applicant applied for new technology add-on payments, as currently reflected at § 412.87(f)(3). Accordingly, beginning with the FY 2028 new technology add-on payment applications, in order to be eligible for consideration for the new technology add on payment for the upcoming fiscal year, all applicants would need to receive FDA marketing authorization by May 1 of the year prior to the beginning of the fiscal year for which the application is being considered, as reflected at § 412.87(f)(2).
We are proposing to amend § 412.87 to reflect these proposals by revising paragraphs § 412.87(c) and (d) and removing subparagraph 412.87(f)(3). We are also proposing related revisions to the title of paragraph (f) and subparagraphs (1) and (2) of paragraph (f) to reflect this proposed policy. We are also proposing to make a technical correction to the introductory text at § 412.87(d) to restore language that was previously removed in error, with additional revisions to reflect the proposed repeal. We are also proposing to make a technical correction to the introductory text at § 412.88(a)(2)(ii)(A) to reference § 412.88(a)(2)(ii)(C), consistent with our policy as finalized in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69245 through 69252).
Similarly, we are proposing that all applications received for OPPS device pass-through payment status on or after October 1, 2026, including all applications received through the remainder of the CY 2028 OPPS application cycle ending on March 1, 2027, and applications received for subsequent calendar years would have to demonstrate that the technology met the requirements currently reflected at § 419.66(c)(2)(i). OPPS device pass-through payment applications submitted as of September 30, 2026, for devices that are part of the FDA's Breakthrough Devices Program and received FDA marketing authorization for the indication covered by the Breakthrough Device designation would be evaluated and could be approved under the alternative pathway, provided that all other criteria have been met. Existing device category codes established based on the approval, either preliminary or via a final determination made in an OPPS/ASC final rule, including any device category codes established for approved alternative pathway applications received as of September 30, 2026, would continue to be eligible for device pass-through payment status and would remain in effect for at least 2 years, but no more than 3 years, consistent with § 419.66(g). Previously existing device category codes that were no longer eligible for device pass-through payment status would remain unchanged. We are proposing to revise paragraph § 419.66(c)(2)(ii) to reflect this proposed policy, effective October 1, 2026.
We believe these changes would be the most prudent and transparent method to allow us to improve our focus on facilitating payment for innovative, high-value technologies that improve care for Medicare beneficiaries. As we stated in the September 7, 2001 final rule (66 FR 46913), we believed the special payments for new technology should be limited to those new technologies that have been demonstrated to represent a substantial improvement in caring for Medicare beneficiaries, such that there is a clear advantage to creating a payment incentive for physicians and hospitals to utilize the new technology. We also stated that where such an improvement was not demonstrated, we continued to believe the incentives of the DRG system would provide a useful balance to the introduction of new technologies. As discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36672), even if a technology does not receive new technology add-on payments, CMS continues to pay for new technologies through the regular payment mechanism established by the DRG payment methodology. Similarly, as we stated in the CY 2026 OPPS/ASC final rule (90 FR 53635), if a technology does not obtain OPPS device pass-through payment status, these devices can still be used by hospitals, and hospitals will be paid for them through appropriate Ambulatory Payment Classifications (APC) payment. Whether a technology receives new technology add-on payments or OPPS device pass-through payments does not affect coverage of the technology or the ability for Medicare providers to provide such technology to patients where appropriate.
In addition, we believe that holding all applicants to the same standards by
We would also be interested in information on alternate methods that stakeholders believe would more effectively or efficiently accomplish the goal of aligning payment with value by facilitating payment for innovative, high-value technologies that have demonstrated improved Medicare beneficiary health outcomes, such as alternative strategies for leveraging FDA designations.
We invite public comment on our proposal to require all applicants for new technology add-on payments and OPPS device pass-through payments to demonstrate that they meet the same requirements for eligibility.
Section 1886(d)(3)(E) of the Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary adjust the standardized amounts for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. We refer to this factor as the wage index. We currently define hospital labor market areas based on the delineations of statistical areas established by the Office of Management and Budget (OMB). A discussion of the proposed FY 2027 hospital wage index based on the statistical areas appears under section III.B of the preamble of this proposed rule.
Section 1886(d)(3)(E) of the Act requires the Secretary to update the wage index annually and to base the update on a survey of wages and wage-related costs of short-term, acute care hospitals. CMS collects these data on the Medicare cost report titled “Hospital and Hospital Health Care Complex Cost Report”, Form CMS-2552-10, Worksheet S-3, Parts II, III, and IV. The information collection is currently approved under OMB control number 0938-0050 and has a September 30, 2028, expiration date. Section 1886(d)(3)(E) of the Act also requires that any updates or adjustments to the wage index be made in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. The proposed adjustment for FY 2027 is discussed in section II.B of the Addendum to this proposed rule.
As discussed in section III.I of the preamble of this proposed rule, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B), 1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. The proposed budget neutrality adjustment for FY 2027 is discussed in section II.A.4.b of the Addendum to this proposed rule.
Section 1886(d)(3)(E) of the Act also provides for the collection of data every 3 years on the occupational mix of employees for short-term, acute care hospitals participating in the Medicare program to construct an occupational mix adjustment to the wage index. The information collection is currently approved under OMB control number is 0938-0907 and expires on December 31, 2028. A discussion of the occupational mix adjustment that we are proposing to apply to the FY 2027 wage index appears under section III.E of the preamble of this proposed rule.
The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. In accordance with section 1886(d)(3)(E) of the Act, we delineate hospital labor market areas based on OMB-established Core-Based Statistical Areas (CBSAs) (FY 2005 IPPS final rule, 69 FR 49026 through 49032). In the July 16, 2021,
CBSAs are made up of one or more constituent counties. Each CBSA and constituent county has its own unique identifying code, a Federal Information Processing Standard (FIPS) county code. The FIPS county codes are maintained by the U.S. Census Bureau. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through 38130), we adopted a policy to use the FIPS county codes for purposes of crosswalking counties to CBSAs. In addition, in the same rule, we implemented the latest FIPS code updates, which were effective October 1, 2017, beginning with the FY 2018 wage indexes. These updates have been used to calculate the wage indexes in a manner generally consistent with the CBSA-based methodologies finalized in the FY 2005 IPPS final rule and the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through 49963). We refer the reader to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through 38130) for a complete discussion of our adoption of FIPS county codes. For FY 2027, we are proposing to continue to use the FIPS county codes for purposes of crosswalking counties to CBSAs. For FY 2027, Tables 2 and 3 associated with this proposed rule and the County to CBSA Crosswalk File and Urban CBSAs and Constituent Counties for Acute Care Hospitals File posted on the CMS website reflect the latest FIPS county code updates.
The proposed FY 2027 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2023 (cost reports with a begin date on or after October 1, 2022 and before October 1, 2023). The FY 2026 wage indexes were based on data from cost reporting periods beginning during FY 2022.
The proposed FY 2027 wage index includes all of the following categories of data associated with costs paid under the IPPS (as well as outpatient costs):
• Salaries and hours from short-term, acute care hospitals (including paid lunch hours and hours associated with military leave and jury duty).
• Home office costs and hours.
• Certain contract labor costs and hours including direct patient care (which includes nursing), certain top management, pharmacy, laboratory, and nonteaching physician Part A services, and certain contract indirect patient care services (as discussed in the FY 2008 IPPS final rule with comment period (72 FR 47315 through 47317)).
• Wage-related costs, including pension costs (based on policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 through 51590) and modified in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49505 through 49508)) and other deferred compensation costs.
Consistent with the wage index methodology for FY 2026, the proposed wage index for FY 2027 excludes the direct and overhead salaries and hours for services not subject to IPPS payment, such as skilled nursing facility (SNF) services, home health services, costs related to Graduate Medical Education (GME) (teaching physicians and residents), certified registered nurse anesthetists (CRNAs), and other subprovider components that are not paid under the IPPS. The proposed FY 2027 wage index also excludes the salaries, hours, and wage-related costs of hospital-based rural health clinics (RHCs), and Federally Qualified Health Centers (FQHCs), because Medicare pays for these costs outside of the IPPS (68 FR 45395). In addition, as explained in the FY 2004 IPPS final rule (68 FR 45397 through 45398), salaries, hours, and wage-related costs of Critical Access Hospitals (CAHs) are excluded from the wage index as we believe that removing CAHs from the wage index is prudent policy, given the substantial negative impact these hospitals have on the wage indexes in the areas where they are located and the minimal impact they have on the wage indexes of other areas. We refer the reader to the FY 2004 IPPS final rule (68 FR 45397 through 45398) for a complete discussion regarding the exclusion of CAHs from the wage index. Similar to our treatment of CAHs, as discussed later in this section, we exclude Rural Emergency Hospitals (REHs) from the wage index.
For FY 2020 and subsequent years, other wage-related costs are also excluded from the calculation of the wage index. As discussed in the FY 2019 IPPS/LTCH final rule (83 FR 41365 through 41369), other wage-related costs reported on Worksheet S-3, Part II, Line 18 and Worksheet S-3, Part IV, Line 25 and subscripts, as well as all other wage-related costs, such as contract labor costs, are excluded from the calculation of the wage index.
Data collected for the IPPS wage index also are currently used to calculate wage indexes applicable to suppliers and other providers, such as SNFs, home health agencies (HHAs), ambulatory surgical centers (ASCs), and hospices. In addition, they are used for prospective payments to Inpatient Rehabilitation Facilities (IRFs), Inpatient Psychiatric Facilities (IPFs), Long-Term Care Hospitals (LTCHs), and for hospital outpatient services. We note, in the calendar year (CY) 2025 End-Stage Renal Disease (ESRD) PPS final rule (89 FR 89097-89116), CMS finalized a new ESRD PPS-specific wage index that is used to adjust ESRD PPS payments for geographic differences in area wages. We refer the reader to the CY 2025 ESRD PPS final rule for complete details regarding ESRD wage index. We further note that, in the IPPS rules, we do not address comments pertaining to the wage indexes of any supplier or provider except IPPS providers and LTCHs. Such comments should be made in response to separate proposed rules for those suppliers and providers.
The wage data for the proposed FY 2027 wage index were obtained from Worksheet S-3, Parts II, III and IV of the Medicare cost report, CMS Form 2552-10 (OMB Control Number 0938-0050 with an expiration date September 30, 2028) for cost reporting periods beginning on or after October 1, 2022, and before October 1, 2023. For wage index purposes, we refer to cost reports beginning on or after October 1, 2022, and before October 1, 2023, as the “FY 2023 cost report,” the “FY 2023 wage data,” or the “FY 2023 data.” Instructions for completing the wage index sections of Worksheet S-3 are included in the Provider Reimbursement Manual (PRM), Part 2 (Pub. 15-2), Chapter 40, Sections 4005.2 through 4005.4. The data file used to construct the FY 2027 wage index includes FY 2023 data submitted to us as of January 21, 2026. For FY 2027, the wage data was not subject to a desk review by the Medicare Administrative Contractors (MACs). CMS performed a review of the wage data to identify and resolve aberrant data, such as analyzing the data from a regional and national level.
We note, in previous fiscal years, we reviewed and evaluated the audited wage data, and the impacts of the COVID-19 PHE on such data. For FY 2027, we have not identified any significant issues with the FY 2023 wage data itself in terms of our review of this data.
For the proposed FY 2027 wage index, we identified and excluded 68
In constructing the proposed FY 2027 wage index, we included the wage data for facilities that were IPPS hospitals in FY 2023, inclusive of those facilities that have since terminated their participation in the program as hospitals, as long as those data did not fail any of our edits for reasonableness. We believe that including the wage data for these hospitals is, in general, appropriate to reflect the economic conditions in the various labor market areas during the relevant past period and to ensure that the current wage index represents the labor market area's current wages as compared to the national average of wages.
As discussed in the FY 2004 IPPS final rule (68 FR 45397 through 45398) and FY 2025 IPPS/LTCH final rule (89 FR 69268), any hospital that is designated as a CAH or REH by 7 days prior to the publication of the preliminary wage index public use file (PUF) is excluded from the calculation of the wage index.
For the proposed FY 2027 wage index, we removed 7 hospitals that converted to CAH status and 2 hospitals that converted to REH status on or after January 24, 2025, the cut-off date for CAH and REH exclusion from the FY 2026 wage index, and through and including January 23, 2026, the cut-off date for CAH and REH exclusion from the FY 2027 wage index. We also note that we removed 2 hospitals that converted to REH status prior to January 24, 2025. In summary, we calculated the proposed FY 2027 wage index using the Worksheet S-3, Parts II and III wage data of 3,006 hospitals.
For the proposed FY 2027 wage index, we allotted the wages and hours data for a multicampus hospital among the different labor market areas where its campuses are located using campus full-time equivalent (FTE) percentages as originally finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51591). Table 2, which contains the FY 2027 wage index associated with this proposed rule (available via the internet on the CMS website), includes separate wage data for the campuses of 26 multicampus hospitals. The following chart lists the multicampus hospitals by CMS certification number (CCN) and the FTE percentages on which the wages and hours of each campus were allotted to their respective labor market areas:
We note that, in past years, in Table 2, we have placed a “B” to designate the subordinate campus in the fourth position of the hospital CCN. However, for the FY 2019 IPPS/LTCH PPS proposed and final rules and subsequent rules, we have moved the “B” to the third position of the CCN. Because all IPPS hospitals have a “0” in the third position of the CCN, we believe that placement of the “B” in this third position, instead of the “0” for the subordinate campus, is the most efficient method of identification and interferes the least with the other variable digits in the CCN. We also note that providers can have an additional second sub campus located in a different CBSA then the main campus and its other sub campus(es). Therefore, in order to uniquely identify a second sub campus, we place a “C” in the third position of the CCN.
The preliminary, unaudited Worksheet S-3 wage data files for the proposed FY 2027 wage index were made available on May 23, 2025, through the internet on the CMS website at
On January 30, 2026, we posted a public use file (PUF) at
In the interest of meeting the data needs of the public, beginning with the proposed FY 2009 wage index, we post an additional PUF on the CMS website that reflects the actual data that are used in computing the proposed wage index. The release of this file does not alter the current wage index process or schedule.
In a memorandum dated April 16, 2025, we instructed all MACs to inform the IPPS hospitals that they service of the availability of the preliminary wage index data files and the CY 2022 occupational mix survey data files posted on May 23, 2025, and the process and timeframe for requesting revisions.
If a hospital wished to request a change to its data as shown in the May 23, 2025, preliminary wage data files and occupational mix data files, the hospital had to submit corrections along with complete, detailed supporting documentation to its MAC so that the MAC received them by September 2, 2025. Hospitals were notified of these deadlines and of all other deadlines and requirements, including the requirement to review and verify their data as posted in the preliminary wage index data files on the internet, through the letters sent to them by their MACs.
November 14, 2025, was the date by when MACs were required to transmit revised wage index data files and occupational mix data files to CMS. CMS published the wage index PUFs that included hospitals' revised wage index data on January 30, 2026. Hospitals had until February 17, 2026, to submit requests to the MACs to correct errors in the January 30, 2026, PUF due to CMS or MAC mishandling of the wage index data, or to revise adjustments to their wage index data as included in the January 30, 2026, PUF. Hospitals also were required to submit sufficient documentation to support their requests. Hospitals' requests and supporting documentation must have been received by the MAC by the February deadline (that is, by February 17, 2026, for the FY 2027 wage index).
After reviewing requested changes submitted by hospitals, MACs were required to transmit to CMS any additional revisions resulting from the hospitals' reconsideration requests by March 20, 2026. Under our current policy as adopted in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38153), the deadline for a hospital to request CMS intervention in cases where a hospital disagreed with a MAC's handling of wage data on any basis (including a policy, factual, or other dispute) is April 3, 2026. Data that were incorrect in the preliminary or January 30, 2026, wage index data PUFs, but for which no correction request was received by the February 17, 2026, deadline, are not considered for correction at this stage. In addition, April 3, 2026, is the deadline for hospitals to dispute data corrections made by CMS of which the hospital was notified after the January 30, 2026, PUF and at least 14 calendar days prior to April 3, 2026 (that is, by March 20, 2026), that do not arise from a hospital's request for revisions. The hospital's request and supporting documentation must be received by CMS (and a copy received by the MAC) by the April deadline (that is, by April 3, 2026, for the FY 2027 wage index). We refer readers to the FY 2027 Hospital Wage Index Development Timetable for complete details.
Hospitals were given the opportunity to examine Table 2 associated with this proposed rule, which is listed in section VI of the Addendum to this proposed rule and available via the internet on the CMS website at
We plan to post the final wage index data PUFs on April 30, 2026, on the CMS website at
After the release of the April 2026 wage index data PUFs, changes to the wage and occupational mix data can only be made in those very limited situations involving an error by the MAC or CMS that the hospital could not have known about before its review of the final wage index data files. Specifically, neither the MAC nor CMS will approve the following types of requests:
• Requests for wage index data corrections that were submitted too late to be included in the data transmitted to CMS by the MACs on or before March 20, 2026.
• Requests for correction of errors that were not, but could have been, identified during the hospital's review of the January 30, 2026, wage index PUFs.
• Requests to revisit factual determinations or policy interpretations made by the MAC or CMS during the wage index data correction process.
If, after reviewing the April 2026 final wage index data PUFs, a hospital believes that its wage or occupational mix data are incorrect due to a MAC or CMS error in the entry or tabulation of the final data, the hospital is given the opportunity to notify both its MAC and CMS regarding why the hospital believes an error exists and provide all supporting information, including relevant dates (for example, when it first became aware of the error). The hospital is required to send its request to CMS and to the MAC so that it is received no later than May 29, 2026. May 29, 2026, is also the deadline for hospitals to dispute data corrections made by CMS of which the hospital is notified on or after 13 calendar days prior to April 3, 2026 (that is, March 21, 2026), and at least 14 calendar days prior to May 29, 2026 (that is, May 15, 2026), that did not arise from a hospital's request for revisions. (Data corrections made by CMS of which a hospital is notified on or after 13 calendar days prior to May 29, 2026 (that is, May 16, 2026), may be appealed to the Provider Reimbursement Review Board (PRRB)). In accordance with the FY 2027 Hospital Wage Index Development Timetable posted on the CMS website at
Verified corrections to the wage index data received timely (that is, by May 29, 2026) by CMS and the MACs will be incorporated into the final FY 2027 wage index, which will be effective October 1, 2026.
We created the processes previously described to resolve all substantive wage index data correction disputes before we finalize the wage and occupational mix data for the FY 2027 payment rates. Accordingly, hospitals
Again, we believe the wage index data correction process described earlier provides hospitals with sufficient opportunity to bring errors in their wage and occupational mix data to the MAC's attention. Moreover, because hospitals will have access to the final wage index data PUFs by late April 2026, they have an opportunity to detect any data entry or tabulation errors made by the MAC or CMS before the development and publication of the final FY 2027 wage index by August 2026, and the implementation of the FY 2027 wage index on October 1, 2026. Given these processes, the wage index implemented on October 1 should be accurate. Nevertheless, in the event that errors are identified by hospitals and brought to our attention after May 29, 2026, we retain the right to make midyear changes to the wage index under very limited circumstances.
Specifically, in accordance with § 412.64(k)(1) of our regulations, we make midyear corrections to the wage index for an area only if a hospital can show that: (1) the MAC or CMS made an error in tabulating its data; and (2) the requesting hospital could not have known about the error or did not have an opportunity to correct the error, before the beginning of the fiscal year. For purposes of this provision, “before the beginning of the fiscal year” means by the May deadline for making corrections to the wage data for the following fiscal year's wage index (for example, May 29, 2026, for the FY 2027 wage index). This provision is not available to a hospital seeking to revise another hospital's data that may be affecting the requesting hospital's wage index for the labor market area. As indicated earlier, because CMS makes the wage index data available to hospitals on the CMS website prior to publishing both the proposed and final IPPS rules, and the MACs notify hospitals directly of any wage index data changes, we do not expect that midyear corrections will be necessary. However, under our current policy, if the correction of a data error changes the wage index value for an area, the revised wage index value will be effective prospectively from the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 47485), we revised § 412.64(k)(2) to specify that, effective October 1, 2005, that is, beginning with the FY 2006 wage index, a change to the wage index can be made retroactive to the beginning of the Federal fiscal year only when CMS determines all of the following: (1) the MAC or CMS made an error in tabulating data used for the wage index calculation; (2) the hospital knew about the error and requested that the MAC and CMS correct the error using the established process and within the established schedule for requesting corrections to the wage index data, before the beginning of the fiscal year for the applicable IPPS update (that is, by the May 29, 2026, deadline for the FY 2027 wage index); and (3) CMS agreed before October 1 that the MAC or CMS made an error in tabulating the hospital's wage index data and the wage index should be corrected.
In those circumstances where a hospital requested a correction to its wage index data before CMS calculated the final wage index (that is, by the May 29, 2026 deadline for the FY 2027 wage index), and CMS acknowledges that the error in the hospital's wage index data was caused by CMS' or the MAC's mishandling of the data, we believe that the hospital should not be penalized by our delay in publishing or implementing the correction. As with our current policy, we indicated that the provision is not available to a hospital seeking to revise another hospital's data. In addition, the provision cannot be used to correct prior years' wage index data; it can only be used for the current Federal fiscal year. In situations where our policies will allow midyear corrections other than those specified in § 412.64(k)(2)(ii), we continue to believe that it is appropriate to make prospective-only corrections to the wage index.
We note that, as with prospective changes to the wage index, the final retroactive correction will be made irrespective of whether the change increases or decreases a hospital's payment rate. In addition, we note that the policy of retroactive adjustment will still apply in those instances where a final judicial decision reverses a CMS denial of a hospital's wage index data revision request.
The process set forth with the wage index timetable discussed in section III.C.4 of the preamble of this proposed rule allows hospitals to request corrections to their wage index data within prescribed timeframes. In addition to hospitals' opportunity to request corrections of wage index data errors or MACs' mishandling of data, CMS has the authority under section 1886(d)(3)(E) of the Act to make corrections to hospital wage index and occupational mix data to ensure the accuracy of the wage index. As we explained in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49490 through 49491) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 56914), section 1886(d)(3)(E) of the Act requires the Secretary to adjust the proportion of hospitals' costs attributable to wages and wage-related costs for area differences reflecting the relative hospital wage level in the geographic areas of the hospital compared to the national average hospital wage level. We believe that, under section 1886(d)(3)(E) of the Act, we have discretion to make corrections to hospitals' data to help ensure that the costs attributable to wages and wage-related costs in fact accurately reflect the relative hospital wage level in the hospitals' geographic areas.
We have a multistep, 15-month process for the review and correction of the hospital wage data that is used to create the IPPS wage index for the upcoming fiscal year. Since the origin of the IPPS, the wage index has been subject to its own annual review process. As noted above, for the development of the FY 2027 wage index, the wage data was not subject to a desk review by the MACs. As in past years, CMS conducted its own review of the data and, if necessary, hospitals
We note that CMS corrects errors to hospital wage data as appropriate, regardless of whether that correction will raise or lower a hospital's average hourly wage. For example, as discussed in section III.C of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41364), in situations where a hospital did not have documentable salaries, wages, and hours for housekeeping and dietary services, we imputed estimates, in accordance with policies established in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). Furthermore, for example, if a positive adjustment resulting from a prior year's wage index appeal of a hospital's wage-related costs such as pension costs was not incorporated in the data, CMS can correct the data error, and the hospital's average hourly wage will likely increase as a result.
While we maintain CMS' authority to conduct additional review and make resulting corrections at any time during the wage index development process, in accordance with the policy finalized in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156) and as first implemented with the FY 2019 wage index (83 FR 41389), hospitals are able to request further review of a correction made by CMS that did not arise from a hospital's request for a wage index data correction. Instances where CMS makes a correction to a hospital's data after the January 30, 2026, PUF based on a different understanding than the hospital about certain reported costs, for example, could potentially be resolved using this process before the final wage index is calculated. We believe this process and the timeline for requesting review of such corrections (as described earlier and in the FY 2018 IPPS/LTCH PPS final rule) promote additional transparency in instances where CMS makes data corrections after the January 30, 2026 PUF and provide opportunities for hospitals to request further review of CMS changes in time for the most accurate data to be reflected in the final wage index calculations. These additional appeals opportunities are described earlier and in the FY 2027 Hospital Wage Index Development Timetable, as well as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156).
The method used to compute the proposed FY 2027 wage index without an occupational mix adjustment follows the same methodology that we used to compute the wage indexes without an occupational mix adjustment in the FY 2021 IPPS/LTCH PPS final rule (see 85 FR 58758 through 58761), and we are not proposing any changes to this methodology. We have restated our methodology in this preamble section of this proposed rule.
To determine Total Salaries plus Wage-Related Costs, we add to the Net Salaries the costs of contract labor for direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services (Lines 11, 12 and 13), home office salaries and wage-related costs reported by the hospital on Lines 14.01, 14.02, 15.01 and 15.02, and nonexcluded area wage-related costs (Lines 17, 22, 25.50, 25.51, and 25.52). We note that contract labor and home office salaries for which no corresponding hours are reported are not included. In addition, wage-related costs for nonteaching physician Part A
As noted above, the proposed FY 2027 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2023 (cost reports with a begin date on or after October 1, 2022 and before October 1, 2023). Per the instructions in Section 4005.2, Part II, Hospital Wage Index Information, of the Provider Reimbursement Manual, for cost reporting periods on or after October 1, 2015 and before October 1, 2022, hospitals reported salaries and hours for Home Office (and related organizations) Physician Part A—Administrative direct employees and employees under contract on Worksheet S3, Part II, Line 15.
Per the instructions in Section 4005.2, Part II, Hospital Wage Index Information, of the Provider Reimbursement Manual, for cost reporting periods on or after October 1, 2022, line 15 has been split into two lines with hospitals reporting salaries and hours for Home Office (and related organizations) Physician Part A—Administrative direct employees on Line 15.01 and salaries and hours for Home Office (and related organizations) Physicians Part A—Administrative under contract on Line 15.02. Since the FY 2027 wage index uses cost reports with a begin date in FY 2023, we propose including Lines 15.01 and 15.02 in the calculation of the FY 2027 wage index and future fiscal years.
In reviewing the wage data used for FY 2027, approximately 61 hospitals reported salaries and hours on Line 15 instead of Lines 15.01 and 15.02. Because this is the first year we are using Lines 15.01 and 15.02 and hospitals are still adjusting to this reporting change, for FY 2027, we are proposing to use Line 15 in the wage index calculation in addition to lines 15.01 and 15.02. We believe using Line 15 for the FY 2027 wage index will minimize disparities in the FY 2027 wage index by ensuring that the data informing the calculation are applied uniformly.
The formula for Total Salaries plus Wage-Related Costs (from Worksheet S-3, Part II) is the following:
As noted above, for FY 2027 we are proposing to include Lines 15, 15.01 and Line 15.02 in this calculation. We are further proposing to use Lines 15.01 and 15.02 instead of Line 15 for future fiscal years.
As noted above, for FY 2027 we are proposing to include Lines 15, 15.01 and Line 15.02 in this calculation. We are further proposing to use Lines 15.01 and 15.02 instead of Line 15 for future fiscal years.
We then compute the amounts of overhead salaries and hours to be allocated to the excluded areas by multiplying the previously discussed ratio by the total overhead salaries and hours reported on Lines 26 through 43 of Worksheet S-3, Part II. Next, we compute the amounts of overhead wage-related costs to be allocated to the excluded areas using three steps:
• We determine the “overhead rate” (from Worksheet S-3, Part II), which is the ratio of overhead hours (Lines 26 through 43 minus the sum of Lines 28, 33, and 35) to revised hours excluding the sum of lines 28, 33, and 35 (Line 1 minus the sum of Lines 2, 3, 4.01, 5, 6, 7, 7.01, 8, 9, 10, 28, 33, and 35). We note that, for the FY 2008 and subsequent wage index calculations, we have been excluding the overhead contract labor (Lines 28, 33, and 35) from the determination of the ratio of overhead hours to revised hours because hospitals typically do not provide fringe benefits (wage-related costs) to contract personnel. Therefore, it is not necessary for the wage index calculation to exclude overhead wage-related costs for contract personnel. Further, if a hospital does contribute to wage-related costs for contracted personnel, the instructions for Lines 28, 33, and 35 require that associated wage-related costs be combined with wages on the respective contract labor lines. The formula for the Overhead Rate (from Worksheet S-3, Part II) is the following:
• We compute overhead wage-related costs by multiplying the overhead hours ratio by wage-related costs reported on Part II, Lines 17, 22, 25.50, 25.51, and 25.52.
• We multiply the computed overhead wage-related costs by the previously described excluded area hours ratio.
Finally, we subtract the computed overhead salaries, wage-related costs, and hours associated with excluded areas from the total salaries (plus wage-related costs) and hours derived in Steps 2 and 3.
We refer readers to section II of Appendix B of this proposed rule for the policy regarding rural areas that do not have IPPS hospitals.
The following is our policy with regard to rounding of the wage data (dollar amounts, hours, and other numerical values) in the calculation of the unadjusted and adjusted wage index, as finalized in the FY 2020 IPPS/LTCH final rule (84 FR 42306). For data that we consider to be “raw data,” such as the cost report data on Worksheets S-3, Parts II and III, and the occupational mix survey data, we use such data “as is,” and do not round any of the individual line items or fields. However, for any dollar amounts within the wage index calculations, including any type of summed wage amount, average hourly wages, and the national average hourly wage (both the unadjusted and adjusted for occupational mix), we round the dollar amounts to 2 decimals. For any hour amounts within the wage index calculations, we round such hour amounts to the nearest whole number. For any numbers not expressed as dollars or hours within the wage index calculations, which could include ratios, percentages, or inflation factors, we round such numbers to 5 decimals. However, we continue rounding the actual unadjusted and adjusted wage indexes to 4 decimals, as we have done historically.
As discussed in the FY 2012 IPPS/LTCH PPS final rule, in “Step 5,” for each hospital, we adjust the total salaries plus wage-related costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimate the percentage change in the ECI for compensation for each 30-day increment from October 14, 2022, through April 15, 2024, for private industry hospital workers from the BLS' Office of Compensation and Working Conditions data. We have consistently used the ECI as the data source for our wages and salaries and other price proxies in the IPPS market basket, and we are not proposing any changes to the usage of the ECI for FY 2027. The factors used to adjust the hospital's data were based on the midpoint of the cost reporting period, as indicated in the following table.
For example, the midpoint of a cost reporting period beginning January 1, 2023, and ending December 31, 2023, is June 30, 2023. An adjustment factor of 1.02991 was applied to the wages of a hospital with such a cost reporting period.
Previously, we would also provide a Puerto Rico overall average hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56915), prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. As a result, we calculated a Puerto Rico specific wage index that was applied to the labor-related share of the Puerto Rico-specific standardized amount. Section 601 of Division O, Title VI (section 601) of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. As we stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56915 through 56916), because Puerto Rico hospitals are no longer paid with a Puerto Rico specific standardized amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act, as amended by section 601 of the Consolidated Appropriations Act, 2016, there is no longer a need to calculate a Puerto Rico specific average hourly wage and wage index. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the national average hourly wage (unadjusted for occupational mix) and the national wage index, which is applied to the national labor-related share of the national standardized amount. Therefore, for FY 2027, there is no Puerto Rico-specific overall average hourly wage or wage index.
Based on the previously described methodology, the proposed FY 2027 unadjusted national average hourly wage is the following:
As stated earlier, section 1886(d)(3)(E) of the Act provides for the collection of data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, to construct an occupational mix adjustment to the wage index, for application beginning October 1, 2004 (the FY 2005 wage index). The purpose of the occupational mix adjustment is to control for the effect of hospitals' employment choices on the wage index. For example, hospitals may choose to employ different combinations of registered nurses, licensed practical nurses, nursing aides, and medical assistants for the purpose of providing nursing care to their patients. The varying labor costs associated with these choices reflect hospital management decisions rather than geographic differences in the costs of labor.
Section 304(c) of Appendix F, Title III of the Consolidated Appropriations Act, 2001 (Pub. L. 106-554) amended section 1886(d)(3)(E) of the Act to require CMS to collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program and to measure the earnings and paid hours of employment for such hospitals by occupational category. As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69275 through 69278), we collected data in 2022 to compute the occupational mix adjustment for the FY 2025, FY 2026, and FY 2027 wage indexes.
The FY 2027 occupational mix adjustment is based on a calendar year (CY) 2022 survey. Hospitals were required to submit their completed 2022
For FY 2027, we are proposing to calculate the occupational mix adjustment factor using the same methodology that we have used since the FY 2012 wage index (76 FR 51582 through 51586) and to apply the occupational mix adjustment to 100 percent of the FY 2027 wage index. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308), we modified our methodology with regard to how dollar amounts, hours, and other numerical values in the unadjusted and adjusted wage index calculation are rounded, to ensure consistency in the calculation. According to the policy finalized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308 and 42309), for data that we consider to be “raw data,” such as the cost report data on Worksheets S-3, Parts II and III, and the occupational mix survey data, we continue to use these data “as is”, and not round any of the individual line items or fields. However, for any dollar amounts within the wage index calculations, including any type of summed wage amount, average hourly wages, and the national average hourly wage (both the unadjusted and adjusted for occupational mix), we round such dollar amounts to 2 decimals. We round any hour amounts within the wage index calculations to the nearest whole number. We round any numbers not expressed as dollars or hours in the wage index calculations, which could include ratios, percentages, or inflation factors, to 5 decimals. However, we continue rounding the actual unadjusted and adjusted wage indexes to 4 decimals, as we have done historically.
Similar to the method we use for the calculation of the wage index without occupational mix, salaries and hours for a multicampus hospital are allotted among the different labor market areas where its campuses are located. Table 2 associated with this proposed rule (which is available via the internet on the CMS website), which contains the proposed FY 2027 occupational mix adjusted wage index, includes separate wage data for the campuses of multicampus hospitals. We refer readers to section III.C of the preamble of this proposed rule for a chart listing the multicampus hospitals and the FTE percentages used to allot their occupational mix data.
Because the statute requires that the Secretary measure the earnings and paid hours of employment by occupational category not less than once every 3 years, all hospitals that are subject to payments under the IPPS, or any hospital that will be subject to the IPPS if not granted a waiver, must complete the occupational mix survey, unless the hospital has no associated cost report wage data that are included in the proposed FY 2027 wage index. For the proposed FY 2027 wage index, we used the Worksheet S-3, Parts II and III wage data of 3,006 hospitals, and we used the occupational mix surveys of 2,922 hospitals for which we also had Worksheet S-3 wage data, which represented a “response” rate of 97 percent (2,922/3,006). For the proposed FY 2027 wage index, we applied proxy data for noncompliant hospitals, new hospitals, or hospitals that submitted erroneous or aberrant data in the same manner that we applied proxy data for such hospitals in the FY 2012 wage index occupational mix adjustment (76 FR 51586). As a result of applying this methodology, the proposed FY 2027 occupational mix adjusted national average hourly wage is the following:
A new measurement of occupational mix is required for FY 2028. The FY 2028 occupational mix adjustment will be based on a new calendar year (CY) 2025 survey. The CY 2025 survey (Form CMS-10079, OMB Control Number 0938-0907, expiration date December 31, 2028) received OMB approval on December 30, 2025. The final CY 2025 Occupational Mix Survey Hospital Reporting Form is available on the CMS website at:
As discussed in section III.E of the preamble of this proposed rule, for FY 2027, we are applying the occupational mix adjustment to 100 percent of the FY 2027 wage index. We calculated the occupational mix adjustment using data from the 2022 occupational mix survey, using the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582-51586).
Based on the 2022 occupational mix survey data, the proposed FY 2027 national average hourly wages for each occupational mix nursing subcategory as calculated in Step 2 of the occupational mix calculation are as follows:
The proposed national average hourly wage for the entire nurse category is computed in Step 5 of the occupational mix calculation. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of greater than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of less than 1.0. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of less than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of greater than 1.0.
Based on the 2022 occupational mix survey data, we determined (in Step 7 of the occupational mix calculation) the following:
The following sections III.E.1 through III.E.4 discuss revisions to the wage index based on hospital redesignations and reclassifications. Specifically, hospitals may have their geographic area changed for wage index payment by applying for urban to rural reclassification under section 1886(d)(8)(E) of the Act (implemented at § 412.103), reclassification by the Medicare Geographic Classification Review Board (MGCRB) under section 1886(d)(10) of the Act, Lugar status redesignations under section 1886(d)(8)(B) of the Act, or a combination of the foregoing.
Under section 1886(d)(8)(E) of the Act, a qualifying prospective payment hospital located in an urban area may apply for rural status for payment purposes separate from reclassification through the MGCRB. Specifically, section 1886(d)(8)(E) of the Act provides that, not later than 60 days after the receipt of an application (in a form and manner determined by the Secretary) from a subsection (d) hospital that satisfies certain criteria, the Secretary shall treat the hospital as being located in the rural area (as defined in paragraph (2)(D)) of the State in which the hospital is located. We refer readers to the regulations at § 412.103 for the general criteria and application requirements for a subsection (d) hospital to reclassify from urban to rural status in accordance with section 1886(d)(8)(E) of the Act (such hospitals are referred to herein as “§ 412.103 hospitals”). The FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through 51596) includes our policies regarding the effect of wage data from reclassified or redesignated hospitals. We refer readers to the FY 2024 IPPS/LTCH final rule (88 FR 58971 through 58977) for a review of our policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49004) to calculate the rural floor with the wage data of urban hospitals reclassifying to rural areas under § 412.103, and discussion of our modification to the calculation of the rural wage index and its implications for the rural floor.
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41369 through 41374), we codified certain policies regarding multicampus hospitals in the regulations at §§ 412.92, 412.96, 412.103, and 412.108. We stated that reclassifications from urban to rural under § 412.103 apply to the entire hospital (that is, the main campus and its remote location(s)). We also stated that a main campus of a hospital cannot obtain Sole Community Hospital (SCH), Rural Referral Center (RRC), or Medicare Dependent Hospital (MDH) status, or rural reclassification under § 412.103, independently or separately from its remote location(s), and vice versa. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49012 and 49013), we added § 412.103(a)(8) to clarify that for a multicampus hospital, approved rural reclassification status applies to the main campus and any remote location located in an urban area, including a main campus or any remote location deemed urban under section 1886(d)(8)(B) of the Act. If a remote location of a hospital is located in a different CBSA than the main campus of the hospital, it is CMS' longstanding policy to assign that remote location a wage index based on its own geographic area to comply with the statutory requirement to adjust for geographic differences in hospital wage levels (section 1886(d)(3)(E) of the Act). Hospitals are required to identify and allocate wages and hours based on FTEs for remote locations located in different CBSAs on Worksheet S-2, Part I, Lines 165 and 166 of form CMS-2552-10. In calculating wage index values, CMS identifies the allocated wage data for these remote locations in Table 2 with a “B” in the 3rd position of the CCN. These remote locations of hospitals with § 412.103 rural reclassification status in a different CBSA are identified in Table 2, and hospitals should evaluate potential wage index outcomes for their remote location(s) when terminating MGCRB reclassification, or canceling § 412.103 rural reclassification status.
As discussed at § 412.103(f), the duration of an approved rural reclassification remains in effect without need for reapproval unless there is a change in the circumstances under which the classification was approved. If a hospital located in an urban area was approved for a rural reclassification under § 412.103(a)(1), that reclassification will no longer be valid if the hospital is no longer located within a rural census tract of an MSA as determined by the Federal Office of Rural Health Policy (FORHP) of the Health Resources and Services Administration (HRSA). Therefore, we encourage all hospitals and CAHs with active rural reclassifications under section 1886(d)(8)(E) of the Act to review their original reclassification application and determine whether the reclassification status will still apply.
Finally, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69280), CMS finalized a policy regarding terminated or “tied-out” hospitals, to address our concerns regarding the impacts these hospitals would have on rural wage index values. Specifically, we finalized a policy that § 412.103 reclassifications would be considered cancelled for the purposes of calculating the area wage index for any hospital with a CCN listed as terminated or “tied-out” as of the date that the hospital ceased to operate with an active CCN. We stated that we will obtain and review the best available CCN termination status lists as of the § 412.103(b)(6) “lock-in” date (60 days after the proposed rule for the FY is displayed in the
We noted that our policy to consider § 412.103 reclassifications cancelled for the purposes of calculating area wage
Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. Hospitals must apply to the MGCRB to reclassify not later than 13 months prior to the start of the fiscal year for which reclassification is sought (usually by September 1). Generally, hospitals must be proximate to the labor market area to which they are seeking reclassification and must demonstrate characteristics similar to hospitals located in that area. The MGCRB issues its decisions not later than the end of February for reclassifications that become effective for the following fiscal year (beginning October 1). The regulations applicable to reclassifications by the MGCRB are located in §§ 412.230 through 412.280. (We refer readers to a discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage for purposes of the proximity requirements.) The general policies for reclassifications and redesignations and the policies for the effects of hospitals' reclassifications and redesignations on the wage index are discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 final wage index (76 FR 51595 and 51596).
In addition, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the effects on the wage index of urban hospitals reclassifying to rural areas under § 412.103. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332 through 42336), we finalized a policy to exclude the wage data of urban hospitals reclassifying to rural areas under § 412.103 from the calculation of the rural floor, but we reverted to the pre-FY 2020 policy in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49002 through 49004). Hospitals that are geographically located in States without any rural areas are ineligible to apply for rural reclassification in accordance with the provisions of § 412.103.
On April 21, 2016, we published an interim final rule with comment period (IFC) in the
Prior to FY 2024, we excluded hospitals with § 412.103 urban to rural redesignations from the calculation of the reclassified rural wage index if they also have an active MGCRB reclassification to another area. That is, if an application for urban reclassification through the MGCRB is approved and is not terminated by the hospital within the established timelines, we considered the hospital's geographic CBSA and the urban CBSA to which the hospital is reclassified under the MGCRB for the wage index calculation. We refer readers to the April 21, 2016, IFC (81 FR 23428 through 23438) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through 56930), in which we finalized the April 21, 2016, IFC, for a full discussion of the effect of simultaneous reclassifications under both the § 412.103 and the MGCRB processes on wage index calculations. For FY 2024 and subsequent years, we refer readers to the FY 2024 IPPS/LTCH PPS final rule for discussion of our policy to include hospitals with a § 412.103 reclassification that also have an active MGCRB reclassification to another area in the calculation of the reclassified rural wage index (88 FR 58971 through 58977).
As previously stated, under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. The specific procedures and rules that apply to the geographic reclassification process are outlined in regulations under 42 CFR 412.230 through 412.280. There are 707 hospitals approved for wage index reclassifications by the MGCRB starting in FY 2027. Because MGCRB wage index reclassifications are effective for 3 years, for FY 2027, hospitals reclassified beginning in FY 2025 or FY 2026 are eligible to continue to be reclassified to a particular labor market area based on such prior reclassifications for the remainder of their 3-year period. There were 242 hospitals approved for wage index reclassifications in FY 2025 that will continue for FY 2027, and 263 hospitals approved for wage index reclassifications in FY 2026 that will continue for FY 2027. Of all the hospitals approved for reclassification for FY 2025, FY 2026, and FY 2027, 1,212 hospitals (approximately 37 percent of IPPS hospitals) are in a MGCRB reclassification status for FY 2027 (with 331 of these hospitals reclassified back to their urban geographic location). We note that several hospitals approved for MGCRB reclassifications may opt to terminate this status after the proposed rule, and in some cases prior year reclassification would become effective in its place. We refer readers to section III.F.3.b of the preamble of this proposed rule for information on the effects of implementation of the new OMB delineations on reclassified hospitals.
Under the regulations at § 412.273, hospitals that have applied to be reclassified by the MGCRB are permitted to withdraw their applications if the request for withdrawal is received by the MGCRB any time before the MGCRB issues a
For information about the current process for withdrawing a 3-year MGCRB reclassification application, terminating an approved 3-year MGCRB reclassification, or canceling a previous termination of a 3-year reclassification for wage index purposes, we refer readers to § 412.273, as well as section III.E.3.b of the preamble of this proposed rule, the FY 2002 IPPS final rule (66 FR 39887 through 39888), and the FY 2003 IPPS final rule (67 FR 50065 through 50066). Additional discussion on withdrawals and terminations was included in the FY 2008 IPPS final rule (72 FR 47333), the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148 through 38150), and the FY 2026 IPPS/LTCH PPS final rule (90 FR 36847 through 36848).
Applications for FY 2028 reclassifications are due to the MGCRB by September 1, 2026. This is also the current deadline for canceling a previous wage index reclassification termination (reinstating a reclassification) under § 412.273(d) for the FY 2027 cycle.
Applications and other information about MGCRB reclassifications may be obtained beginning in mid-July 2026 via the internet on the CMS website at
The regulation at 412.230(c)(1) requires that hospitals seeking reclassification to an area must submit appropriate data relating to its proximity to the area, including evidence of the shortest route over improved roads to the area and the distance of that route as proximity data. The MGCRB has denied reclassification requests using ferry routes, but these decisions were overturned via administrative appeal.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69281), commenters suggested revising the proximity data regulations to include waterways traveled by ferry boats as equivalent to travel over improved roads. CMS agreed that a modification to § 412.230(c)(1) could reduce unnecessary appeals.
Therefore, we are proposing to modify 412.230(c)(1) to include ferry routes when mapping the shortest route. This change would minimize appeals of MGCRB decisions and reduce administrative burden for both CMS and hospitals. This proposal is consistent with our definition of mileage for purposes of proximity in the FY 2002 IPPS Final Rule (66 FR 39874-39875), where we stated that we believe that mileage should continue to be measured by the shortest route over improved roads maintained by any local, State, or Federal government entity for public use. Since most ferry routes are maintained by local, State, or Federal government entities for public transportation over water, similar to bridges, we consider it appropriate to treat them as improved roads.
We would apply the same measurement method for miles traveled on land to those traveled by ferry boat over water. That is, the MGCRB requires providers to submit map evidence from nationally recognized electronic mapping services (
We are proposing to revise the regulations at 412.230(c)(1) to state: “To demonstrate proximity to the area, the hospital must submit evidence from a nationally recognized electronic mapping service of the shortest route from the front entrance of the hospital over improved roads or waterways traveled by ferry boats to the county line of the requested area and the distance of that route.” We seek comment on this proposal.
MGCRB reclassifications are approved for a 3-year period, and when evaluating a hospital's request for reclassification, effective with reclassifications for FY 2003, section 1886(d)(10)(D)(vi)(II) of the Act requires that the MGCRB must use the average of the most recent hospital wage survey data and the data from each of the two immediately preceding surveys. These data requirements are described in regulation at § 412.230(d)(2). CMS publishes this data in a “Three Year MGCRB Reclassification Data Applications” file during each application cycle on the CMS website.
To be approved for an MGCRB reclassification, hospitals, in general, must demonstrate that their average hourly wage data is, on average, greater than their geographic area, and is similar to the area to which they seek to be reclassified. As described at § 412.230(a)(5)(i), hospitals also must demonstrate that the area to which they are reclassifying has a higher pre-reclassification wage index than the area they are geographically located. It has come to our attention that some view the data requirement of § 412.230(a)(5)(i) to be ambiguous and believe using only a single year of wage data is acceptable. It is CMS' longstanding position that, for all average hourly wage criteria described under § 412.230, the three-year weighted average data is required for approval by the MGCRB. To remove any ambiguity, we are therefore proposing to revise § 412.230(a)(5)(i) to explicitly state that the data submitted must comply with the requirements of § 412.230(d)(2). That is, for purposes of meeting the criterion at § 412.230(a)(5)(i), we are affirming that the most recent three-year average hourly wage data must be submitted for hospitals located in both the area the applicant is located, and hospitals in the area to which reclassification is sought. This clarification is consistent with prior decisions made by the MGCRB, and the required usage of published 3-year data has been upheld on appeal through the Administrator's review process. We seek comment on this proposal.
As discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45188-45190), urban hospitals with § 412.103 rural reclassifications are eligible to
The only criterion that most home area reclassification applicants are required to meet is at § 412.230(d)(1)(iv). That is, if a hospital with a rural reclassification demonstrates that its 3-year average hourly wage is at least 82 percent of the average hourly wage of its own geographic labor market area (the area to which it is seeking a home area MGCRB reclassification), the MGCRB application would be approved. The 82 percent criterion was initially determined to cover more than two standard deviations of wage variance within any given labor market area. Given these factors, it would be exceptionally rare for any hospital with a rural reclassification to be denied a home area MGCRB reclassification.
However, we are aware of a circumstance in which a home area MGCRB reclassification would be denied. The published wage data used for MGCRB reclassification is based on cost report data that could be up to three years old. Newly established hospitals (or remote locations of hospitals located in a different labor market area than the main campus of the hospital) would not yet have a cost report included in the current fiscal year wage index development process, and no average hourly wage data would be published. In this case, these hospitals and remote locations would not be eligible for individual MGCRB reclassification due to their inability to meet the § 412.230(d)(1)(iv) average hourly wage comparison.
Individual hospitals are required to have at least one year of published average hourly wage data in order to receive a wage index reclassification. Newly established hospitals or remote locations without published wage data that are included in a county group reclassification (§ 412.232 and § 412.234) with other hospitals are eligible for approval. However, individual reclassification requests would be denied. We believe this is the appropriate policy, as the MGCRB is required to review wage data to determine whether it is appropriate to grant an individual hospital the wage index of another labor market area. However, given the unique nature of a home area reclassification, it is difficult to see what policy objective would be achieved by denying a hospital a wage index based on its own geographic area. Therefore, we are proposing to waive the application of § 412.230(d)(1)(iv) for a hospital requesting reclassification to its geographic home area. Specifically, we are proposing to add an exception § 412.230(d)(6) to waive the application of requirements of § 412.230(d)(1)(iv) for hospitals with § 412.103 rural reclassification and are seeking MGCRB reclassification to their geographic labor market area. While CMS continues to have concerns with hospitals using § 412.103 in order to enhance the state's rural floor, the scenario we are addressing would only affect situations where the inability to obtain a home area reclassification could lead to lower wage index value for the hospital. In such a case, a hospital would have the option to cancel its rural reclassification per the provision at § 412.103(g), and receive the wage index of its geographic urban area. However, there are situations where canceling rural reclassification would have significant financial impacts on the hospital, particularly in scenarios where a hospital operates in multiple urban labor market areas. For example, if a hospital with a § 412.103 reclassification opens or acquires a remote location in a different urban labor market area, we apply a separate wage index to that remote location based on its location and reclassification status. That remote location would be ineligible for individual MGCRB reclassification until CMS reviewed a cost report that allocates wages between the inpatient locations. In this case, the new remote location would be assigned its state's rural wage index based on the main campus' rural status, not the urban wage index for its geographic area.
Given that the large majority of hospitals with § 412.103 rural reclassifications can obtain home area MGCRB reclassification, we see no compelling policy justification to restrict reclassification in such a narrow circumstance. The few hospitals potentially affected by this proposed policy would not have published wage data for at least first year of any MGCRB reclassification and, therefore, would have a negligible impact on the accuracy or consistency of overall wage index values. We believe this proposal to waive the application of § 412.230(d)(1)(iv) for hospitals requesting reclassification to its geographic home area would provide an equitable opportunity to obtain a competitive wage index for affected hospitals.
We seek comment on this proposal.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 51600), we adopted the policy that, beginning with FY 2012, an eligible hospital that waives its Lugar status to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS effective for the fiscal year in which the hospital receives the outmigration adjustment. In addition, in that rule, we adopted a minor procedural change that will allow a Lugar hospital that qualifies for and accepts the out-migration adjustment (through written notification to CMS within 45 days from the issuance of the proposed rule in the
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42314 and 42315), we clarified that in circumstances where an eligible hospital elects to receive the outmigration adjustment within 45 days of the public display date of the proposed rule at the Office of the Federal Register in lieu of its Lugar wage index reclassification, and the county in which the hospital is located will no longer qualify for an outmigration adjustment when the final rule (or a subsequent correction notice) wage index calculations are completed, the hospital's request to accept the outmigration adjustment will be denied, and the hospital will be automatically assigned to its deemed urban status under section 1886(d)(8)(B) of the Act. We stated that final rule wage index values will be recalculated to reflect this reclassification, and in some instances, after taking into account this reclassification, the out-migration adjustment for the county in question could be restored in the final rule. However, as the hospital is assigned a Lugar reclassification under section 1886(d)(8)(B) of the Act, it will be ineligible to receive the county outmigration adjustment under section 1886(d)(13)(G) of the Act.
The following adjustments to the wage index are listed in the order that they are generally applied. First, the rural floor, imputed floor, and state frontier floor provide a minimum wage index. The rural floor at section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33) provides that the wage index for hospitals in urban areas of a State may not be less than the wage index applicable to hospitals located in rural areas in that State. The imputed floor at section 1886(d)(3)(E)(iv) of the Act provides a wage index minimum for all-urban states. The state frontier floor at section 1886(d)(3)(E)(iii) of the Act generally requires that hospitals in frontier states cannot be assigned a wage index of less than 1.00. Next, the out-migration adjustment at section 1886(d)(13)(A) of the Act is applied, potentially increasing the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county but work in a different county or counties with a higher wage index. Finally, all hospital wage index decreases are capped at 5 percent of the hospital's final wage index in the prior fiscal year, such that a hospital's wage index would not be less than 95 percent of its final wage index for the prior fiscal year, according to the policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021).
Section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33) provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area of a State may not be less than the area wage index applicable to hospitals located in rural areas in that State. This provision is referred to as the rural floor. Section 3141 of the Patient Protection and Affordable Care Act (Pub. L. 111-148) also requires that a national budget neutrality adjustment be applied in implementing the rural floor. Based on the FY 2027 wage index associated with this proposed rule (which is available on the CMS website), and based on the calculation of the rural floor including the wage data of hospitals that have reclassified as rural under § 412.103, we estimate that 535 hospitals would receive the rural floor in FY 2027. The budget neutrality impact of the proposed application of the rural floor is discussed in section II.A.4.e of Addendum A of this proposed rule.
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48784), CMS finalized a policy change to calculate the rural floor in the same manner as we did prior to the FY 2020 IPPS/LTCH PPS final rule, in which the rural wage index sets the rural floor. We stated that for FY 2023 and subsequent years, we would include the wage data of § 412.103 hospitals that have no Medicare Geographic Classification Review Board (MGCRB) or Lugar reclassification in the calculation of the rural floor, and include the wage data of such hospitals in the calculation of “the wage index for rural areas in the State in which the county is located” as referred to in section 1886(d)(8)(C)(iii) of the Act.
In the FY 2024 IPPS/LTCH final rule (88 FR 58971 through 58977), we finalized a policy change beginning that year to include the data of
Accordingly, in the FY 2024 IPPS/LTCH PPS final rule, we finalized a policy to include hospitals with § 412.103 reclassification along with geographically rural hospitals in all rural wage index calculations, and to exclude “dual reclass” hospitals (hospitals with simultaneous § 412.103
In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we adopted the imputed floor policy as a temporary 3-year regulatory measure to address concerns from hospitals in all-urban States that had stated that they were disadvantaged by the absence of rural hospitals to set a wage index floor for those States. We extended the imputed floor policy eight times since its initial implementation, the last of which was adopted in the FY 2018 IPPS/LTCH PPS final rule and expired on September 30, 2018. We refer readers to further discussions of the imputed floor in the IPPS/LTCH PPS final rules from FYs 2014 through 2019 (78 FR 50589 through 50590, 79 FR 49969 through 49971, 80 FR 49497 through 49498, 81 FR 56921 through 56922, 82 FR 38138 through 38142, and 83 FR 41376 through 41380, respectively) and to the regulations at § 412.64(h)(4). For FYs 2019, 2020, and 2021, hospitals in all-urban states received a wage index that was calculated without applying an imputed floor, and we no longer included the imputed floor as a factor in the national budget neutrality adjustment.
Section 9831 of the American Rescue Plan Act of 2021 (Pub. L. 117-2), enacted on March 11, 2021, amended section 1886(d)(3)(E)(i) of the Act and added section 1886(d)(3)(E)(iv) of the Act to establish a minimum area wage index for hospitals in all-urban States for discharges occurring on or after October 1, 2021. Specifically, section 1886(d)(3)(E)(iv)(I) and (II) of the Act provides that for discharges occurring on or after October 1, 2021, the area wage index applicable to any hospital in an all-urban State may not be less than the minimum area wage index for the fiscal year for hospitals in that State established using the methodology described in § 412.64(h)(4)(vi) as in effect for FY 2018. Unlike the imputed floor that was in effect from FYs 2005 through 2018, section 1886(d)(3)(E)(iv)(III) of the Act provides that the imputed floor wage index shall not be applied in a budget neutral manner. Section 1886(d)(3)(E)(iv)(IV) of the Act provides that, for purposes of the imputed floor wage index under clause (iv), the term all-urban State means a State in which there are no rural areas (as defined in section 1886(d)(2)(D) of the Act) or a State in which there are no hospitals classified as rural under section 1886 of the Act. Under this definition, given that it applies for purposes of the imputed floor wage index, we consider a hospital to be classified as rural under section 1886 of the Act if it is assigned the State's rural area wage index value.
Effective beginning October 1, 2021 (FY 2022), section 1886(d)(3)(E)(iv) of the Act reinstated the imputed floor wage index policy for all-urban States, with no expiration date, using the methodology described in § 412.64(h)(4)(vi) as in effect for FY 2018. We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45176 through 45178) for further discussion of the original imputed floor calculation methodology implemented in FY 2005 and the alternative methodology implemented in FY 2013.
Based on data available for this proposed rule, States that would be all-urban States as defined in section 1886(d)(3)(E)(iv)(IV) of the Act, and thus hospitals in such States that would be eligible to receive an increase in their wage index due to application of the imputed floor for FY 2027, are identified in Table 3 (which is available on the CMS website) associated with this proposed rule. States with a value in the column titled “State Imputed Floor” are eligible for the imputed floor.
The regulations at § 412.64(e)(1) and (4) and (h)(4) and (5) implement the imputed floor required by section 1886(d)(3)(E)(iv) of the Act for discharges occurring on or after October 1, 2021. The imputed floor would continue to be applied for FY 2027 in accordance with the policies adopted in the FY 2022 IPPS/LTCH PPS final rule. For more information regarding our implementation of the imputed floor required by section 1886(d)(3)(E)(iv) of the Act, we refer readers to the discussion in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45176 through 45178).
Section 10324 of Public Law 111-148 amended Section 1886(d)(3)(E) of the Act and added section 1886(d)(3)(E)(iii) of the Act to require that hospitals in frontier States cannot be assigned a wage index of less than 1.00. We refer readers to the regulations at § 412.64(m) and to a discussion of the implementation of this provision in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 through 50161). We are not proposing any changes to the frontier floor policy for FY 2027. In this proposed rule, 40 hospitals would receive the frontier floor value of 1.00 for their FY 2027 proposed wage index. These hospitals are located in Montana, North Dakota, South Dakota, and Wyoming. We note that while Nevada meets the criteria of a frontier State, all hospitals within the State currently receive a wage index value greater than 1.00.
The areas affected by the rural and frontier floor policies for the proposed FY 2027 wage index are identified in Table 3 associated with this proposed rule, which is available via the internet on the CMS website.
In accordance with section 1886(d)(13) of the Act, as added by section 505 of Public Law 108-173, beginning with FY 2005, we established a process to make adjustments to the hospital wage index based on commuting patterns of hospital employees (the “out-migration” adjustment). The process, outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county but work in a different county (or counties) with a higher wage index.
Section 1886(d)(13)(B) of the Act requires the Secretary to use data the Secretary determines to be appropriate to establish the qualifying counties. When section 1886(d)(13) was implemented for the FY 2005 wage index, we analyzed commuting data compiled by the U.S. Census Bureau that were derived from a special tabulation of the 2000 Census journey-to-work data for all industries (CMS extracted data applicable to hospitals). These data were compiled from responses to the “long-form” survey, which the Census Bureau used at that time, and which contained questions on where residents in each county worked (69 FR 49062). However, the 2010 Census was “short form” only; information on where residents in each county worked was not collected as part of the 2010 Census. The Census Bureau worked with CMS to provide an alternative data set based on the latest available data on where residents in each county worked in 2010, for use in developing a new out-migration adjustment based on new commuting patterns developed from the 2010 Census data beginning with FY 2016.
To determine the out-migration adjustments and applicable counties for FY 2016, we analyzed commuting data compiled by the Census Bureau that
As discussed previously in section III.A.2, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69253 through 69266), CMS adopted revised Core-Based Statistical Area (CBSA) delineations from the OMB Bulletin 23-01, published July 21, 2023. The revised delineations incorporated population estimates based on the 2020 decennial census, as well as updated journey-to-work commuting data. The Census Bureau once again worked with CMS to provide an alternative dataset based on the latest available data on where residents in each county worked, for use in developing a new out-migration adjustment based on new commuting patterns. We analyzed commuting data compiled by the Census Bureau that were derived from a custom tabulation of the ACS, utilizing 2016 through 2020 data. The Census Bureau produces county level commuting flow tables every 5 years using non-overlapping 5-year ACS estimates. The data includes demographic characteristics, home and work locations, and journey-to-work travel flows. The custom tabulation requested by CMS was specific to general medical and surgical hospital and specialty (except psychiatric and substance use disorder treatment) hospital employees (hospital sector Census code 8191/NAICS code 6221 and 6223) who worked in the 50 States, Washington, DC, and Puerto Rico and, therefore, provided information about commuting patterns of workers at the county level for residents of the 50 States, Washington, DC, and Puerto Rico.
For the ACS, the Census Bureau selects a random sample of addresses where workers reside to be included in the survey, and the sample is designed to ensure good geographic coverage. The ACS samples approximately 3.5 million resident addresses per year.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69301), we finalized that for FY 2025 and subsequent years, the out-migration adjustment will be based on the data derived from the previously discussed custom tabulation of the ACS utilizing 2016 through 2020 (5-year) Microdata. We believe that these data are the most appropriate to establish qualifying counties, because they are the most accurate and up-to-date data that are available to us. For FY 2027, we are not proposing any changes to the methodology or data source for calculating the out-migration adjustment. Specifically, we are proposing that the FY 2027 out-migration adjustments continue to be based on the same policies, procedures, and computation that were used for the FY 2012 out-migration adjustment. We have applied these same policies, procedures, and computations since FY 2012, and we believe they continue to be appropriate for FY 2027. We refer readers to a full discussion of the out-migration adjustment, including rules on deeming hospitals reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51601 through 51602). Table 2 of this proposed rule (which is available on the CMS website) lists the proposed out-migration adjustments for the FY 2027 wage index. In addition, Table 4A associated with this proposed rule, “List of Counties Eligible for the Out Migration Adjustment under Section 1886(d)(13) of the Act” (also available on the CMS website), consists of the following: A list of counties that are eligible for the outmigration adjustment for FY 2027 identified by FIPS county code, the proposed FY 2027 out-migration adjustment, and the number of years the adjustment would be in effect. We refer readers to section V.I of the Addendum of this proposed rule for instructions on accessing IPPS tables that are posted on the CMS websites identified in this proposed rule.
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021), we finalized a wage index cap policy and associated budget neutrality adjustment for FY 2023 and subsequent fiscal years. Under this policy, we apply a 5-percent cap on any decrease to a hospital's wage index from its wage index in the prior FY, regardless of the circumstances causing the decline. A hospital's wage index will not be less than 95 percent of its final wage index for the prior FY. We note, as discussed below, that for FY 2027 we are proposing to continue the transitional payment exception that addresses the effects of the removal of the low wage index hospital policy. This proposed transitional payment exception would be applied after the application of the 5-percent cap.
Except for newly opened hospitals, we apply the cap for a fiscal year using the final wage index applicable to the hospital on the last day of the prior fiscal year. A newly opened hospital will be paid the wage index for the area in which it is geographically located for its first full or partial fiscal year, and it will not receive a cap for that first year, because it will not have been assigned a wage index in the prior year. The wage index cap policy is reflected at § 412.64(h)(7). We apply the cap in a budget neutral manner through a national adjustment to the standardized amount each fiscal year. For more information about the wage index cap policy and associated budget neutrality adjustment, we refer readers to the discussion in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021).
For FY 2027, we would apply the wage index cap and associated budget neutrality adjustment in accordance with the policies adopted in the FY 2023 IPPS/LTCH PPS final rule. We refer readers to the Addendum of this proposed rule for further information regarding the budget neutrality calculations.
In the FY 2025 interim final action with comment period (IFC) (89 FR 80405 through 80421), we recalculated the FY 2025 IPPS hospital wage index to remove the low wage index hospital policy for FY 2025. We also removed the low wage index budget neutrality factor from the FY 2025 standardized amounts. For FY 2026 and subsequent fiscal years, consistent with the FY 2025 IFC, after considering the D.C. Circuit's
For FY 2025 and FY 2026, consistent with our past practice to establish temporary transition policies to mitigate short-term instability and payment fluctuations, we established transition policies for hospitals significantly impacted by the discontinuation of the low wage index hospital policy using our authority under section 1886(d)(5)(I) of the Act. The transitional payment exception for FY 2025 for those hospitals was equal to the additional FY 2025 amount a hospital would have been paid under the IPPS if its FY 2025 wage index were equal to 95 percent of its FY 2024 wage index. The transitional payment exception for FY 2026 was equal to the additional FY 2026 amount the hospital would be paid under the IPPS if its FY 2026 wage index were equal to 90.25 percent of its FY 2024 wage index.
Some hospitals that previously benefitted from the low wage index hospital policy would continue to experience decreases of approximately 5 percent or more per year from their FY 2024 wage index (with the low wage index hospital policy applied). For example, these hospitals may experience a decrease of 15 percent or more over the three years from their FY 2024 wage index to their proposed FY 2027 wage index (that is, approximately 5 percent or more per year over that time period). Therefore, we are proposing to extend the transitional exception to the calculation payments for FY 2027 for these hospitals in the same manner as we did for the FY 2026 wage index.
Similar to the FY 2026 transition, the transitional exception policy we are proposing for FY 2027 would continue to apply only to hospitals that benefited from the FY 2024 low wage index hospital policy. For FY 2027, for example, we would compare the hospital's proposed FY 2027 wage index to the hospital's FY 2024 wage index if the hospital benefited from the low wage index hospital policy in FY 2024. If the hospital is significantly impacted by the discontinuation of the low wage index hospital policy, meaning the hospital's proposed FY 2027 wage index is decreasing by more than 14.2625 percent
For example: assume the FY 2024 wage index for a hospital that benefitted from the low wage index hospital policy is 0.7600, and the hospital's proposed FY 2027 wage index is 0.6500. (If applicable, this proposed FY 2027 wage index value would include the 5-percent cap based on a comparison of the hospital's FY 2027 wage index prior to application of the 5-percent cap, to the hospital's FY 2026 wage index. We note that the FY 2026 wage index that will be used in this comparison is generally the FY 2026 wage index listed in Table 2 from the FY 2026 Final Rule in the column labeled “FY 2026 Wage Index With Cap”. We note that all hospitals, regardless of whether the cap was applied to their FY 2026 wage index, have a value in the column “FY 2026 Wage Index With Cap”. Hospitals that did not have a cap applied to their FY 2026 wage index will display a wage index in this column without the cap.) The hospital's proposed FY 2027 wage index is decreasing by more than 14.2625 percent from the hospital's FY 2024 wage index [that is, 0.6500 < 0.6516 where 0.6516 = (0.857375 times 0.7600)]. The proposed transitional payment exception for FY 2027 for this hospital is equal to the additional amount the hospital would be paid under the IPPS if its FY 2027 wage index were equal to 0.6516, which is 85.7375 percent of 0.7600, its FY 2024 wage index. We note that the hospital in this example would not qualify for the transitional payment exception in FY 2028 should the policy be extended if its 2028 wage index is more than 0.6190, which is 81.450625 percent (or 0.95^4) of its FY 2024 wage index of 0.7600.
Similar to the FY 2026 transition, we are proposing to make this policy budget neutral for FY 2027 through an adjustment applied to the standardized amount for all hospitals because: (1) the wage index cap policy at 42 CFR 412.64(h)(7) would have mitigated these FY 2027 wage index decreases had the combined payment effect of the FY 2025 and FY 2026 wage index and the transitional payment exception been reflected solely in the FY 2025 and FY 2026 wage index, and it would have done so in a budget neutral manner under our current regulations; and (2) the circumstances described in the FY 2025 IFC (89 FR 80405 through 80421) that caused us to decline to budget neutralize the interim FY 2025 transition policy are not applicable to subsequent years. In addition, implementing the proposed transition policy for FY 2027 in a budget neutral manner would be consistent with past practice. For example, we budget neutralized the FY 2015 wage index transition budget neutrality policy discussed earlier (79 FR 49956 through 49962). As we have discussed in other instances (89 FR 19398), we believed, and continue to believe, that transition policies should not increase estimated aggregate Medicare payments beyond the payments that would be made had we never proposed these transition policies. Therefore, we are proposing to use our authority under section 1886(d)(5)(I)(i) of the Act twice. First, we are proposing to adopt a narrow transitional exception to the calculation of FY 2027 IPPS for low wage index hospitals significantly impacted by the discontinuation of the low wage index
We are also proposing to make a budget neutral equivalent exception under the capital IPPS. Under the capital IPPS, the adjustment for local cost variation is based on the hospital wage index value that is applicable to the hospital under the operating IPPS. We adjust the capital standard Federal rate so that the effects of the annual changes in the geographic adjustment factor (GAF) are budget neutral. As discussed in the FY 2025 IFC (89 FR 80408), since FY 2023, the GAFs reflect the wage index cap policy that limits any decrease to a hospital's wage index from its wage index in the prior FY, regardless of the circumstances causing the decline, to 95 percent of its prior year value. As described previously, some hospitals that previously benefitted from the low wage index hospital policy will experience decreases of 15 percent or more over the three years from their FY 2024 wage index (with the low wage index hospital policy applied) to their proposed FY 2027 wage index, at approximately 5 percent or more per year over that time period and for subsequent years. As such, similar to the FY 2025 and FY 2026 transition policies, we are proposing for FY 2027 to make a budget neutral equivalent exception under the capital IPPS.
In this FY 2027 IPPS/LTCH PPS proposed rule, we have included the following wage index tables: Table 2 titled “Case-Mix Index and Wage Index Table by CCN”; Table 3 titled “Wage Index Table by CBSA”; Table 4A titled “List of Counties Eligible for the Out-Migration Adjustment under Section 1886(d)(13) of the Act”; and Table 4B titled “Counties redesignated under section 1886(d)(8)(B) of the Act (Lugar Counties).” We refer readers to section VI of the Addendum to this proposed rule for a discussion of the wage index tables for FY 2027.
Section 1886(d)(3)(E) of the Act directs the Secretary to adjust the proportion of the national prospective payment system base payment rates that are attributable to wages and wage-related costs by a factor that reflects the relative differences in labor costs among geographic areas. It also directs the Secretary to estimate from time to time the proportion of hospital costs that are labor-related and to adjust the proportion (as estimated by the Secretary from time to time) of hospitals' costs that are attributable to wages and wage-related costs of the diagnosis related group (DRG) prospective payment rates. We refer to the portion of hospital costs attributable to wages and wage-related costs as the labor-related share. The labor-related share of the prospective payment rate is adjusted by an index of relative labor costs, which is referred to as the wage index.
Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless this would result in lower payments to a hospital than would otherwise be made. However, this provision of Public Law 108-173 did not change the legal requirement that the Secretary estimate from time to time the proportion of hospitals' costs that are attributable to wages and wage-related costs. Thus, hospitals receive payment based on either a 62-percent labor-related share, or the labor-related share estimated from time to time by the Secretary, depending on which labor-related share results in a higher payment.
In the FY 2026 IPPS/LTCH PPS final rule (90 FR 36869 through 36873), we rebased and revised the hospital market basket to a 2023-based IPPS hospital market basket, which replaced the 2018-based IPPS hospital market basket, effective beginning October 1, 2025. Using the 2023-based IPPS market basket, we finalized a labor-related share of 66.0 percent for discharges occurring on or after October 1, 2025. In addition, in FY 2026, we implemented this rebased labor-related share in a budget neutral manner (90 FR 36857 through 36858, 90 FR 37216 through 37217). However, consistent with section 1886(d)(3)(E) of the Act, we did not take into account the additional payments that would be made as a result of hospitals with a wage index less than or equal to 1.0000 being paid using a labor-related share lower than the labor-related share of hospitals with a wage index greater than 1.0000.
The labor-related share is used to determine the proportion of the national IPPS base payment rate to which the area wage index is applied. We include a cost category in the labor-related share if the costs are labor intensive and vary with the local labor market. In the FY 2026 IPPS/LTCH PPS final rule, we included in the labor-related share the national average proportion of operating costs that are attributable to the following cost categories in the 2023-based IPPS market basket: Wages and Salaries; Employee Benefits; Professional Fees: Labor-Related; Administrative and Facilities Support Services; Installation, Maintenance, and Repair Services; and All Other: Labor-Related Services as measured in the 2023-based IPPS market basket. For FY 2027, we are proposing to continue to use a labor-related share of 66.0 percent for discharges occurring on or after October 1, 2026.
As discussed in section VI.B of the preamble of this proposed rule, prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. As a result, we applied the Puerto Rico-specific labor-related share percentage and nonlabor-related share percentage to the Puerto Rico-specific standardized amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that the payment calculation with respect to operating costs of inpatient hospital services of a subsection (d) Puerto Rico hospital for inpatient hospital discharges on or after January 1, 2016, shall use 100 percent of the national standardized amount. Because Puerto Rico hospitals are no longer paid with a Puerto Rico-specific standardized amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as amended by section 601 of the Consolidated Appropriations Act, 2016, there is no longer a need for us to calculate a Puerto Rico-specific labor-related share percentage and nonlabor-related share percentage for application to the Puerto Rico-specific standardized amount. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are
Tables 1A and 1B, which are published in section VI of the Addendum to this FY 2027 IPPS/LTCH PPS proposed rule and available via the internet on the CMS website, reflect the proposed national labor-related share. Table 1C, in section VI of the Addendum to this FY 2027 IPPS/LTCH PPS proposed rule and available via the internet on the CMS website, reflects the national labor-related share for hospitals located in Puerto Rico. For FY 2027, for all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are less than or equal to 1.0000, we are proposing to apply the wage index to a labor-related share of 62 percent of the national standardized amount. For all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are greater than 1.000, for FY 2027, we are proposing to apply the wage index to a labor-related share of 66.0 percent of the national standardized amount.
Section 1886(d)(5)(F) of the Act provides for additional Medicare payments to subsection (d) hospitals
A hospital's DPP is the sum of two fractions: the “Medicare fraction” and the “Medicaid fraction.” The Medicare fraction (also known as the “SSI fraction” or “SSI ratio”) is computed by dividing the number of the hospital's inpatient days that are furnished to patients who were entitled to both Medicare Part A and Supplemental Security Income (SSI) benefits by the hospital's total number of patient days furnished to patients entitled to benefits under Medicare Part A. The Medicaid fraction is computed by dividing the hospital's number of inpatient days furnished to patients who, for such days, were eligible for Medicaid, but were not entitled to benefits under Medicare Part A, by the hospital's total number of inpatient days in the same period.
Because the DSH payment adjustment is part of the IPPS, the statutory references to “days” in section 1886(d)(5)(F) of the Act have been interpreted to apply only to hospital acute care inpatient days. Regulations located at 42 CFR 412.106 govern the Medicare DSH payment adjustment and specify how the DPP is calculated as well as how beds and patient days are counted in determining the Medicare DSH payment adjustment. Under § 412.106(a)(1)(i), the number of beds for the Medicare DSH payment adjustment is determined in accordance with bed counting rules for the IME adjustment under § 412.105(b).
Section 3133 of the Patient Protection and Affordable Care Act (Pub. L. 111-148), as amended by section 10316 of the same Act and section 1104 of the Health Care and Education Reconciliation Act (Pub. L. 111-152), added a section 1886(r) to the Act that modifies the methodology for computing the Medicare DSH payment adjustment. We refer to these provisions collectively as section 3133 of the Affordable Care Act. Beginning with discharges in FY 2014, hospitals that qualify for Medicare DSH payments under section 1886(d)(5)(F) of the Act receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments. This provision applies equally to hospitals that qualify for DSH payments on the basis of the hospital's DPP under section 1886(d)(5)(F)(i)(I) of the Act and those hospitals that qualify under the Pickle method under section 1886(d)(5)(F)(i)(II) of the Act.
The remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals who are uninsured, is available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The payments to each hospital for a fiscal year are based on the hospital's amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all hospitals that receive Medicare DSH payments for that fiscal year.
Since FY 2014, section 1886(r) of the Act has required that hospitals that are eligible under section 1886(d)(5)(F) of the Act receive two separately calculated payments:
Specifically, section 1886(r)(1) of the Act provides that the Secretary shall pay to such subsection (d) hospital 25 percent of the amount the hospital would have received under section 1886(d)(5)(F) of the Act for DSH payments, which represents the empirically justified amount for such payment, as determined by the MedPAC in its March 2007 Report to Congress.
In addition to this empirically justified Medicare DSH payment, section 1886(r)(2) of the Act provides that, for FY 2014 and each subsequent fiscal year, the Secretary shall pay to such subsection (d) hospitals an additional amount equal to the product of three factors. The first factor is the difference between the aggregate amount of payments that would be made to subsection (d) hospitals under section 1886(d)(5)(F) of the Act if subsection (r) did not apply and the aggregate amount of payments that are made to subsection (d) hospitals under section 1886(r)(1) of the Act for such fiscal year. In other words, the first factor of the uncompensated care payment calculation is 75 percent of the payments that would otherwise be made as Medicare DSH payments under section 1886(d)(5)(F) of the Act.
Section 1886(r)(2)(B) of the Act provides that the second factor is, for FY 2018 and subsequent fiscal years, 1 minus the percent change in the percent of individuals who are uninsured, as determined by comparing the percent of individuals who were uninsured in 2013 (as estimated by the Secretary, based on data from the Census Bureau or other sources the Secretary determines appropriate, and certified by the Chief Actuary of CMS) and the percent of individuals who were uninsured in the most recent period for which data are available (as so estimated and certified). As discussed in a later section, we note that the second factor is computed based on estimates of the total U.S. population.
Section 1886(r)(2)(C) of the Act provides that the third factor is a percent that, for each subsection (d) hospital, represents the quotient of the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data), including the use of alternative data where the Secretary determines that alternative data are available which are a better proxy for the costs of subsection (d) hospitals for treating the uninsured, and the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act. Therefore, this third factor represents a hospital's uncompensated care amount for a given time period relative to the uncompensated care amount for that same time period for all hospitals that receive Medicare DSH payments in the applicable fiscal year, expressed as a percent.
For each hospital, the product of these three factors represents its additional payment for uncompensated care for the applicable fiscal year. We refer to the additional payment amount determined by these factors as the “uncompensated care payment.” In brief, the uncompensated care payment for an individual hospital is the product of the following 3 factors:
Section 1886(r) of the Act applies to FY 2014 and each subsequent fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 through 50647) and the FY 2014 IPPS interim final rule with comment period (78 FR 61191 through 61197), we set forth our policies for implementing the required changes to the Medicare DSH payment methodology made by section 3133 of the Affordable Care Act for FY 2014. In those rules, we noted that, because section 1886(r) of the Act modifies the payment required under section 1886(d)(5)(F) of the Act, it affects only the DSH payment under the operating IPPS. It does not revise or replace the capital IPPS DSH payment provided under the regulations at 42 CFR part 412, subpart M, which was established through the exercise of the Secretary's discretion in implementing the capital IPPS under section 1886(g)(1)(A) of the Act.
Finally, section 1886(r)(3) of the Act provides that there shall be no administrative or judicial review under section 1869, section 1878, or otherwise of any estimate of the Secretary for purposes of determining the factors described in section 1886(r)(2) of the Act or of any period selected by the Secretary for the purpose of determining those factors. Therefore, there is no administrative or judicial review of the estimates developed for purposes of applying the three factors used to determine uncompensated care payments, or of the periods selected to develop such estimates.
The payment methodology under section 3133 of the Affordable Care Act applies to “subsection (d) hospitals” that would otherwise receive a DSH payment made under section 1886(d)(5)(F) of the Act. Therefore, hospitals must receive empirically justified Medicare DSH payments in a fiscal year to receive a Medicare uncompensated care payment for that year. Specifically, section 1886(r)(2) of the Act states that, in addition to the empirically justified Medicare DSH payment made to a subsection (d) hospital under section 1886(r)(1) of the Act, the Secretary shall pay to “such subsection (d) hospitals” the
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 2014 IPPS interim final rule with comment period (78 FR 61193), we explained that hospitals that are not eligible to receive empirically justified Medicare DSH payments in a fiscal year will not receive uncompensated care payments for that year. We also specified that we would make a determination concerning eligibility for interim uncompensated care payments based on each hospital's estimated DSH status (that is, eligibility to receive empirically justified Medicare DSH payments) for the applicable fiscal year (using the most recent data that is available). For this proposed rule, we estimated DSH status for all hospitals using the most recent available SSI ratios and information from the most recent available Provider Specific File. We note that FY 2023 SSI ratios available on the CMS website were the most recent available SSI ratios at the time of developing this proposed rule.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and in the rulemakings for subsequent fiscal years, we have specified our policies for several specific classes of hospitals within the scope of section 1886(r) of the Act. Eligible hospitals include the following:
• Subsection (d) Puerto Rico hospitals are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under section 1886(r) of the Act (78 FR 50623 and 79 FR 50006).
• Sole community hospitals (SCHs) that are paid under the IPPS Federal rate receive interim payments based on what we estimate and project their DSH status to be prior to the beginning of the fiscal year (based on the best available data at that time) subject to settlement through the cost report. If they receive interim empirically justified Medicare DSH payments in a fiscal year, they will also be eligible to receive interim uncompensated care payments for that fiscal year on a per discharge basis. Final eligibility determinations will be made at the end of the cost reporting period at settlement, and both interim empirically justified Medicare DSH payments and uncompensated care payments will be adjusted accordingly (78 FR 50624 and 79 FR 50007).
• Medicare-dependent, small rural hospitals (MDHs) are paid based on the IPPS Federal rate or, if higher, the IPPS Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the updated hospital-specific rate from certain specified base years (FY 2012 IPPS/LTCH PPS final rule, 76 FR 51684). The IPPS Federal rate that is used in the MDH payment methodology is the same IPPS Federal rate that is used in the SCH payment methodology. Because MDHs are paid based on the IPPS Federal rate, they continue to be eligible to receive empirically justified Medicare DSH payments and uncompensated care payments if their DPP is at least 15 percent, and we apply the same process to determine MDHs' eligibility for interim empirically justified Medicare DSH and interim uncompensated care payments as we do for all other IPPS hospitals. Recently enacted legislation has extended the MDH program through December 31, 2026. We refer readers to section V.E. of the preamble of this proposed rule for further discussion of the MDH program. We will continue to make a determination concerning an MDH's eligibility for interim empirically justified Medicare DSH and uncompensated care payments based on the hospital's estimated DSH status for the applicable fiscal year.
• Transforming Episode Accountability Model (TEAM) is a new episode-based payment model (89 FR 68986). Hospitals participating in TEAM continue to be paid under the IPPS and, therefore, are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments. The model started January 1, 2026.
• IPPS hospitals that participate in the proposed Comprehensive Care for Joint Replacement Expansion (CJR-X) Model would continue to be paid under the IPPS and, therefore, are eligible to receive empirically justified Medicare DSH payments and uncompensated care payments. We refer the reader to section X.C. of the FY2027 IPPS/LTCH proposed rule for further discussion on the CJR-X Model. CMS proposes beginning this model on October 1, 2027.
Ineligible hospitals include the following:
• Maryland hospitals are not eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under the payment methodology of section 1866(r) of the Act because they are not paid under the IPPS. CMS and the State have entered into an agreement to govern payments to Maryland hospitals under a new payment model, the Achieving Healthcare Efficiency through Accountable Design (AHEAD) Model, beginning January 1, 2026. Maryland hospitals are not paid under the IPPS and are ineligible to receive empirically justified Medicare DSH payments and uncompensated care payments under section 1886(r) of the Act. Further information is available on the CMS website at
• SCHs that are paid under their hospital-specific rate are not eligible for Medicare DSH and uncompensated care payments (78 FR 50623 and 50624).
• Hospitals participating in the Rural Community Hospital Demonstration Program are not eligible to receive empirically justified Medicare DSH payments and uncompensated care payments under section 1886(r) of the Act because they are not paid under the IPPS (78 FR 50625 and 79 FR 50008). The Rural Community Hospital Demonstration Program was originally authorized for a 5-year period by section 410A of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173).
As we have discussed earlier, section 1886(r)(1) of the Act requires the Secretary to pay 25 percent of the amount of the Medicare DSH payment that would otherwise be made under section 1886(d)(5)(F) of the Act to a subsection (d) hospital. Because section 1886(r)(1) of the Act merely requires the Secretary to pay a designated percentage of these payments, without revising the criteria governing eligibility for DSH payments or the underlying payment methodology, we stated in the FY 2014 IPPS/LTCH PPS final rule that we did not believe that it was necessary to develop any new operational mechanisms for making such payments.
Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626), we implemented this provision by advising Medicare Administrative Contractors (MACs) to simply adjust subsection (d) hospitals' interim claim payments to an amount equal to 25 percent of what would have been paid if section 1886(r) of the Act did not apply. We also made corresponding changes to the hospital cost report so that these empirically justified Medicare DSH payments could be settled at the appropriate level at the time of cost report settlement. We provided more detailed operational instructions and cost report instructions following issuance of the FY 2014 IPPS/LTCH PPS final rule that are available on the CMS website at
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 49051), we established a new supplemental payment for IHS/Tribal hospitals and hospitals located in Puerto Rico for FY 2023 and subsequent fiscal years. This payment was established to help to mitigate the impact of the decision to discontinue the use of low-income insured days as a proxy for uncompensated care costs for these hospitals and to prevent undue long-term financial disruption for these providers. The regulations located at 42 CFR 412.106(h) govern the supplemental payment. In brief, the supplemental payment for a fiscal year is determined as the difference between the hospital's base year amount and its uncompensated care payment for the applicable fiscal year as determined under § 412.106(g)(1). The base year amount is the hospital's FY 2022 uncompensated care payment adjusted by one plus the percent change in the total uncompensated care amount between the applicable fiscal year (that is, FY 2027 for purposes of this rulemaking) and FY 2022, where the total uncompensated care amount for a fiscal year is determined as the product of Factor 1 and Factor 2 for that year. If the base year amount is equal to or lower than the hospital's uncompensated care payment for the current fiscal year, then the hospital would not receive a supplemental payment because the hospital would not be experiencing financial disruption in that year as a result of the use of uncompensated care data from the Worksheet S-10 in determining Factor 3 of the uncompensated care payment methodology.
For FY 2027, we are not proposing any changes to the methodology for determining the supplemental payments and we will calculate the supplemental payments to eligible IHS/Tribal and Puerto Rico hospitals consistent with the methodology described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 49051) and § 412.106(h).
As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49048 and 49049), the eligibility and payment processes for the supplemental payment are consistent with the processes for determining eligibility to receive interim and final uncompensated care payments adopted in FY 2014 IPPS/LTCH PPS final rule. We note that the MAC will make a final determination with respect to a hospital's eligibility to receive the supplemental payment for a fiscal year, in conjunction with its final determination of the hospital's eligibility for DSH payments and uncompensated care payments for that fiscal year.
As we discussed earlier, section 1886(r)(2) of the Act provides that, for each eligible hospital in FY 2014 and subsequent years, the uncompensated care payment is the product of three factors, which are discussed in the next sections.
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the calculation of the uncompensated care payment. The regulations located at 42 CFR 412.106(g)(1)(i) govern the Factor 1 calculation. Under a prospective payment system, we would not know the precise aggregate Medicare DSH payment amounts that would be paid for a fiscal year until cost report settlement for all IPPS hospitals is completed, which occurs several years after the end of the fiscal year. Therefore, section 1886(r)(2)(A)(i) of the Act provides authority to estimate this amount by specifying that, for each fiscal year to which the provision applies, such amount is to be estimated by the Secretary. Similarly, we would not know the precise aggregate empirically justified Medicare DSH payment amounts that would be paid for a fiscal year until cost report settlement for all IPPS hospitals is completed. Thus, section 1886(r)(2)(A)(ii) of the Act provides authority to estimate this amount. In brief, Factor 1 is the difference between the Secretary's estimates of: (1) the amount that would have been paid in Medicare DSH payments for the fiscal year, in the absence of section 1886(r) of the Act; and (2) the amount of empirically justified Medicare DSH payments that are made for the fiscal year, which takes into account the requirement to pay 25 percent of what would have otherwise been paid under section 1886(d)(5)(F) of the Act.
In this FY 2027 IPPS/LTCH PPS proposed rule, consistent with the policy that has applied since the FY 2014 final rule (78 FR 50627 through 50631), we are determining Factor 1 from the most recently available estimates of the aggregate amount of Medicare DSH payments that would be made for FY 2027 in the absence of section 1886(r)(1) of the Act and the aggregate amount of empirically justified Medicare DSH payments that would be made for FY 2027, both as calculated by CMS' Office of the Actuary (OACT). Consistent with the policy that has applied in previous years, these estimates will not be revised or updated subsequent to publication of our final projections in the FY 2027 IPPS/LTCH PPS final rule.
For this proposed rule, to calculate both estimates, we used the most recently available projections of Medicare DSH payments for the fiscal year, as calculated by OACT using the
For purposes of calculating Factor 1 and modeling the impact of this FY 2027 IPPS/LTCH PPS proposed rule, we used OACT's January 2026 Medicare DSH estimates, which were based on data from the December 2025 update of the Medicare Hospital Cost Report Information System (HCRIS) and the FY 2026 IPPS/LTCH PPS final rule IPPS Impact File, published in conjunction with the publication of the FY 2026 IPPS/LTCH PPS final rule. Because SCHs that are projected to be paid under their hospital-specific rate are ineligible for empirically justified Medicare DSH payments and uncompensated care payments, they were excluded from the January 2026 Medicare DSH estimates. Because Maryland hospitals are not paid under the IPPS, they are also ineligible for empirically justified Medicare DSH payments and uncompensated care payments and were also excluded from OACT's January 2026 Medicare DSH estimates.
The 22 hospitals that CMS expects will participate in the Rural Community Hospital Demonstration Program in FY 2027 were also excluded from OACT's January 2026 Medicare DSH estimates because under the payment methodology that applies during the demonstration, these hospitals are not eligible to receive empirically justified Medicare DSH payments or uncompensated care payments.
For this proposed rule, using the data sources previously discussed, OACT's January 2026 estimates of Medicare DSH payments for FY 2027 without regard to the application of section 1886(r)(1) of the Act, is approximately $15.303 billion. Therefore, also based on OACT's January 2026 Medicare DSH estimates, the estimate of empirically justified Medicare DSH payments for FY 2027, with the application of section 1886(r)(1) of the Act, is approximately $3.826 billion (or 25 percent of the total amount of estimated Medicare DSH payments for FY 2027). Under § 412.106(g)(1)(i), Factor 1 is the difference between these two OACT estimates. Therefore, in this FY 2027 IPPS/LTCH PPS proposed rule, we are determining that Factor 1 for FY 2027 would be $11.477 billion, which is equal to 75 percent of the total amount of estimated Medicare DSH payments for FY 2027 ($15.303 billion minus $3.826 billion). We note that consistent with our approach in previous rulemakings, OACT intends to use more recent data that may become available for purposes of projecting the final Factor 1 estimates for the FY 2027 IPPS/LTCH PPS final rule.
We note that the Factor 1 estimates for IPPS/LTCH PPS proposed rules are generally consistent with the economic assumptions and actuarial analysis used to develop the President's Budget estimates under current law, and Factor 1 estimates for IPPS/LTCH PPS final rules are generally consistent with those used for the Midsession Review of the President's Budget. Consistent with historical practice, we expect the Midsession Review will have updated economic assumptions and actuarial analysis, which will be used for the development of Factor 1 estimates in the FY 2027 IPPS/LTCH PPS final rule.
For a general overview of the principal steps involved in projecting future inpatient costs and utilization, we refer readers to the “2025 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,” available on the CMS website at
In this proposed rule, we include information regarding the data sources, methods, and assumptions employed by OACT's actuaries in determining our estimate of Factor 1. In summary, we indicate the historical HCRIS data update OACT used to estimate Medicare DSH payments. We also explain that the most recent Medicare DSH payment adjustments provided in the IPPS Impact File were used, and we provide the components of all the update factors that were applied to the historical data to estimate the Medicare DSH payments for the upcoming fiscal year, along with the associated rationale and assumptions. The discussion also includes descriptions of the “Other” and “Discharges” assumptions.
OACT's estimates for FY 2027 for this proposed rule began with a baseline of $12.901 billion in Medicare DSH expenditures for FY 2023. The following table shows the factors applied to update this baseline through the current estimate for FY 2027:
In this table, the discharges column shows the changes in the number of Medicare FFS inpatient hospital discharges. The discharge figures for FY 2024 and FY 2025 are based on Medicare claims data that have been adjusted by a completion factor to account for incomplete claims data. The discharge figures for FY 2026 and FY 2027 are assumptions based on recent historical experience and assumptions related to how many beneficiaries will be enrolled in MA plans.
The case-mix column shows the estimated change in case-mix for IPPS hospitals. The case-mix figures for FY 2024 and FY 2025 are based on actual claims data adjusted by a completion factor to account for incomplete claims data. The case-mix figure for FY 2026 is the expected transition to the case-mix for FY 2027. The FY 2027 case-mix is based on assumptions from the 2012 “Review of Assumptions and Methods of the Medicare Trustees' Financial Projections” report by the 2010-2011 Medicare Technical Review Panel.
The “Other” column reflects the change in other factors that contribute to the Medicare DSH estimates. These factors include the difference between the total inpatient hospital discharges and IPPS discharges and various adjustments to the payment rates that have been included over the years but are not reflected in the other columns.
The following table shows the factors that are included in the “IPPS Hospital Market Basket Update Factor” column of the previous table:
We are inviting public comments on our proposed Factor 1 for FY 2027.
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the calculation of the uncompensated care payment. Section 1886(r)(2)(B)(ii) of the Act provides that, for FY 2018 and subsequent fiscal years, the second factor is 1 minus the percent change in the percent of individuals who are uninsured, as determined by comparing the percent of individuals who were uninsured in 2013 (as estimated by the Secretary, based on data from the Census Bureau or other sources the Secretary determines appropriate, and certified by the Chief Actuary of CMS) and the percent of individuals who were uninsured in the most recent period for which data are available (as so estimated and certified).
We are continuing to use the methodology that was used in fiscal years (FYs) 2018 through 2026 to determine Factor 2 for FY 2027—to use the National Health Expenditure Accounts (NHEA) data to determine the percentage point change in the percent of individuals who are uninsured. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198) for a complete discussion of the NHEA and why we determined, and continue to believe, that it is the data source for the rate of uninsurance that best meets all our considerations and is consistent with the statutory requirement that the estimate of the rate of uninsurance be based on data from the Census Bureau or other sources the Secretary determines appropriate.
In brief, the NHEA represents the government's official estimates of economic activity (
To compute Factor 2 for FY 2027, the first metric that is needed is the proportion of the total U.S. population that was uninsured in 2013. For a complete discussion of the approach OACT used to prepare the NHEA's estimate of the rate of uninsurance in 2013, including the data sources used, we refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 58998-58999).
The next metrics needed to compute Factor 2 for FY 2027 are projections of the rate of uninsurance in calendar years (CYs) 2026 and 2027 for the total U.S. population. On an annual basis, OACT projects enrollment and spending trends for the coming 10-year period. The most recent projections are for 2024 through 2033 and were published on June 25, 2025. Those projections used the latest NHEA historical data that were available at the time of their construction (that is, all NHEA historical data through 2023). The NHEA projection methodology accounts for expected changes in enrollment across all of the categories of insurance coverage previously noted. For a complete discussion of how the NHEA data account for expected changes in enrollment across all the categories of insurance coverage previously noted, we refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 58999).
Using these data sources and the previously described methodologies, at the time of developing this proposed rule, OACT has estimated that the uninsured rate for the historical baseline year of 2013 was 14.0 percent, and that the uninsured rates for CYs 2026 and 2027 are projected to be 9.0 and 9.1percent, respectively. As required by section 1886(r)(2)(B)(ii) of the Act, the Chief Actuary of CMS certified these
As with the CBO estimates on which we based Factor 2 for fiscal years before FY 2018, the NHEA estimates are for a calendar year. Under the approach originally adopted in the FY 2014 IPPS/LTCH PPS final rule (79 FR 50014), we use a weighted average approach to project the rate of uninsurance for each fiscal year. We continue to believe that, in order to estimate the rate of uninsurance during a fiscal year accurately, Factor 2 should reflect the estimated rate of uninsurance that hospitals will experience during the fiscal year, rather than the rate of uninsurance during only one of the calendar years the fiscal year spans. Accordingly, in this proposed rule, we are continuing to apply the weighted average approach used in past fiscal years to estimate this proposed rule's rate of uninsurance for FY 2027.
OACT certified the estimate of the rate of uninsurance for FY 2027 determined using this weighted average approach to be reasonable and appropriate for purposes of section 1886(r)(2)(B)(ii) of the Act.
The calculation of the proposed Factor 2 for FY 2027 is as follows:
• Percent of individuals without insurance for CY 2013: 14.0 percent.
• Percent of individuals without insurance for CY 2026: 9.0 percent.
• Percent of individuals without insurance for CY 2027: 9.1 percent.
• Percent of individuals without insurance for FY 2027: (0.25 times 0.090) + (0.75 times 0.091) = 9.1 percent.
• FY 2027's proposed Factor 2 is calculated as 1 minus the percent change in the percent of individuals without insurance between CY 2013 and FY 2027.
• Proposed Factor 2 is as follows: 1−|((0.14−0.091)/0.14)| = 1−0.3500 = 0.6500.
We propose that Factor 2 for FY 2027 would be 65.00 percent.
The proposed FY 2027 uncompensated care amount is equivalent to proposed Factor 1 multiplied by proposed Factor 2, which is $7,460,212,500.
We invite public comments on our proposed Factor 2 for FY 2027.
Section 1886(r)(2)(C) of the Act defines Factor 3 in the calculation of the uncompensated care payment. As we have discussed earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal to the percent, for each subsection (d) hospital, that represents the quotient of: (1) the amount of uncompensated care for such hospital for a period selected by the Secretary (as estimated by the Secretary, based on appropriate data (including, in the case where the Secretary determines alternative data are available that are a better proxy for the costs of subsection (d) hospitals for treating the uninsured, the use of such alternative data)); and (2) the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act for such period (as so estimated, based on such data).
Therefore, Factor 3 is a hospital-specific value that expresses the proportion of the estimated uncompensated care amount for each subsection (d) hospital and each subsection (d) Puerto Rico hospital with the potential to receive Medicare DSH payments relative to the estimated uncompensated care amount for all hospitals estimated to receive Medicare DSH payments in the fiscal year for which the uncompensated care payment is to be made. Factor 3 is applied to the product of Factor 1 and Factor 2 to determine the amount of the uncompensated care payment that each eligible hospital will receive for FY 2014 and subsequent fiscal years. To implement the statutory requirements for this factor of the uncompensated care payment formula, it was necessary for us to determine: (1) the definition of uncompensated care or, in other words, the specific items that are to be included in the numerator (the estimated uncompensated care amount for an individual hospital) and the denominator (the estimated uncompensated care amount for all hospitals estimated to receive Medicare DSH payments in the applicable fiscal year); (2) the data source(s) for the estimated uncompensated care amount; and (3) the timing and manner of computing the quotient for each hospital estimated to receive Medicare DSH payments. The statute instructs the Secretary to estimate the amounts of uncompensated care for a period based on appropriate data. In addition, the statute permits the Secretary to use alternative data in the case where the Secretary determines that such alternative data are available that are a better proxy for the costs of subsection (d) hospitals for treating individuals who are uninsured. For a discussion of the methodology, we used to calculate Factor 3 for fiscal years (FYs) 2014 through 2022, we refer readers to the FY 2024 IPPS/LTCH final rule (88 FR 59001 and 59002).
Section 1886(r)(2)(C) of the Act governs the selection of the data to be used in calculating Factor 3 and allows the Secretary the discretion to determine the time periods from which we derive the data to estimate the numerator and the denominator of the Factor 3 quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the numerator of the quotient as the amount of uncompensated care for a subsection (d) hospital for a period selected by the Secretary. Section 1886(r)(2)(C)(ii) of the Act defines the denominator as the aggregate amount of uncompensated care for all subsection (d) hospitals that receive a payment under section 1886(r) of the Act for such period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634 through 50647), we adopted a process of making interim payments with final cost report settlement for both the empirically justified Medicare DSH payments and the uncompensated care payments required by section 3133 of the Affordable Care Act. Consistent with that process, we also determined the time period from which to calculate the numerator and denominator of the Factor 3 quotient in a way that would be consistent with making interim and final payments. Specifically, we must have Factor 3 values available for hospitals that we estimate will qualify for Medicare DSH payments for a fiscal year and for those hospitals that we do not estimate will qualify for Medicare DSH payments for that fiscal year but that may ultimately qualify for Medicare DSH payments for that fiscal year at the time of cost report settlement.
As described in the FY 2022 IPPS/LTCH PPS final rule, commenters expressed concerns that the use of only 1 year of data to determine Factor 3 would lead to significant variations in year-to-year uncompensated care payments. Some stakeholders recommended the use of 2 years of
In consideration of the comments discussed in the FY 2022 IPPS/LTCH PPS final rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49036 through 49047), we finalized a policy of using a multi-year average of audited Worksheet S-10 data to determine Factor 3 for FY 2023 and subsequent fiscal years. We explained our belief that this approach would be generally consistent with our past practice of using the most recent single year of audited data from the Worksheet S-10, while also addressing commenters' concerns regarding year-to-year fluctuations in uncompensated care payments. Under this policy, we used a 2-year average of audited FYs 2018 and 2019 Worksheet S-10 data to calculate Factor 3 for FY 2023. We also indicated that we expected FY 2024 would be the first year that 3 years of audited data would be available at the time of rulemaking. For FY 2024 and subsequent fiscal years, we finalized a policy of using a 3-year average of the uncompensated care data from the 3 most recent fiscal years for which audited data are available to determine Factor 3. Consistent with the approach that we followed when multiple years of data were previously used in the Factor 3 methodology, if a hospital does not have data for all 3 years used in the Factor 3 calculation, we will determine Factor 3 based on an average of the hospital's available data. For IHS and Tribal hospitals and Puerto Rico hospitals, we use the same multi-year average of Worksheet S-10 data to determine Factor 3 for FY 2024 and subsequent fiscal years as is used to determine Factor 3 for all other DSH-eligible hospitals (in other words, hospitals eligible to receive empirically justified Medicare DSH payments for a fiscal year) to determine Factor 3.
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49033 through 49047), we also modified our policy regarding cost reports that start in one fiscal year and span the entirety of the following fiscal year. Specifically, in the rare cases when we use a cost report that starts in one fiscal year and spans the entirety of the subsequent fiscal year to determine uncompensated care costs for the subsequent fiscal year, we would not use the same cost report to determine the hospital's uncompensated care costs for the earlier fiscal year. We explained that using the same cost report to determine uncompensated care costs for both fiscal years would not be consistent with our intent to smooth year-to-year variation in uncompensated care costs. As an alternative, we finalized our proposal to use the hospital's most recent prior cost report, if that cost report spans the applicable period.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69323), we continued the policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042) to address the effects of calculating Factor 3 using data from multiple fiscal years, in which we apply a scaling factor to the Factor 3 values calculated for all DSH-eligible hospitals so that total uncompensated care payments to hospitals that are projected to be DSH-eligible for a fiscal year will be consistent with the estimated amount available to make uncompensated care payments for that fiscal year. Pursuant to that policy, we divide 1 (the expected sum of all DSH-eligible hospitals' Factor 3 values) by the actual sum of all DSH-eligible hospitals' Factor 3 values and then multiply the quotient by the uncompensated care payment determined for each DSH-eligible hospital to obtain a scaled uncompensated care payment amount for each hospital. This process is designed to ensure that the sum of the scaled uncompensated care payments for all hospitals that are projected to be DSH-eligible is consistent with the estimate of the total amount available to make uncompensated care payments for the applicable fiscal year.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69323), we continued our new hospital policy that was modified in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042) and initially adopted in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42370 through 42371) to determine Factor 3 for new hospitals. Consistent with our policy of using multiple years of cost reports to determine Factor 3, we defined new hospitals as hospitals that do not have cost report data for the most recent year of data being used in the Factor 3 calculation. Under this definition, the cut-off date for the new hospital policy is the beginning of the fiscal year after the most recent year for which audits of the Worksheet S-10 data have been conducted. For FY 2027, the FY 2023 cost reports are the most recent year of cost reports for which audits of Worksheet S-10 data have been conducted. Thus, hospitals with CMS Certification Numbers (CCNs) established on or after October 1, 2023, would be subject to the new hospital policy for FY 2027.
Under our modified new hospital policy, if a new hospital has a preliminary projection of being DSH-eligible based on its most recent available disproportionate patient percentage, it may receive interim empirically justified DSH payments. However, new hospitals will not receive interim uncompensated care payments because we would have no uncompensated care data on which to determine what those interim payments should be. The MAC will make a final determination concerning whether the hospital is eligible to receive Medicare DSH payments at cost report settlement. In FY 2025, while we continued to determine the numerator of the Factor 3 calculation using the new hospital's uncompensated care costs reported on Worksheet S-10 of the hospital's cost report for the current fiscal year, we determined Factor 3 for new hospitals using a denominator based solely on uncompensated care costs from cost reports for the most recent fiscal year for which audits have been conducted. In addition, we applied a scaling factor to the Factor 3 calculation for a new hospital.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 690323 through 690324), we continued our policy of treating hospitals that merge after the development of the final rule for the applicable fiscal year similar to new hospitals. As explained in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50021), for these newly merged
Consistent with the policy adopted in the FY 2015 IPPS/LTCH PPS final rule, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 690323 through 690324), we stated that we would continue to treat newly merged hospitals in a similar manner to new hospitals, such that the newly merged hospital's final uncompensated care payment will be determined at cost report settlement where the numerator of the newly merged hospital's Factor 3 will be based on the cost report of only the surviving hospital (that is, the newly merged hospital's cost report) for the current fiscal year. However, if the hospital's cost reporting period includes less than 12 months of data, the data from the newly merged hospital's cost report will be annualized for purposes of the Factor 3 calculation. Consistent with the methodology used to determine Factor 3 for new hospitals described in section IV.E.3. of the preamble of this proposed rule, we continued our policy for determining Factor 3 for newly merged hospitals using a denominator that is the sum of the uncompensated care costs for all DSH-eligible hospitals, as reported on Worksheet S-10 of their cost reports for the most recent fiscal year for which audits have been conducted. In addition, we apply a scaling factor, as discussed in section IV.E.3. of the preamble of this proposed rule, to the Factor 3 calculation for a newly merged hospital. In the FY 2025 IPPS/LTCH PPS final rule, we explained that consistent with past policy, interim uncompensated care payments for the newly merged hospital would be based only on the data for the surviving hospital's CCN available at the time of the development of the final rule.
The calculation of a hospital's total uncompensated care costs on Worksheet S-10 requires the use of the hospital's cost to charge ratio (CCR). In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69324), we continued the policy of trimming CCRs, which we adopted in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49043), for FY 2025. Under this policy, we apply the following steps to determine the applicable CCR separately for each fiscal year that is included as part of the multi-year average used to determine Factor 3:
After completing these steps, we re-calculate the hospital's uncompensated care costs (Line 30) for the applicable fiscal year using the trimmed CCR (the statewide average CCR (urban or rural, as applicable)).
After applying the CCR trim methodology, there are rare situations where a hospital has potentially aberrant uncompensated care data for a fiscal year that are unrelated to its CCR. Therefore, under the trim methodology for potentially aberrant uncompensated care costs (UCC) that was included as part of the methodology for purposes of determining Factor 3 in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58832), if the hospital's uncompensated care costs for any fiscal year that is included as a part of the multi-year average are an extremely high ratio (greater than 50 percent) of its total operating costs in the applicable fiscal year, we will determine the ratio of uncompensated care costs to the hospital's total operating costs from another available cost report, and apply that ratio to the total operating expenses for the potentially aberrant fiscal year to determine an adjusted amount of uncompensated care costs for the applicable fiscal year.
However, we note that we have audited the Worksheet S-10 data that will be used in the Factor 3 calculation for a number of hospitals. Because the UCC data for these hospitals have been subject to audit, we believe that there is increased confidence that if high uncompensated care costs are reported by these audited hospitals, the information is accurate. Therefore, as we explained in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58832), we determined it is unnecessary to apply the UCC trim methodology for a fiscal year for which a hospital's UCC data have been audited.
In rare cases, hospitals that are not currently projected to be DSH-eligible and that do not have audited Worksheet S-10 data may have a potentially aberrant amount of insured patients' charity care costs (line 23 column 2). In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69324 through 69325), we stated that in addition to the UCC trim methodology, we will continue to apply an alternative trim specific to certain hospitals that do not have audited Worksheet S-10 data for one or more of the fiscal years that are used in the Factor 3 calculation. For FY 2023 and subsequent fiscal years, in the rare case that a hospital's insured patients' charity care costs for a fiscal year are greater than $7 million and the ratio of the hospital's cost of insured patient charity care (line 23 column 2) to total uncompensated care costs (line 30) is greater than 60 percent, we will not calculate a Factor 3 for the hospital at the time of proposed or final rulemaking. This trim will only impact hospitals that are not currently
Similar to the approach initially adopted in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45245 and 45246), in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69324), we also stated that we would continue to use a threshold of 3 standard deviations from the mean ratio of insured patients' charity care costs to total uncompensated care costs (line 23 column 2 divided by line 30) and a dollar threshold that is the median total uncompensated care cost reported on most recent audited cost reports for hospitals that are projected to be DSH-eligible. We stated that we continued to believe these thresholds are appropriate to address potentially aberrant data. We also continued to include Worksheet S-10 data from IHS/Tribal hospitals and Puerto Rico hospitals consistent with our policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through 49051). In addition, we continued our policy adopted in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49044) of applying the same threshold amounts originally calculated for the FY 2019 reports to identify potentially aberrant data for FY 2025 and subsequent fiscal years to facilitate transparency and predictability. If a hospital subject to this trim is determined to be DSH-eligible at cost report settlement, the MAC will calculate the hospital's Factor 3 using the same methodology used to calculate Factor 3 for new hospitals.
For FY 2027, consistent with § 412.106(g)(1)(iii)(C)(
Thus, for FY 2027, we will use 3 years of audited Worksheet S-10 Part 1 data to calculate Factor 3 for all eligible hospitals, including IHS and Tribal hospitals and Puerto Rico hospitals that have a cost report for 2013, following steps. We note that these steps use Worksheet S-10, Part I, rather than Worksheet S-10, Part II, to calculate Factor 3.
As we explained previously in this section, for FY 2027, we are also applying the scaling factor, new hospital, newly merged hospital, CCR trim methodology, UCC trim, and alternative trim methodology policies discussed in the previous section of the preamble of this proposed rule. For a hospital that is subject to either of the trims for potentially aberrant data (the UCC trim and alternative trim methodology explained in the previous section of the preamble of this proposed rule) and is ultimately determined to be DSH-eligible at cost report settlement, its uncompensated care payment will be calculated only after the hospital's reporting of insured charity care costs on its FY 2027 Worksheet S-10 has been reviewed. Accordingly, the MAC will calculate a Factor 3 for the hospital only after reviewing the uncompensated care information reported on Worksheet S-10 of the hospital's FY 2027 cost report. Then we will calculate Factor 3 for the hospital using the same methodology used to determine Factor 3 for new hospitals. Specifically, the numerator will reflect the uncompensated care costs reported on the hospital's FY 2027 cost report, while the denominator will reflect the sum of the uncompensated care costs reported on Worksheet S-10 of the FY 2023 cost reports of all DSH-eligible hospitals. In addition, we will apply a scaling factor, as discussed previously, to the Factor 3 calculation for the hospital.
Under the CCR trim methodology, for purposes of this FY 2027 IPPS/LTCH proposed rule, the statewide average CCR was applied to 12 hospitals' FY 2021 reports, of which 6 hospitals had FY 2021 Worksheet S-10 data. The statewide average CCR was applied to 10 hospitals' FY 2022 reports, of which 4 hospitals had FY 2022 Worksheet S-10 data. The statewide average CCR was applied to 12 hospitals' FY 2023 reports, of which 7 hospitals had FY 2023 Worksheet S-10 data.
For purposes of the FY 2027 IPPS/LTCH PPS final rule, consistent with our Factor 3 methodology since the FY 2014 IPPS/LTCH PPS final rule (78 FR
Regarding requests from providers to amend and/or reopen previously audited Worksheet S-10 data for the most recent 3 cost reporting years that are used in the methodology for calculating Factor 3, we note that MACs follow normal timelines and procedures. For purposes of the Factor 3 calculation for the FY 2027 IPPS/LTCH PPS final rule, any amended reports and/or reopened reports would need to have completed the amended report and/or reopened report submission processes by the end of March 2026. In other words, if the amended report and/or reopened report is not available for the March HCRIS extract, then that amended and/or reopened report data would not be part of the FY 2027 IPPS/LTCH PPS final rule's Factor 3 calculation. We note that the March HCRIS data extract will be available during the comment period for this proposed rule if providers wanted to verify that their amended and/or reopened data is reflected in the March HCRIS extract.
Since FY 2014, we have made interim uncompensated care payments during the fiscal year on a per-discharge basis. Typically, we use a 3-year average of the number of discharges for a hospital to produce an estimate of the amount of the hospital's uncompensated care payment per discharge. Specifically, the hospital's total uncompensated care payment amount for the applicable fiscal year is divided by the hospital's historical 3-year average of discharges computed using the most recent available data to determine the uncompensated care payment per discharge for that fiscal year.
As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69328 and 69329), we finalized a policy to use a 3-year average of the most recent years of available historical discharge data to calculate a per-discharge payment amount that would be used to make interim uncompensated care payments to each projected DSH-eligible hospital during FY 2027 and subsequent fiscal years, codified at 42 CFR 412.106(i)(1). We are applying this policy for FY 2027. Interim uncompensated care payments made to a hospital during the fiscal year are reconciled following the end of the year to ensure that the final payment amount is consistent with the hospital's prospectively determined uncompensated care payment for the fiscal year.
As we explained in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69329 through 69330), we also finalized a voluntary process in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58833 and 58834), through which a hospital may submit a request to its MAC for a lower per-discharge interim uncompensated care payment amount, including a reduction to zero, once before the beginning of the fiscal year and/or once during the fiscal year. In conjunction with this request, the hospital must provide supporting documentation demonstrating that there would likely be a significant recoupment at cost report settlement if the per-discharge amount is not lowered (for example, recoupment of 10 percent or more of the hospital's total uncompensated care payment, or at least $100,000). For example, a hospital might submit documentation showing a large projected increase in discharges during the fiscal year to support reduction of its per-discharge uncompensated care payment amount. As another example, a hospital might request that its per-discharge uncompensated care payment amount be reduced to zero midyear if the hospital's interim uncompensated care payments during the year have already surpassed the total uncompensated care payment calculated for the hospital.
Under the policy we finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58833 through 58834), the hospital's MAC will evaluate these requests and the supporting documentation before the beginning of the fiscal year and/or with midyear requests when the historical average number of discharges is lower than the hospital's projected discharges for the current fiscal year. If, following review of the request and the supporting documentation, the MAC agrees that there likely would be significant recoupment of the hospital's interim Medicare uncompensated care payments at cost report settlement, the only change that will be made is to lower the per-discharge amount either to the amount requested by the hospital or another amount determined by the MAC to be appropriate to reduce the likelihood of a substantial recoupment at cost report settlement. If the MAC determines it would be appropriate to reduce the interim Medicare uncompensated care payment per-discharge amount, that updated amount will be used for purposes of the outlier payment calculation for the remainder of the fiscal year. We are continuing to apply this policy for FY 2027. We refer readers to the Addendum in the FY 2023 IPPS/LTCH final rule for a more detailed discussion of the steps for determining the operating and capital Federal payment rate and the outlier payment calculation (87 FR 49431 through 49432). No change would be made to the total uncompensated care payment amount determined for the hospital on the basis of its Factor 3. In other words, any change to the per-discharge uncompensated care payment amount will not change how the total uncompensated care payment amount will be reconciled at cost report settlement.
As we have done for every proposed and final rule beginning in FY 2014, in conjunction with this proposed rule, we will publish on the CMS website a table listing Factor 3 for hospitals that we estimate will receive empirically justified Medicare DSH payments in FY 2027 (that is, those hospitals that will receive interim uncompensated care payments during the fiscal year), and for the remaining subsection (d) hospitals and subsection (d) Puerto Rico hospitals that have the potential of receiving an uncompensated care payment in the event that they receive an empirically justified Medicare DSH payment for the fiscal year as determined at cost report settlement. However, we note that a Factor 3 will not be published for new hospitals and hospitals that are subject to the alternative trim for hospitals with potentially aberrant data that are not projected to be DSH-eligible.
We will also publish a supplemental data file containing a list of the mergers that we are aware of and the computed uncompensated care payment for each merged hospital. In the DSH uncompensated care supplemental data file, we list new hospitals and the 17 hospitals that would be subject to the alternative trim for hospitals with potentially aberrant data that are not projected to be DSH-eligible, with a N/A in the Factor 3 column.
Hospitals have 60 days from the date of public display of this FY 2027 IPPS/LTCH PPS proposed rule in the
We invite public comments on all the previously described proposals for Factor 3 for FY 2027.
Existing regulations at 42 CFR 412.4(a) define discharges under the IPPS as situations in which a patient is formally released from an acute care hospital or dies in the hospital. Section 412.4(b) defines acute care transfers, and § 412.4(c) defines postacute care transfers. Our policy set forth in § 412.4(f) provides that when a patient is transferred and his or her length of stay is less than the geometric mean length of stay for the MS-DRG to which the case is assigned, the transferring hospital is generally paid based on a graduated per diem rate for each day of stay, not to exceed the full MS-DRG payment that would have been made if the patient had been discharged without being transferred.
The per diem rate paid to a transferring hospital is calculated by dividing the full MS-DRG payment by the geometric mean length of stay for the MS-DRG. Based on an analysis that showed that the first day of hospitalization is the most expensive (60 FR 45804), our policy generally provides for payment that is twice the per diem amount for the first day, with each subsequent day paid at the per diem amount up to the full MS-DRG payment (§ 412.4(f)(1)). Transfer cases also are eligible for outlier payments. In general, the outlier threshold for transfer cases, as described in § 412.80(b), is equal to (Fixed-Loss Outlier threshold for Nontransfer Cases adjusted for geographic variations in costs/Geometric Mean Length of Stay for the MS-DRG) * (Length of Stay for the Case plus 1 day).
We established the criteria set forth in § 412.4(d) for determining which DRGs qualify for postacute care transfer payments in the FY 2006 IPPS final rule (70 FR 47419 through 47420). The determination of whether a DRG is subject to the postacute care transfer policy was initially based on the Medicare Version 23.0 GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is revised, we use the current version of the Medicare GROUPER and the most recent complete year of MedPAR data to determine if the DRG is subject to the postacute care transfer policy. Specifically, if the MS-DRG's total number of discharges to postacute care equals or exceeds the 55th percentile for all MS-DRGs and the proportion of short-stay discharges to postacute care to total discharges in the MS-DRG exceeds the 55th percentile for all MS-DRGs, CMS will apply the postacute care transfer policy to that MS-DRG and to any other MS-DRG that shares the same base MS-DRG. The statute at subparagraph 1886(d)(5)(J) of the Act directs CMS to identify MS-DRGs based on a high volume of discharges to postacute care facilities and a disproportionate use of postacute care services. As discussed in the FY 2006 IPPS final rule (70 FR 47416), we determined that the 55th percentile is an appropriate level at which to establish these thresholds. In that same final rule (70 FR 47419), we stated that we will not revise the list of DRGs subject to the postacute care transfer policy annually unless we are making a change to a specific MS-DRG.
To account for MS-DRGs subject to the postacute care policy that exhibit exceptionally higher shares of costs very early in the hospital stay, § 412.4(f) also includes a special payment methodology. For these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment, plus the single per diem payment, for the first day of the stay, as well as a per diem payment for subsequent days (up to the full MS-DRG payment (§ 412.4(f)(6))). For an MS-DRG to qualify for the special payment methodology, the geometric mean length of stay must be greater than 4 days, and the average charges of 1-day discharge cases in the MS-DRG must be at least 50 percent of the average charges for all cases within the MS-DRG. MS-DRGs that are part of an MS-DRG severity level group will qualify under the MS-DRG special payment methodology policy if any one of the MS-DRGs that share that same base MS-DRG qualifies (§ 412.4(f)(6)).
Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), under section 1886(d)(5)(J) of the Act, a discharge was deemed a “qualified discharge” if the individual was discharged to one of the following postacute care settings:
• A hospital or hospital unit that is not a subsection (d) hospital.
• A skilled nursing facility.
• Related home health services provided by a home health agency provided within a timeframe established by the Secretary (beginning within 3 days after the date of discharge).
Section 53109 of the Bipartisan Budget Act of 2018 amended section 1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care provided by a hospice program as a qualified discharge, effective for discharges occurring on or after October 1, 2018. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41394), we made conforming amendments to § 412.4(c) of the regulation to include discharges to hospice care occurring on or after October 1, 2018, as qualified discharges. We specified that hospital bills with a Patient Discharge Status code of 50 (Discharged/Transferred to Hospice—Routine or Continuous Home Care) or 51 (Discharged/Transferred to Hospice, General Inpatient Care or Inpatient Respite) are subject to the postacute care transfer policy in accordance with this statutory amendment.
As discussed in the preamble of this proposed rule, based on our analysis of FY 2025 MedPAR claims data, CMS proposed to make changes to a number of MS-DRGs, effective for FY 2027. Specifically, we are proposing the following changes:
• Reassigning an ICD-10-PCS code describing the insertion of an endocardiac pacing electrode to MS-DRGs 228-229, deleting MS-DRGs 258, 259, 260, 261 and 262, and creating proposed new MS-DRGs 210 and 211 (Cardiac Pacemaker Revision or Device Replacement with MCC and without MCC, respectively).
• Reassigning the ICD-10-PCS codes describing extensive spinal fusions, fusions performed with a custom-made anatomically designed interbody fusion device and fusion of the sacroiliac joints using an internal fixation device with tulip connector from MS-DRGs 402, 426-428, 447-448, 450-451, and 456-458 to proposed new MS-DRGs 523, 524, and 525 (Extensive or Complex Spinal Fusion Procedures Except Cervical with MCC, with CC, and without CC/MCC, respectively).
• Redesignating an ICD-10-PCS code describing introduction of an antibiotic-eluting bone void filler from non-O.R. to non-O.R. affecting the MS-DRG assignment for MS-DRGs 463, 474, 477, 480, 492, 616, and 628.
• Deleting MS-DRGs 485-487, and creating proposed new MS-DRG 400 (Knee Procedures with Principal Diagnosis of Infection).
• Deleting MS-DRGs 466-468, and creating proposed new MS-DRG 449 (Revision of Hip or Knee Replacement).
• Creating proposed new MS-DRG 403 (Hip or Knee Procedures with Principal Diagnosis of Periprosthetic Joint Infection with MCC or Insertion of Antibiotic-eluting Bone Void Filler) and proposed new MS-DRG 404 (Hip or Knee Procedures with Principal Diagnosis of Periprosthetic Joint Infection without MCC).
• Deleting MS-DRGs 736, 737, 738, 739, 740 and 741 and creating proposed new MS-DRGs 731, 732, and 733 for uterine and adnexa procedures for female reproductive system malignancies.
• Deleting MS-DRG 264 (Other Circulatory System O.R. Procedures) and creating proposed new MS-DRGs 361 and 362 (Other Circulatory System O.R. Procedures with and without MCC, respectively).
• Adding ICD-10-PCS procedure codes describing the introduction of pancreatic islet cells to a new “Islet Cell Transplant Procedures” logic list in Pre-MDC MS-DRGs 008, 010, and 019.
When proposing changes to MS-DRGs that involve adding, deleting, and reassigning procedure or diagnosis codes between proposed new and revised MS-DRGs, we continue to believe it is necessary to evaluate the affected MS-DRGs to determine whether they should be subject to the postacute care transfer policy. Considering the proposed changes to the MS-DRGs for FY 2027, according to the regulations under § 412.4(d), we evaluated the proposed new MS-DRGs using the general postacute care transfer policy criteria and data from the FY 2025 MedPAR file. We continue to believe it is appropriate to assess new MS-DRGs and reassess revised MS-DRGs when proposing reassignment of procedure codes or diagnosis codes that would result in material changes to an MS-DRG. We evaluated any current MS-DRG if we estimate that more than 5 percent of the current cases would shift from the current assigned MS-DRGs to proposed new MS-DRGs, or to a current MS-DRG from a proposed revised or deleted MS-DRG.
For existing MS-DRG 426 (Multiple Level Combined Anterior and Posterior Spinal Fusion Except Cervical with MCC or Custom-Made Anatomically Designed Interbody Fusion Device), MS-DRG 427 (Multiple Level Combined Anterior and Posterior Spinal Fusion Except Cervical with CC), and MS-DRG 428 (Multiple Level Combined Anterior and Posterior Spinal Fusion Except Cervical without CC/MCC)) and MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with Spinal Curvature, Malignancy, Infection or Extensive Fusions with MCC, with CC, and without CC/MCC, respectively) we determined that more than 5 percent of the current cases would shift from the current assigned MS-DRGs to proposed new MS-DRGs 523, 524, and 525. For existing MS-DRGs 463, 464, and 465 (Wound Debridement and Skin Graft Except Hand for Musculoskeletal and Connective Tissue Disorders with MCC with CC, and without CC/MCC, respectively) and MS-DRGS 474, 475, and 476 (Amputation for Musculoskeletal System and Connective Tissue Disorders with MCC, with CC, and without CC/MCC, respectively) we determined that more than 5 percent of the current cases would shift from the current assigned MS-DRGs to proposed new MS-DRGs 403 and 404. For existing MS-DRGs 616, 617, and 618 (Amputation of Lower Limb for Endocrine, Nutritional and Metabolic Disorders with MCC, with CC, and without CC/MCC, respectively) we determined that more than 5 percent of the current cases would shift from the current assigned MS-DRGs to MS-DRGs 622, 623, and 624 (Skin Grafts and Wound Debridement for Endocrine, Nutritional and Metabolic Disorders with MCC, with CC, and without CC/MCC, respectively). We note that for all other proposed changes, the relative volume of cases shifting to or from current MS-DRGs does not exceed the 5 percent threshold.
If an MS-DRG qualified for the postacute care transfer policy, we also evaluated that MS-DRG under the special payment methodology criteria according to regulations at § 412.4(f)(6).
We note that proposed new and revised MS-DRGs 210, 361, 362, 400, 403, 404, 426, 457, 463, 464, 474, 475, 523, 524, 616, and 617 would qualify to be included on the list of MS-DRGs that are subject to the postacute care transfer policy. As described in the regulations at § 42 CFR 412.4(d)(3)(ii)(D), MS-DRGs that share the same base MS-DRG will all qualify under the MS-DRG postacute care transfer payment policy if any one of the MS-DRGs that share that same base MS-DRG qualifies. We therefore are proposing to add new or revised MS-DRGs 210, 211, 361, 362, 400, 403, 404, 456, 457, 458, 523, 524, and 525 to the list of MS-DRGs that are subject to the postacute care transfer policy. We note that MS-DRGs 426, 427, 428, 463, 464, 465, 474, 475, 476, 616, 617, and 618 are currently subject to the postacute care transfer policy. As a result of our review, these MS-DRGs, as proposed to be revised, would continue to qualify to be included on the list of MS-DRGs that are subject to the postacute care transfer policy.
Using the December 2025 update of the FY 2025 MedPAR file, we have developed the following table which sets forth the most recent analysis of the postacute care transfer policy criteria completed for this proposed rule with respect to each of these proposed new or revised MS-DRGs. For the FY 2027 final rule, we intend to update this analysis using the most recent available data at that time.
During our annual review of proposed new or revised MS-DRGs and analysis of the December 2025 update of the FY 2026 MedPAR file, we reviewed the list of proposed revised or new MS-DRGs that qualify to be included on the list of
Based on our analysis of the proposed changes to the MS-DRGs included in the proposed rule, we determined that proposed new or revised MS-DRGs 362, 400, 404, 426, 457, 463, 617 met the criteria for the MS-DRG special payment methodology. As described in the regulations at § 412.4(f)(6)(iv), MS-DRGs that share the same base MS-DRG will all qualify under the MS-DRG special payment policy if any one of the MS-DRGs that share that same base MS-DRG qualifies. Therefore, we are proposing that proposed new and revised MS-DRGs 361, 362, 400, 403, 404, 456, 457, 458, 463, 464, 465, 616, 617, 618 would be subject to the MS-DRG special payment methodology, effective for FY 2027. We note that MS-DRGs 426, 427, and 428 are currently subject to the special payment methodology. As a result of our review, these MS-DRGs, as proposed to be revised, would continue to qualify to be included on the list of MS-DRGs that are subject to the special payment methodology.
For the FY 2027 final rule, we intend to update this analysis using the most recent available data at that time.
In accordance with section 1886(b)(3)(B)(i) of the Act, each year we update the national standardized amount for inpatient hospital operating costs by a factor called the “applicable percentage increase.” For FY 2027, we are setting the applicable percentage increase by applying the adjustments listed in this section in the same sequence as we did for FY 2026. (We note that section 1886(b)(3)(B)(xii) of the Act required an additional reduction each year only for FYs 2010 through 2019.) Specifically, consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are setting the applicable percentage increase by applying the following adjustments in the following sequence. The applicable percentage increase under the IPPS for FY 2027 is equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to all of the following:
• A reduction of one-quarter of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act.
• A reduction of three-quarters of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act.
• An adjustment based on changes in economy-wide multifactor productivity (the productivity adjustment) in accordance with section 1886(b)(3)(B)(xi)(II) of the Act.
Section 1886(b)(3)(B)(xi) of the Act, as added by section 3401(a) of the Affordable Care Act, states that application of the productivity adjustment may result in the applicable percentage increase being less than zero.
As published in the FY 2006 IPPS final rule (70 FR 47403), in accordance with section 404 of Public Law 108-173, CMS determined a new frequency for rebasing the hospital market basket of every 4 years. In compliance with section 404 of Public Law 108-173, in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36859 through 36866), we replaced the 2018 based IPPS operating and capital market baskets with the rebased and revised 2023-based IPPS operating and capital market baskets beginning in FY 2026. Consistent with our established frequency of rebasing the IPPS market basket every 4 years, we plan on proposing to rebase and revise the IPPS market in the FY 2030 IPPS/LTCH PPS proposed rule.
We are proposing to base the FY 2027 market basket update used to determine the applicable percentage increase for the IPPS on IHS Global Inc.'s (IGI's) fourth quarter 2025 forecast of the 2023-based IPPS market basket rate-of-increase with historical data through third quarter 2025, which is estimated to be 3.2 percent. We are also proposing that if more recent data subsequently become available (for example, a more recent estimate of the market basket update), we would use such data, if appropriate, to determine the FY 2027 market basket update in the final rule.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the productivity adjustment. As we explained in that rule, section 1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the Affordable Care Act, defines this productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, calendar year, cost reporting period, or other annual period). The U.S. Department of Labor's Bureau of Labor Statistics (BLS) publishes the official measures of productivity for the U.S. economy. The productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act is published by BLS as private nonfarm business total factor productivity ((TFP) previously referred to as multifactor productivity).
For FY 2027, we are proposing a productivity adjustment of 0.8 percent. Similar to the proposed market basket rate-of-increase, for this proposed rule, the estimate of the proposed FY 2027 productivity adjustment is based on IGI's fourth quarter 2025 forecast. As noted previously, we are proposing that if more recent data subsequently become available, we would use such data, if appropriate, to determine the FY 2027 productivity adjustment for the final rule.
Based on these data, we have determined four proposed applicable percentage increases to the standardized amount for FY 2027, as specified in the following table:
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42344), we revised our regulations at 42 CFR 412.64(d) to reflect the current law for the update for FY 2020 and subsequent fiscal years. Specifically, in accordance with section 1886(b)(3)(B) of the Act, we added paragraph (d)(1)(viii) to § 412.64 to set forth the applicable percentage increase to the operating standardized amount for FY 2020 and subsequent fiscal years as the percentage increase in the market basket index, subject to the reductions specified under § 412.64(d)(2) for a hospital that does not submit quality data and § 412.64(d)(3) for a hospital that is not a meaningful EHR user, reduced by a productivity adjustment.
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase to the hospital-specific rates for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Therefore, the update to the hospital-specific rates for SCHs and MDHs is also subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act.
As discussed in section V.F. of the preamble of this proposed rule, section 6202 of the Consolidated Appropriations Act, 2026 (Pub. L. 119-75) extended the MDH program for FY 2027 discharges occurring before January 1, 2027. Therefore, under current law, the MDH program will expire for discharges on or after January 1, 2027. We refer readers to section V.F. of the preamble of this proposed rule for further discussion of the MDH program.
For FY 2027, we are proposing the following updates to the hospital-specific rates applicable to SCHs and MDHs: A proposed update of 2.4 percent for a hospital that submits quality data and is a meaningful EHR user (as defined in section 1886(n) of the Act); a proposed update of 0.0 percent for a hospital that submits quality data and is not a meaningful EHR user; a proposed update of 1.6 percent for a hospital that fails to submit quality data and is a meaningful EHR user; and a proposed update of −0.8 percent for a hospital that fails to submit quality data and is not an meaningful EHR user. As previously discussed, we are proposing that if more recent data subsequently become available (for example, a more recent estimate of the market basket update and the productivity adjustment), we would use such data, if appropriate, to determine the market basket update and the productivity adjustment in the final rule.
Section 602 of Public Law 114-113 amended section 1886(n)(6)(B) of the Act to specify that subsection (d) Puerto Rico hospitals are eligible for incentive payments for the meaningful use of certified EHR technology, effective beginning FY 2016. In addition, section 1886(n)(6)(B) of the Act was amended to specify that the adjustments to the applicable percentage increase under section 1886(b)(3)(B)(ix) of the Act apply to subsection (d) Puerto Rico hospitals that are not meaningful EHR users, effective beginning FY 2022. Accordingly, for FY 2022, section 1886(b)(3)(B)(ix) of the Act in conjunction with section 602(d) of Public Law 114-113 requires that any subsection (d) Puerto Rico hospital that is not a meaningful EHR user as defined in section 1886(n)(3) of the Act and not subject to an exception under section 1886(b)(3)(B)(ix) of the Act will have “three-quarters” of the applicable percentage increase (prior to the application of other statutory adjustments), or three-quarters of the applicable market basket rate-of-increase, reduced by 33
For FY 2027, consistent with section 1886(b)(3)(B) of the Act, as amended by section 602 of Public Law 114-113, we are setting the applicable percentage increase for Puerto Rico hospitals by applying the following adjustments in the following sequence. Specifically, the applicable percentage increase under the IPPS for Puerto Rico hospitals will be equal to the rate of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of three-quarters of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket update or rate-of-increase (with no adjustments)) for Puerto Rico hospitals not considered to be meaningful EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act, and then subject to the productivity adjustment at section 1886(b)(3)(B)(xi) of the Act. As noted previously, section 1886(b)(3)(B)(xi) of the Act states that application of the productivity adjustment may result in the applicable percentage increase being less than zero.
Based on IGI's fourth quarter 2025 forecast of the 2023-based IPPS market basket update with historical data through third quarter 2025, for this FY 2027 IPPS/LTCH PPS proposed rule, in accordance with section 1886(b)(3)(B) of the Act, as discussed previously, for Puerto Rico hospitals we are proposing a market basket update of 3.2 percent reduced by a productivity adjustment of 0.8 percentage point. Therefore, for FY 2027, depending on whether a Puerto Rico hospital is a meaningful EHR user, there are two possible applicable percentage increases that could be applied to the standardized amount. Based on these data, we determined the following proposed applicable percentage increases to the standardized amount for FY 2027 for Puerto Rico hospitals:
• For a Puerto Rico hospital that is a meaningful EHR user, we are proposing a FY 2027 applicable percentage increase to the operating standardized amount of 2.4 percent (that is, the FY 2027 estimate of the proposed market basket rate-of-increase of 3.2 percent, less 0.8 percentage point for the proposed productivity adjustment).
• For a Puerto Rico hospital that is not a meaningful EHR user, we are proposing a FY 2027 applicable percentage increase to the operating standardized amount of 0.0 percent (that is, the FY 2027 estimate of the proposed market basket rate-of-increase of 3.2 percent, less 2.4 percentage points (the proposed market basket rate-of-increase of 3.2 percent × 0.75 for failure to be a meaningful EHR user), and less 0.8 percentage point for the proposed productivity adjustment).
As noted previously, we are proposing that if more recent data subsequently become available, we would use such data, if appropriate, to determine the FY 2027 market basket update and the productivity adjustment for the FY 2027 IPPS/LTCH PPS final rule.
Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at 42 CFR 412.96 set forth the criteria that a hospital must meet to qualify under the IPPS as a rural referral center (RRC). RRCs receive special treatment under both the DSH payment adjustment and the criteria for geographic reclassification.
Section 402 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) raised the DSH payment adjustment for RRCs such that they are not subject to the 12-percent cap on DSH payments that is applicable to other rural hospitals. RRCs also are not subject to the proximity criteria when applying for geographic reclassification. In addition, they do not have to meet the requirement that a hospital's average hourly wage must exceed, by a certain percentage, the average hourly wage of the labor market area in which the hospital is located.
Section 4202(b) of the Balanced Budget Act of 1997 (Pub. L. 105-33) states, in part, that any hospital classified as an RRC by the Secretary for FY 1991 shall be classified as such an RRC for FY 1998 and each subsequent fiscal year. In the August 29, 1997, IPPS final rule with comment period (62 FR 45999 through 46000), we reinstated RRC status for all hospitals that lost that status due to triennial review or MGCRB reclassification. However, we did not reinstate the status of hospitals that lost RRC status because they were now urban for all purposes because of the designation of their geographic area as urban. Subsequently, in the August 1, 2000, IPPS final rule (65 FR 47087), we indicated that we were revisiting that decision. Specifically, we stated that we would permit hospitals that previously qualified as an RRC and lost their status due to redesignation of the county in which they are located from rural to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC status must satisfy all of the other applicable criteria. We use the definitions of “urban” and “rural” specified in subpart D of 42 CFR part 412. One of the criteria under which a hospital may qualify as an RRC is to have 275 or more beds available for use (42 CFR 412.96(b)(1)(ii)). A rural hospital that does not meet the bed size requirement can qualify as an RRC if the hospital meets two mandatory prerequisites (a minimum case-mix index (CMI) and a minimum number of discharges), and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume). (We refer readers to 42 CFR 412.96(c)(1) through (5) and the September 30, 1988,
• CMI is at least equal to the lower of the median CMI for urban hospitals in its census region, excluding hospitals with approved teaching programs, or the median CMI for all urban hospitals nationally; and
• Number of discharges is at least 5,000 per year, or, if fewer, the median number of discharges for urban hospitals in the census region in which the hospital is located. The number of discharges criterion for an osteopathic hospital is at least 3,000 discharges per year, as specified in section 1886(d)(5)(C)(i) of the Act.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45217), in light of the COVID-19 PHE, we amended the regulations at 42 CFR 412.96(h)(1) to provide for the use of the best available data rather than the latest available data in calculating the national and regional CMI criteria. We also amended the regulations at 42 CFR 412.96(c)(1) to indicate that the individual hospital's CMI value for discharges during the same Federal fiscal year used to compute the national and regional CMI values is used for purposes of determining whether a hospital qualifies for RRC classification. We also amended the regulations 42 CFR 412.96(i)(1) and (2), which describe the methodology for calculating the number of discharges criteria, to provide for the use of the best available data rather than the latest available or most recent data when calculating the regional discharges for RRC classification.
Section 412.96(c)(1) provides that CMS establish updated national and regional CMI values in each year's annual notice of prospective payment rates for purposes of determining RRC status. The methodology we used to determine the national and regional CMI values is set forth in the regulations at 42 CFR 412.96(c)(1)(ii). The proposed national median CMI value for FY 2027 is based on the CMI values of all urban hospitals nationwide, and the proposed regional median CMI values for FY 2027 are based on the CMI values of all urban hospitals within each census region, excluding those hospitals with approved teaching programs (that is, those hospitals that train residents in an approved GME program as provided in 42 CFR 413.75). These proposed values are based on discharges occurring during FY 2025 (October 1, 2024, through September 30, 2025), and include bills posted to CMS' records through December 2025. We believe that this is the best available data for use in calculating the proposed national and regional median CMI values and is consistent with our proposal to use the FY 2025 MedPAR claims data for FY 2027 ratesetting.
In this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing that, in addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2026, they must have a CMI value for FY 2025 that is at least—
• 1.7783 (national—all urban); or
• The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in 42 CFR 413.75) calculated by CMS for the census region in which the hospital is located.
The proposed median CMI values by region are set forth in the following table. We intend to update the proposed CMI values in the FY 2027 IPPS/LTCH PPS final rule to reflect the updated FY 2025 MedPAR file, which contains data from additional bills received through March 2026.
A hospital seeking to qualify as an RRC should obtain its hospital-specific CMI value (not transfer-adjusted) from its MAC. Data are available on the Provider Statistical and Reimbursement (PS&R) System. In keeping with our policy on discharges, the CMI values are computed based on all Medicare patient discharges subject to the IPPS MS-DRG-based payment.
Section 412.96(c)(2)(i) provides that CMS set forth the national and regional numbers of discharges criteria in each year's annual notice of prospective payment rates for purposes of determining RRC status. As specified in section 1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 discharges. For FY 2027, we are proposing to update the regional standards based on discharges for urban hospitals' cost reporting periods that began during FY 2024 (that is, October 1, 2023, through September 30, 2024), which are the latest cost report data available at the time this proposed rule was developed. We believe that this is the best available data for use in calculating the proposed median number of discharges by region and is consistent with our data proposal to use cost report data from cost reporting periods beginning during FY 2024 for FY 2027 ratesetting. Therefore, we are proposing that, in addition to meeting other criteria, a hospital, if it is to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2026, must have, as the number of discharges for its cost reporting period that began during FY 2024, at least—
• 5,000 (3,000 for an osteopathic hospital); or
• If less, the median number of discharges for urban hospitals in the census region in which the hospital is located. We refer readers to the proposed number of discharges as set forth in the following table. We intend to update these numbers in the FY 2027 final rule based on the latest available cost report data.
We note that because the median number of discharges for hospitals in each census region is greater than the national standard of 5,000 discharges, under this proposed rule, 5,000 discharges is the minimum criterion for all hospitals, except for osteopathic hospitals for which the minimum criterion is 3,000 discharges.
Section 1886(d)(12) of the Act provides for an additional payment to each qualifying low-volume hospital under the IPPS beginning in FY 2005. The low-volume hospital payment adjustment is implemented in the regulations at 42 CFR 412.101. The additional payment adjustment to a low-volume hospital provided for under section 1886(d)(12) of the Act is in addition to any payment calculated under section 1886 of the Act and is based on the per discharge amount paid to the qualifying hospital. In other words, the low-volume hospital payment adjustment is based on total per discharge payments made under section 1886 of the Act, including capital, DSH, IME, and outlier payments. For SCHs and MDHs, the low-volume hospital payment adjustment is based in part on either the Federal rate or the hospital-specific rate, whichever results in a greater operating IPPS payment. The payment adjustment for low-volume hospitals is not budget neutral.
As discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36908 through 36912), section 2201 of the Full-Year Continuing Appropriations and Extensions Act, 2025 (Pub. L. 119-4) extended the temporary changes to the low-volume hospital qualifying criteria and payment adjustment under the IPPS, that is, the modified definition of low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals under section 1886(d)(12), through September 30, 2025. The Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 (Pub. L. 119-37), enacted on November 12, 2025, provided an extension of those temporary changes to the qualifying criteria and payment adjustment methodology for certain low-volume
As discussed previously, section 2201 of the Full-Year Continuing Appropriations and Extensions Act, 2025, extended the temporary changes to the low-volume hospital qualifying criteria and payment adjustment through September 30, 2025. Section 6201 of the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 further extended the temporary changes to the low-volume hospital qualifying criteria and payment adjustment under the IPPS for the portion of FY 2026 beginning on October 1, 2025, and ending on January 30, 2026. Most recently, section 6201 of the Consolidated Appropriations Act, 2026 extended the temporary changes to the low-volume hospital qualifying criteria and payment adjustment through FY 2026 and the portion of fiscal year 2027 beginning on October 1, 2026, and ending on December 31, 2026. We note the extension provided by the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 was addressed in Change Request 14341 (Transmittal 13564) and the extension provided by the Consolidated Appropriations Act, 2026 was addressed in Change Request 14415 (Transmittal 13703), issued March 26, 2026. For additional information, please refer to the transmittal R13564OTN and R13703OTN.
Under section 1886(d)(12)(C)(i) of the Act, as amended by the Consolidated Appropriations Act, 2026, for FYs 2019 through FY 2026 and the portion of FY 2027 beginning on October 1, 2026 and ending on December 31, 2026, a subsection (d) hospital qualifies as a low-volume hospital if it is more than 15 road miles from another subsection (d) hospital and has less than 3,800 total discharges during the fiscal year. In accordance with the existing regulations at § 412.101(a), we define the term “road miles” to mean “miles” as defined at § 412.92(c)(1). Under section 1886(d)(12)(D) of the Act, as amended, for discharges occurring in FYs 2019 through 2026 and the portion of FY 2027 beginning on October 1, 2026 and ending on December 31, 2026, the Secretary determines the applicable percentage increase using a continuous, linear sliding scale ranging from an additional 25 percent payment adjustment for low-volume hospitals with 500 or fewer discharges to a zero percent additional payment for low volume hospitals with more than 3,800 discharges in the fiscal year. Consistent with the requirements of section 1886(d)(12)(C)(ii) of the Act, the term “discharge” for purposes of these provisions refers to total discharges, regardless of payer (that is, Medicare and non-Medicare discharges).
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399), we specified a continuous, linear sliding scale formula to determine the low volume payment adjustment, as reflected in the regulations at § 412.101(c)(3)(ii). Consistent with the statute, we provided that qualifying hospitals with 500 or fewer total discharges will receive a low-volume hospital payment adjustment of 25 percent. For qualifying hospitals with fewer than 3,800 discharges but more than 500 discharges, the low-volume payment adjustment is calculated by subtracting from 25 percent the proportion of payments associated with the discharges in excess of 500. For qualifying hospitals with fewer than 3,800 total discharges but more than 500 total discharges, the low-volume hospital payment adjustment is calculated using the formula at § 412.101(c)(3)(ii) (which is shown in the Table V.D.-01). For this purpose, the term “discharge” refers to total discharges, regardless of payer (that is, Medicare and non-Medicare discharges). The hospital's most recently submitted cost report is used to determine if the hospital meets the discharge criterion to receive the low volume payment adjustment in the current year (§ 412.101(b)(2)(iii)). The low-volume hospital payment adjustment for FYs 2019 through 2025 is set forth in the current regulations at § 412.101(c)(3).
In this proposed rule, we propose to make conforming changes to the regulation text in § 412.101 to reflect the extension of the changes to the qualifying criteria and the payment adjustment methodology for low-volume hospitals in accordance with provisions of the Consolidated Appropriations Act, 2026. Specifically, we propose to make conforming changes to paragraphs (b)(2)(iii) and (c)(3) introductory text of § 412.101 to reflect that the low-volume hospital payment adjustment policy in effect through FY 2026 and the portion of fiscal year 2027 beginning on October 1, 2026, and ending on December 31, 2026 is the same low-volume hospital payment adjustment policy in effect for FYs 2019 through 2025 (as described in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41398 through 41399) and in the FY 2026 IPPS/LTCH PPS final rule (90 FR
In accordance with section 1886(d)(12) of the Act, as amended by the Consolidated Appropriations Act, 2026, beginning with FY 2027 discharges occurring on or after January 1, 2027 the low-volume hospital definition and payment adjustment methodology revert to the statutory requirements that were in effect prior to the amendments made by the Affordable Care Act and subsequent legislation. Specifically, section 1886(d)(12)(B) of the Act requires, for discharges occurring in FYs 2005 through 2010 and for discharges occurring during the portion of FY 2027 beginning on or after January 1, 2027, and subsequent fiscal years, that the Secretary determine an applicable percentage increase for these low-volume hospitals based on the “empirical relationship” between the standardized cost-per-case for such hospitals and the total number of discharges of such hospitals and the amount of the additional incremental costs (if any) that are associated with such number of discharges. The statute thus mandates that the Secretary develop an empirically justifiable adjustment based on the relationship between costs and discharges for these low-volume hospitals.
Therefore, absent further Congressional action, effective for the portion of FY 2027 beginning on January 1, 2027, and ending on September 30, 2027, and for FY 2028 and subsequent fiscal years, under current policy at § 412.101(b), to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 discharges total, including both Medicare and non-Medicare discharges) during the fiscal year. For the portion of FY 2027 beginning on January 1, 2027 and for subsequent fiscal years, the statute specifies that a low-volume hospital must have less than 800 discharges during the fiscal year. However, as required by section 1886(d)(12)(B)(i) of the Act, the Secretary has developed an empirically justifiable payment adjustment based on the relationship, for IPPS hospitals with less than 800 discharges, between the additional incremental costs (if any) that are associated with a particular number of discharges. Based on an analysis we conducted for the FY 2005 IPPS final rule (69 FR 49099 through 49102), a 25 percent low-volume adjustment to all qualifying hospitals with less than 200 discharges was found to be most consistent with the statutory requirement to provide relief for low-volume hospitals where there is empirical evidence that higher incremental costs are associated with low numbers of total discharges. (Under the policy we established in that same final rule, hospitals with between 200 and 799 discharges do not receive a low-volume hospital adjustment.)
As discussed previously, for FYs 2005 through 2010 and FY 2019 and subsequent years, the discharge determination is made based on the hospital's number of total discharges, that is, Medicare and non-Medicare discharges. The hospital's most recently submitted cost report is used to determine if the hospital meets the discharge criterion to receive the low-volume payment adjustment in the current year (§ 412.101(b)(2)(i)). We use cost report data to determine if a hospital meets the discharge criterion because this is the best available data source that includes information on both Medicare and non-Medicare discharges. We note that, for FYs 2011 through 2018, we used the most recently available MedPAR data to determine the hospital's Medicare discharges because only Medicare discharges were used to determine if a hospital met the discharge criterion for those years.
In addition to the discharge criterion, a hospital must also meet the mileage criterion to qualify for the low-volume payment adjustment. As specified by section 1886(d)(12)(C)(i) of the Act, a low-volume hospital must be more than 25 road miles (or 15 road miles for FYs 2011 through the portion of FY 2027 ending on December 31, 2026) from another subsection (d) hospital. Accordingly, for the portion of FY 2027 beginning on January 1, 2027, and for subsequent fiscal years, in addition to the discharge criterion, the eligibility for the low-volume payment adjustment is also dependent upon the hospital meeting the mileage criterion at § 412.101(b)(2)(i), which specifies that a hospital must be located more than 25 road miles from the nearest subsection (d) hospital, consistent with section 1886(d)(12)(C)(i) of the Act. We define, at § 412.101(a), the term “road miles” to mean “miles” as defined at § 412.92(c)(1) (75 FR 50238 through 50275 and 50414). As previously noted, we propose to make conforming changes to paragraphs (b)(2)(i) and (c)(1) of § 412.101 to reflect that for the portion of FY 2027 beginning on January 1, 2027, and for subsequent fiscal years, the low-volume hospital payment adjustment policy is the same as that in effect for FYs 2005 through 2010.
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 and 50414) and subsequent rulemaking, most recently in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36908 through 36912), we discussed the process for requesting and obtaining the low-volume hospital payment adjustment. Under this previously established process, a hospital makes a written request for the low-volume payment adjustment under § 412.101 to its MAC. This request must contain sufficient documentation to establish that the hospital meets the applicable mileage and discharge criteria. The MAC will determine if the hospital qualifies as a low-volume hospital by reviewing the data the hospital submits with its request for low-volume hospital status in addition to other available data. Under this approach, a hospital will know in advance whether or not it will receive a payment adjustment under the low-volume hospital policy. The MAC and CMS may review available data such as the number of discharges, in addition to the data the hospital submits with its request for low-volume hospital status, to determine whether or not the hospital meets the qualifying criteria. (For additional information on our existing process for requesting the low-volume hospital payment adjustment, we refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399 through 41401).)
As explained earlier, for FY 2019 and subsequent fiscal years, the discharge determination is made based on the hospital's number of total discharges, that is, Medicare and non-Medicare discharges, as was the case for FYs 2005 through 2010. Under § 412.101(b)(2)(i) and (iii), a hospital's most recently submitted cost report is used to determine if the hospital meets the discharge criterion to receive the low-volume payment adjustment in the current year. As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399 and 41400), we use cost report data to determine if a hospital meets the discharge criterion because this is the best available data source that includes information on both Medicare and non-Medicare discharges. (For FYs 2011 through 2018, the most recently available MedPAR data were used to determine the hospital's Medicare discharges because non-Medicare discharges were not used to determine if a hospital met the discharge criterion for those years.) Therefore, a hospital must refer to its most recently submitted cost report for total discharges (Medicare and non-Medicare) to decide whether or not to apply for low-volume hospital status for a particular fiscal year.
In addition to the discharge criterion, eligibility for the low-volume hospital payment adjustment is also dependent upon the hospital meeting the applicable mileage criterion specified in section 1886(d)(12)(C)(i) of the Act, which is codified at § 412.101(b)(2), for the fiscal year. To meet the mileage criterion to qualify for the low-volume hospital payment adjustment for the portion of FY 2027 beginning October 1, 2026 through December 31, 2026, a hospital must be located more than 15 road miles from the nearest subsection (d) hospital, as reflected in proposed revised § 412.101(b)(2). Additionally, to meet the mileage criterion to qualify for the low-volume hospital payment adjustment for the portion of FY 2027 beginning January 1, 2027 through September 30, 2027, a hospital must be located more than 25 road miles from the nearest subsection (d) hospital. (We define in § 412.101(a) the term “road miles” to mean “miles” as defined in § 412.92(c)(1) (75 FR 50238 through 50275 and 50414).) For establishing that the hospital meets the mileage criterion, the use of a web-based mapping tool as part of the documentation is acceptable. The MAC will determine if the information submitted by the hospital, such as the name and street address of the nearest hospital(s), location on a map, and distance from the hospital requesting low-volume hospital status, is sufficient to document that it meets the mileage criterion. If not, the MAC will follow up with the hospital to obtain additional necessary information to determine whether or not the hospital meets the applicable mileage criterion.
In accordance with our previously established process, a hospital must make a written request for low-volume hospital status that is received by its MAC by September 1 immediately preceding the start of the Federal fiscal year for which the hospital is applying for low-volume hospital status in order for the applicable low-volume hospital payment adjustment to be applied to payments for its discharges for the fiscal year beginning on or after October 1 immediately following the request (that is, the start of the Federal fiscal year). For a hospital whose request for low-volume hospital status is received after September 1, if the MAC determines the hospital meets the criteria to qualify as a low-volume hospital, the MAC will apply the applicable low-volume hospital payment adjustment to determine payment for the hospital's discharges for the fiscal year, effective prospectively within 30 days of the date of the MAC's low-volume status determination.
Consistent with this previously established process, for FY 2027, we propose that a hospital must submit a written request for low-volume hospital status to its MAC that includes sufficient documentation to establish that the hospital meets the applicable mileage and discharge criteria (as described earlier). Specifically, for the portion of FY 2027 beginning October 1, 2026 through December 31, 2026, a hospital must make a written request for low-volume hospital status that is received by its MAC no later than September 1, 2026, in order for the low-volume, add-on payment adjustment to be applied to payments for its discharges beginning on or after October 1, 2026. If a hospital's written request for low-volume hospital status for the portion of FY 2027 beginning October 1, 2026 through December 31, 2026 is received after September 1, 2026, and if the MAC determines the hospital meets the criteria to qualify as a low-volume hospital, the MAC would apply the low-volume hospital payment adjustment to determine the payment for the hospital's FY 2027 discharges beginning October 1, 2026 through December 31, 2026, effective prospectively within 30 days of the date of the MAC's low-volume hospital status determination.
Additionally, we are proposing that a hospital must also submit a written request for low-volume hospital status to its MAC that includes sufficient documentation to establish that the hospital continues to meet the applicable mileage and discharge criteria for the portion of FY 2027 beginning on January 1, 2027 through September 30, 2027 (as described earlier). Specifically, for the portion of FY 2027 beginning on January 1, 2027, a hospital must make a written request for low-volume hospital status that is received by its MAC no later than December 1, 2026, in order for the 25-percent, low-volume, add-on payment adjustment to be applied to payments for its discharges beginning on or after January 1, 2027. If a hospital's written request for low-volume hospital status for the portion of FY 2027 beginning on January 1, 2027 is received after December 1, 2026, and if the MAC determines the hospital meets the criteria to qualify as a low-volume hospital, the MAC would apply the low-volume hospital payment adjustment to determine the payment for the hospital's FY 2027 discharges on or after January 1, 2027, effective prospectively within 30 days of the date of the MAC's low-volume hospital status determination.
A hospital may choose to make a single written request for low-volume hospital status to its MAC for both the portion of FY 2027 beginning on October 1, 2026 and ending December 31, 2026 and the portion of FY 2027 beginning on January 1, 2027 through September 30, 2027 by the September 1, 2026 deadline discussed previously. Alternatively, a hospital may choose to submit separate written requests, one for the portion of FY 2027 beginning on October 1, 2026 and ending on December 31, 2026 (by the September 1, 2026 deadline discussed previously), and another for the portion of FY 2027 beginning on January 1, 2027 through September 30, 2027 (by the December 1, 2026 deadline discussed previously).
Under this process, a hospital that qualified for the low-volume hospital payment adjustment for FY 2026 may continue to receive a low-volume hospital payment adjustment for FY 2027 without reapplying if it meets both the discharge criterion and the mileage criterion applicable for FY 2027 (that is, the discharge criterion and mileage criterion for the period beginning October 1, 2026 through December 31, 2026, as well as the discharge criterion and mileage criterion for the period beginning on January 1, 2027 through September 30, 2027, respectively). As discussed previously, for the portion of FY 2027 beginning on January 1, 2027, the discharge and the mileage criteria are reverting to the statutory requirements that were in effect prior to
Section 1886(d)(5)(G) of the Act provides special non-budget neutral payment protections, under the IPPS, to a Medicare-dependent, small rural hospital (MDH). MDHs are paid for their hospital inpatient services based on the higher of the Federal rate or a blended rate based in part on the Federal rate and in part on the MDH's hospital specific rate. (For additional information on the MDH program and the payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51683 through 51684).) Under current law, the MDH program provisions at section 1886(d)(5)(G) of the Act will expire for discharges on or after January 1, 2027. Beginning with discharges occurring on or after January 1, 2027, absent further Congressional action, all hospitals that previously qualified for MDH status will be paid based on the Federal rate.
Since the extension of the MDH program through FY 2012 provided by section 3124 of the Affordable Care Act, the MDH program has been extended by subsequent legislation, most recently through December 31, 2026 (that is, for discharges occurring before January 1, 2027), as discussed further in this section. (Additional information on the extensions of the MDH program through FY 2025 can be found in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36912).) As discussed in the FY 2026 IPPS/LTCH PPS final rule, the MDH program provision at section 1886(d)(5)(G) of the Act was set to expire at the end of FY 2025 (90 FR 36913). Subsequently, the MDH program was extended by additional legislation as follows:
• Section 6202 of the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 (Pub. L. 119-37), enacted on November 12, 2025, provided for an extension of the MDH program through January 30, 2026.
• Section 6202 of the Consolidated Appropriations Act, 2026 (Pub. L. 119-75), enacted on February 3, 2026, provided for an extension of the MDH program through December 31, 2026 (that is, for discharges occurring before January 1, 2027).
Specifically, section 6202 of Public Law 119-75 amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act by striking “January 31, 2026” and inserting “January 1, 2027”. Section 6202 of Public Law 119-75 also made conforming amendments to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the Act. Therefore, we are proposing to make conforming changes to the regulations governing the MDH program at § 412.108(a)(1) and (c)(2)(iii) and the general payment rules at § 412.90(j) to reflect the extension of the MDH program through December 31, 2026.
Generally, as a result of these extensions, a provider that was classified as an MDH as of September 30, 2025 may continue to be classified as a MDH as of October 1, 2025, with no need to reapply for MDH classification. (For more information on the MDH extensions through December 31, 2026, see Change Request 14341 (Transmittal 13564), issued December 23, 2025 and Change Request 14415 (Transmittal 13703), issued March 27, 2026, which are available online at
Because section 6202 of the Consolidated Appropriations Act, 2026 extended the MDH program through December 31, 2026 only, beginning January 1, 2027, the MDH program will no longer be in effect. Since the MDH program is not authorized by statute beyond December 31, 2026, absent Congressional action, beginning January 1, 2027, all hospitals that previously qualified for MDH status under section 1886(d)(5)(G) of the Act will no longer have MDH status and will be paid based on the Federal rate.
When the MDH program was set to expire at the end of FY 2012, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405), we revised our sole community hospital (SCH) policies to allow MDHs to apply for SCH status in advance of the expiration of the MDH program and be paid as such under certain conditions. We codified these changes in the regulations at § 412.92(b)(2)(i) and (v). For additional information, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53674). We note that a MDH that classifies as a SCH in anticipation of the MDH program expiration would have to reapply for MDH classification in accordance with the regulations at 42 CFR 412.108(b) and meet the classification criteria at 42 CFR 412.108(a) in the event that the MDH program is further extended, and the provider wishes to return to its classification as a MDH.
As noted, we are proposing to make conforming changes to the regulations governing the MDH program at § 412.108(a)(1) and (c)(2)(iii) and the general payment rules at § 412.90(j) to reflect the extension of the MDH program through December 31, 2026. We are further proposing that if the MDH program were to be extended by law beyond December 31, 2026, similar
Section 1886(h) of the Act, as added by section 9202 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 99-272) and as currently implemented in the regulations at 42 CFR 413.75 through 413.83, establishes a methodology for determining payments to hospitals for the direct costs of approved graduate medical education (GME) programs. Section 1886(h)(2) of the Act sets forth a methodology for the determination of a hospital-specific base-period per resident amount (PRA) that is calculated by dividing a hospital's allowable direct costs of GME in a base period by its number of full-time equivalent (FTE) residents in the base period. The base period is, for most hospitals, the hospital's cost reporting period beginning in FY 1984 (that is, October 1, 1983, through September 30, 1984). The base year PRA is updated annually for inflation.
In general, Medicare direct GME payments are calculated by multiplying the hospital's updated PRA by the weighted number of FTE residents working in all areas of the hospital complex (and at non-provider sites, when applicable), and the hospital's Medicare share of total inpatient days. Section 1886(d)(5)(B) of the Act provides for a payment adjustment known as the indirect medical education (IME) adjustment under the IPPS for hospitals that have residents in an approved GME program, in order to account for the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The regulations regarding the calculation of this additional payment are located at 42 CFR 412.105. The hospital's IME adjustment applied to the DRG payments is calculated based on the ratio of the hospital's number of FTE residents training in either the inpatient or outpatient departments of the IPPS hospital (and, for discharges occurring on or after October 1, 1997, at non-provider sites, when applicable) to the number of inpatient hospital beds.
The calculation of both direct GME payments and the IME payment adjustment is affected by the number of FTE residents that a hospital is allowed to count. Generally, the greater the number of FTE residents a hospital counts, the greater the amount of Medicare direct GME and IME payments the hospital will receive. In an attempt to end the implicit incentive for hospitals to increase the number of FTE residents, Congress established a limit on the number of allopathic and osteopathic residents that a hospital could include in its FTE resident count for direct GME and IME payment purposes in the Balanced Budget Act of 1997 (Pub. L. 105-33). Under section 1886(h)(4)(F) of the Act, for cost reporting periods beginning on or after October 1, 1997, a hospital's unweighted FTE count of residents for purposes of direct GME cannot exceed the hospital's unweighted FTE count for direct GME in its most recent cost reporting period ending on or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for IME during that cost reporting period is applied, effective for discharges occurring on or after October 1, 1997. Dental and podiatric residents are not included in this statutorily mandated cap.
Hospitals may receive direct GME and IME payments for residents in “approved medical residency training programs.” Section 1886(h)(5)(A) of the Act defines an “approved medical residency training program” as “a residency or other postgraduate medical training program participation in which may be counted toward certification in a specialty or subspecialty and includes formal postgraduate training programs in geriatric medicine approved by the Secretary.” “Approved medical residency program” and equivalent terms are defined in the regulations at §§ 412.105(f)(1)(i), 413.75(b), and 415.152. In general, under these regulations, an “approved” program is a program accredited by one of several national accrediting bodies or that leads toward board certification by the American Board of Medical Specialties (ABMS).
Therefore, to ensure that accreditation for approved medical residency programs is in compliance with applicable laws related to race-based admission policies and to improve the accreditation process, in the CY 2026 OPPS/ASC final rule (90 FR 54024 through 54027), we finalized changes to the regulations at §§ 412.105(f)(1)(i), 413.75(b), and 415.152, to state that accrediting organizations may not use accreditation criteria that promote or encourage discrimination on the basis of race, color, national origin, sex, age, disability, or religion, including the use of those characteristics or intentional proxies for those characteristics as a selection criterion for employment, program participation, resource allocation, or similar activities, opportunities, or benefits. We also clarified that prohibited practices under this policy include all other conduct in violation of federal antidiscrimination laws, including any “unlawful practices” under the Attorney General's
The policy finalized in the CY 2026 OPPS/ASC final rule applied specifically to graduate medical education accrediting bodies. In this proposed rule, we are proposing a similar policy that would apply to approved medical residency programs themselves. Specifically, we are proposing to require that, in addition to meeting other applicable requirements, an approved medical residency training program must not discriminate, or promote or encourage discrimination, on the basis of race, color, national origin, sex, age, disability, or religion, including the use of those characteristics or intentional proxies for those characteristics as a selection criterion for employment, program participation, resource allocation, or similar activities, opportunities, or benefits. We believe such a policy is necessary to ensure that, even in the absence of discriminatory accreditation standards, individual programs do not implement policies that constitute unlawful discrimination under Federal law. The effective date of this proposed policy would be October 1, 2026.
In order to streamline the regulations text and ensure consistent application of the requirements to approved medical residency programs and GME accrediting organizations, we are also proposing to consolidate the majority of our existing and proposed non-discrimination requirements under proposed new 42 CFR 413.84. We are proposing to cross-reference this new section as necessary in the regulations at §§ 412.105(f)(1)(i), 413.75(b), and 415.152. We further note that we are
Section 1886(h)(4)(H)(i) of the Act requires CMS to establish rules for applying the direct GME cap in the case of medical residency training programs established on or after January 1, 1995. Under section 1886(d)(5)(B)(viii) of the Act, this provision also applies for purposes of the IME adjustment. These statutory requirements are implemented in the direct GME regulations at §§ 413.79(e)(1) through (3) and the IME regulations at § 412.105(f)(1)(vii), which provide for an FTE cap increase for certain hospitals that begin training residents in a new medical residency training program(s) on or after January 1, 1995, and specify the methodology for determining the permanent cap adjustment. Under these rules, cap adjustments are not provided for expansions of existing programs. Rather, a new urban teaching hospital receives a single five-year cap-building window to start new residency programs and grow those new residency programs, after which point its IME and DGME caps are permanently set. However, a rural teaching hospital may receive a separate cap adjustment each time it starts a new program. CMS originally implemented these policies in the August 29, 1997
Section 413.79(l) defines a new medical residency training program as “a medical residency that receives initial accreditation by the appropriate accrediting body or begins training residents on or after January 1, 1995.” In the August 27, 2009
• The program director is new;
• The teaching staff are new;
• The residents are new.
Over the years, we have received questions regarding the application of these criteria, such as whether CMS would still consider a program to be new for cap adjustment purposes if the three criteria are partially, but not fully, satisfied. We have answered such questions by stating that, generally, a residency program's newness would not be compromised as long as the “overwhelming majority” of the residents and staff are not coming from previously existing programs in the same specialty.
In the FY 2025 IPPS/LTCH PPS proposed rule (May 2, 2024; 89 FR 36221 through 36224), we noted that the question of what constitutes a “new” program eligible to receive additional Medicare-funded GME slots has taken on increasing significance in light of the ability of urban hospitals to reclassify as rural under 42 CFR 412.103 for IME payment purposes and thus to receive additional IME cap slots for any new program started, leading to significant increases in aggregate Medicare IME spending. We stated that, to continue to ensure that new cap slots are created appropriately, we ultimately would like to establish additional criteria through rulemaking for determining program newness. However, we indicated that we were not yet certain about some of the criteria that should be proposed. Accordingly, we issued a proposal regarding the threshold for determining whether the “overwhelming majority” of residents in a program are new and solicited public input on other topics via a Request for Information (RFI) (89 FR 36222).
With regard to the newness of residents, we proposed that, in order for a residency program to be considered new, at least 90 percent of the individual resident trainees (not FTEs) must not have previous training in the same specialty as the new program. If more than 10 percent of the trainees (not FTEs) transferred from another program at a different hospital/sponsor in the same specialty, even during their first year of training, we proposed that this would render the program as a whole (but not the entire hospital or its other new programs, if applicable) ineligible for new cap slots. In addition, we stated that there may be certain challenges that are unique to small or rural-based programs in developing new residencies, and that meeting the proposed threshold of 90 percent of resident trainees with no previous training experience in the specialty may be more difficult for those programs. Accordingly, we solicited comment on what should be considered a “small” program and what percentage threshold or other approach regarding new resident trainees should be applied to these programs. We specifically sought comment on defining a small residency program as a program accredited for 16 or fewer resident positions.
For further detail regarding our proposal on the newness of residents, we direct readers to the discussion in the FY 2025 proposed rule at 89 FR 36222.
As stated previously, in the FY 2025 proposed rule we also issued a Request for Information on other aspects of the policy for determining program newness. In particular, we noted that it would be reasonable for a new residency program to seek to hire some experienced staff members, and we therefore solicited feedback on what an appropriate threshold should be for the percentage of faculty with no previous experience teaching in a program in the same specialty. We also solicited comment on whether it would be appropriate to define a certain period of time (for example, 10 years or 5 years) during which a faculty member or program director must not have been employed by another program in the same specialty in order to be considered “new.” Finally, we sought input on two additional scenarios that might have implications for determining the newness of a residency program: the sharing of certain clinical and didactic experiences among residents from different programs, which we referred to as “commingling”; and situations in which one hospital operates two (or more) programs in the same specialty.
For further details regarding the topics on which we solicited public comment, we direct readers to the discussion in the FY 2025 proposed rule at 89 FR 36222 through 36224.
In the FY 2025 IPPS/LTCH PPS final rule (August 28, 2024; 89 FR 69377 through 69380), we published a summary of the comments we received in response to our proposal that, for a residency program to be considered new, at least 90 percent of the individual resident trainees (not FTEs) must not have previous training in the
We also noted that, in response to our Requests for Information, the vast majority of commenters opposed any restrictions on the hiring of experienced faculty and program directors, as well as on the commingling of residents or sponsorship of multiple programs in the same specialty by a single hospital.
We received 14 timely pieces of correspondence to our second comment solicitation on an appropriate standard for determining the newness of residents in a new program, including potential exceptions for small and/or rural programs. In addition, commenters submitted additional feedback on other topics on which we had previously issued Requests for Information, including the hiring of experienced faculty and staff, commingling of residents, and sponsorship of multiple programs in the same specialty by a single hospital. Later in this section, we present a summary of the responses we received and discuss our proposed policy for determining whether a residency program should be considered new for purposes of receiving additional Medicare-funded GME slots.
Several commenters continued to urge CMS to define a “new” residency program as one that has received initial accreditation from the ACGME and to disregard other factors in determining program newness. However, a majority of commenters (including some who expressed a preference for the initial accreditation criterion) indicated that considering the previous training experience of residents could be an appropriate way for CMS to determine whether a residency program is genuinely new for cap-building purposes. Several commenters also indicated that the 90 percent threshold that we had originally proposed in the FY 2025 IPPS/LTCH PPS proposed rule could be an acceptable standard, while urging CMS to provide exceptions for programs that fall short of the threshold as a result of various extenuating circumstances. (We discuss feedback pertaining specifically to exceptions for small and/or rural programs separately later in the section.)
For example, several commenters mentioned that hospitals sometimes need to replace residents who depart from a program for various reasons, including residents accepted via the supplemental match process who subsequently transfer to another residency in their preferred specialty. The commenters recommended that CMS allow programs to replace departing residents with other residents at the same training level, and that these replacements should not count against a program's compliance with the 90 percent threshold. More generally, several commenters stated that the 90 percent requirement should apply only to residents at the Program Year 1 level, while residents recruited at the Program Year 2 level or above should not disqualify a program from consideration as “new.” In addition, a number of commenters recommended that CMS allow a program to demonstrate that it would have met the 90 percent threshold were it not for the results of the National Resident Matching Program (the “Match”) or other GME matching programs. Commenters noted that the results of the Match are binding on hospitals, and that selecting against candidates with prior training experience could violate the Match code of conduct and result in programs being banned from participation in the Match.
A few commenters indicated that, for purposes of determining whether a program complies with the minimum new resident threshold, CMS should consider all the individual residents that enter the program during its five-year cap-building period. Additionally, some commenters recommended that CMS conduct interim reviews during the cap-building period to determine whether a new program is on track to meet the requirements and to give providers a chance to make necessary changes before a final newness determination is made. Several commenters also indicated that residents with previous training experience could be excluded from the final cap calculation without disqualifying the program itself from consideration as new. One commenter suggested that, instead of establishing an overall new resident threshold, CMS should only limit the number of residents admitted from the
In general, commenters reiterated their strong opposition to any restrictions on the hiring of experienced faculty and program directors, stating that such a policy would be harmful to the development of new residency programs. However, some commenters suggested a compromise policy whereby CMS would consider the previous experience of faculty and program director in conjunction with the previous experience of residents. Under this policy, CMS would continue to assess newness primarily on the basis of the proportion of residents with previous experience training in a program in the same specialty, but would conduct an “enhanced review” under certain circumstances, as follows:
• 100 percent new residents: the program qualifies as new, without further review;
• At least 90 percent but less than 100 percent new residents: the program must demonstrate that residents have not previously trained in an existing residency program in the same specialty with any faculty or with the program director from the new residency program;
• Less than 90 percent new residents: the program does not qualify as new (subject to exceptions for certain categories of residents, as discussed previously).
The commenters stated that this policy would effectively prevent the transfer of existing programs without unduly restricting the ability of programs to hire experienced staff.
Other commenters recommended that CMS adopt a “safe harbor” policy, whereby a separately accredited program would be considered “new” regardless of any potential overlap (in terms of residents, faculty or program director) with an existing program, as long as the existing program remains in operation for at least one year. Commenters argued that the concurrent operation of both programs would make it clear that the new program does not constitute a relocation of the existing program or an inappropriate duplication of the existing program's cap slots. Similarly, one commenter recommended that, instead of considering the previous experience of residents or staff, CMS should only consider whether these individuals are “solely committed” to the new program going forward.
Commenters agreed that CMS should create exceptions to the new requirements for small and/or rural programs. A majority of commenters also agreed that a “small” program
Finally, commenters generally reiterated their opposition to any restrictions on “commingling” of residents or on hospitals sponsoring multiple residency programs in the same specialty. Commenters asserted the educational soundness of shared clinical and didactic experiences and indicated that such arrangements are increasingly required by the ACGME. In addition, commenters provided examples of circumstances under which a hospital might sponsor multiple programs in the same specialty, such as in the wake of a merger of hospitals, or in the case of a hospital that serves a large geographic area.
We thank the commenters for their thoughtful feedback in response to the comment solicitation published in the FY 2025 IPPS final rule. While commenters continued to recommend various ways of defining a “new” residency program for purposes of establishing FTE caps, we believe there is sufficient consensus on the major issues for us to propose certain modifications to our existing policy.
First, we acknowledge that a number of commenters continued to urge CMS to define a new residency program as one that has received initial accreditation from the ACGME and to disregard other factors in determining program newness. While we concede that this approach would be simple administratively, we reiterate the concerns that we originally discussed in the August 27, 2009
Nevertheless, we are persuaded by commenters' arguments that some of the supporting factors promulgated in the August 27, 2009
While we are proposing to remove the requirement related to previous employment of the faculty or program director, we do believe it is still appropriate for CMS to consider the previous training experience of residents in determining whether a residency program should be considered genuinely new. As discussed previously in the summary of responses to our second comment solicitation, a majority of commenters indicated that a 90 percent threshold could be an appropriate standard for determining whether the “overwhelming majority” of residents in a program are in fact new. Additionally, as discussed in the FY 2025 IPPS proposed rule (89 FR 36222), a 90 percent threshold would be generally consistent with the concept of an “overwhelming majority,” and we have precedent for such a threshold in the regulations for section 5506 of the Affordable Care Act, which state that a hospital is considered to have taken over an “entire” program from a closed hospital if it can demonstrate that it took in 90 percent or more of the FTE residents in that program. Therefore, we are proposing that, effective for programs started on or after October 1, 2026, in order for a residency program to be considered new, in addition to receiving initial accreditation from the appropriate accrediting body, at least 90 percent of the individual resident trainees (not FTEs) must not have previous training in the same specialty as the new program. Apart from the exceptions, discussed later in this section, for small programs, for certain residents admitted via a binding resident matching program, and for displaced residents counted under the provisions of 42 CFR 413.79(h), this proposal regarding the newness of residents is substantially the same as the policy we had originally proposed in the FY 2025 IPPS/LTCH PPS proposed rule (89 FR 36222).
For example, if a hospital establishes a new residency program in internal medicine, then, under our proposal, at least 90 percent of the residents in that program must not have previous training experience in another internal medicine program. If a resident was formally enrolled in another internal medicine program (whether preliminary or categorical), even if that resident switched programs during their first year of training, we would consider that resident to have previous training in the same specialty. By contrast, if an individual previously trained in a specialty
(Consistent with the definition of “resident” at 42 CFR 413.75(b), in the example noted previously we are distinguishing between a resident that was actually accepted, enrolled and participated in an internal medicine residency program from a resident who was
Under the proposed policy, we would determine whether a program has satisfied the 90 percent threshold by tallying all of the individual residents who enter a program during the five-year cap building period (that is, for new urban teaching hospitals, during the first five program years of the first new program's existence; and for rural hospitals, during the first five program years of each new program). For example, if 50 trainees (not FTEs) enter the program over the course of the five-year cap building period, then at least 45 of the trainees (that is, 90 percent of 50) must enter the program as brand-new first-year residents in that particular specialty. If more than 10 percent of the individual trainees (not FTEs) previously trained in another program in the same specialty, we propose that this would render the program not new and therefore ineligible for an FTE cap adjustment. We would apply standard rounding in instances where the quotient does not equal a whole number, rounding down to the nearest whole number when the remainder is less than 0.5, and rounding up to the nearest whole number when the remainder is greater than or equal to 0.5. For example, if 48 trainees (not FTEs) enter a program over the course of the five-year cap building period, then at least 43 of the trainees (90 percent of 48 = 43.2, which rounds down to 43) must not have previous experience training in a different program in the same specialty.
We propose that, after the end of the five-year cap building period, the MAC would review the previous training experience of each individual trainee and determine the newness of the residency program prior to calculating the IME and DGME cap adjustments for the hospital. Consistent with our historical policy, the MAC would not be required to provide an initial assessment of “newness” prior to the end of the five-year cap building period.
As noted previously, we are proposing to create a limited exception to the counting rules for certain residents admitted via the National Resident Matching Program (the Match) or other third-party resident matching programs whose results are binding on hospitals. (Examples of other matching programs that would fall under this provision include the Supplemental Offer and Acceptance Program, the Urology Residency Match Program, and the SF Match for Ophthalmology and Plastic Surgery residency programs.) Based on feedback received from commenters, we understand that the Match and similar programs are generally used to match prospective first-year residents to residency programs in their chosen specialties, and that hospitals do not have the discretion to refuse admission to a resident matched via this process. We also understand that candidates applying through the various matching programs may occasionally have previous experience training in another program in the same specialty—for example, an individual who may have withdrawn from a residency program and is seeking to restart his or her training.
While hospitals may rank their preferred candidates, they cannot predict the ultimate complement of first-year residents allocated via the Match or other matching programs. As a result, a hospital that included multiple candidates with previous training experience on its ranked list could be required to accept a mix of residents that would cause it to fall short of our proposed 90 percent requirement. We agree with commenters that in such situations hospitals should not be penalized for the results of the Match or other binding resident matching programs. Accordingly, for purposes of determining compliance with the 90 percent requirement, we are proposing to exclude from the count of trainees any individuals with previous experience training in another program in the same specialty who enter the new program as first-year residents through the National Resident Matching Program or another binding third-party resident matching program. That is,
We also propose to exclude from the count of trainees any residents admitted into the new program from another program in the same specialty who meet the definition of a “displaced resident” under 42 CFR 413.79(h)(1)(iii). That is,
For example, suppose that 50 individual trainees (not FTEs) enter a program during the five-year cap-building period, and that 4 of those
In addition, we are proposing to create an exception to the 90 percent requirement for small residency programs. We propose to define a “small” program as one that is accredited for 16 or fewer resident (or fellow) positions, regardless of whether the program is located in an urban or a rural area. Based on the feedback we received from commenters, we believe that small programs, in particular, are at the greatest risk of failing to meet the 90 percent threshold for reasons beyond their control. Accordingly, we are proposing to exempt small residency programs, as defined previously, from the requirement that at least 90 percent of the residents who enter the program during the five-year cap-building period must not have previous experience training in another program in the same specialty. We are not proposing any minimum proportion of new residents that a small program must achieve in order to be considered new for cap-building purposes. However, programs accredited for 16 or fewer positions must still obtain initial accreditation from the appropriate accrediting body.
We note that we are not proposing to adopt various other exceptions or policies recommended by commenters, as summarized in the preceding section of this preamble. We believe that the criterion we have proposed would accomplish our stated goal of preventing the inappropriate duplication of FTE cap slots, while the exception for small programs provides a reasonable safeguard for those programs that are at greatest risk of failing to meet the proposed requirement for reasons beyond their control. Additionally, we believe that the proposed policies have the advantage of being unambiguous and administratively simple, whereas we wish to avoid scenarios in which CMS or the MACs would need to review individual hospitals' circumstances on a case-by-case basis.
Additionally, we note that we are not proposing any distinct policies with respect to the commingling of residents. Rather, we propose that program newness should be determined consistently on the basis of initial accreditation and the 90 percent new resident threshold. That is, we propose that if a particular program has received initial accreditation, and at least 90 percent of the individual trainees (not FTEs) entering the program during the five-year cap building period are new (with exceptions as noted previously), then the program would be considered new for cap-building purposes regardless of whether residents in that program have shared educational experiences with residents of an existing program in the same specialty.
Similarly, with regard to the question of whether it is permissible for one hospital to operate two or more programs in the same specialty, we propose that this would be permissible for cap-building purposes if the second or subsequent program has separately received initial accreditation and at least 90 percent of the individual trainees (not FTEs) entering the program during the five-year cap building period are new (with exceptions as noted previously). Note that this would be a change from existing policy, under which it is permissible for one hospital to operate two or more programs in the same specialty provided that the programs have separate program directors, staff, and separately matched residents without meeting any additional requirements (see discussion of existing policy in the August 27, 2009
In summary, we are proposing that, in addition to receiving initial accreditation by the appropriate accrediting body, for a residency program to be considered new, at least 90 percent of the individual resident trainees (not FTEs) must not have previous experience training in another program in the same specialty. We would no longer consider the previous employment of the faculty or program director in determining whether a residency program is genuinely new for cap-building purposes. We would determine compliance with the 90 percent threshold by tallying all of the individual residents who enter a program during the five-year cap building period (that is, for new urban teaching hospitals, during the first five program years of the first new program's existence; and for rural hospitals, during the first five program years of each new program). This tally would exclude individuals with previous experience training in another program in the same specialty who enter the new program as first-year residents through the National Resident Matching Program or another binding third-party resident matching program, as well as individuals who meet the definition of a “displaced resident” under 42 CFR 413.79(h)(1)(iii). The requirement that at least 90 percent of the individual residents must be new would not apply to small programs, defined as programs accredited for 16 or fewer resident positions, regardless of geographic designation. These policies would be effective for programs starting on or after October 1, 2026.
To ensure that the regulations text appropriately reflects our proposed policy, we propose to revise the text of 42 CFR 413.79(l) to state that a new medical residency training program means a program that receives initial accreditation by the appropriate accrediting body or begins training residents on or after January 1, 1995, and that meets the following conditions:
• Subject to the following provisions, effective for programs started on or after October 1, 2026, at least 90 percent of the individual residents (not FTEs) that enter the program during the five-year cap building period (that is, for new urban teaching hospitals, during the first five program years of the first new program's existence under § 413.79(e)(1); and for rural hospitals, during the first five program years of each new program under § 413.79(e)(3)) must not have previous experience training in another program in the same specialty.
• For purposes of determining compliance with the preceding requirement, the count of individual residents excludes individuals with previous experience training in another program in the same specialty who enter the program as first-year residents through the National Resident Matching
• The 90 percent new resident requirement does not apply to a program accredited for 16 or fewer resident positions.
When a hospital merger involves one or more teaching hospitals, the surviving provider experiences an influx of FTE residents from the terminating providers' residency programs. The surviving hospital also absorbs those providers' FTE caps (63 FR 26329) and receives a merged per resident amount for purposes of direct GME payment (71 FR 48073). In addition, the Medicare Part A and Medicare Advantage (MA) patient loads of the surviving hospital represent the combined Medicare utilization of all hospitals (teaching and non-teaching) participating in the merger.
The surviving provider also experiences changes in the payment rates that determine the amount of its indirect medical education adjustment. In addition to the influx of FTE residents from the terminating providers' residency programs, the surviving provider absorbs those hospitals' existing IME FTE caps and available beds, resulting in a change to its intern- and resident-to-bed (IRB) ratio. The total amount of IME payment is also affected by the combination of the merged hospitals' Part A and simulated MA DRG revenues.
While we are not proposing any new policies at this time, we are taking the opportunity to clarify in rulemaking the methodology for calculating DGME and IME payments for the surviving provider following a merger of hospitals. We discuss the procedure for calculating each payment type separately later in this section.
If the surviving hospital begins a new cost reporting period effective with the date of the merger, then direct GME payment for that initial merged period and subsequent periods is determined based on the hospital's new, combined DGME payment rates (with special consideration for the rolling average during the first two cost reporting periods, as discussed further later in this section). However, if the merger takes place in the middle of the surviving hospital's cost reporting period, then the hospital's DGME payment for that period must reflect the different payment rates that apply before and after the merger.
In the August 18, 2006
In effect, the pre- and post-merger timeframes are treated as though they were individual short cost reporting periods, with virtual payment rates established for each period on the basis of the best available data for all providers. Later in this section, we provide a detailed step-by-step explanation, with an illustrative example, of how to calculate pre- and post-merger direct GME payments according to the policy outlined previously.
To facilitate the calculation of the DGME payment amounts, the MAC determines the following variables separately for the pre- and post-merger timeframes, consistent with the FTE counting rules for non-12-month cost reporting periods as clarified in the August 4, 2025
•
•
•
Note that a “virtual” rolling average must also be calculated for the merged provider's first two cost reporting periods beginning on or after the effective date of the merger: that is, the surviving and terminating providers' FTE counts must be combined as though they were merged during the prior and/or penultimate years (with proration applied as necessary to account for differences in the length of the respective hospitals' cost years). This procedure applies whether or not the merger occurred in the middle of the surviving provider's cost reporting period. Standard computation of the rolling average would resume in the third full post-merger cost reporting period.
In addition to the FTE resident count, FTE resident limit, and rolling average FTE count, the MAC also determines separate per resident amounts and Medicare patient loads (for both Part A and managed care enrollees) for the pre- and post-merger timeframes:
•
If the surviving and/or terminating providers count additional residents under the provisions of section 422, then direct GME payments for those residents would be calculated separately for the pre- and post-merger periods, as applicable, with the special per resident amounts updated according to the same procedures outlined previously.
•
If either the pre- or post-merger period straddles multiple calendar years, then separate MA patient loads must also be determined for the portions of that period occurring prior to and on or after January 1, so that the MA DGME payments may be adjusted by the percentage reduction applicable to each calendar year (as required by the regulations at § 413.76(d)).
Since the cost report does not support the use of multiple DGME payment rates for portions of a single cost year, these calculations must be performed off the cost report, and the results are summed to determine total DGME payment for the cost reporting period. Placeholder values based on the combined payment rates of the merged hospitals are reported as necessary on the applicable lines of Worksheet E-4.
The following example illustrates the application of the policies described previously.
Consider a merger between teaching Hospitals A and B, effective November 1, 2023, where Hospital A is the surviving provider. Prior to the merger, Hospitals A and B had fiscal year ends of June 30 and December 31, respectively. As the surviving provider, Hospital A elects to maintain its existing fiscal year, and files a cost report for the period July 1, 2023, to June 30, 2024. Since different payment rates apply to the timeframes 07/01/23-10/31/23 and 11/01/23-06/30/24, two separate direct GME payments must be calculated for Hospital A's cost reporting period ending June 30, 2024. These calculations are performed off the cost report, and the sum of the total payments is reported on line 31 of Worksheet E-4 of the hospital cost report (Form CMS-2552-10). (Hospital B would file a terminating cost report for the period January 1, 2023-October 31, 2023, with direct GME payment determined in accordance with the rules applicable to short cost reporting periods, as clarified in the August 4, 2025
The following table summarizes the data that will be used to calculate Hospital A's pre- and post-merger DGME payments, based on the surviving and terminating providers' historical cost reports, as well as other sources such as rotation schedules and PS&R reports:
• Since the hospitals are merged effective November 1, 2023, Hospital B technically does not have a separate FTE resident count, or separate inpatient days, during the period 11/01/23-06/30/24; post-merger data for Hospital B are broken out for illustrative purposes only. In addition, Hospital B's pre-merger FTE counts and inpatient days for its 2023 cost year are printed in brackets since they do not factor into the merged provider's DGME payment rates for FYE 06/30/24. (However, note that Hospital B's pre-merger FTE counts will be used to calculate the rolling average for the merged provider's subsequent cost reports, as explained further later in this section.) Hospital B would file its terminating cost report and receive DGME payment for the period 01/01/23-10/31/23 in accordance with the rules applicable to short cost reporting periods.
As noted later in this section, we assume in this example that Hospitals A and B each have a single PRA; accordingly, the FTE counts in this table represent combined totals for residents in both primary and nonprimary care programs.
• The prior- and penultimate-year FTE counts are required to calculate the three-year rolling averages for the pre- and post-merger periods. Hospital A's prior- and penultimate-year cost reporting periods are those ending on June 30, 2023, and June 30, 2022, respectively; Hospital B's are those ending on December 31, 2022, and December 31, 2021.
• The hospitals' DGME FTE resident limits include any applicable adjustments, such as those for new programs or slots received under various statutory provisions. For the purpose of this example, we assume that neither hospital has received additional residency slots under section 422.
• Consistent with the policy finalized in the August 18, 2006
• Managed care and total inpatient days during the post-merger period 11/01/23-06/30/24 are further broken out into portions occurring before and after January 1, since different percentage reductions to MA DGME payments apply to calendar years 2023 and 2024.
To calculate the surviving provider's direct GME payment for the pre-merger period 07/01/23-10/31/23, the following variables are determined based on Hospital A's individual records for the relevant timeframe:
•
•
•
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The rolling average therefore equals: (13.44 + 13.48 + 13.14) ÷ 3 = 13.35 FTEs.
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•
With these data points established, we can calculate total Part A and MA DGME payment for Hospital A during the pre-merger period 07/01/23-10/31/23. (Note: MA DGME payment is reduced by the percentage determined by CMS for calendar year 2023 and published in the
•
•
Thus, Hospital A's total DGME payment for the pre-merger period is: $948,055.59 + $307,359.62 = $1,255,415.21.
For the post-merger period, the same payment variables are calculated using data from the records of both the surviving and terminating providers:
•
•
•
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The rolling average therefore equals: (40.92 + 40.94 + 38.78) ÷ 3 = 40.21 FTEs.
○ Hospital A's FY 2021 PRA of $134,000 is updated by an inflation factor of 1.1416 to $152,974.
○ Hospital B's FY 2020 PRA of $127,500 is updated by an inflation factor of 1.1530 to $147,007.
To determine the weighted average merged PRA, each hospital's individual PRA is weighted by the number of DGME FTE residents on its most recently settled cost report. Assume that on their FY 2021 and FY 2020 cost reports, Hospitals A and B reported 40 FTEs and 20 FTEs, respectively. The merged PRA is then equal to: ((40 × $152,974) + (20 × $147,007)) ÷ 60 = $150,985.
Finally, the merged PRA as established previously is updated from the calendrical midpoint of Hospital A's June 30, 2023 fiscal year to the midpoint of the period 11/01/23-06/30/24, that is, from December 30, 2022, to March 1, 2024. Using the same methodology as previously, the merged PRA of $150,985 is updated by an inflation factor of 1.0448 to $157,749.
•
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(In these calculations, the denominator is equal to the total number of inpatient days at the merged hospital for the entire period 11/01/23-06/30/24 (that is, the sum of the inpatient days at Hospitals A and B, as indicated in the table noted previously); the numerators are obtained by summing the relevant categories of inpatient days for the respective periods.)
With these data points established, we can calculate total Part A and MA DGME payment for the merged provider during the post-merger period 11/01/23-06/30/24. (Note: MA DGME payments are reduced by the percentages determined by CMS for calendar years 2023 and 2024 and published in the
•
•
•
Thus, the provider's total DGME payment for the post-merger period is: $2,530,891.83 + $271,448.61 + $792,997.55 = $3,595,337.99.
Direct GME payments for subsequent cost reporting periods are based on the provider's merged DGME payment rates and calculated according to the usual procedures. However, during the first two cost reporting periods following the merger (that is, FYE 06/30/25 and FYE 06/30/26), the rolling average must be calculated as though the hospitals had been merged for the entirety of their prior- and penultimate-year cost reporting periods. This ensures that the rolling average is representative of the training that occurs at the post-merger entity. (Note that this procedure applies whether the merger occurs in the middle of the surviving provider's cost reporting period, as in this example, or coincides with the start of a new cost reporting period.)
Accordingly, in this example, the prior- and penultimate-year FTE counts for the merged provider's cost reporting period ending June 30, 2025, would be determined as follows:
•
Since Hospital B's prior cost reporting period was only 10 months long, its prior-year FTE count must be inflated to a 12-month equivalent, consistent with the policy clarified in the August 4, 2025
•
For the following cost reporting period ending June 30, 2026, the prior year-FTE count would be the merged provider's weighted DGME count, subject to the cap, as reported on the preceding cost report (FYE 06/30/2025; not shown); and the penultimate-year FTE count would be the hospitals' combined count as determined previously for the periods 07/01/23-06/30/24 and 01/01/23-10/31/23, that is, 59.87 FTEs. Beginning with the provider's FYE 06/30/2027 cost report, the rolling average would be calculated in accordance with normal procedure.
As stated previously, when a hospital merger involves one or more teaching hospitals, the surviving provider experiences an influx of FTE residents from the terminating providers' residency programs and absorbs those hospitals' existing IME FTE caps and available beds, resulting in a change to its intern- and resident-to-bed (IRB) ratio. The merged provider also experiences an increase in both Part A and simulated managed care DRG revenue.
The IME payment associated with a particular discharge reflects the payment rates applicable on the date the discharge occurs: if the discharge occurs prior to the effective date of the merger, the provider's individual IME payment rates are used; if the discharge occurs on or after the effective date of the merger, the IME adjustment is computed based on the combined payment rates of the merged providers. For cost reporting purposes, the surviving provider's total IME payment is based on the payment rate(s) applicable during each cost reporting period or portion thereof. Specifically, if the surviving hospital begins a new cost reporting period effective with the date of the merger, then total IME payment for that initial merged period and subsequent periods is determined based on the hospital's new, combined IME payment rates (with special consideration for the IRB ratio cap and rolling average during the first two cost reporting periods, as discussed further later in this section). However, if the merger takes place in the middle of the surviving hospital's cost reporting period, then the hospital's total IME payment for that period must reflect the different payment rates that apply before and after the merger.
Principles similar to what is discussed previously for direct GME apply to the calculation of the surviving provider's total IME payment amounts: that is, the MAC divides the cost reporting period into pre- and post-merger portions and calculates separate IME payments for each portion (according to the procedure described later in this section). In effect, the pre- and post-merger timeframes are treated as though they were individual short cost reporting periods, with virtual payment rates established for each period on the basis of the best available data for all providers and consistent with the FTE counting policies for non-12-month cost reporting periods as clarified in the August 4, 2025
To facilitate the calculation of the IME payment amounts, the MAC determines separate intern- and resident-to-bed ratios for the pre- and post-merger portions of the cost reporting period, which involves determining separate FTE resident counts, FTE caps, rolling average FTE counts, and available bed counts, as well as separate application of the IRB ratio cap. The resulting teaching adjustment factors are multiplied by DRG revenue to obtain total Part A and managed care IME payments for the respective timeframes. Specific procedures for determining these variables are discussed later in this section; as clarified previously for DGME, the pre-merger IME payment rates are based on data from the surviving provider only, while post-merger rates utilize data from all participating hospitals.
The numerator of the current year IRB ratio (prior to the application of the IRB ratio cap) consists of the allowable IME FTE resident count, subject to the IME FTE cap and the three-year rolling average. These variables are determined for the pre- and post-merger periods as follows:
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•
•
Note that a “virtual” rolling average must also be calculated for the merged provider's first two cost reporting periods beginning on or after the effective date of the merger: that is, the surviving and terminating providers' FTE counts must be combined as though they were merged during the prior and/or penultimate years. This procedure applies whether or not the merger occurred in the middle of the surviving provider's cost reporting period. Standard computation of the rolling average would resume in the third full post-merger cost reporting period.
Also note that the procedures for determining the partial year IME resident counts, caps, and rolling averages closely resemble the corresponding procedures described previously for direct GME, except that the IME variables are not adjusted relative to a standard 12-month cost reporting period, consistent with the policy clarified in the August 4, 2025
The denominator of the current year IRB ratio (prior to the application of the IRB ratio cap) consists of the number of available beds, determined for the pre- and post-merger periods as follows:
•
Similar to the rolling average, the IRB ratio cap must be determined and applied separately for the pre- and post-merger timeframes, with the post-merger cap simulating what the effect of the merger would have been during the hospitals' preceding cost reporting periods:
•
•
For reasons analogous to those discussed elsewhere in this preamble and in the August 4, 2025
Similar to the rolling average, a “virtual” IRB ratio cap, consisting of the combined FTE and available bed counts of the surviving and terminating providers, must also be determined for the first cost reporting period beginning on or after the effective date of the merger, to simulate what the effect of the merger would have been during the prior year. This procedure applies whether or not the merger occurred in the middle of the surviving provider's cost reporting period. Standard computation of the IRB ratio cap would resume in the second full post-merger cost reporting period.
To calculate total IME payments, the pre- and post-merger teaching adjustment factors, as determined previously, are multiplied by the hospitals' Part A and simulated managed care DRG revenue for the respective timeframes:
•
Note that if the surviving and/or terminating providers count additional residents under the provisions of section 422, the total IME payments for those residents would be calculated separately for the pre- and post-merger periods, as applicable, using the special formula multiplier of 0.66.
Since the cost report does not support the use of multiple IME payment rates for portions of a single cost year, the calculations described in this section must be performed off the cost report, and the results are summed to determine total IME payment for the cost reporting period. Placeholder values based on the combined payment rates of the merged hospitals are reported as necessary on the applicable lines of Worksheet E, Part A.
The following example illustrates the application of the policies described previously.
(Note: This example generally replicates the scenario outline previously in the discussion of direct GME payment, adjusted as necessary to reflect the variables involved in the IME payment calculation.)
Consider a merger between teaching Hospitals A and B, effective November 1, 2023, where Hospital A is the surviving provider. Prior to the merger, Hospitals A and B had fiscal year ends of June 30 and December 31, respectively. As the surviving provider, Hospital A elects to maintain its existing fiscal year, and files a cost report for the period July 1, 2023, to June 30, 2024. Since different payment rates apply to the timeframes 07/01/23-10/31/23 and 11/01/23-06/30/24, two separate IME payment totals must be calculated for Hospital A's cost reporting period ending June 30, 2024. These calculations are performed off the cost report, and the total Part A and managed care payments are reported on lines 29 and 29.01, respectively, of Worksheet E, Part A of the hospital cost report (Form CMS-2552-10). (Hospital B would file a terminating cost report for the period January 1, 2023-October 31, 2023, with IME payment determined in accordance with the rules applicable to short cost reporting periods, as clarified in the August 4, 2025
The following table summarizes the data that will be used to calculate Hospital A's pre- and post-merger IME payments, based on the surviving and terminating providers' historical cost reports, as well as other sources such as rotation schedules and PS&R reports:
• Since the hospitals are merged effective November 1, 2023, Hospital B technically does not have a separate FTE resident count, separate available bed count, or separate DRG revenue during the period 11/01/23-06/30/24; post-merger data for Hospital B are broken out for illustrative purposes only. In addition, Hospital B's pre-merger FTE counts and available bed counts for its 2023 cost year are printed in brackets since they do not factor into the merged provider's IME payment rates for FYE 06/30/24. (However, note that Hospital B's pre-merger FTE and bed counts will be used to calculate the rolling average and the IRB ratio cap for the merged provider's subsequent cost reports, as explained further below.) Hospital B would file its terminating cost report and receive IME payment for the period 01/01/23-10/31/23 in accordance with the rules applicable to short cost reporting periods.
• The prior- and penultimate-year FTE counts are required to calculate the three-year rolling averages for the pre- and post-merger periods. Hospital A's prior- and penultimate-year cost reporting periods are those ending on June 30, 2023, and June 30, 2022, respectively; Hospital B's are those ending on December 31, 2022, and December 31, 2021.
• The hospitals' IME FTE resident limits include any applicable adjustments, such as those for new programs or slots received under various statutory provisions. For purposes of this example, we assume that neither hospital has received additional residency slots under section 422.
• As explained previously, the available bed count is equal to the number of available bed days divided by the number of days in the cost reporting period (or virtual period, as here). For purposes of this example, we assume that each hospital's available bed count remains constant over time.
To calculate the surviving provider's IME payment for the pre-merger period 07/01/23-10/31/23, the following variables are determined based on Hospital A's individual records for the relevant timeframe:
•
•
•
•
•
•
Based on the data noted previously, the IME teaching adjustment factor for Hospital A during the pre-merger period 07/01/23-10/31/23 equals: 1.35 × ((1 + 0.132)
•
•
Thus, Hospital A's total IME payment for the pre-merger period is: $1,093,750 + $363,125 = $1,456,875.
For the post-merger period, the same payment variables are calculated using data from the records of both the surviving and terminating providers:
•
•
•
•
•
•
Based on the data noted previously, the IME teaching adjustment factor for the merged provider during the post-merger period 11/01/23-06/30/24 equals: 1.35 × ((1 + 0.11)0.405−1) = 0.058. Accordingly, the provider's total IME payment amounts during this period are:
•
•
Thus, the provider's total IME payment for the post-merger period is: $3,248,000 + $1,384,750 = $4,632,750.
Total IME payments for subsequent cost reporting periods are based on the provider's merged IME payment rates and calculated according to the usual procedures. However, during the first cost reporting period following the merger (that is, FYE 06/30/25), the IRB ratio cap must be calculated as though the hospitals had been merged for the entirety of their prior cost reporting periods. In addition, as for direct GME, during the first two cost reporting periods following the merger (that is, FYE 06/30/25 and FYE 06/30/26), the rolling average must be calculated as though the hospitals had been merged for the entirety of their prior- and penultimate-year cost reporting periods. This ensures that both the IRB ratio cap and the rolling average are representative of the training that occurs at the post-merger entity. (Note that this procedure applies whether the merger occurs in the middle of the surviving provider's cost reporting period, as in this example, or coincides with the start of a new cost reporting period.)
Accordingly, in this example, the IRB ratio cap for the merged provider's cost reporting period ending June 30, 2025, would be determined as follows:
•
•
Thus, the IRB ratio cap for the merged provider during this period is: 60 ÷ 550 = 0.11. Beginning with the provider's FYE 06/30/2026 cost report, the IRB ratio cap would be calculated in accordance with normal procedure.
For a demonstration of how to calculate the rolling average for the cost reporting periods ending on June 30, 2025, and June 30, 2026, refer to the direct GME example earlier in this preamble. Beginning with the provider's FYE 06/30/2027 cost report, the rolling average would be calculated in accordance with normal procedure.
Section 5506 of the Patient Protection and Affordable Care Act (Pub. L. 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (collectively, “Affordable Care Act”), authorizes the Secretary to redistribute residency slots after a hospital that trained residents in an approved medical residency program closes. Section 5506 of the Affordable Care Act instructs the Secretary to establish a process by regulation that redistributes slots from teaching hospitals that close to hospitals that meet certain criteria, with priority given to certain hospitals including those located in the same Core Based Statistical Area (CBSA), in a contiguous CBSA or in the same state as the closed hospital.
Specifically, section 5506 of the Affordable Care Act amended the Act by adding subsection (vi) to section 1886(h)(4)(H) of the Act and modifying language at section 1886(d)(5)(B)(v) of the Act, to instruct the Secretary to establish a process to increase the FTE resident caps for other hospitals based upon the full-time equivalent (FTE) resident caps in teaching hospitals that closed on or after a date that is 2 years before the date of enactment (that is, March 23, 2008). In the CY 2011 Outpatient Prospective Payment System (OPPS) final rule with comment period (75 FR 72264), we established regulations at 42 CFR 413.79(o) and an application process for qualifying hospitals to apply to CMS to receive direct GME and IME FTE resident cap slots from the hospital that closed. We made certain additional modifications to § 413.79 in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434), and we made changes to the section 5506 application process in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50122 through 50134). The procedures we established apply both to teaching hospitals that closed on or after March 23, 2008, and on or before August 3, 2010, and to teaching hospitals that close after August 3, 2010 (75 FR 72215).
CMS has learned of the closure of Delaware County Memorial Hospital, located in Drexel Hill, PA (CCN 390081). Accordingly, this notice serves to notify the public of the closure of this teaching hospital and initiate another round (“Round 27”) of the application and selection process. This round will be the 27th round (“Round 27”) of the application and selection process. The table in this section of this rule contains the identifying information and IME and direct GME FTE resident caps for the closed teaching hospital, which are part of the Round 27 application process under section 5506 of the Affordable Care Act.
CMS has learned of the closure of Crozer-Chester Medical Center, located in Chester, PA (CCN 390180). Accordingly, this notice serves to notify the public of the closure of this teaching hospital and initiate another round (“Round 28”) of the application and selection process. This round will be the 28th round (“Round 28”) of the application and selection process. The table in this section of this rule contains the identifying information and IME and direct GME FTE resident caps for the closed teaching hospital, which are part of the Round 28 application process under section 5506 of the Affordable Care Act.
The application period for hospitals to apply for slots under section 5506 of the Affordable Care Act is 90 days following notice to the public of a hospital closure (77 FR 53436). Therefore, hospitals that wish to apply for and receive slots from the previously noted hospitals' FTE resident caps must submit applications using the electronic application intake system, Medicare Electronic Application Request Information System
CMS will only accept Round 27 and 28 applications submitted via MEARIS
• Please refer to the “Resources” section for guidance regarding the application submission process at:
• Technical support is available under “Useful Links” at the bottom of the MEARIS
• Application related questions can be submitted to CMS using the form available under “Contact” at:
Application submission through MEARIS
We have not established a deadline by when CMS will issue the final determinations to hospitals that receive slots under section 5506 of the Affordable Care Act. However, we review all applications received by the application deadline and notify applicants of our determinations as soon as possible.
We refer readers to the CMS Direct Graduate Medical Education (DGME) website at:
Under section 1861(v) of the Act, Medicare has historically paid providers for Medicare's share of the costs that providers incur in connection with approved educational activities. The costs of these activities are excluded from the definition of “inpatient hospital operating costs” and are not included in the calculation of payment rates for hospitals or hospital units paid under the IPPS, IRF PPS, or IPF PPS, and are excluded from the rate-of-increase ceiling for certain facilities not paid on a PPS. These costs are separately identified and “passed through” (that is, paid separately on a reasonable cost basis).
Under the existing regulations at 42 CFR 413.85, approved nursing and allied health (NAH) education programs must meet State licensure requirements or be accredited by a recognized national professional organization. Additionally, an approved NAH education program must be operated by a provider. The most recent substantive rulemakings on these regulations were in the January 12, 2001, final rule (66 FR 3358 through 3374), and in the August 1, 2003, final rule (68 FR 45423 and 45434).
Section 541 of the Balanced Budget Refinement Act (BBRA) of 1999 (codified at section 1886(l) of the Act) provides for additional payments to hospitals for costs of nursing and allied health education associated with services to Medicare+Choice (now called Medicare Advantage (MA))
Section 512 of the Benefits Improvement and Protection Act (BIPA) of 2000 changed the formula for determining the additional amounts to be paid to hospitals for Medicare+Choice (now MA) nursing and allied health costs. Under section 541 of the BBRA, the additional payment amount was determined based on the proportion of each individual hospital's nursing and allied health education payment to total nursing and allied health education payments made to all hospitals. However, this formula did not account for a hospital's specific Medicare+Choice (now MA) utilization. Section 512 of the BIPA revised this payment formula to specifically account for each hospital's Medicare+Choice (now MA) utilization. This provision was effective for portions of cost reporting periods occurring in a calendar year, beginning with CY 2001.
The regulations at 42 CFR 413.87 implement these statutory provisions. We first implemented the BBRA NAH Medicare+Choice (now MA) provision in the August 1, 2000, IPPS interim final rule with comment period (IFC) (65 FR 47036 through 47039), and subsequently implemented the BIPA provision in the August 1, 2001 IPPS final rule (66 FR 39909 and 39910). In those rules, we outlined the qualifying conditions for a hospital to receive the NAH Medicare+Choice (now MA) payment, how we would calculate the NAH Medicare+Choice (now MA) payment pool, and how a qualifying hospital would calculate its “share” of payment from that pool. Determining a hospital's NAH MA payment essentially involves applying a ratio of the hospital-specific NAH Part A payments, total inpatient days, and MA inpatient days, to national totals of those same variables, from cost reporting periods ending in the fiscal year that is 2 years prior to the current calendar year. The formula is as follows:
With regard to determining the total national amounts for NAH pass-through payment, Part A inpatient days, and MA inpatient days, we note that section 1886(l) of the Act, as added by section 541 of the BBRA, gives the Secretary the discretion to “estimate” the national components of the formula noted previously. For example, section 1886(l)(2)(A) of the Act states that the Secretary shall estimate the ratio of payments for all hospitals for portions of cost reporting periods occurring in the year under section 1886(h)(3)(D) of
Accordingly, we stated in the August 1, 2000, IFC (65 FR 47038) that each year, we would determine and publish in a final rule the total amount of nursing and allied health education payments made across all hospitals during the fiscal year 2 years prior to the current calendar year. We would use the best available cost reporting data for the applicable hospitals from the Hospital Cost Report Information System (HCRIS) for cost reporting periods in the fiscal year that is 2 years prior to the current calendar year.
To calculate the pool, in accordance with section 1886(l) of the Act, we stated that we would “estimate” a total amount for each calendar year, not to exceed $60 million (65 FR 47038). To calculate the proportional reduction to Medicare+Choice (now MA) direct GME payments, we stated that the percentage is estimated by calculating the ratio of the Medicare+Choice nursing and allied health payment “pool” for the current calendar year to the projected total Medicare+Choice direct GME payments made across all hospitals for the current calendar year. We stated that the projections of Medicare+Choice direct GME and Part A direct GME payments are based on the best available cost report data from the HCRIS (for example, for CY 2000, the projections are based on the best available cost report data from FY 1998 HCRIS), and these payment amounts are increased using the increases allowed by section 1886(h) of the Act for these services (using the percentage applicable for the current calendar year for Medicare+Choice direct GME and the Consumer Price Index (CPI-U) increases for Part A direct GME). We also stated that we would publish the applicable percentage reduction each year in the IPPS proposed and final rules (65 FR 47038).
Thus, in the August 1, 2000, IFC, we described our policy regarding the timing and source of the national data components for the NAH Medicare+Choice (now MA) add-on payment and the percent reduction to the direct GME Medicare+Choice payments, and we stated that we would publish the rates for each calendar year in the IPPS proposed and final rules. While the rates for CY 2000 were published in the August 1, 2000, IFC (see 65 FR 47038 and 47039), the rates for subsequent CYs were only issued through Change Requests (CRs) (CR 2692, CR 11642, CR 12407). After recent issuance of the CY 2019 rates in CR 12407 on August 19, 2021, we reviewed our update procedures, and were reminded that the August 1, 2000, IFC states that we would publish the NAH Medicare+Choice (now MA) rates and direct GME percent reduction every year in the IPPS rules. Accordingly, for CY 2020 and CY 2021, we proposed and finalized the NAH MA add-on rates in the FY 2023 IPPS/LTCH PPS proposed and final rules. We stated that for CYs 2022 and after, we would similarly propose and finalize the respective NAH MA rates and direct GME percent reductions in subsequent IPPS/LTCH PPS rulemakings (see 87 FR 49073, August 10, 2022).
In this FY 2027 IPPS/LTCH PPS proposed rule, we proposed the rates for CY 2025. Consistent with the use of HCRIS data for past calendar years, we are proposing to use data from cost reports ending in FY 2023 HCRIS (the fiscal year that is 2 years prior to CY 2025) to compile these national amounts: NAH pass-through payment, Part A Inpatient Days, MA Inpatient Days.
For this proposed rule, we accessed the FY 2023 HCRIS data from the third quarterly HCRIS update of 2025. However, to calculate the “pool” and the direct GME MA percent reduction, we “project” Part A direct GME payments and MA direct GME payments for the current calendar year, which in this proposed rule is CY 2025, based on the “best available cost report data from the HCRIS” (65 FR 47038). Next, consistent with the method we described previously in the August 1, 2000, IFC, we increase these payment amounts from midpoint to midpoint of the appropriate calendar year using the increases allowed by section 1886(h) of the Act for these services (using the percentage applicable for the current calendar year for MA direct GME, and the Consumer Price Index-Urban (CPI-U) increases for Part A direct GME). For CY 2025, the direct GME projections are based on the third quarterly update of CY 2023 HCRIS, adjusted for the CPI-U and for increasing MA enrollment.
For CY 2025, the proposed national rates and percentages, and their data sources, are set forth in this table. We intend to update these numbers in the FY 2027 final rule based on the latest available cost report data.
Hospitals may receive nursing and allied health education pass-through payments for costs incurred in connection with approved programs. The statute does not explicitly define “approved programs” for purposes of NAH education payments. Instead, section 1886(l)(1) of the Act refers to “approved educational activities for nurse and allied health professional training”. Under the existing regulations at § 413.85(e), CMS considers an activity to be an “approved nursing and allied health education program” if the program is a planned program of study that is licensed by State law, or if licensing is not required, is accredited by the recognized national professional organization for the particular activity. The regulations note that such national accrediting bodies include, but are not limited to, the Commission on Accreditation of Allied Health Education Programs, the National League of Nursing Accrediting Commission, the Association for Clinical Pastoral Education Inc., and the American Dietetic Association.
In the CY 2026 OPPS/ASC final rule (90 FR 54024 through 54027), we finalized changes to the definition of “approved medical residency program” and equivalent terms, to state that accrediting organizations may not use accreditation criteria that promote or encourage discrimination on the basis of race, color, national origin, sex, age,
We believe that similar concerns related to unlawful and discriminatory accreditation standards and program requirements also apply to approved nursing and allied health education programs. Therefore, we are proposing to require that, in addition to meeting other applicable requirements, individual NAH education programs and NAH accrediting bodies must not discriminate, or promote or encourage discrimination, on the basis of race, color, national origin, sex, age, disability, or religion, including the use of those characteristics or intentional proxies for those characteristics as a selection criterion for employment, program participation, resource allocation, or similar activities, opportunities, or benefits. These policies would be effective October 1, 2026, and would be codified under proposed new 42 CFR 413.84, which would be cross-referenced as necessary by the regulations at § 413.85.
Separately, we propose to remove from § 413.85(e) the language specifying individual accrediting organizations of nursing and allied health education programs. In the January 12, 2001
In the January 12, 2001, final rule (66 FR 3358) “Medicare Program; Payment for Nursing and Allied Health Education”, we codified the payment regulations regarding NAH education program costs at 42 CFR 413.85. With regard to determining the net costs that are allowed for “pass-through” payment, § 413.85(d)(2)(i) states that the net cost of approved educational activities is determined by deducting the revenues that a provider receives from tuition and student fees from the provider's total allowable educational costs that are directly related to approved educational activities. Section 413.85(d)(2)(ii) further states that a provider's total allowable educational costs are those costs incurred by the provider for trainee stipends, compensation of teachers, and other costs of the activities as determined under the Medicare cost-finding principles in § 413.24. These costs do not include patient care costs, costs incurred by a related organization, or costs that constitute a redistribution of costs from an educational institution to a provider or costs that have been or are currently being provided through community support. Worksheet A of the Medicare cost report captures the direct costs associated with a hospital's various cost centers, including its NAH education programs. The direct costs associated with operating a hospital's approved NAH education programs are reported on Worksheet A, line 20 (nursing programs) and line 23 (paramedical/allied health education programs). The instructions to these lines state—
In addition to direct costs, hospitals also incur indirect or overhead costs associated with their operations. Overhead costs are assigned to the general service cost centers on lines 1 through 23 of Worksheet A, which are a hospital's non-patient care/non-revenue producing cost centers, and which include the administrative & general (A&G) cost center on line 5. The general cost report instructions for Worksheet A state—
Because the costs of operating a hospital's NAH education programs are not directly associated with furnishing patient care, these cost centers are also included among the general service cost centers on Worksheet A. As noted in the cost report instructions cited previously, general service cost centers may furnish services to other general service areas. Thus, for example, a hospital's Administrative and General cost center may furnish services to its Nursing and Allied Health Education cost centers.
The regulations and cost report instructions require that, prior to allocating overhead costs to the revenue producing cost centers, a provider must make appropriate reclassifications and adjustments to its direct costs. Worksheet A-6 is used to reclassify costs between cost centers on the cost report, while Worksheet A-8 is used to adjust both revenue and non-revenue producing cost centers for (1) expenses to reflect actual expenses incurred; (2) those items which constitute recovery of expenses through sales, charges, fees, etc.; (3) expenses in accordance with the Medicare principles of reimbursement; and (4) those items which are provided for separately in the cost apportionment process. (CMS Pub. 15-2, section 4016.)
Adjustments, including the recovery of expenses through various forms of revenue, occur prior to cost finding, which is the process by which indirect costs (that is, the costs of the general service cost centers) are allocated to other cost centers (both other general service cost centers and revenue producing cost centers). Worksheets B,
On November 17, 2017, CMS issued Transmittal 12, which contained clarifications to the hospital cost report instructions at CMS-2552-10, Pub. 15-2, chapter 40. Transmittal 12 added the following clarification to line 19 of Worksheet A-8:
Transmittal 12 also added to Worksheet B-2 specific instructions for post-stepdown adjustments for certain costs associated with NAHE nonprovider-operated programs under 42 CFR 413.85(g)(2), with the following note:
Do not use this worksheet to reduce the total allowable costs that are directly related to the NAHE programs by the revenue received from tuition and student fees. Use Worksheet A-8 to offset NAHE program costs by tuition and student fees (42 CFR 413.85(d)(2)(i)). Do not use a post step-down adjustment. (CMS Pub. 15-2, section 4022.)
In issuing these cost report clarifications in Transmittal 12, CMS was clarifying the rules regarding the appropriate order of operations for assigning costs and allocating overhead to the NAH education pass-through cost centers. Specifically, Transmittal 12 made it clear that adjustments to the direct costs of NAH education programs as a result of revenue received from tuition, student fees and other sources should occur on Worksheet A-8, prior to the allocation of overhead costs, and not as post-stepdown adjustments on Worksheet B-2.
On February 9, 2024, the U.S. District Court for the District of Columbia (DC) issued a decision involving five plaintiff hospitals (
In the FY 2026 IPPS proposed rule (90 FR 18280 through 18282), we proposed to revise 42 CFR 413.85(d)(2)(i) to define the net cost of approved educational activities in a manner consistent with the cost reporting clarifications in Transmittal 12. Specifically, we proposed that revenues from tuition, student fees and other sources should be subtracted from the allowable direct costs of a provider's NAH education programs prior to the allocation of overhead costs. We also clarified that, in order to mitigate the reduction in overhead costs that might result from this procedure, a provider could seek permission from its MAC to utilize a statistical basis other than accumulated cost for the purpose of allocating indirect costs to its nursing and allied health cost centers. More specifically, we explained that a provider may elect to subscript its administrative and general cost center (line 5 of Worksheet A) for overhead costs directly related to its NAH programs and employ a statistical basis other than accumulated cost that would accurately reflect the services rendered to those departments. In addition, we stated that the proposed order of operations to offset revenue from direct costs on Worksheet A-8 would be consistent with the policy that A&G costs allocated to the NAH cost centers must be
We received many comments in opposition to our proposal to determine the net cost of approved nursing and allied health education programs by deducting tuition and other revenue from direct costs prior to the allocation of indirect costs. Commenters objected that the proposed policy would be inconsistent with general cost-finding principles and would result in the NAH cost centers receiving less than their share of institutional overhead. Due to the number and nature of the comments we received, we decided not to finalize changes to our existing policy in the FY 2026 IPPS final rule (90 FR 36921). Instead, we stated that we expected to revisit the treatment of NAH education costs in future rulemaking.
After considering the feedback we received on our earlier proposal, we continue to believe, for the reasons stated below, that correct accounting procedures require the deduction of tuition and other revenue from the direct costs of a provider's approved educational activities on Worksheet A-8, prior to the allocation of overhead, consistent with the clarifications contained in Transmittal 12. However, we acknowledge that it would be helpful to provide additional technical context to explain how the proposed order of operations is consistent with general Medicare cost-finding principles. We are also modifying our original proposal to ensure that the deduction of revenue on Worksheet A-8 does not inappropriately reduce the allocation of overhead to the NAH cost centers when hospitals allocate administrative and general costs using accumulated cost as the default statistical basis.
In addition, we recognize that some portions of our discussion in the FY 2026 proposed rule may have caused confusion about our existing policies regarding allowable indirect costs of approved nursing and allied health education programs. In particular, some commenters believed that we had defined allowable indirect costs in such a way as to essentially preclude the recognition of overhead for purposes of NAH pass-through payment. Therefore, in this proposed rule, we are also proposing to clarify the nature of allowable indirect costs of approved educational activities and to refine the cost reporting procedures to ensure that hospitals appropriately allocate overhead costs to the NAH cost centers.
We are proposing to change the regulations text at 42 CFR 413.85(d)(2)(i) and (ii) to state that the net cost of approved educational activities is determined by taking the allowable direct costs incurred by the provider for trainee stipends and compensation of faculty employed by the provider, and
As we stated in the FY 2026 proposed rule (90 FR 18281), we understand that it is not uncommon for a provider's allowable nursing and allied health education programs to generate revenues from tuition, student fees and other sources that exceed the allowable direct costs the provider incurs for those programs. Because of that, the revenue offset on Worksheet A-8 might result in a zero or negative balance prior to the allocation of overhead costs; on Worksheet B-1, the accumulated cost statistic, which serves as the recommended statistical basis for allocating administrative and general costs, would consequently also be reduced to zero. Even if the provider were to componentize their administrative and general cost center (consistent with the procedures proposed below), certain components might continue to be allocated on the basis of accumulated cost, limiting the amount of A&G allocated to the provider's NAH cost centers, regardless of the extent to which those cost centers benefit from the hospital's administrative functions.
In order to ensure that the deduction of revenue on Worksheet A-8 does not understate the administrative and general costs allocated to the NAH cost centers, we are proposing the following modifications to the procedures for offsetting revenue and computing the accumulated cost statistic. First, we are proposing that providers offset the total revenue generated by each NAH program, which may result in a credit balance (negative amount) on the corresponding line(s) of Worksheet A. Next, we propose that providers utilize the reconciliation column on Worksheet B-1 to adjust the accumulated cost statistic by the total amount of NAH revenue offset on Worksheet A-8, effectively reversing that offset for purposes of overhead allocation only.
The following example illustrates the application of this procedure in the event that total revenues from tuition and other sources exceed the direct costs that the provider incurs for a particular NAH program. (Note, the same procedure would be followed if total revenues do not exceed direct costs.)
• Suppose that Hospital A incurs $1,000,000 in direct costs for an allied health education program; Hospital A reports $1,000,000 on line 23, column 5, of Worksheet A, which represents the direct costs of the program prior to any adjustments.
• Hospital A receives $1,200,000 in tuition and fees from students enrolled in the program; Hospital A reports a revenue adjustment of $1,200,000 on line 19, column 2, of Worksheet A-8, representing a recovery of expenses associated with that program.
• The revenue adjustment of $1,200,000 carries over to line 23, column 6, of Worksheet A. This results in a negative expense of ($200,000) ($1,000,000 minus $1,200,000 equals ($200,000)) on line 23, column 7. Assume for purposes of this example that there are no further adjustments (positive or negative) to Hospital A's direct NAH costs.
• On Worksheet B-1, the hospital then utilizes the reconciliation column (line 23, column 5A) to increase the accumulated cost statistic by the amount of revenue offset previously, $1,200,000. (Note: in the cost report software, the provider must ensure to indicate “override with value” and check to add this value to the existing accumulated cost from Worksheet B, Part I, line 23, column 4A.)
• The accumulated cost statistic for purposes of allocating A&G on Worksheet B, Part I, will be equal to the adjusted expense on Worksheet A, column 7, line 23, plus the amount of revenue from tuition and fees deducted on Worksheet A-8, plus any amounts already allocated to the NAH cost center on Worksheet B, Part I, line 23, columns 1 through 4.
• From this point, the stepdown process on Worksheet B, Part I, continues according to normal procedures. While the accumulated cost statistic will thus allocate an appropriate share of institutional overhead to the NAH cost center, the amount of NAH costs available for allocation on Worksheet B, Part I, line 23, column 23, will continue to reflect the revenue offset, ensuring that the unallowable costs are not allocated from NAH to the patient care cost centers.
We emphasize that the deduction of tuition and other revenue on Worksheet A-8, prior to the allocation of indirect costs on Worksheet B, Part I, is consistent with general Medicare cost-finding principles as described in PRM 15-1, chapter 23, and the cost report instructions in PRM 15-2, chapter 40, and as codified in the regulations at 42 CFR 413.24. The general service cost centers, including the NAH cost centers, represent a hospital's allowable non-patient care expenses, which are allocated to all the cost centers they serve via the stepdown method on Worksheet B, Part I. Once these expenses have been allocated to the patient care cost centers, Medicare's share of allowable costs is determined based on the hospital's Medicare utilization. It is therefore necessary to remove those costs that are not generally allowable to Medicare
We would also like to take the opportunity to address concerns raised in response to the FY 2026 proposed rule that the proposed order of operations for deducting tuition and other revenue would be inconsistent with our treatment of organ acquisition costs, which are also reimbursed on a pass-through basis. In contrast to the NAH cost centers, the organ acquisition cost centers are ancillary/revenue-producing centers related to patient care. Revenue for organs sold to other
The FY 2026 proposed rule included a discussion of the types of costs allowable for purposes of pass-through payment under 42 CFR 413.85 (90 FR 18281 through 18282). That discussion referred to our longstanding nursing and allied health payment policies finalized in the January 12, 2001
In the FY 2026 proposed rule, we observed that a significant portion of the indirect costs that certain hospitals allocate to their nursing and allied health cost centers include costs incurred by a related organization (such as a home office), in violation of the regulation at § 413.85(d)(2)(ii),
We intended this discussion in the FY 2026 proposed rule to serve as a restatement and clarification of various elements of our existing NAH payment policies. Nevertheless, we received several comments objecting to our characterization of the allowable costs of educational activities. In particular, commenters alleged that we had defined allowable indirect costs in such a way as to effectively preclude the allocation of overhead to the NAH cost centers, by requiring that indirect costs be “directly attributable” to the operation of a provider's NAH education programs. One commenter also objected to our examples of unallowable indirect costs and specifically to our characterization of the salary costs of a nursing supervisor as “usual patient care costs that would be incurred in the absence of the educational activity” and that are thus not allowable for purposes of NAH pass-through payment. We are therefore taking this opportunity to further clarify our existing policies concerning the nature of allowable costs of nursing and allied health, as well as to propose specific procedures for correctly allocating those costs on the hospital cost report.
First, we propose to clarify the meaning of the statement in the January 12, 2001, final rule that “total costs” include only “direct and indirect costs incurred by a provider that are directly attributable to the operation of an approved educational activity.” We note that these costs are explicitly contrasted with “usual patient care costs that would be incurred in the absence of the educational activity, such as the salary costs for nursing supervisors who oversee the floor nurses and student nurses” (66 FR 3367). With respect to the assignment of direct costs on Worksheet A, the purpose of this requirement is to distinguish between the costs of NAH educational activities engaged in by the hospital's nursing and allied health staff, which would not occur in the absence of a hospital's approved NAH programs and which are thus “directly attributable” to the operation of such programs, and the costs of usual patient care services, which may be furnished by some of the same staff members and which the hospital would incur even in the absence of its NAH programs.
For example, a nursing supervisor who oversees floor nurses and student nurses may spend part of his or her time engaged in usual patient care activities, such as monitoring patient vital signs or directing the clinical activities of the floor nurses, and part of the time instructing students in the hospital's nursing program. A portion of the salary costs of the nursing supervisor would be considered direct costs of the nursing program, and the salary costs would thus be apportioned between the hospital's patient care and nursing education cost centers, based on the percentage of time the supervisor spent on each activity. This procedure is analogous to the apportionment of the salary costs of teaching physicians who spend part of their time supervising residents and part of their time providing clinical services to the hospital's patients.
With respect to the allocation of indirect costs on Worksheet B, Part I, the requirement that such costs must be “directly attributable to the operation of an approved educational activity” does not categorically preclude the allocation of institutional overhead to the nursing and allied health cost centers. Rather, this requirement emphasizes the general principle that indirect costs allocated to a particular cost center must
If a program does
The general service cost centers, including the administrative and general cost center, comprise a variety of distinct overhead functions, some of which may benefit the hospital's nursing and allied health education programs, while others may not. In order to properly distinguish between the costs associated with these distinct functions, and to ensure that the pass-through cost centers receive only those indirect costs allowable under our longstanding policies, we are proposing to require providers with approved NAH education programs to componentize (that is, to fragment or subscript) their general service cost centers according to the procedures described below.
We are proposing that if a hospital operates “approved educational activities,” as defined under § 413.85(c) and subject to the provider-operated requirements under § 413.85(f), then the hospital must identify any general service cost center that comprises costs of multiple overhead functions, where some of those functions provide a benefit to the hospital's NAH programs and others do not. For each such general service cost center, the hospital must create one or more subscripts that contain only those costs that provide a benefit to its NAH programs. (Note that such costs may also provide a benefit to other departments of the hospital.) As a result of this process, the general service cost center would contain the following components (in addition to any other subscripts created by the hospital for other purposes): (1) Indirect costs that provide a benefit to the hospital's NAH programs, and (2) Indirect costs that do not provide a benefit to NAH.
Only those costs contained in component (1) would flow to Worksheet D, Parts III and IV, to be reimbursed on a pass-through basis. On lines 20 and 23 (and subscripts thereof) of Worksheet B-1, the hospital would delete (zero out) the allocation statistic in the column corresponding to component (2), so that those costs are allocated to the departments that they serve but not to the NAH cost centers.
We note that a similar procedure would apply to certain nonprovider-operated programs paid for clinical costs on a pass-through basis under 42 CFR 413.85(g)(1) and (2). In contrast to provider-operated programs paid under § 413.85(f), providers that qualify for reasonable cost payment of clinical costs associated with nonprovider operated programs under § 413.85(g) may receive reasonable cost payment for the clinical training costs only, including the clinical training costs incurred by a related organization (§ 413.85(g)(2)(v); 66 FR 3367); however, the January 12, 2001
These procedures would ensure that only indirect costs incurred by the provider that are “directly attributable” to the provider's operation of approved educational activities are allocated to the pass-through NAH cost centers. We note that the componentization of general service cost centers is consistent with longstanding Medicare cost reporting procedures as described in CMS Pub. 15-1, chapter 23, section 2307(B). In addition, we are clarifying that the hospital must ensure that the statistical basis used to allocate each general service cost center and its subscripts (if applicable) must reasonably relate to the general service costs and must appropriately reflect the proportion of those costs attributable to the downstream cost centers, including NAH. For further discussion of the use of appropriate allocation statistics, refer to section X.D.3. of this proposed rule (“Clarification and Codification of Cost Allocation Principles”).
The following example illustrates the application of our proposed procedures in the case of a hospital with a subset of administrative and general costs allowable for purposes of NAH pass-through payment. Assume the hospital's NAH programs are deemed provider-operated consistent with the requirements at § 413.85(f).
• One subscript (for example, line 5.01), would contain the $75,000,000 in A&G costs that provide a benefit to the hospital's NAH programs.
• Another subscript (for example, line 5.02), would contain the residual $25,000,000 in A&G costs not attributable to the hospital's NAH programs.
• Cost center 5.01 would be allocated among all cost centers on an appropriate statistical basis (for example, accumulated cost, adjusted so as to reverse the offset of tuition and/or other revenue, as described in the preceding section of this proposal); any costs allocated to the NAH cost centers would flow to Worksheet D, Parts III and IV, and be reimbursed on a pass-through basis.
• The hospital would delete (zero out) the allocation statistic on Worksheet B-1, lines 20 and 23, column 5.02; this would prevent A&G costs unrelated to the hospital's NAH programs from being allocated to the NAH cost centers.
We propose that the effective date of these policies would be cost reporting periods beginning on or after October 1, 2026. We intend to issue revisions to the hospital cost report (Form CMS-2552-10) to implement these policies, if finalized.
Effective for FY 2021, we created MSDRG 018 for cases that include procedures describing CAR T-cell therapies, which were reported using ICD-10-PCS procedure codes XW033C3 or XW043C3 (85 FR 58599 through 58600). Effective for FY 2022, we revised MSDRG 018 to include cases that report the procedure codes for CAR T-cell and non-CAR T-cell therapies and other immunotherapies (86 FR 44798 through 448106).
Effective for FY 2021, we modified our relative weight methodology for MSDRG 018 to develop a relative weight that is reflective of the typical costs of providing CAR T-cell therapies relative to other IPPS services. Specifically, under our finalized policy we do not include claims determined to be clinical trial claims that group to MS-DRG 018 when calculating the average cost for MS-DRG 018 that is used to calculate the relative weight for this MSDRG, with the additional refinements that: (a) when the CAR T-cell therapy product is purchased in the usual manner, but the case involves a clinical trial of a different product, the claim will be included when calculating the average cost for MS DRG 018 to the extent such claims can be identified in the historical data; and (b) when there is expanded access use of immunotherapy, these cases will not be included when calculating the average cost for MS-DRG 018 to the extent such claims can be identified in the historical data (85 FR 58600). The term “expanded access” (sometimes called “compassionate use”) is a potential pathway for a patient with a serious or immediately life-threatening disease or condition to gain access to an investigational medical product (drug, biologic, or medical device) for treatment outside of clinical trials when, among other criteria, there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition (21 CFR 312.305).
Effective FY 2021, we also finalized an adjustment to the payment amount for applicable clinical trial and expanded access immunotherapy cases that group to MS-DRG 018 using the same methodology that we used to adjust the case count for purposes of the relative weight calculations (85 FR 58842 through 58844). (As previously noted, effective beginning FY 2022, we revised MS-DRG 018 to include cases that report the procedure codes for CAR T-cell and non-CAR T-cell therapies and other immunotherapies (86 FR 44798 through 448106).) Specifically, under our finalized policy we apply a payment adjustment to claims that group to MS-DRG 018 and include ICD-10CM diagnosis code Z00.6, with the modification that when the CAR T-cell, non-CAR T-cell, or other immunotherapy product is purchased in the usual manner, but the case involves a clinical trial of a different product, the payment adjustment will not be applied in calculating the payment for the case. We also finalized that when there is expanded access use of immunotherapy, the payment adjustment will be applied in calculating the payment for the case. Effective FY 2026, we also finalized the application of the payment adjustment for clinical trial and expanded access use of immunotherapy cases to other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost. This payment adjustment is codified at 42 CFR 412.85 (for operating IPPS payments) and 412.312 (for capital IPPS payments), for claims appropriately containing Z00.6, as described previously, and reflects that the adjustment is also applied for cases involving expanded access use immunotherapy, and that the payment adjustment only applies to applicable clinical trial cases; that is, the adjustment is not applicable to cases where the CAR T-cell, non-CAR T-cell, or other immunotherapy product is purchased in the usual manner, but the case involves a clinical trial of a different product. The regulations at 42 CFR 412.85(c) also specify that the adjustment factor will reflect the average cost for cases assigned to MS-DRG 018 that involve expanded access use of immunotherapy, are part of an applicable clinical trial, or for discharges occurring on or after October 1, 2025, other cases where the immunotherapy product is not purchased in the usual manner, such as provided at no cost, to the average cost for all other cases assigned to MS-DRG 018 (90 FR 36922).
For FY 2027, we are proposing to continue to apply an adjustment to the payment amount for expanded access use of immunotherapy and applicable clinical trial cases, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, that group to MS-DRG 018, calculated using the same methodology, as modified in the FY 2024 IPPS/LTCH PPS final rule (88 FR 59062), that we are proposing to use to adjust the case count for purposes of the relative weight calculations, including our proposed modifications to that methodology for FY 2027, as described in section II.D. of the preamble of this proposed rule.
As discussed in the FY 2024 IPPS/LTCH PPS final rule, the MedPAR claims data now includes a field that identifies whether or not the claim includes expanded access use of immunotherapy. For the FY 2023 MedPAR data and for subsequent years, this field identifies whether or not the claim includes condition code 90. The MedPAR files now also include information for claims with the payer-only condition code “ZC”, which is used by the IPPS Pricer to identify a case where the CAR T-cell, non-CAR T-cell, or other immunotherapy product is purchased in the usual manner, but the case involves a clinical trial of a different product so that the payment adjustment is not applied in calculating the payment for the case (for example, see Change Request 11879, available at
Using the same methodology that we are proposing to use to adjust the case count for purposes of the relative weight calculations, we are proposing to calculate the adjustment to the payment amount for expanded access use of immunotherapy, applicable clinical trial cases, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost as follows:
• Calculate the average cost for cases assigned to MS-DRG 018 that: (a) contain ICD-10-CM diagnosis code Z00.6 and do not contain condition code “ZC”; (b) contain condition code “90”; or (c) contain standardized drug charges below the median standardized drug charge of clinical trial cases in MS-DRG 018.
• Calculate the average cost for all other cases assigned to MS-DRG 018.
• Calculate an adjustor by dividing the average cost calculated in step 1 by the average cost calculated in step 2.
• Apply this adjustor when calculating payments for expanded access use of immunotherapy, applicable clinical trial cases, and other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, that group to MS-DRG 018 by multiplying the relative weight for MS-DRG 018 by the adjustor.
We refer the readers to section II.D. of the preamble of this proposed rule for further discussion of our methodology.
Consistent with our calculation of the proposed adjustor for the relative weight calculations, for this proposed rule we are proposing to calculate this adjustor based on the December 2025 update of the FY 2025 MedPAR file for purposes of establishing the FY 2027 payment amount. Specifically, in accordance with 42 CFR 412.85 (for operating IPPS payments) and 412.312 (for capital IPPS payments), we are proposing to multiply the FY 2027 relative weight for MS-DRG 018 by a proposed adjustor of 0.17 as part of the calculation of the payment for claims determined to be applicable clinical trial claims, expanded access use immunotherapy claims, or other cases where the immunotherapy product is not purchased in the usual manner, such as obtained at no cost, that group to MS-DRG 018, which includes CAR T-cell and non-CAR T-cell therapies and other immunotherapies. We are also proposing to update the value of the adjustor based on more recent data for the final rule.
Section 1886(q) of the Act sets forth the requirements of the Hospital Readmissions Reduction Program effective for discharges from applicable hospitals beginning on or after October 1, 2012. Under the Hospital Readmissions Reduction Program, payments to applicable hospitals must be reduced to account for certain excess readmissions after an initial treatment for specified diagnoses (referred to in section 1886(q)(5)(A) of the Act as “applicable conditions”, certain high-volume or high-expenditure conditions specified by the Secretary). We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 49543) and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 38240) for a general overview of the Hospital Readmissions Reduction Program. We also refer readers to 42 CFR 412.152 through 412.154 for codified Hospital Readmissions Reduction Program requirements.
Table V.K-01 shows the Hospital Readmissions Reduction Program measure set for the FY 2027 program year and subsequent years, that is, the “applicable conditions” used to calculate excess readmission ratios.
Sepsis, or septicemia, is a life-threatening condition that results from the body's dysregulated response to infection and is a leading cause of mortality, hospitalization, and readmission in the United States.
Consistent with section 1886(q)(5)(A) of the Act, which, as noted above, defines an “applicable condition” in the Hospital Readmissions Reduction Program, sepsis readmissions are both high volume and high expenditure. Thirty-day average readmission rates for patients with sepsis are estimated to be about 21 percent.
Sepsis readmissions are often preventable, highlighting the need for targeted interventions to reduce sepsis-related mortality and improve post-discharge outcomes including readmissions.
We propose adopting the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure (Sepsis Readmission measure) for the Hospital Readmissions Reduction Program beginning with an applicable period of July 1, 2025, to June 30, 2027, for the FY 2029 program year. The purpose of the Sepsis Readmission measure is to improve patient outcomes by providing patients, physicians, hospitals, and policymakers with important information about hospital-level unplanned readmission rates following hospitalization for sepsis. The Sepsis Readmission measure would encourage hospitals to improve patient safety and the quality of care provided across the care continuum by tracking hospital-level rates of sepsis readmission. The measure would also promote adherence to evidence-based practices, including standardized clinical protocols,
The measure aligns with our Meaningful Measures 2.0 priority area of “Seamless Care Coordination,” which aims to ensure patients receive timely and coordinated care, reduce the risk of errors, and improve overall patient outcomes.
The proposed Sepsis Readmission measure addresses a significant performance gap in healthcare quality. Sepsis represents a critical public health challenge, with substantial variation in hospital readmission rates following an index sepsis hospitalization. This variation reflects differences in the quality of initial treatment, discharge planning, and post-discharge care transitions across healthcare facilities. Based on our calculations using data from 2022 to 2023, the mean 30-day all-cause risk-standardized readmission rate (RSRR) for sepsis using the proposed measure methodology (see section V.I.b.4. of the preamble of this proposed rule for the proposed Sepsis Readmission measure methodology) for all hospitals with at least 25 eligible discharges for the measure is about 18.09 percent. Among hospitals with at least 25 eligible discharges for the Sepsis Readmission measure, hospitals with a Disproportionate Share Hospital (DSH) patient percentage of at least 65 percent and teaching hospitals with 100 or more residents have the highest mean RSRRs (18.63 percent and 18.62 percent, respectively). Additionally, safety-net hospitals with at least 25 eligible discharges have a slightly higher mean RSRR than non-safety-net hospitals with at least 25 eligible discharges (18.37 percent and 18.02 percent, respectively).
As discussed in the Background section, research demonstrates that thirty-day hospital readmissions following sepsis hospitalization often stem from ineffective initial treatment, poor discharge planning, and insufficient post-discharge follow-up. Studies have shown that facilities implementing a higher number of evidence-based transitional care processes experience lower readmission rates, indicating substantial opportunity for quality improvement across the healthcare system.
Given that infection (either new or recurrent) is the leading cause of sepsis-related readmission, and that evidence-based interventions such as care coordination, medication reconciliation, patient education, and timely post-discharge follow-up have been proven effective in reducing readmissions, this measure would provide hospitals with actionable feedback to enhance quality across the entire care continuum and reduce preventable readmissions for a population not captured in CMS' other condition- and procedure-specific readmission measures.
The numerator of the measure is defined as Medicare Fee-for-Service or Medicare Advantage beneficiaries aged 65 years and older, who were discharged from the hospital with a principal diagnosis of sepsis (including post-procedural sepsis), who were then readmitted to an acute care hospital for any cause within 30 days. Patients must have been enrolled in Medicare Fee-for-Service or Medicare Advantage during the index admission and for the 12 months prior to the date of admission, discharged alive from a non-federal short-term acute care hospital, and not transferred to another acute care facility. Only an unplanned inpatient admission to a short-term acute care hospital can qualify as a readmission. Planned readmissions, which are generally not a signal of quality of care, are not included in the numerator. For details of the measure methodology, we refer readers to the measure methodology report, available at:
The measure denominator includes all Medicare Fee-for-Service or Medicare Advantage beneficiaries aged 65 years and older, hospitalized at non-federal short-term acute care hospitals who are discharged alive following a principal hospital discharge diagnosis of sepsis (including post-procedural sepsis), and with a continuous 12-month Medicare enrollment period prior to the index hospitalization.
This measure excludes index admissions for patients who meet additional exclusion criteria, including: (1) admissions during which patients leave the hospital against medical advice (AMA) (excluded because providers may not have the opportunity to deliver full care and prepare the patient for discharge); (2) admissions for patients without at least 30 days post-discharge enrollment in Medicare Fee-for-Service or Medicare Advantage (excluded because the 30-day readmission outcome cannot be assessed in this group); (3) admissions resulting in patients discharged to hospice (readmission may not be a meaningful outcome for these hospice patients and the discharging hospital is not the most appropriate party to hold accountable for the readmission from hospice for this measure); (4) sepsis admissions captured in the pneumonia readmission measure (to avoid overlap with the pneumonia readmission measure); and (5) sepsis admissions within 30 days of an eligible sepsis index admission (excluded because they are considered readmissions, not index admissions). For more information about the measure specifications, we refer readers to the methodology report, available at:
To account for differences in case mix across hospitals, the Sepsis Readmission measure includes risk adjustments for patient factors such as age, comorbid diseases, and indicators of patient frailty. The measure also adjusts for the aggressiveness of the infectious organism (bacteria, virus, or fungus) causing sepsis, a transplant recipient indicator, and clinical markers of severe sepsis. These factors are included in risk adjustment calculations for the measure because they are clinically relevant and are related to the measure outcome. For each patient, risk adjustment variables are obtained from inpatient, outpatient, and physician Medicare administrative claims data (Medicare Fee-for-Service Part A and Part B claims, hospital-submitted Medicare Advantage claims, and Medicare Advantage Organization-submitted encounter data) extending up to 12 months prior to the index hospitalization, and secondary diagnoses documented as present on admission during the index hospitalization. The risk adjustment does not include complications that arise during the course of the index hospitalization because they reflect the quality of care delivered and fall within the causal pathway rather than patient risk.
The Sepsis Readmission measure calculates hospital-level 30-day all-cause risk-standardized readmission rates (RSRR) for sepsis. If this measure is adopted as proposed, the sepsis RSRR would be calculated as the ratio of the number of predicted readmissions based on the hospital's performance with its observed case mix to the number of expected readmissions based on the average national level of performance with that hospital's case mix, multiplied by the national observed readmission rate. This is the same measure calculation methodology as the current measures in the Hospital Readmissions Reduction Program. For more detail on how the Sepsis Readmission measure would be used to calculate the 30-day Risk-Standardized Readmission Rate we refer readers to the methodology report available at:
If finalized as proposed, the Sepsis Readmission measure would use the same methodology and statistical modeling approach as the current measures in the Hospital Readmissions Reduction Program. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51673 through 51676), we finalized the excess readmission ratio pursuant to section 1886(q)(4)(C) of the Act. The ratio is calculated using hierarchical logistic regression. The method adjusts for variation across hospitals in how sick their patients are when admitted to the hospital (and therefore, variation in hospital patients' readmission risk) as well as the variation in the number of patients that a hospital treats to reveal differences in quality. The method produces an adjusted actual (or “predicted”) number in the numerator and an “expected” number in the denominator. The expected calculation is similar to that for logistic regression—it is the sum of all patients' expected probabilities of readmission, given their risk factors and the risk of readmission at an average hospital with a similar patient case mix. For each hospital, the numerator of the ratio used in the consensus-based entity methodology (actual adjusted readmissions) is calculated by estimating the probability of readmission for each patient at that hospital and summing up over all the hospital's patients to get the actual adjusted number of readmissions for that hospital. The ratio compares the total adjusted actual readmissions at the hospital to the number that would be expected if the hospital's patients were treated at an average hospital with similar patients. Hospitals with more adjusted actual readmissions than expected readmissions will have a risk-standardized ratio (excess readmission ratio) greater than one.
For additional detail on the methodology of excess readmission ratio calculations, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53380 through 53381). We also refer readers to section V.I.2.b.5. of the preamble of this proposed rule for a description of how the Sepsis Readmission measure would be incorporated into the Hospital Readmissions Reduction Program payment adjustment beginning with the FY 2029 program year.
Reliability testing was conducted to assess the consistency and stability of the Sepsis Readmission measure in distinguishing hospital performance. The testing methodology evaluated whether observed differences in hospital readmission rates reflect true differences in quality of care rather than random variation.
The reliability analysis employed standard statistical approaches to examine measure performance across hospitals with varying patient volumes. Specifically, we assessed split-half reliability, also called split-sample reliability, to test the internal consistency or stability of the measure. Reliability was estimated both at the measure score and accountable-entity levels.
Reliability testing was assessed using two years of data from January 1, 2022, through December 31, 2023. Table V.I.-03 shows split-half reliability result at the measure score level for hospitals with a minimum case of ≥ 2 cases and ≥ 25 cases (the proposed threshold for public reporting), respectively. The results indicate that the measure is sufficiently reliable for distinguishing between high- and low-performing hospitals, consistent with the minimum standard for reliability set forth by the Partnership for Quality Measurement (>=0.60).
Table V.I.-04 shows the accountable entity-level reliability results for hospitals with a minimum case of ≥ 25 cases (the proposed threshold for public reporting). Hospitals were categorized into volume deciles to assess reliability across different facility sizes and patient populations. Using this method, 69 percent of accountable entities met the split-half reliability estimate threshold of ≥ 0.60. This indicates that the measure is sufficiently reliable for distinguishing between high- and low-performing hospitals.
The Sepsis Readmission measure demonstrates acceptable reliability based on the split-half reliability method, both at the measure score level, and at the entity level. The measure's strong reliability, combined with evidence of substantial performance variation, indicates that it will provide hospitals with actionable, consistent feedback to drive improvements in sepsis care transitions and reduce preventable readmissions.
We also conducted additional analyses to examine coding variability as a source of bias in entity level performance scores; and post-discharge mortality within 30 days of discharge to account for competing risk of mortality in readmission risk. The analyses found no correlation between the hospital level use of sepsis code A41.9 (the most widely used code) and readmission or mortality risk. There was also no correlation between post-discharge mortality and readmission risk at the entity (hospital) level. Post-discharge mortality was stable with increasing duration of time since discharge and up to 30 days. Please refer to the measure methodology report on QualityNet for more detailed information on these analyses, available at:
We refer readers to the Partnership for Quality Measurement website for details on the PRMR process, including the voting procedures used to reach consensus on measure recommendations.
The voting results of the PRMR Hospital Recommendation Group for the proposed Sepsis Readmission measure within the Hospital Readmissions Reduction Program were as follows: 13 (65 percent) of the Recommendation Group members recommended adopting the measure into the Hospital Readmissions Reduction Program; seven (35 percent) of the Recommendation Group members voted not to recommend the measure for adoption.
The Recommendation Group expressed concerns about adopting the Sepsis Readmission measure directly into the Hospital Readmissions Reduction Program, given the payment implications and the perception that hospitals may need time to adapt. Several members recommended a staged approach—initial implementation in the Hospital Inpatient Quality Reporting Program for multiple years, followed by later consideration for Hospital Readmissions Reduction Program—so hospitals have adequate time to understand the measure before the measure is tied to payment.
We appreciate these implementation concerns and agree that careful rollout planning is important for any measure proposed for pay-for-performance programs. We agree that hospitals would benefit from understanding their performance on the Sepsis Readmission measure and potential impacts to their payment under the Hospital Readmissions Reduction Program prior to using the measure for payment adjustments. We considered whether to first adopt this measure in the Hospital Inpatient Quality Reporting Program, in order to give hospitals time to become familiar with the measure before adopting it in a penalty program. However, given the significant morbidity and mortality linked to sepsis and the high case volume and cost of hospital readmissions, we are proposing to adopt the measure directly into the Hospital Readmissions Reduction Program, but using a phased approach, in an effort to balance implementation concerns against our intention to address this CMS priority in a timely manner. We are proposing to implement the Sepsis Readmission measure with “early look” reports for FY 2028—discussed further in section V.I.2.b.6. of the preamble of this proposed rule— that would include sepsis readmission rates as well as estimated Hospital Readmissions Reduction Program payment adjustments with the addition
Committee members also raised methodological concerns, including the perceived imprecision of claims-based readmission measures and uncertainty about risk adjustment adequacy, particularly for rural hospitals and hospitals facing documentation constraints (for example, non-employed clinicians, limited resources). We acknowledge the committee's view of the limitations and variability in accuracy of claims-based measures; however, claims-based readmission measures are widely used in CMS programs because they are nationally scalable, consistently available, and minimize provider reporting burden while enabling standardized comparisons across hospitals. For this measure specifically, we conducted analyses to examine variation in the use of sepsis codes across hospitals, stratified by volume of sepsis cases treated, and observed no correlation with 30-readmission or mortality, indicating that documentation practices are not driving hospital measure performance. We wish to emphasize that the risk adjustment variables were identified through a deliberative and empirical process that resulted in a robust risk adjustment model that includes clinically relevant variables such as severity of sepsis, source of infection, how aggressive the infectious organism is, immunocompromised state of the patient, and organ failure/dysfunction. The risk model demonstrated strong calibration and discrimination in testing including for patients with differing severity of sepsis. For more details on our analysis of measure reliability and the risk adjustment methodology, we refer readers to subsection (6) in this section and to the measure methodology report, available at:
Finally, the committee emphasized the need for greater consistency in sepsis definitions across measures and payors, with many urging alignment with Sepsis-3 as the most current international consensus definition.
We refer readers to the Partnership for Quality Measurement website for details on the measure endorsement and maintenance process, including the measure evaluation procedures the Endorsement and Maintenance Committees use to evaluate measures and whether they meet endorsement criteria. The measure was submitted for review in the Fall 2025 cycle. The Cost and Efficiency Recommendation Group reviewed the Hospital-Level, Risk-Standardized 30-day All-Cause Readmission Following Hospitalization for Sepsis (CBE# 5275) on February 6, 2026. The voting results of the Recommendation Group were: 16 members (84 percent) voted to endorse the measure, and 3 members (16 percent) voted not to endorse the measure. With a vote of 84 percent, the measure was endorsed, without conditions.
The payment adjustment factor under the Hospital Readmissions Reduction Program is calculated as the greater of 1 minus the ratio of aggregate payments for excess readmissions for the applicable condition to aggregate payments for all discharges or the applicable floor adjustment factor, as defined by section 1886(q)(3)(A) of the Act. The definition for “aggregate payments for excess readmissions” is codified at § 412.152 and the methodology to calculate the payment adjustment factor is codified at § 412.154(c).
As a result of the proposal to add sepsis as an applicable condition under the Hospital Readmissions Reduction Program, excess readmissions for sepsis would be included in the calculation of aggregate payments for excess readmissions beginning with the FY 2029 program year. Consistent with the definition codified at § 412.152, aggregate payments for excess readmissions would include the aggregate base operating DRG payments for excess readmissions associated with sepsis, as applicable. Accordingly, the inclusion of sepsis as an applicable condition would be reflected in the calculation of the payment adjustment factor consistent with the established methodology of the program.
To assess the expected impact on hospital payment adjustments resulting from the proposal to adopt the Sepsis Readmission measure, we estimated hospitals' payment adjustment factors including the Sepsis Readmission measure. Table V.I.-05 shows the estimated total Medicare savings with and without the Sepsis Readmission measure included in the program measure set. Based on our analysis, the estimated average payment reduction per penalized hospital when including the Sepsis Readmission measure increased by approximately $63,500.
Our analysis, as reflected in Table V.I.-06, also assessed the impact of the proposed Sepsis Readmission measure adoption on the number of hospitals that could be penalized under the Hospital Readmissions Reduction Program (that is, they have 25 or more eligible discharges for at least one measure), the number and percentage of penalized hospitals, and penalties as a share of payments overall and by hospital characteristics. The results for the current measure set are equal to those in Table V.I.-05, which show the estimated results for the FY 2027 Hospital Readmissions Reduction Program by hospital characteristic. The second and sixth columns in Table V.I.-06 indicate the total number of hospitals that could be penalized under the Hospital Readmissions Reduction Program. Poorly performing hospitals included in the program may receive a penalty if they are non-Maryland subsection (d) hospitals with 25 or more eligible discharges for at least one measure during the applicable period. The third and seventh columns in the table indicate the total number of non-Maryland hospitals with available data for each characteristic that have an estimated payment adjustment factor less than 1 (that is, penalized hospitals). The fourth and eighth columns in the table indicate the estimated percentage of penalized hospitals among those that could be penalized by hospital characteristic. The fifth and ninth columns in the table estimate the financial impact on hospitals by hospital characteristic, referred to as the penalty as a share of payments. The penalty as a share of payments is calculated as the sum of penalties for all hospitals with that characteristic over the sum of all base operating DRG payments for those hospitals. For example, under the current measure set without sepsis, the penalty as a share of payments for urban hospitals is 0.48 percent, and with the proposed updates, the penalty as a share of payments for urban hospitals is 0.68 percent. This means that total penalties for all urban hospitals is 0.48 percent of total payments for urban hospitals under the current measure set and 0.68 percent with the proposed measure set to add sepsis. Measuring the financial impact on hospitals as a percentage of total base operating DRG payments accounts for differences in the amount of base operating DRG payments for hospitals with the characteristic when comparing the financial impact of the program on different groups of hospitals.
The Sepsis Readmission measure uses Medicare administrative data (Medicare Fee-for-Service Part A and Part B claims, hospital-submitted Medicare Advantage claims, and Medicare Advantage Organization-submitted encounter data) for Medicare Fee-for-Service and Medicare Advantage beneficiaries hospitalized for sepsis. Because this measure utilizes CMS administrative data, a hospital would not be required to submit additional data for calculating the measure. In the FY 2026 IPPS/LTCH PPS final rule, we finalized our policy to use 2 years of claims data to calculate readmission measures (90 FR 36931 through 36932) in conjunction with the policy to integrate Medicare Advantage beneficiaries into the cohorts of the Hospital Readmissions Reduction Program measure set (90 FR 36923 through 36929) beginning with the FY 2027 program year.
We considered whether to first adopt this measure in the Hospital Inpatient Quality Reporting Program, in order to give hospitals time to become familiar with the measure before adopting it in a penalty program. However, as discussed in section V.I.b.1. of the preamble of this proposed rule, given the significant morbidity and mortality linked to sepsis and the high case volume and cost of hospital readmissions, and our intention to address this CMS priority in a timely manner, we are proposing to adopt the measure in the Hospital Readmissions Reduction Program without delay, but also to provide hospitals with an “early look” of their Sepsis Readmission measure results and estimated Hospital Readmissions Reduction Program payment adjustments with the addition of the Sepsis Readmission measure for the FY 2028 program year, for which the applicable period is from July 1, 2024, to June 30, 2026. Data used in this early look would not be publicly reported or used for payment adjustment; the early look would provide hospitals with confidential reports of their measure and program results prior to public reporting of the Sepsis Readmission measure beginning with the FY 2029 program year.
We are proposing that the Sepsis Readmission measure would be used for payment adjustment beginning with the FY 2029 program year, for which the applicable period is from July 1, 2025, to June 30, 2027. We recognize that the first year of data used to calculate the Sepsis Readmission measure would include patient data from a period of time predating the proposal of the measure. We note that the approach of including that data in public reporting and payment determination is consistent with prior claims-based measure adoptions in the Hospital Readmissions Reduction Program. We reiterate that this measure would not require any additional data from hospitals and that the proposed implementation timeline would support our goal of addressing the health care quality gap in sepsis care in a timely manner. Consistent with the standard of care for patients with sepsis, we expect that hospitals are already providing the types of discharge planning and care coordination services that would be expected to minimize readmissions. Additionally, more than half of the proposed first reporting period would take place after the intended publication date of the FY 2027 IPPS/LTCH PPS final rule. This would allow hospitals to make any necessary improvements to their discharge planning and care coordination processes. We refer readers to the FY 2015 IPPS/LTCH PPS final rule for an example of such an instance (79 FR 50033 through 50039). If this measure adoption is finalized, we would continue to publicly report readmission rates by publicly posting the readmission measure results annually for the applicable conditions for each hospital on the Compare tool or successor website(s), currently available at
We invite public comment on our proposal to adopt the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure as part of the Hospital Readmissions Reduction Program measure set beginning with an early look for the FY 2028 program year (applicable period of July 1, 2024, to June 30, 2026), and use for the FY 2029 program year (applicable period of July 1, 2025, to June 30, 2027) and subsequent years.
For background on the Hospital Value-Based Purchasing Program, we refer readers to the CMS website at:
Under section 1886(o)(7)(C)(v) of the Act, the applicable percent for the FY 2027 program year is 2.00 percent. Using the methodology we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 53573), we estimate that the total amount available for value-based incentive payments for FY 2027 is approximately $1.9 billion, based on the December 2025 update of the FY 2025 MedPAR file.
As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53573 through 53576), we will utilize a linear exchange function to translate this estimated amount available into a value-based incentive payment percentage for each hospital, based on its Total Performance Score (TPS). We are publishing proxy value-based incentive payment adjustment factors in Table 16 associated with this proposed rule (which is available via the internet on the CMS website). We note that these proxy adjustment factors will not be used to adjust hospital payments. These proxy value-based incentive payment adjustment factors were calculated using the FY 2027 Hospital Value-Based Purchasing Program methodology and historical baseline and performance periods for the FY 2026 Hospital Value-Based Purchasing Program. These proxy factors were calculated using the December 2025 update to the FY 2025 MedPAR file. The slope of the linear exchange function used to calculate these proxy factors was 3.4503276602, and the estimated amount available for value-based incentive payments to hospitals for FY 2027 is approximately $1.9 billion. We intend to include an update to this table, as Table 16A, with the FY 2027 IPPS/LTCH PPS final rule, to reflect changes based on the March 2026 update to the FY 2025 MedPAR file. We will add Table 16B to display the actual value-based incentive payment adjustment factors, exchange function slope, and estimated amount available for the FY 2027 Hospital Value-Based Purchasing Program. We expect that Table 16B will be posted on the CMS website in fall 2026.
We are proposing to adopt substantive measure updates to five condition-specific and procedure-specific mortality measures, in the Clinical Outcome domain, beginning with the July 1, 2028 through June 30, 2030
We refer readers to the FY 2026 IPPS/LTCH PPS final rule for summaries of the previously adopted measures for the FY 2027 through FY 2031 program years (90 FR 36951). We are not proposing any changes to the measure set. Table V.J.1. summarizes the previously adopted Hospital Value-Based Purchasing Program measure set for the FY 2027 program year.
Table V.J.2. summarizes the previously adopted Hospital Value-Based Purchasing Program measures for the FY 2028 through FY 2032 program years.
We refer readers to the FY 2026 IPPS/LTCH PPS final rule (90 FR 36951 through 36954) for previously adopted baseline and performance periods for the FY 2027 through FY 2031 program years. We also refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56998) in which we finalized a schedule for all future baseline and performance periods.
Tables V.J.3., V.J.4., V.J.5., V.J.6., and V.J.7. summarize the baseline and performance periods that we have previously adopted.
We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69406 through 69407) for previously established performance standards for the FY 2027 program year. We also refer readers to the FY 2026 IPPS/LTCH PPS final rule (90 FR 36955 through 36957) for the previously established performance standards for the FY 2028 program year.
We have adopted certain measures for the Safety domain, Clinical Outcomes domain, and the Efficiency and Cost Reduction domain for future program years to ensure that we can adopt baseline and performance periods of sufficient length for performance scoring purposes. In the FY 2026 IPPS/LTCH PPS final rule (90 FR 36948 through 36950), we made technical updates to the Clinical Outcomes domain beginning with the FY 2027 program year to include COVID-19 patients in the measure data, and thus established new performance standards for the FY 2029 through the FY 2031 program years for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-HF, MORT-30-PN, MORT-30-COPD, MORT-30- CABG, and COMP-HIP-KNEE). In the FY 2026 IPPS/LTCH PPS final rule (90 FR 36954 through 36955), we made technical updates to the Safety domain, such that the five National Healthcare Safety Network Healthcare-associated Infection measures (CAUTI, CLABSI, CDI, MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI) would use the CY 2022 data to calculate performance standards for the FY 2029 program year and subsequent years. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69409 through 69410), we established performance standards for the FY 2029 through the FY 2030 program years for the Efficiency and Cost Reduction domain measure (MSPB Hospital). We note that the performance standards for the MSPB Hospital measure are based on performance period data. Therefore, we are unable to provide numerical equivalents for the standards at this time. The previously established performance standards for Clinical Outcomes domain and the Efficiency and Cost Reduction domain and newly estimated performance standards for the Safety domain measures are set out in Table V.J.8. for the FY 2029 program year.
We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69507 through 69508) where we finalized the policy to modify the scoring of the HCAHPS Survey for the FY 2027 through FY 2029 program years while updates to the survey are publicly reported under the Hospital Inpatient Quality Reporting Program. Scoring is modified to only score hospitals on the six unchanged Hospital Value-Based Purchasing Program dimensions of the HCAHPS Survey until the updates to the HCAHPS Survey have been publicly reported for one year. The six unchanged dimensions of the HCAHPS Survey for the Hospital Value-Based Purchasing Program are as follows:
• “Communication with Nurses,”
• “Communication with Doctors,”
• “Communication about Medicines,”
• “Discharge Information,”
• “Cleanliness and Quietness,”
• “Overall Rating.”
Scoring is modified such that for each of the six unchanged dimensions, Achievement Points (0-10 points) and Improvement Points (0-9 points) will be calculated, the larger of which will be summed across these six dimensions to create a pre-normalized HCAHPS Base Score of 0-60 points (as compared to 0-80 points with the current eight dimensions). The pre-normalized HCAHPS Base Score will then be multiplied by
The previously established performance standards for Clinical Outcomes domain and the Efficiency and Cost Reduction domain measures are set out in Table V.J.10. for the FY 2030 program year.
The previously established performance standards for Clinical Outcomes domain and the Efficiency and Cost Reduction domain measures are set out in Table V.J.11. for the FY 2031 program year.
As discussed previously, we have adopted certain measures for the Clinical Outcomes domain (MORT-30- AMI, MORT-30-HF, MORT-30-PN, MORT-30-COPD, MORT-30-CABG, and COMP-HIP- KNEE) and the Efficiency and Cost Reduction domain (MSPB Hospital) for future program years to ensure that we can adopt baseline and performance periods of sufficient length for performance scoring purposes. In accordance with our methodology for calculating performance standards discussed more fully in the Hospital Inpatient Value-Based Purchasing Program final rule (76 FR 26511 through 26512), which is codified at 42 CFR 412.160, we are establishing the following performance standards for the FY 2032 program year for the Clinical Outcomes domain and the Efficiency and Cost Reduction domain. We note that the performance standards for the MSPB Hospital measure are based on performance period data. Therefore, we are unable to provide numerical equivalents for the standards at this time. The newly established performance standards for these measures are set out in Table V.J.12.
We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50709) for a general overview of the HAC Reduction Program and a detailed discussion of the statutory basis for the program. We also refer readers to 42 CFR 412.170 through 412.172 for codified HAC Reduction Program requirements. For additional information about the HAC Reduction Program measures and maintenance of technical specifications, we refer readers to the FY 2026 IPPS/LTCH PPS final rule (90 FR 36963 through 36967).
We are not making any proposals or updates for the HAC Reduction Program in this proposed rule. We refer readers to section I.G.8. of Appendix A of this
The Rural Community Hospital Demonstration was originally authorized by section 410A of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). The demonstration has been extended three times since the original 5-year period mandated by the MMA, each time for an additional 5 years. These extensions were authorized by sections 3123 and 10313 of the Patient Protection and Affordable Care Act (ACA) (Pub. L. 111-148), section 15003 of the 21st Century Cures Act (Pub. L. 114-255) (Cures Act) enacted in 2016, and most recently, by section 128 of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260), which also reauthorized the RCHD for five years. Later in this section we summarize the status of the demonstration program and the current methodologies for implementation and calculating budget neutrality.
Section 410A(a) of the MMA required the Secretary to establish a demonstration program to test the feasibility and advisability of establishing rural community hospitals to furnish covered inpatient hospital services to Medicare beneficiaries. The demonstration pays rural community hospitals under a reasonable cost-based methodology for Medicare payment purposes for covered inpatient hospital services furnished to Medicare beneficiaries. A rural community hospital, as defined in section 410A(f)(1), is a hospital that—
• Is located in a rural area (as defined in section 1886(d)(2)(D) of the Act) or is treated as being located in a rural area under section 1886(d)(8)(E) of the Act;
• Has fewer than 51 beds (excluding beds in a distinct part psychiatric or rehabilitation unit) as reported in its most recent cost report;
• Provides 24-hour emergency care services; and
• Is not designated or eligible for designation as a CAH under section 1820 of the Act.
Our policy for implementing the 5-year extension period authorized by the CAA, 2021 follows upon the previous extensions under the ACA and the Cures Act. Section 410A of the MMA initially required a 5-year period of performance. Subsequently, sections 3123 and 10313 of the ACA (Pub. L. 111-148) required the Secretary to conduct the demonstration program for an additional 5-year period, to begin on the date immediately following the last day of the initial 5year period. In addition, the ACA (Pub. L. 111-148) limited the number of hospitals participating to no more than 30. Section 15003 of the Cures Act (Pub. L. 114-255) required a 10-year extension period in place of the 5-year extension period under the ACA (Pub. L. 111-148), thereby extending the demonstration for another 5 years. Section 128 of CAA, 2021 (Pub. L. 116-260), in turn, revised the statute to indicate a 15-year extension period, instead of the 10-year extension period mandated by the Cures Act (Pub. L. 114-255). The FY 2023 IPPS proposed and final rules (87 FR 28454 through 28458, and 87 FR 49138 through 49142, respectively) describe hospitals entering into and withdrawing from the demonstration with these re-authorizations. As of March 2026, there are 27 hospitals participating in the demonstration.
Section 410A(c)(2) of the MMA (Pub. L. 108-173) requires that, in conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount that the Secretary would have paid if the demonstration program under this section was not implemented. This requirement is commonly referred to as “budget neutrality.” Generally, when we implement a demonstration program on a budget neutral basis, the demonstration program is budget neutral on its own terms; the aggregate payments to the participating hospitals do not exceed the amount that would be paid to those same hospitals in the absence of the demonstration program. We note that the payment methodology for this demonstration, that is, cost-based payments to participating small rural hospitals, made it unlikely that increased Medicare outlays would produce an offsetting reduction to Medicare expenditures elsewhere. Therefore, in the IPPS final rules spanning the period from FY 2005 through FY 2016, we have adjusted the national IPPS rates by an amount sufficient to account for the added costs of this demonstration program, applying budget neutrality across the payment system as a whole rather than merely across the participants in the demonstration program. We applied a different methodology for FY 2017, with the demonstration expected to end prior to the Cures Act extension. As described in the FYs 2005 through 2017 IPPS/LTCH PPS final rules (69 FR 49183; 70 FR 47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 74 FR 43922, 75 FR 50343, 76 FR 51698, 77 FR 53449, 78 FR 50740, 77 FR 50145; 80 FR 49585; and 81 FR 57034, respectively), we believe that the statutory language of the budget neutrality requirements permits the agency to implement the budget neutrality provision in this manner.
We resumed this methodology of offsetting demonstration costs against the national payment rates in the IPPS final rules from FY 2018 through FY 2026. Please see the FY 2026 IPPS/LTCH PPS final rule for a description of how we applied the budget neutrality requirement for these fiscal years (90 FR 36967 through 36969).
We have generally incorporated two components into the budget neutrality offset amounts identified in the final IPPS rules in previous years. First, we have estimated the costs of the demonstration for the upcoming fiscal year, generally determined from historical, “as submitted” cost reports for the hospitals participating in that year. Updated factors representing nationwide trends in cost and volume increases have been incorporated into these estimates, as specified in the methodology described in the final rule for each fiscal year. Second, as finalized cost reports became available, we determined the amount by which the actual costs of the demonstration for an earlier, given year differed from the estimated costs for the demonstration set forth in the final IPPS rule for the corresponding fiscal year, and incorporated that amount into the budget neutrality offset amount for the upcoming fiscal year. If the actual costs for the demonstration for the earlier fiscal year exceeded the estimated costs of the demonstration identified in the final rule for that year, this difference was added to the estimated costs of the demonstration for the upcoming fiscal year when determining the budget neutrality adjustment for the upcoming fiscal year. Conversely, if the estimated costs of the demonstration set forth in the final rule for a prior fiscal year exceeded the actual costs of the demonstration for that year, this difference was subtracted from the estimated cost of the demonstration for
We note that we have calculated this difference for FYs 2005 through 2020 between the actual costs of the demonstration as determined from finalized cost reports once available, and estimated costs of the demonstration as identified in the applicable IPPS final rules for these years.
For the most-recently enacted extension period, under the CAA, 2021, we have continued upon the general budget neutrality methodology used in previous years, as described previously in the citations to earlier IPPS final rules.
Under the general methodology used in previous years, we have estimated the costs of the demonstration for the upcoming fiscal year, and proposed to incorporate the estimate into the budget neutrality offset amount to be applied to the national IPPS rates for the upcoming fiscal year. We are conducting this estimate for FY 2027 based on the 30 participating hospitals for cost report periods ending in CY2024. However, due to timing issues with the addition of 11 new hospitals in 2025, we are not yet able to finalize the estimated FY 2027 costs of the demonstration at this time. We anticipate that all of the historical “as submitted” cost reports needed to formulate estimated demonstration costs for FY 2027 and FY 2028 will be available in advance of the FY 2028 IPPS/LTCH PPS proposed rule and we will be able to finalize estimated demonstration costs for both FY 2027 and FY 2028.
As noted, in previous years we have also calculated the difference between the actual costs of the demonstration and estimated costs of the demonstration for FYs 2005 through 2020 as determined from finalized cost reports. We intend to continue with this approach and anticipate that we will be able to determine the actual costs for the demonstration for FY 2021 and FY 2022 from finalized cost reports in advance of the FY 2028 IPPS/LTCH PPS proposed rule. Consistent with our methods in previous years these differences will be applied to the estimated costs of the demonstration when determining the FY 2027 and FY 2028 budget neutrality offsets.
As we are not yet able to finalize the FY 2027 estimated costs of the demonstration at this time, we are not proposing to apply a budget neutrality offset to the FY 2027 IPPS/LTCH PPS proposed rule. Rather, we are proposing to apply budget neutrality offsets for both FY 2027 and FY 2028 to the national IPPS rates in the FY 2028 IPPS/LTCH PPS proposed rule. We will also incorporate any statutory change that might affect the methodology for determining hospital costs either with or without the demonstration. We invite public comments.
Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient acute hospital services in accordance with a prospective payment system established by the Secretary. Under the statute, the Secretary has broad authority in establishing and implementing the IPPS for acute care hospital inpatient capital-related costs. We initially implemented the IPPS for capital-related costs in the FY 1992 IPPS final rule (56 FR 43358). In that final rule, we established a 10-year transition period to change the payment methodology for Medicare hospital inpatient capital-related costs from a reasonable cost-based payment methodology to a prospective payment methodology (based fully on the Federal rate).
FY 2001 was the last year of the 10-year transition period that was established to phase in the IPPS for hospital inpatient capital-related costs. For cost reporting periods beginning in FY 2002, capital IPPS payments are based solely on the Federal rate for almost all acute care hospitals (other than hospitals receiving certain exception payments and certain new hospitals). (We refer readers to the FY 2002 IPPS final rule (66 FR 39910 through 39914) for additional information on the methodology used to determine capital IPPS payments to hospitals both during and after the transition period.)
The basic methodology for determining capital prospective payments using the Federal rate is set forth in the regulations at 42 CFR 412.312. For the purpose of calculating capital payments for each discharge, the standard Federal rate is adjusted as follows:
In addition, under § 412.312(c), hospitals also may receive outlier payments under the capital IPPS for extraordinarily high-cost cases that qualify under the thresholds established for each fiscal year.
The regulations at 42 CFR 412.348 provide for certain exception payments under the capital IPPS. The regular exception payments provided under § 412.348(b) through (e) were available only during the 10-year transition period. For a certain period after the transition period, eligible hospitals may have received additional payments under the special exceptions provisions at § 412.348(g). However, FY 2012 was the final year hospitals could receive special exceptions payments. For additional details regarding these exceptions policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725).
Under § 412.348(f), a hospital may request an additional payment if the hospital incurs unanticipated capital expenditures in excess of $5 million due to extraordinary circumstances beyond the hospital's control. Additional information on the exception payment for extraordinary circumstances in § 412.348(f) can be found in the FY 2005 IPPS final rule (69 FR 49185 and 49186).
Under the capital IPPS, the regulations at 42 CFR 412.300(b) define a new hospital as a hospital that has operated (under previous or current ownership) for less than 2 years and lists examples of hospitals that are not considered new hospitals. In accordance with § 412.304(c)(2), under the capital IPPS, a new hospital is paid 85 percent of its allowable Medicare inpatient hospital capital related costs through its first 2 years of operation, unless the new hospital elects to receive full prospective payment based on 100 percent of the Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725) for additional information on payments to new hospitals under the capital IPPS.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57061), we revised the regulations at 42 CFR 412.374 relating to the calculation of capital IPPS payments to hospitals located in Puerto Rico
The proposed annual update to the national capital Federal rate, as provided in 42 CFR 412.308(c), for FY 2027 is discussed in section III. of the Addendum to this FY 2027 IPPS/LTCH PPS proposed rule.
Certain hospitals excluded from a prospective payment system, including children's hospitals, 11 cancer hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) receive payment for inpatient hospital services they furnish on the basis of reasonable costs, subject to a rate-of-increase ceiling. A per discharge limit (the target amount, as defined in § 413.40(a) of the regulations) is set for each hospital based on the hospital's own cost experience in its base year, and updated annually by a rate-of-increase percentage. For each cost reporting period, the updated target amount is multiplied by total Medicare discharges during that period and applied as an aggregate upper limit (the ceiling as defined in § 413.40(a)) of Medicare reimbursement for total inpatient operating costs for a hospital's cost reporting period. In accordance with § 403.752(a) of the regulations, religious nonmedical health care institutions (RNHCIs) also are subject to the rate-of-increase limits established under § 413.40 of the regulations discussed previously. Furthermore, in accordance with § 412.526(c)(3) of the regulations, extended neoplastic disease care hospitals (formerly classified as “Subclause II LTCs”) also are subject to the rate-of-increase limits established under § 413.40 of the regulations discussed previously.
As explained in the FY 2006 IPPS final rule (70 FR 47396 through 47398), beginning with FY 2006, we have used the percentage increase in the IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, and RNHCIs.
Consistent with the regulations at §§ 412.23(g) and 413.40(a)(2)(ii)(A) and (c)(3)(viii), we also have used the percentage increase in the IPPS operating market basket to update target amounts for short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45207), we finalized the use of the percentage increase in the 2018-based IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa for FY 2022 and subsequent fiscal years. As discussed in section IV. of the preamble of the FY 2026 IPPS/LTCH PPS final rule (90 FR 36859 through 36866), we rebased and revised the IPPS operating basket to a 2023 base year. Therefore, we used the percentage increase in the 2023-based IPPS operating market basket to update the target amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa for FY 2026.
For this FY 2027 IPPS/LTCH PPS proposed rule, based on IGI's 2025 fourth quarter forecast, we estimate that the 2023-based IPPS operating market basket percentage increase for FY 2027 is 3.2 percent (that is, the estimate of the market basket rate-of-increase). Based on this estimate, the FY 2027 rate-of-increase percentage that will be applied to the FY 2026 target amounts in order to calculate the FY 2027 target amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa is 3.2 percent, in accordance with the applicable regulations at 42 CFR 413.40. Furthermore, we are proposing that if more recent data become available for the FY 2027 IPPS/LTCH PPS final rule, we would use such data, if appropriate, to calculate the final IPPS operating market basket percentage increase for FY 2027.
In addition, payment for inpatient operating costs for hospitals classified under section 1886(d)(1)(B)(vi) of the Act (which we refer to as “extended neoplastic disease care hospitals”) for cost reporting periods beginning on or after January 1, 2015, is to be made as described in 42 CFR 412.526(c)(3), and payment for capital costs for these hospitals is to be made as described in 42 CFR 412.526(c)(4), (for additional information on these payment regulations, we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38321 through 38322).) Section 412.526(c)(3) provides that the hospital's Medicare allowable net inpatient operating costs for that period are paid on a reasonable cost basis, subject to that hospital's ceiling, as determined under § 412.526(c)(1), for that period. Under § 412.526(c)(1), for each cost reporting period, the ceiling was determined by multiplying the updated target amount, as defined in § 412.526(c)(2), for that period by the number of total Medicare discharges paid during that period. Section 412.526(c)(2)(i) describes the method for determining the target amount for cost reporting periods beginning during FY 2015. Section 412.526(c)(2)(ii) specifies that, for cost reporting periods beginning during fiscal years after FY 2015, the target amount will equal the hospital's target amount for the previous cost reporting period updated by the applicable annual rate-of-increase percentage specified in § 413.40(c)(3) for the subject cost reporting period (79 FR 50197).
For FY 2027, in accordance with §§ 412.22(i) and 412.526(c)(2)(ii) of the regulations, for cost reporting periods beginning during FY 2027, the proposed update to the target amount for extended neoplastic disease care hospitals (that is, hospitals described under § 412.22(i)) is the applicable annual rate-of-increase percentage specified in § 413.40(c)(3), which is estimated to be the proposed percentage increase in the 2023-based IPPS operating market basket (that is, the estimate of the market basket rate-of-increase). Accordingly, the proposed update to an extended neoplastic disease care hospital's target amount for FY 2027 is 3.2 percent, which is based on IGI's fourth quarter 2025 forecast. Furthermore, we are proposing that if more recent data become available for the FY 2027 IPPS/LTCH PPS final rule,
Section 1820 of the Act provides for the establishment of Medicare Rural Hospital Flexibility Programs (MRHFPs), under which individual States may designate certain facilities as critical access hospitals (CAHs). Facilities that are so designated and meet the CAH conditions of participation under 42 CFR part 485, subpart F, will be certified as CAHs by CMS. Regulations governing payments to CAHs for services to Medicare beneficiaries are located in 42 CFR part 413.
The Frontier Community Health Integration Project Demonstration was originally authorized by section 123 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub L. 110-275). The demonstration has been extended by section 129 of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260) for an additional 5 years. In this proposed rule, we are summarizing the status of the demonstration program, and the ongoing methodologies for implementation and budget neutrality for the demonstration extension period.
As discussed in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36971 through 36975), section 123 of the Medicare Improvements for Patients and Providers Act of 2008, as amended by section 3126 of the Affordable Care Act, authorized a demonstration project to allow eligible entities to develop and test new models for the delivery of health care services in eligible counties in order to improve access to and better integrate the delivery of acute care, extended care and other health care services to Medicare beneficiaries. The demonstration was titled “Demonstration Project on Community Health Integration Models in Certain Rural Counties,” and commonly known as the Frontier Community Health Integration Project (FCHIP) Demonstration.
The authorizing statute stated the eligibility criteria for entities to be able to participate in the demonstration. An eligible entity, as defined in section 123(d)(1)(B) of Public Law 110-275, as amended, is a Medicare Rural Hospital Flexibility Program (MRHFP) grantee under section 1820(g) of the Act (that is, a CAH); and is located in a State in which at least 65 percent of the counties in the state are counties that have 6 or less residents per square mile.
The authorizing statute stipulated several other requirements for the demonstration. In addition, section 123(g)(1)(B) of Public Law 110-275 required that the demonstration be budget neutral. Specifically, this provision stated that, in conducting the demonstration project, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary estimates would have been paid if the demonstration project under the section were not implemented. Furthermore, section 123(i) of Public Law 110-275 stated that the Secretary may waive such requirements of titles XVIII and XIX of the Act as may be necessary and appropriate for the purpose of carrying out the demonstration project, thus allowing the waiver of Medicare payment rules encompassed in the demonstration. CMS selected CAHs to participate in four interventions, under which specific waivers of Medicare payment rules would allow for enhanced payment for telehealth, skilled nursing facility/nursing facility beds, ambulance services, and home health services. These waivers were formulated with the goal of increasing access to care with no net increase in costs.
Section 123 of Public Law 110-275 initially required a 3-year period of performance. The FCHIP Demonstration began on August 1, 2016, and concluded on July 31, 2019 (referred to in this section of the proposed rule as the “initial period”). Subsequently, section 129 of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260) extended the demonstration by 5 years (referred to in this section of the proposed rule as the “extension period”). The Secretary is required to conduct the demonstration for an additional 5-year period. CAHs participating in the demonstration project during the extension period began such participation in their cost reporting year that began on or after January 1, 2022.
As described in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36971 through 36975), 10 CAHs were selected for participation in the demonstration initial period. The selected CAHs were located in three states—Montana, Nevada, and North Dakota—and participated in three of the four interventions identified in the FY 2025 IPPS/LTCH PPS final rule. Each CAH was allowed to participate in more than one of the interventions. None of the selected CAHs were participants in the home health intervention, which was the fourth intervention.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 45328), CMS concluded that the initial period of the FCHIP Demonstration (covering the performance period of August 1, 2016, to July 31, 2019) had satisfied the budget neutrality requirement described in section 123(g)(1)(B) of Public Law 110-275. Therefore, CMS did not apply a budget neutrality payment offset policy for the initial period of the demonstration.
Section 129 of Public Law 116-260, stipulates that only the 10 CAHs that participated in the initial period of the FCHIP Demonstration are eligible to participate during the extension period. Among the eligible CAHs, five have elected to participate in the extension period. The selected CAHs are located in two states—Montana and North Dakota—and are implementing three of the four interventions. The eligible CAH participants elected to change the number of interventions and payment waivers they would participate in during the extension period. CMS accepted and approved the CAHs intervention and payment waiver updates. For the extension period, five CAHs are participants in the telehealth intervention, three CAHs are participants in the skilled nursing facility/nursing facility bed intervention, and three CAHs are participants in the ambulance services intervention. As with the initial period, each CAH was allowed to participate in more than one of the interventions during the extension period. None of the selected CAHs are participants in the home health intervention, which was the fourth intervention.
As described in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36971 through 36975), CMS waived certain Medicare rules for CAHs participating in the demonstration initial period to allow for alternative reasonable cost-based payment methods in the three distinct intervention service areas: telehealth services, ambulance services, and skilled nursing facility/nursing facility (SNF/NF) beds expansion. The payments and payment waiver provisions only apply if the CAH is a participant in the associated intervention. CMS Intervention Payment and Payment Waivers for the demonstration extension period consist of the following:
CMS waives section 1834(m)(2)(B) of the Act, which specifies the facility fee to the originating site for Medicare telehealth services. CMS modifies the facility fee payment specified under section 1834(m)(2)(B) of the Act to make reasonable cost-based reimbursement to the participating CAH where the participating CAH serves as the originating site for a telehealth service furnished to an eligible telehealth individual, as defined in section 1834(m)(4)(B) of the Act. CMS reimburses the participating CAH serving as the originating site at 101 percent of its reasonable costs for overhead, salaries and fringe benefits associated with telehealth services at the participating CAH. CMS does not fund or provide reimbursement to the participating CAH for the purchase of new telehealth equipment.
CMS waives section 1834(m)(2)(A) of the Act, which specifies that the payment for a telehealth service furnished by a distant site practitioner is the same as it would be if the service had been furnished in-person. CMS modifies the payment amount specified for telehealth services under section 1834(m)(2)(A) of the Act to make reasonable cost-based reimbursement to the participating CAH for telehealth services furnished by a physician or practitioner located at distant site that is a participating CAH that is billing for the physician or practitioner professional services. Whether the participating CAH has or has not elected Optional Payment Method II for outpatient services, CMS would pay the participating CAH 101 percent of reasonable costs for telehealth services when a physician or practitioner has reassigned their billing rights to the participating CAH and furnishes telehealth services from the participating CAH as a distant site practitioner. This means that participating CAHs that are billing under the Standard Method on behalf of employees who are physicians or practitioners (as defined in section 1834(m)(4)(D) and (E) of the Act, respectively) would be eligible to bill for distant site telehealth services furnished by these physicians and practitioners. Additionally, CAHs billing under the Optional Method would be reimbursed based on 101 percent of reasonable costs, rather than paid based on the Medicare physician fee schedule, for the distant site telehealth services furnished by physicians and practitioners who have reassigned their billing rights to the CAH. For distant site telehealth services furnished by physicians or practitioners who have not reassigned billing rights to a participating CAH, payment to the distant site physician or practitioner would continue to be made as usual under the Medicare physician fee schedule. Except as described herein, CMS does not waive any other provisions of section 1834(m) of the Act for purposes of the telehealth services intervention payments, including the scope of Medicare telehealth services as established under section 1834(m)(4)(F) of the Act.
CMS waives 42 CFR 413.70(b)(5)(i)(D) and section 1834(l)(8) of the Act, which provides that payment for ambulance services furnished by a CAH, or an entity owned and operated by a CAH, is 101 percent of the reasonable costs of the CAH or the entity in furnishing the ambulance services, but only if the CAH or the entity is the only provider or supplier of ambulance services located within a 35-mile drive of the CAH, excluding ambulance providers or suppliers that are not legally authorized to furnish ambulance services to transport individuals to or from the CAH. The participating CAH would be paid 101 percent of reasonable costs for its ambulance services regardless of whether there is any provider or supplier of ambulance services located within a 35-mile drive of the participating CAH or participating CAH-owned and operated entity. CMS would not make cost-based payment to the participating CAH for any new capital (for example, vehicles) associated with ambulance services. This waiver does not modify any other Medicare rules regarding or affecting the provision of ambulance services.
CMS waives 42 CFR 485.620(a), 42 CFR 485.645(a)(2), and section 1820(c)(2)(B)(iii) of the Act which limit CAHs to maintaining no more than 25 inpatient beds, including beds available for acute inpatient or swing bed services. CMS waives 1820(f) of the Act permitting designating or certifying a facility as a critical access hospital for which the facility at any time is furnishing inpatient beds which exceed more than 25 beds. Under this waiver, if the participating CAH has received swing bed approval from CMS, the participating CAH may maintain up to ten additional beds (for a total of 35 beds) available for acute inpatient or swing bed services; however, the participating CAH may only use these 10 additional beds for nursing facility or skilled nursing facility level of care. CMS would pay the participating CAH 101 percent of reasonable costs for its SNF/NF services furnished in the 10 additional beds.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 45328), we finalized a policy to address the budget neutrality requirement for the demonstration initial period. As explained in the FY 2022 IPPS/LTCH PPS final rule, we based our selection of CAHs for participation in the demonstration with the goal of maintaining the budget neutrality of the demonstration on its own terms, meaning that the demonstration would produce savings from reduced transfers and admissions to other health care providers, offsetting any increase in Medicare payments as a result of the demonstration. However, because of the small size of the demonstration and uncertainty associated with the projected Medicare utilization and costs, the policy we finalized for the demonstration initial period of performance in the FY 2022 IPPS/LTCH PPS final rule provides a contingency plan to ensure that the budget neutrality requirement in section 123 of Public Law 110-275 is met.
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 through 49147), we adopted the same budget neutrality policy contingency plan used during the demonstration initial period to ensure that the budget neutrality requirement in section 123 of Public Law 110 275 is met during the demonstration extension period. If analysis of claims data for Medicare beneficiaries receiving services at each of the participating CAHs, as well as from other data sources, including cost reports for the participating CAHs, shows that increases in Medicare payments under the demonstration during the 5-year extension period are not sufficiently offset by reductions elsewhere, we would recoup the additional expenditures attributable to the demonstration through a reduction in payments to all CAHs nationwide.
As explained in the FY 2023 IPPS/LTCH PPS final rule, because of the small scale of the demonstration, we indicated that we did not believe it would be feasible to implement budget neutrality for the demonstration extension period by reducing payments to only the participating CAHs. Therefore, in the event that this demonstration extension period is
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 through 49147), we stated that we believe it is appropriate to make any payment reductions across all CAHs because the FCHIP Demonstration was specifically designed to test innovations that affect delivery of services by the CAH provider category. We explained our belief that the language of the statutory budget neutrality requirement at section 123(g)(1)(B) of Public Law 110-275 permits the agency to implement the budget neutrality provision in this manner. The statutory language merely refers to ensuring that aggregate payments made by the Secretary do not exceed the amount which the Secretary estimates would have been paid if the demonstration project was not implemented and does not identify the range across which aggregate payments must be held equal.
In the FY 2023 IPPS/LTCH PPS final rule, we finalized a policy that in the event the demonstration extension period is found not to have been budget neutral, any excess costs would be recouped within one fiscal year. We explained our belief that this policy is a more efficient timeframe for the government to conclude the demonstration operational requirements (such as analyzing claims data, cost report data or other data sources) to adjudicate the budget neutrality payment recoupment process due to any excess cost that occurred as result of the demonstration extension period.
As explained in the FY 2022 IPPS/LTCH PPS final rule, we finalized a policy to address the demonstration budget neutrality methodology and analytical approach for the initial period of the demonstration. In the FY 2023 IPPS/LTCH PPS final rule, we finalized a policy to adopt the budget neutrality methodology and analytical approach used during the demonstration initial period to ensure budget neutrality for the extension period. The analysis of budget neutrality during the initial period of the demonstration identified both the costs related to providing the intervention services under the FCHIP Demonstration and any potential downstream effects of the intervention-related services, including any savings that may have accrued.
The budget neutrality analytical approach for the demonstration initial period incorporated two major data components: (1) Medicare cost reports; and (2) Medicare administrative claims. As described in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 45328), CMS computed the cost of the demonstration for each fiscal year of the demonstration initial period using Medicare cost reports for the participating CAHs, and Medicare administrative claims and enrollment data for beneficiaries who received demonstration intervention services.
In addition, in order to capture the full impact of the interventions, CMS developed a statistical modeling, Difference-in-Difference (DiD) regression analysis to estimate demonstration expenditures and compute the impact of expenditures on the intervention services by comparing cost data for the demonstration and non-demonstration groups using Medicare administrative claims across the demonstration period of performance under the initial period of the demonstration. The DiD regression analysis would compare the direct cost and potential downstream effects of intervention services, including any savings that may have accrued, during the baseline and performance period for both the demonstration and comparison groups.
Second, the Medicare administrative claims analysis would be reconciled using data obtained from auditing the participating CAHs' Medicare cost reports. We would estimate the costs of the demonstration using “as submitted” cost reports for each hospital's financial fiscal year participation within each of the demonstration extension period performance years. Each CAH has its own Medicare cost report end date applicable to the 5-year period of performance for the demonstration extension period. The cost report is structured to gather costs, revenues and statistical data on the provider's financial fiscal period. As a result, we finalized a policy in the FY 2023 IPPS/LTCH PPS final rule that we would determine the final budget neutrality results for the demonstration extension once complete data is available for each CAH for the demonstration extension period.
As stated in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36971 through 36975), our policy for implementing the 5-year extension period for section 129 of Public Law 116-260 follows same budget neutrality methodology and analytical approach as the demonstration initial period methodology. While we expect to use the same methodology that was used to assess the budget neutrality of the FCHIP Demonstration during initial period of the demonstration to assess the financial impact of the demonstration during this extension period, upon receiving data for the extension period, we may update and/or modify the FCHIP budget neutrality methodology and analytical approach to ensure that the full impact of the demonstration is appropriately captured.
At this time, for the FY 2027 IPPS/LTCH PPS proposed rule, while this discussion represents our anticipated approach to assessing the financial impact of the demonstration extension period based on upon receiving data for the full demonstration extension period, we may update and/or modify the FCHIP Demonstration budget neutrality methodology and analytical approach to ensure that the full impact of the demonstration is appropriately captured. Therefore, we do not propose to apply a budget neutrality payment offset to payments to CAHs in FY 2027. This policy would have no impact for any national payment system for FY 2027.
Section 123 of the Medicare, Medicaid, and SCHIP (State Children's Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), as amended by section 307(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554), provides for payment for both the operating and capital-related costs of hospital inpatient stays in long-term care
Section 1886(d)(1)(B)(iv)(I) of the Act originally defined an LTCH as a hospital that has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days.
Section 1886(d)(1)(B)(iv)(II) of the Act also provided an alternative definition of LTCHs (“subclause II” LTCHs). However, section 15008 of the 21st Century Cures Act (Pub. L. 114-255) amended section 1886 of the Act to exclude former “subclause II” LTCHs from being paid under the LTCH PPS and created a new category of IPPS-excluded hospitals, which we refer to as “extended neoplastic disease care hospitals,” to be paid as hospitals that were formally classified as “subclause (II)” LTCHs (82 FR 38298).
Section 123 of the BBRA requires the PPS for LTCHs to be a “per discharge” system with a diagnosis-related group (DRG) based patient classification system that reflects the differences in patient resource use and costs in LTCHs.
Section 307(b)(1) of the BIPA, among other things, mandates that the Secretary shall examine, and may provide for, adjustments to payments under the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment.
In the August 30, 2002,
The LTCH PPS replaced the reasonable cost-based payment system under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97-248) for payments for inpatient services provided by an LTCH with a cost reporting period beginning on or after October 1, 2002. (The regulations implementing the TEFRA reasonable-cost-based payment provisions are located at 42 CFR part 413.) With the implementation of the PPS for acute care hospitals authorized by the Social Security Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the Act, certain hospitals, including LTCHs, were excluded from the PPS for acute care hospitals and paid their reasonable costs for inpatient services subject to a per discharge limitation or target amount under the TEFRA system. For each cost reporting period, a hospital specific ceiling on payments was determined by multiplying the hospital's updated target amount by the number of total current year Medicare discharges. (Generally, in this section of the preamble of this proposed rule, when we refer to discharges, we describe Medicare discharges.) The August 30, 2002, final rule further details the payment policy under the TEFRA system (67 FR 55954).
In the August 30, 2002, final rule, we provided for a 5-year transition period from payments under the TEFRA system to payments under the LTCH PPS. During this 5-year transition period, an LTCH's total payment under the PPS was based on an increasing percentage of the Federal rate with a corresponding decrease in the percentage of the LTCH PPS payment that is based on reasonable cost concepts, unless an LTCH made a one-time election to be paid based on 100 percent of the Federal rate. Beginning with LTCHs' cost reporting periods beginning on or after October 1, 2006, total LTCH PPS payments are based on 100 percent of the Federal rate.
In addition, in the August 30, 2002, final rule, we presented an in-depth discussion of the LTCH PPS, including the patient classification system, relative weights, payment rates, additional payments, and the budget neutrality requirements mandated by section 123 of the BBRA. The same final rule that established regulations for the LTCH PPS under 42 CFR part 412, subpart O, also contained LTCH provisions related to covered inpatient services, limitation on charges to beneficiaries, medical review requirements, furnishing of inpatient hospital services directly or under arrangement, and reporting and recordkeeping requirements. We refer readers to the August 30, 2002, final rule for a comprehensive discussion of the research and data that supported the establishment of the LTCH PPS (67 FR 55954).
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 49623), we implemented the provisions of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated the application of the “site neutral” payment rate under the LTCH PPS for discharges that do not meet the statutory criteria for exclusion beginning in FY 2016. For cost reporting periods beginning on or after October 1, 2015, discharges that do not meet certain statutory criteria for exclusion are paid based on the site neutral payment rate. Discharges that do meet the statutory criteria continue to receive payment based on the LTCH PPS standard Federal payment rate. For more information on the statutory requirements of the Pathway for SGR Reform Act of 2013, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 49623) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57068 through 57075).
In the FY 2018 IPPS/LTCH PPS final rule, we implemented several provisions of the 21st Century Cures Act (“the Cures Act”) (Pub. L. 114-255) that affected the LTCH PPS. (For more information on these provisions, we refer readers to (82 FR 38299).)
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41529), we made conforming changes to our regulations to implement the provisions of section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), which extends the transitional blended payment rate for site neutral payment rate cases for an additional 2 years. We refer readers to section VII.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule for a discussion of our final policy. In addition, in the FY 2019 IPPS/LTCH PPS final rule, we removed the 25-percent threshold policy under 42 CFR 412.538, which was a payment adjustment that was applied to payments for Medicare patient LTCH discharges when the number of such patients originating from any single referring hospital was in excess of the applicable threshold for given cost reporting period.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42439), we further revised our regulations to implement the provisions of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) that relate to the payment adjustment for discharges from LTCHs that do not maintain the requisite discharge payment percentage and the process by which such LTCHs may have the payment adjustment discontinued.
Under the regulations at § 412.23(e)(1), to qualify to be paid under the LTCH PPS, a hospital must have a provider agreement with Medicare. Furthermore, § 412.23(e)(2)(i), which implements section 1886(d)(1)(B)(iv) of the Act, requires that a hospital have an average Medicare inpatient length of stay of greater than 25 days to be paid under the LTCH PPS. In accordance with section 1206(a)(3) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), as amended by section 15007 of Public Law 114-255, we amended our regulations to specify that Medicare Advantage plans' and site neutral payment rate discharges are excluded from the calculation of the average length of stay for all LTCHs, for discharges occurring in cost reporting period beginning on or after October 1, 2015.
The following hospitals are paid under special payment provisions, as described in § 412.22(c) and, therefore, are not subject to the LTCH PPS rules:
• Veterans Administration hospitals.
• Hospitals that are reimbursed under State cost control systems approved under 42 CFR part 403.
• Hospitals that are reimbursed in accordance with demonstration projects authorized under section 402(a) of the Social Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1), section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-603) (42 U.S.C. 1395b1 (note)) (Statewide-all payer systems, subject to the rate-of increase test at section 1814(b) of the Act), or section 3021 of the Patient Protection and Affordable Care Act (Pub. L. 111-148) (42 U.S.C. 1315a).
• Nonparticipating hospitals furnishing emergency services to Medicare beneficiaries.
In the August 30, 2002, final rule, we presented an in-depth discussion of beneficiary liability under the LTCH PPS (67 FR 55974 through 55975). This discussion was further clarified in the RY 2005 LTCH PPS final rule (69 FR 25676). In keeping with those discussions, if the Medicare payment to the LTCH is the full LTC-DRG payment amount, consistent with other established hospital prospective payment systems, § 412.507 currently provides that an LTCH may not bill a Medicare beneficiary for more than the deductible and coinsurance amounts as specified under §§ 409.82, 409.83, and 409.87, and for items and services specified under § 489.30(a). However, under the LTCH PPS, Medicare will only pay for services furnished during the days for which the beneficiary has coverage until the short-stay outlier (SSO) threshold is exceeded. If the Medicare payment was for a SSO case (in accordance with § 412.529), and that payment was less than the full LTC-DRG payment amount because the beneficiary had insufficient coverage as a result of the remaining Medicare days, the LTCH also is currently permitted to charge the beneficiary for services delivered on those uncovered days (in accordance with § 412.507). In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49623), we amended our regulations to expressly limit the charges that may be imposed upon beneficiaries whose LTCHs' discharges are paid at the site neutral payment rate under the LTCH PPS. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57102), we amended the regulations under § 412.507 to clarify our existing policy that blended payments made to an LTCH during its transitional period (that is, an LTCH's payment for discharges occurring in cost reporting periods beginning in FYs 2016 through 2019) are considered to be site neutral payment rate payments.
Section 123 of the BBRA required that the Secretary implement a PPS for LTCHs to replace the cost-based payment system under TEFRA. Section 307(b)(1) of the BIPA modified the requirements of section 123 of the BBRA by requiring that the Secretary examine the feasibility and the impact of basing payment under the LTCH PPS on the use of existing (or refined) hospital DRGs that have been modified to account for different resource use of LTCH patients.
Under both the IPPS and the LTCH PPS, the DRG-based classification system uses information on the claims for inpatient discharges to classify patients into distinct groups (for example, DRGs) based on clinical characteristics and expected resource needs. When the LTCH PPS was implemented for cost reporting periods beginning on or after October 1, 2002, we adopted the same DRG patient classification system utilized at that time under the IPPS. We referred to this patient classification system as the “long-term care diagnosis-related groups (LTC-DRGs).” As part of our efforts to better recognize severity of illness among patients, in the FY 2008 IPPS final rule with comment period (72 FR 47130), we adopted the MS-DRGs and the Medicare severity long-term care diagnosis-related groups (MS-LTC-DRGs) under the IPPS and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 2008). For a full description of the development, implementation, and rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 47175 and 47277 through 47299). (We note that, in that same final rule, we revised the regulations at § 412.503 to specify that for LTCH discharges occurring on or after October 1, 2007, when applying the provisions of 42 CFR part 412, subpart O, applicable to LTCHs for policy descriptions and payment calculations, all references to LTC-DRGs would be considered a reference to MS-LTC-DRGs. For the remainder of this section, we present the discussion in terms of the current MS-LTC-DRG patient classification system unless specifically referring to the previous LTC-DRG patient classification system that was in effect before October 1, 2007.)
Consistent with section 123 of the BBRA, as amended by section 307(b)(1) of the BIPA, and § 412.515 of the regulations, we use information derived from LTCH PPS patient records to classify LTCH discharges into distinct MS-LTC-DRGs based on clinical characteristics and estimated resource needs. As noted previously, we adopted the same DRG patient classification system utilized at that time under the IPPS. The MS-DRG classifications are updated annually, which has resulted in the number of MS-DRGs changing over time. For FY 2027, there would be 768 MS-DRG, and by extension, MS-LTC-DRG, groupings based on the proposed changes, as discussed in section II.C. of the preamble of this proposed rule.
Although the patient classification system used under both the LTCH PPS and the IPPS are the same, the relative weights are different. The established relative weight methodology and data used under the LTCH PPS result in relative weights under the LTCH PPS that reflect the differences in patient resource use of LTCH patients, consistent with section 123(a)(1) of the BBRA. That is, we assign an appropriate weight to the MS-LTC-DRGs to account for the differences in resource use by patients exhibiting the case complexity and multiple medical problems characteristic of LTCH patients.
The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under the LTCH PPS) are based on the CMS DRG structure. As noted previously in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs although they are structurally identical to the MS-DRGs used under the IPPS.
The MS-DRGs are organized into 25 major diagnostic categories (MDCs), most of which are based on a particular organ system of the body; the remainder involve multiple organ systems (such as MDC 22, Burns). Within most MDCs, cases are then divided into surgical DRGs and medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. The GROUPER software program does not recognize all ICD-10-PCS procedure codes as procedures affecting DRG assignment. That is, procedures that are not surgical (for example, EKGs) or are minor surgical procedures (for example, a biopsy of skin and subcutaneous tissue (procedure code 0JBH3ZX)) do not affect the MS-LTC-DRG assignment based on their presence on the claim.
Generally, under the LTCH PPS, a Medicare payment is made at a predetermined specific rate for each discharge that varies based on the MS-LTC-DRG to which a beneficiary's discharge is assigned. Cases are classified into MS-LTC-DRGs for payment based on the following six data elements:
• Principal diagnosis.
• Additional or secondary diagnoses.
• Surgical procedures.
• Age.
• Sex.
• Discharge status of the patient.
Currently, for claims submitted using the version ASC X12 5010 standard, up to 25 diagnosis codes and 25 procedure codes are considered for an MS-DRG assignment. This includes one principal diagnosis and up to 24 secondary diagnoses for severity of illness determinations. (For additional information on the processing of up to 25 diagnosis codes and 25 procedure codes on hospital inpatient claims, we refer readers to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS final rule (75 FR 50127).)
Under the HIPAA transactions and code sets regulations at 45 CFR parts 160 and 162, covered entities (45 CFR 160.103) must comply with the adopted transaction standards and operating rules specified in subparts I through S of part 162. Among other requirements, on or after January 1, 2012, covered entities are required to use the ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim: Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care Claim: Institutional (837) ASC X12 Standards for Electronic Data Interchange Technical Report Type 3, October 2007, ASC X12N/005010X233A1 for the health care claims or equivalent encounter information transaction (45 CFR 162.1102(c)).
HIPAA requires covered entities to use the applicable medical data code sets when conducting HIPAA transactions (45 CFR 162.1000). Currently, upon the discharge of the patient, the LTCH must assign appropriate diagnosis and procedure codes from the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure coding, both of which were required to be implemented October 1, 2015 (45 CFR 162.1002(c)(2) and (3)). For additional information on the implementation of the ICD-10 coding system, we refer readers to section II.F.1. of the preamble of the FY 2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56790) and section II.E.1. of the preamble of this proposed rule. Additional coding instructions and examples are published in the AHA's
To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base DRGs were subdivided according to the presence of specific secondary diagnoses designated as complications or comorbidities (CCs) into one, two, or three levels of severity, depending on the impact of the CCs on resources used for those cases. Specifically, there are sets of MS-DRGs that are split into 2 or 3 subgroups based on the presence or absence of a CC or a major complication or comorbidity (MCC). We refer readers to section II.D. of the preamble of the FY 2008 IPPS final rule with comment period for a detailed discussion about the creation of MS-DRGs based on severity of illness levels (72 FR 47141 through 47175).
Medicare Administrative Contractors (MACs) enter the clinical and demographic information submitted by LTCHs into their claims processing systems and subject this information to a series of automated screening processes called the Medicare Code Editor (MCE). These screens are designed to identify cases that require further review before assignment into a MS-LTC-DRG can be made. During this process, certain types of cases are selected for further explanation (74 FR 43949).
After screening through the MCE, each claim is classified into the appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the basis of diagnosis and procedure codes and other demographic information (age, sex, and discharge status). The GROUPER software used under the LTCH PPS is the same GROUPER software program used under the IPPS. Following the MS-LTC-DRG assignment, the MAC determines the prospective payment amount by using the Medicare PRICER program, which accounts for hospital-specific adjustments. Under the LTCH PPS, we provide an opportunity for LTCHs to review the MS-LTC-DRG assignments made by the MAC and to submit additional information within a specified timeframe as provided in § 412.513(c).
The GROUPER software is used both to classify past cases to measure relative hospital resource consumption to establish the MS-LTC-DRG relative weights and to classify current cases for purposes of determining payment. The records for all Medicare hospital inpatient discharges are maintained in the MedPAR file. The data in this file are used to evaluate possible MS-DRG and MS-LTC-DRG classification changes and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during our annual update under both the IPPS (§ 412.60(e)) and the LTCH PPS (§ 412.517), respectively.
As specified by our regulations at § 412.517(a), which require that the MS-LTC-DRG classifications and relative weights be updated annually, and consistent with our historical practice of using the same patient classification system under the LTCH PPS as is used under the IPPS, in this proposed rule, we are proposing to update the MS-LTC-DRG classifications effective October 1, 2026 through September 30, 2027 (FY 2027), consistent with the proposed changes to specific MS-DRG classifications presented in section II.C. of the preamble of this proposed rule. Accordingly, the proposed MS-LTC-DRGs for FY 2027 are the same as the MS-DRGs being proposed for use under the IPPS for FY 2027. In addition, because the proposed MS-LTC-DRGs for FY 2027 are the same as the proposed MS-DRGs for FY 2027, the
One of the primary goals for the implementation of the LTCH PPS is to pay each LTCH an appropriate amount for the efficient delivery of medical care to Medicare patients. The system must be able to account adequately for each LTCH's case-mix to ensure both fair distribution of Medicare payments and access to adequate care for those Medicare patients whose care is costlier (67 FR 55984). To accomplish these goals, we have annually adjusted the LTCH PPS standard Federal prospective payment rate by the applicable relative weight in determining payment to LTCHs for each case. Under the LTCH PPS, relative weights for each MS-LTC-DRG are a primary element used to account for the variations in cost per discharge and resource utilization among the payment groups (§ 412.515). To ensure that Medicare patients classified to each MS-LTC-DRG have access to an appropriate level of services and to encourage efficiency, we calculate a relative weight for each MS-LTC-DRG that represents the resources needed by an average inpatient LTCH case in that MS-LTC-DRG. For example, cases in an MS-LTC-DRG with a relative weight of 2 would, on average, cost twice as much to treat as cases in an MS-LTC-DRG with a relative weight of 1.
The established methodology to develop the MS-LTC-DRG relative weights is generally consistent with the methodology established when the LTCH PPS was implemented in the August 30, 2002, LTCH PPS final rule (67 FR 55989 through 55991). However, there have been some modifications of our historical procedures for assigning relative weights in cases of zero volume or nonmonotonicity or both resulting from the adoption of the MS-LTC-DRGs. We also made a modification in conjunction with the implementation of the dual rate LTCH PPS payment structure beginning in FY 2016 to use LTCH claims data from only LTCH PPS standard Federal payment rate cases (or LTCH PPS cases that would have qualified for payment under the LTCH PPS standard Federal payment rate if the dual rate LTCH PPS payment structure had been in effect at the time of the discharge). We also adopted, beginning in FY 2023, a 10-percent cap policy on the reduction in a MS-LTC-DRG's relative weight in a given year. (For details on the modifications to our historical procedures for assigning relative weights in cases of zero volume and nonmonotonicity or both, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47289 through 47295) and the FY 2009 IPPS final rule (73 FR 48542 through 48550)). For details on the change in our historical methodology to use LTCH claims data only from LTCH PPS standard Federal payment rate cases (or cases that would have qualified for such payment had the LTCH PPS dual payment rate structure been in effect at the time) to determine the MS-LTC-DRG relative weights, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49614 through 49617). For details on our adoption of the 10-percent cap policy, we refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 49152 through 49154).)
For purposes of determining the MS-LTC-DRG relative weights, under our historical methodology, there are three different categories of MS-LTC-DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-LTC-DRGs with at least 25 applicable LTCH cases in the data used to calculate the relative weight, which are each assigned a unique relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that contain between 1 and 24 applicable LTCH cases that are grouped into quintiles (as described later in this section in Step 3 of our proposed methodology) and assigned the relative weight of the quintile); and (3) no-volume MS-LTC-DRGs that are cross-walked to other MS-LTC-DRGs based on the clinical similarities and assigned the relative weight of the cross-walked MS-LTC-DRG (as described later in this section in Step 8 of our proposed methodology). For FY 2027, we are proposing to continue to use applicable LTCH cases to establish the same volume-based categories to calculate the FY 2027 MS-LTC-DRG relative weights.
In this section, we present our proposed methodology for determining the MS-LTC-DRG relative weights for FY 2027. We first list and provide a brief description of our proposed steps for determining the FY 2027 MS-LTC-DRG relative weights. Later in this section, we discuss in greater detail each step. We note that, as we did in FY 2026, we are proposing to use our historical relative weight methodology as described in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58898 through 58907), subject to a ten percent cap as described in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49162).
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We next describe each of the 11 proposed steps for calculating the proposed FY 2027 MS-LTC-DRG relative weights in greater detail.
For this FY 2027 IPPS/LTCH PPS proposed rule, we obtained total charges from FY 2025 Medicare LTCH claims data from the December 2025 update of the FY 2025 MedPAR file and used proposed Version 44 of the GROUPER to classify LTCH cases. Consistent with our historical practice, we are proposing that if better data become available, we would use those data and the finalized Version 44 of the GROUPER in establishing the FY 2027 MS-LTC-DRG relative weights in the final rule.
To calculate the FY 2027 MS-LTC-DRG relative weights under the dual rate LTCH PPS payment structure, we are proposing to continue to use applicable LTCH data, which includes our policy of only using cases that meet the criteria for exclusion from the site neutral payment rate (or would have met the criteria had they been in effect at the time of the discharge) (80 FR 49624). Section 3711(b)(2) of the CARES Act provided a waiver of the application of the site neutral payment rate for LTCH cases admitted during the COVID-19 PHE period. The COVID-19 PHE expired on May 11, 2023. Therefore, nearly all LTCH PPS cases in FY 2025 were subject to the dual rate LTCH PPS payment structure. However, a small number of FY 2025 LTCH PPS cases (those with admission dates on or before May 11, 2023) were subject to the CARES Act waiver and were paid the LTCH PPS standard Federal rate regardless of whether the discharge met the statutory patient criteria. Therefore, for purposes of setting rates for LTCH PPS standard Federal rate cases for FY 2027 (including MS-LTC-DRG relative weights), we are proposing to identify FY 2025 cases that meet the statutory patient criteria depending on date of admission as follows. First, we propose to use LTCH PPS cases in the FY 2025 MedPAR file with an admission date after May 11, 2023, that met the criteria for exclusion from the site neutral payment rate under § 412.522(b) and were paid the LTCH PPS standard Federal rate in FY 2025 (based on the claim payment amount). Second, we propose to also use LTCH PPS cases in the FY 2025 MedPAR file with an admission date on or before May 11, 2023, that would have met the criteria for exclusion from the site neutral payment rate if the CARES Act waiver had not been in effect. For these cases we relied on our historical process for identifying cases that would have met the criteria for exclusion from the site neutral payment rate rather than how those cases were paid in FY 2025. This process is explained in full detail in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69425).
Furthermore, consistent with our historical methodology, we excluded any claims in the resulting data set that were submitted by LTCHs that were all inclusive rate providers and LTCHs that are paid in accordance with demonstration projects authorized under section 402(a) of Public Law 90-248 or section 222(a) of Public Law 92603. In addition, consistent with our historical practice and our policies, we excluded any Medicare Advantage (Part C) claims in the resulting data. Such claims were identified based on the presence of a GHO Paid indicator value of “1” in the MedPAR files.
In summary, in general, we identified the claims data used in the development of the FY 2027 MS-LTC-DRG relative weights in this proposed rule by trimming claims data that were paid the site neutral payment rate or would have been paid the site neutral payment rate had the provisions of the CARES Act not been in effect. We trimmed the claims data of all inclusive rate providers reported in the December 2025 update of the FY 2025 MedPAR file and any Medicare Advantage claims data. There were no data from any LTCHs that are paid in accordance with a demonstration project reported in the December 2025 update of the FY 2025 MedPAR file, but had there been any, we would have trimmed the claims data from those LTCHs as well, in accordance with our established policy.
We used the remaining data (that is, the applicable LTCH data) in the subsequent proposed steps to calculate the proposed MS-LTC-DRG relative weights for FY 2027.
The next step in our proposed calculation of the proposed FY 2027 MS-LTC-DRG relative weights is to remove cases with a length of stay of 7 days or less. The MS-LTC-DRG relative weights reflect the average of resources used on representative cases of a specific type. Generally, cases with a length of stay of 7 days or less do not belong in an LTCH because these stays do not fully receive or benefit from treatment that is typical in an LTCH stay, and full resources are often not used in the earlier stages of admission to an LTCH. If we were to include stays of 7 days or less in the computation of the proposed FY 2027 MS-LTC-DRG relative weights, the value of many relative weights would decrease and, therefore, payments would decrease to a level that may no longer be appropriate. We do not believe that it would be appropriate to compromise the integrity of the payment determination for those LTCH cases that actually benefit from and receive a full course of treatment at an LTCH by including data from these very short stays. Therefore, consistent with our existing relative weight methodology, in determining the proposed FY 2027 MS-LTC-DRG relative weights, we are proposing to remove LTCH cases with a length of stay of 7 days or less from applicable LTCH cases. (For additional information on what is removed in this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
To account for MS-LTC-DRGs with low-volume (that is, with fewer than 25 applicable LTCH cases), consistent with our existing methodology, we are proposing to continue to employ the quintile methodology for low-volume MS-LTC-DRGs, such that we grouped the “low-volume MS-LTC-DRGs” (that is, MS-LTC-DRGs that contain between 1 and 24 applicable LTCH cases into one of five categories (quintiles) based on average charges (67 FR 55984 through 55995; 72 FR 47283 through 47288; and 81 FR 25148)).
In this proposed rule, based on the best available data (that is, the December 2025 update of the FY 2025 MedPAR file), we identified 245 MS-LTC-DRGs that contained between 1 and 24 applicable LTCH cases. This list of MS-LTC-DRGs was then divided into 1 of the 5 low-volume quintiles. We assigned the low-volume MS-LTC-DRGs to specific low-volume quintiles
To determine the FY 2027 relative weights for the low-volume MS-LTC-DRGs, consistent with our historical practice, we are proposing to use the five low-volume quintiles described previously. We determined a relative weight and (geometric) average length of stay for each of the five low-volume quintiles using the methodology described in Step 6 of our proposed methodology. We assigned the same relative weight and average length of stay to each of the low-volume MS-LTC-DRGs that make up an individual low-volume quintile. We note that, as this system is dynamic, it is possible that the number and specific type of MS-LTC-DRGs with a low volume of applicable LTCH cases would vary in the future. Furthermore, we note that we continue to monitor the volume (that is, the number of applicable LTCH cases) in the low-volume quintiles to ensure that our quintile assignments used in determining the MS-LTC-DRG relative weights result in appropriate payment for LTCH cases grouped to low-volume MS-LTC-DRGs and do not result in an unintended financial incentive for LTCHs to inappropriately admit these types of cases.
For this proposed rule, we are providing the list of the composition of the proposed low volume-quintiles for low-volume MS-LTC-DRGs in a supplemental data file for public use posted via the internet on the CMS website for this proposed rule at
The next step in our proposed calculation of the FY 2027 MS-LTC-DRG relative weights is to remove statistical outlier cases from the LTCH cases with a length of stay of at least 8 days. Consistent with our existing relative weight methodology, we are proposing to continue to define statistical outliers as cases that are outside of 3.0 standard deviations from the mean of the log distribution of both charges per case and the charges per day for each MS-LTC-DRG. These statistical outliers are removed prior to calculating the relative weights because we believe that they may represent aberrations in the data that distort the measure of average resource use. Including those LTCH cases in the calculation of the relative weights could result in an inaccurate relative weight that does not truly reflect relative resource use among those MS-LTC-DRGs. (For additional information on what is removed in this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) After removing cases with a length of stay of 7 days or less and statistical outliers, in each set of claims, we were left with applicable LTCH cases that have a length of stay greater than or equal to 8 days. In this proposed rule, we refer to these cases as “trimmed applicable LTCH cases.”
As the next step in the proposed calculation of the FY 2027 MS-LTC-DRG relative weights, consistent with our historical approach, we are proposing to adjust each LTCH's charges per discharge for those remaining cases (that is, trimmed applicable LTCH cases) for the effects of SSOs (as defined in § 412.529(a) in conjunction with § 412.503). Specifically, we are proposing to make this adjustment by counting an SSO case as a fraction of a discharge based on the ratio of the length of stay of the case to the average length of stay of all cases grouped to the MS-LTC-DRG. This has the effect of proportionately reducing the impact of the lower charges for the SSO cases in calculating the average charge for the MS-LTC-DRG. This process produces the same result as if the actual charges per discharge of an SSO case were adjusted to what they would have been had the patient's length of stay been equal to the average length of stay of the MS-LTC-DRG.
Counting SSO cases as full LTCH cases with no adjustment in determining the FY 2027 MS-LTC-DRG relative weights would lower the relative weight for affected MS-LTC-DRGs because the relatively lower charges of the SSO cases would bring down the average charge for all cases within a MS-LTC-DRG. This would result in an “underpayment” for non-SSO cases and an “overpayment” for SSO cases. Therefore, we propose to continue to adjust for SSO cases under § 412.529 in this manner because it would result in more appropriate payments for all LTCH PPS standard Federal payment rate cases. (For additional information on this step of the relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
By nature, LTCHs often specialize in certain areas, such as ventilator-dependent patients. Some case types (MS-LTC-DRGs) may be treated, to a large extent, in hospitals that have, from a perspective of charges, relatively high (or low) charges. This nonrandom distribution of cases with relatively high (or low) charges in specific MS-LTC-DRGs has the potential to inappropriately distort the measure of average charges. To account for the fact that cases may not be randomly distributed across LTCHs, consistent with the methodology we have used since the implementation of the LTCH PPS, in this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing to continue to use a hospital-specific relative value (HSRV) methodology to calculate the MS-LTC-DRG relative weights for FY 2027. We believe that this method removes this hospital specific source of bias in measuring LTCH average charges (67 FR 55985). Specifically, under this methodology, we reduced the impact of the variation in charges across providers on any particular MS-LTC-DRG relative weight by converting each LTCH's charge for an applicable LTCH case to a relative value based on that LTCH's average charge for such cases.
Under the HSRV methodology, we standardize charges for each LTCH by converting its charges for each applicable LTCH case to hospital specific relative charge values and then adjusting those values for the LTCH's case-mix. The adjustment for case-mix is needed to rescale the hospital-specific relative charge values (which, by definition, average 1.0 for each LTCH).
Consistent with our historical relative weight methodology, we propose to calculate the FY 2027 MS-LTC-DRG relative weights using the HSRV methodology, which is an iterative process. Therefore, in accordance with our established methodology, for FY 2027, we are proposing to continue to standardize charges for each applicable LTCH case by first dividing the adjusted charge for the case (adjusted for SSOs under § 412.529 as described in Step 5 of our proposed methodology) by the average adjusted charge for all applicable LTCH cases at the LTCH in which the case was treated. The average adjusted charge reflects the average intensity of the health care services delivered by a particular LTCH and the average cost level of that LTCH. The average adjusted charge is then multiplied by the LTCH's case-mix index to produce an adjusted hospital-specific relative charge value for the case. We used an initial case-mix-index value of 1.0 for each LTCH.
For each proposed MS-LTC-DRG, we calculated the FY 2027 relative weight by dividing the SSO-adjusted average of the hospital-specific relative charge values for applicable LTCH cases for the MS-LTC-DRG (that is, the sum of the hospital-specific relative charge value, as previously stated, divided by the sum of equivalent cases from Step 5 for each MS-LTC-DRG) by the overall SSO-adjusted average hospital-specific relative charge value across all applicable LTCH cases for all LTCHs (that is, the sum of the hospital-specific relative charge value, as previously stated, divided by the sum of equivalent applicable LTCH cases from Step 5 for each MS-LTC-DRG). Using these recalculated MS-LTC-DRG relative weights, each LTCH's average relative weight for all of its SSO adjusted trimmed applicable LTCH cases (that is, it's case-mix) was calculated by dividing the sum of all the LTCH's MS-LTC-DRG relative weights by its total number of SSO-adjusted trimmed applicable LTCH cases. The LTCHs' hospital-specific relative charge values (from previous) are then multiplied by the hospital-specific case-mix indexes. The hospital specific case-mix-adjusted relative charge values are then used to calculate a new set of MS-LTC-DRG relative weights across all LTCHs. This iterative process continued until there was convergence between the relative weights produced at adjacent steps, for example, when the maximum difference was less than 0.0001.
The MS-DRGs contain base DRGs that have been subdivided into one, two, or three severity of illness levels. Where there are three severity levels, the most severe level has at least one secondary diagnosis code that is referred to as an MCC (that is, major complication or comorbidity). The next lower severity level contains cases with at least one secondary diagnosis code that is a CC (that is, complication or comorbidity). Those cases without an MCC or a CC are referred to as “without CC/MCC.” When data do not support the creation of three severity levels, the base MS-DRG is subdivided into either two levels or the base MS-DRG is not subdivided. The two-level subdivisions may consist of the MS-DRG with CC/MCC and the MS-DRG without CC/MCC. Alternatively, the other type of two-level-subdivision may consist of the MS-DRG with MCC and the MS-DRG without MCC.
In those base MS-LTC-DRGs that are split into either two or three severity levels, cases classified into the “without CC/MCC” MS-LTC-DRG are expected to have a lower resource use (and lower costs) than the “with CC/MCC” MS-LTC-DRG (in the case of a two level split) or both the “with CC” and the “with MCC” MS-LTC-DRGs (in the case of a three-level-split). That is, theoretically, cases that are more severe typically require greater expenditure of medical care resources and would result in higher average charges. Therefore, in the three severity levels, relative weights should increase by severity, from lowest to highest. If the relative weights decrease as severity increases (that is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC has a higher relative weight than one with MCC, or the MS-LTC-DRG “without CC/MCC” has a higher relative weight than either of the others), they are nonmonotonic. We continue to believe that utilizing nonmonotonic relative weights to adjust Medicare payments would result in inappropriate payments because the payment for the cases in the higher severity level in a base MS-LTC-DRG (which are generally expected to have higher resource use and costs) would be lower than the payment for cases in a lower severity level within the same base MS-LTC-DRG (which are generally expected to have lower resource use and costs). Therefore, in determining the proposed FY 2027 MS-LTC-DRG relative weights, consistent with our historical methodology, we are proposing to continue to combine MS-LTC-DRG severity levels within a base MS-LTC-DRG for the purpose of computing a relative weight when necessary to ensure that monotonicity is maintained. For a comprehensive description of our existing methodology to adjust for nonmonotonicity, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 through 43966). Any adjustments for nonmonotonicity that were made in determining the proposed FY 2027 MS-LTC-DRG relative weights by applying this methodology are denoted in Table 11, which is listed in section VI. of the Addendum to this proposed rule and is available via the internet on the CMS website.
Using the trimmed applicable LTCH cases, consistent with our historical methodology, we identified the MS-LTC-DRGs for which there were no claims in the December 2025 update of the FY 2025 MedPAR file and, therefore, for which no charge data was available for these MS-LTC-DRGs. Because patients with a number of the diagnoses under these MS-LTC-DRGs may be
Consistent with our existing methodology, we are proposing to cross-walk each no-volume proposed MS-LTC-DRG to another proposed MS-LTC-DRG for which we calculated a relative weight (determined in accordance with the methodology as previously described). Then, the “no-volume” proposed MS-LTC-DRG is assigned the same relative weight (and average length of stay) of the proposed MS-LTC-DRG to which it was cross-walked (as described in greater detail in this section of the preamble of this proposed rule).
Of the 768 proposed MS-LTC-DRGs for FY 2027, we identified 414 MS-LTC-DRGs for which there were no trimmed applicable LTCH cases. The 414 MS-LTC-DRGs for which there were no trimmed applicable LTCH cases includes the 11 “transplant” MS-LTC-DRGs, the 2 “error” MS-LTC-DRGs, and the 15 “psychiatric or rehabilitation” MS-LTC-DRGs, which are discussed in this section of this proposed rule, such that we identified 386 MS-LTC-DRGs that for which, we are proposing to assign a relative weight using our existing “no-volume” MS-LTC-DRG methodology (that is, 414−11−2−15 = 386). We are proposing to assign relative weights to each of the 386 no-volume MS-LTC-DRGs based on clinical similarity and relative costliness to 1 of the remaining 354 (768−414 = 354) MS-LTC-DRGs for which we calculated relative weights based on the trimmed applicable LTCH cases in the FY 2025 MedPAR file data using the steps described previously. (For the remainder of this discussion, we refer to the “cross-walked” MS-LTC-DRGs as one of the 354 MS-LTC-DRGs to which we cross-walked each of the 386 “no-volume” MS-LTC-DRGs.) Then, in general, we are proposing to assign the 386 no-volume MS-LTC-DRGs the relative weight of the cross-walked MS-LTC-DRG (when necessary, we made adjustments to account for nonmonotonicity).
We cross-walked the no-volume MS-LTC-DRG to a MS-LTC-DRG for which we calculated relative weights based on the December 2025 update of the FY 2025 MedPAR file, and to which it is similar clinically in intensity of use of resources and relative costliness as determined by criteria such as care provided during the period of time surrounding surgery, surgical approach (if applicable), length of time of surgical procedure, postoperative care, and length of stay. (For more details on our process for evaluating relative costliness, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 48543).) We believe in the rare event that there would be a few LTCH cases grouped to one of the no-volume MS-LTC-DRGs in FY 2027, the relative weights assigned based on the cross-walked MS-LTC-DRGs would result in an appropriate LTCH PPS payment because the crosswalks, which are based on clinical similarity and relative costliness, would be expected to generally require equivalent relative resource use.
Then we assigned the proposed relative weight of the cross-walked MS-LTC-DRG as the relative weight for the no-volume MS-LTC-DRG such that both of these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and the cross-walked MS-LTC-DRG) have the same relative weight (and average length of stay) for FY 2027. We note that, if the cross-walked MS-LTC-DRG had 25 applicable LTCH cases or more, its relative weight (calculated using the methodology as previously described in Steps 1 through 4) is assigned to the no-volume MS-LTC-DRG as well. Similarly, if the MS-LTC-DRG to which the no-volume MS-LTC-DRG was cross-walked had 24 or less cases and, therefore, was designated to 1 of the low-volume quintiles for purposes of determining the relative weights, we assigned the relative weight of the applicable low-volume quintile to the no-volume MS-LTC-DRG such that both of these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and the cross-walked MS-LTC-DRG) have the same relative weight for FY 2027. (As we noted previously, in the infrequent case where nonmonotonicity involving a no-volume MS-LTC-DRG resulted, additional adjustments are required to maintain monotonically increasing relative weights.)
For this proposed rule, we are providing the list of the no-volume MS-LTC-DRGs and the MS-LTC-DRGs to which each was cross-walked (that is, the cross-walked MS-LTC-DRGs) for FY 2027 in a supplemental data file for public use posted via the internet on the CMS website for this proposed rule at
To illustrate this methodology for determining the proposed relative weights for the FY 2027 MS-LTC-DRGs with no applicable LTCH cases, we are providing the following example.
Again, we note that, as this system is dynamic, it is entirely possible that the number of MS-LTC-DRGs with no volume would vary in the future. Consistent with our historical practice, we are proposing to use the best available claims data to identify the trimmed applicable LTCH cases from which we determined the relative weights in the final rule.
For FY 2027, consistent with our historical relative weight methodology, we are proposing to establish a relative weight of 0.0000 for the following transplant MS-LTC-DRGs: Heart Transplant or Implant of Heart Assist System with MCC (MS-LTC-DRG 001); Heart Transplant or Implant of Heart Assist System without MCC (MS-LTC-DRG 002); Liver Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 005); Liver Transplant without MCC (MS-LTC-DRG 006); Lung Transplant (MS-LTC-DRG 007); Simultaneous Pancreas, Islet Cell and Kidney Transplant (MS-LTC-DRG 008); Simultaneous Pancreas, Islet Cell and Kidney Transplant with Hemodialysis (MS-LTC-DRG 019); Pancreas or Islet Cell Transplant (MS-LTC-DRG 010); Kidney Transplant (MS-LTC-DRG 652); Kidney Transplant with Hemodialysis with MCC (MS-LTC-DRG 650), and Kidney Transplant with Hemodialysis without MCC (MS-LTC-DRG 651). This is because Medicare only covers these
Additionally, we are proposing to establish a relative weight of 0.0000 for the following “psychiatric or rehabilitation” MS-LTC-DRGs: MS-LTC-DRG 876 (O.R. Procedures with Principal Diagnosis of Mental Illness); MS-LTC-DRG 880 (Acute Adjustment Reaction & Psychosocial Dysfunction); MS-LTC-DRG 881 (Depressive Neuroses); MS-LTC-DRG 882 (Neuroses Except Depressive); MS-LTC-DRG 883 (Disorders of Personality & Impulse Control); MS-LTC-DRG 884 (Organic Disturbances & Intellectual Disability); MS-LTC-DRG 885 (Psychoses); MS-LTC-DRG 886 (Behavioral & Developmental Disorders); MS-LTC-DRG 887 (Other Mental Disorder Diagnoses); MS-LTC-DRG 894 (Alcohol, Drug Abuse or Dependence, Left AMA); MS-LTC-DRG 895 (Alcohol, Drug Abuse or Dependence with Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol, Drug Abuse or Dependence without Rehabilitation Therapy with MCC); MS-LTC-DRG 897 (Alcohol, Drug Abuse or Dependence without Rehabilitation Therapy without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and MS-LTC-DRG 946 (Rehabilitation without CC/MCC). We are proposing to establish a relative weight of 0.0000 for these 15 “psychiatric or rehabilitation” MS-LTC-DRGs because the blended payment rate and temporary exceptions to the site neutral payment rate would not be applicable for any LTCH discharges occurring in FY 2027, and as such payment under the LTCH PPS would be no longer be made in part based on the LTCH PPS standard Federal payment rate for any discharges assigned to those MS-LTC-DRGs.
In accordance with the regulations at § 412.517(b) (in conjunction with § 412.503), the annual update to the MS-LTC-DRG classifications and relative weights is done in a budget neutral manner such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the MS-LTC-DRG classification and relative weight changes. (For a detailed discussion on the establishment of the budget neutrality requirement for the annual update of the MS-LTC-DRG classifications and relative weights, we refer readers to the FY 2008 LTCH PPS final rule (72 FR 26881 and 26882)).
To achieve budget neutrality under the requirement at § 412.517(b), under our established methodology, for each annual update the MS-LTC-DRG relative weights are uniformly adjusted to ensure that estimated aggregate payments under the LTCH PPS would not be affected (that is, decreased or increased). Consistent with that provision, we are proposing to continue to apply budget neutrality adjustments in determining the proposed FY 2027 MS-LTC-DRG relative weights so that our proposed update of the MS-LTC-DRG classifications and relative weights for FY 2027 are made in a budget neutral manner. For FY 2027, we are proposing to apply two budget neutrality factors to determine the MS-LTC-DRG relative weights. In this step, we describe the determination of the budget neutrality adjustment that accounts for the proposed update of the MS-LTC-DRG classifications and relative weights prior to the application of the ten-percent cap. In steps 10 and 11, we describe the application of the 10-percent cap policy (step 10) and the determination of the proposed budget neutrality factor that accounts for the application of the 10-percent cap policy (step 11).
In this proposed rule, to ensure budget neutrality for the proposed update to the MS-LTC-DRG classifications and relative weights prior to the application of the 10-percent cap (that is, uncapped relative weights), under § 412.517(b), we are proposing to continue to use our established two-step budget neutrality methodology. Therefore, in the first step of our MS-LTC-DRG update budget neutrality methodology, for FY 2027, we calculated and applied a proposed normalization factor to the recalibrated relative weights (the result of Steps 1 through 8 discussed previously) to ensure that estimated payments are not affected by changes in the composition of case types or the changes to the classification system. That is, the normalization adjustment is intended to ensure that the recalibration of the MS-LTC-DRG relative weights (that is, the process itself) neither increases nor decreases the average case-mix index.
To calculate the proposed normalization factor for FY 2027, we propose to use the following three steps: (1.a.) use the applicable LTCH cases from the best available data (that is, LTCH discharges from the FY 2025 MedPAR file) and group them using the proposed FY 2027 GROUPER (that is, Version 44 for FY 2027) and the proposed recalibrated FY 2027 MS-LTC-DRG uncapped relative weights (determined in Steps 1 through 8 discussed previously) to calculate the average case-mix index; (1.b.) group the same applicable LTCH cases (as are used in Step 1.a.) using the FY 2026 GROUPER (Version 43) and FY 2026 MS-LTC-DRG relative weights in Table 11 of the FY 2026 IPPS/LTCH PPS final rule and calculate the average case-mix index; and (1.c.) compute the ratio of these average case-mix indexes by dividing the average case-mix index for FY 2026 (determined in Step 1.b.) by the average case-mix index for FY 2027 (determined in Step 1.a.). As a result, in determining the proposed MS-LTC-DRG relative weights for FY 2027, each recalibrated MS-LTC-DRG uncapped relative weight is multiplied by the proposed normalization factor of 1.27379 (determined in Step 1.c.) in the first step of the budget neutrality methodology, which produces “normalized relative weights.”
In the second step of our MS-LTC-DRG update budget neutrality methodology, we calculated a proposed budget neutrality adjustment factor consisting of the ratio of estimated aggregate FY 2027 LTCH PPS standard Federal payment rate payments for applicable LTCH cases before reclassification and recalibration to estimated aggregate payments for FY 2027 LTCH PPS standard Federal payment rate payments for applicable LTCH cases after reclassification and recalibration. That is, for this proposed rule, for FY 2027, we propose to determine the budget neutrality adjustment factor using the following three steps: (2.a.) simulate estimated total FY 2027 LTCH PPS standard Federal payment rate payments for applicable LTCH cases using the
To mitigate the financial impacts of significant year-to-year reductions in MS-LTC-DRGs relative weights, beginning in FY 2023, we adopted a policy that applies a budget neutral 10-percent cap on annual relative weight decreases for MS-LTC-DRGs with at least 25 applicable LTCH cases (§ 412.515(b)). Under this policy, in cases where CMS creates new MS-LTC-DRGs or modifies the MS-LTC-DRGs as part of its annual reclassifications resulting in renumbering of one or more MS-LTC-DRGs, the 10-percent cap does not apply to the relative weight for any new or renumbered MS-LTC-DRGs for the fiscal year. We refer readers to section VIII.B.3.b. of the preamble of the FY 2023 IPPS/LTCH PPS final rule with comment period for a detailed discussion on the adoption of the 10-percent cap policy (87 FR 49152 through 49154).
Applying the 10-percent cap to MS-LTC-DRGs with 25 or more cases results in more predictable and stable MS-LTC-DRG relative weights from year to year, especially for high-volume MS-LTC-DRGs that generally have the largest financial impact on an LTCH's operations. For this proposed rule, in cases where the relative weight for a MS-LTC-DRG with 25 or more applicable LTCH cases would decrease by more than 10-percent in FY 2027 relative to FY 2026, we are proposing to limit the reduction to 10-percent. Under this policy, we do not apply the 10 percent cap to the proposed low-volume MS-LTC-DRGs identified in Step 3 or the proposed no-volume MS-LTC-DRGs identified in Step 8.
Therefore, in this step, for each proposed FY 2027 MS-LTC-DRG with 25 or more applicable LTCH cases (excludes low-volume and zero-volume MS-LTC-DRGs) we compared its FY 2027 relative weight (after application of the proposed normalization and proposed budget neutrality factors determined in Step 9), to its FY 2026 MS-LTC-DRG relative weight. For any MS-LTC-DRG where the FY 2027 relative weight would otherwise have declined more than 10 percent, we established a proposed capped FY 2027 MS-LTC-DRG relative weight that is equal to 90 percent of that MS-LTC-DRG's FY 2026 relative weight (that is, we set the proposed FY 2027 relative weight equal to the FY 2026 weight × 0.90).
In section II.C. of the preamble of this proposed rule, we discuss our proposed changes to the MS-DRGs, and by extension the MS-LTC-DRGs, for FY 2027. As discussed previously, under our current policy, the 10-percent cap does not apply to the relative weight for any new or renumbered MS-LTC-DRGs. We are not proposing any changes to this policy for FY 2027, and as such any proposed new or renumbered MS-LTC-DRGs for FY 2027 would not be eligible for the 10-percent cap.
Under the requirement at existing § 412.517(b) that aggregate LTCH PPS payments will be unaffected by annual changes to the MS-LTC-DRG classifications and relative weights, consistent with our established methodology, we are proposing to continue to apply a budget neutrality adjustment to the MS-LTC-DRG relative weights so that the 10-percent cap on relative weight reductions (step 10) is implemented in a budget neutral manner. Therefore, we are proposing to determine the proposed budget neutrality adjustment factor for the 10-percent cap on relative weight reductions using the following three steps: (a) simulate estimated total FY 2027 LTCH PPS standard Federal payment rate payments for applicable LTCH cases using the proposed capped relative weights for FY 2027 (determined in Step 10) and proposed GROUPER Version 44; (b) simulate estimated total FY 2027 LTCH PPS standard Federal payment rate payments for applicable LTCH cases using the proposed uncapped relative weights for FY 2027 (determined in Step 9) and proposed GROUPER Version 44; and (c) calculate the ratio of these estimated total payments by dividing the value determined in step (b) by the value determined in step (a). In determining the proposed FY 2027 MS-LTC-DRG relative weights, each capped relative weight is then multiplied by a proposed budget neutrality factor of 0.997832 (the value determined in step (c)) to achieve the budget neutrality requirement.
Table 11, which is listed in section VI. of the Addendum to this proposed rule and is available via the internet on the CMS website, lists the proposed MS-LTC-DRGs and their respective proposed relative weights, proposed geometric mean length of stay, and proposed five-sixths of the geometric mean length of stay (used to identify SSO cases under § 412.529(a)) for FY 2027. We also are making available on the website the proposed MS-LTC-DRG relative weights prior to the application of the 10 percent cap on MS-LTC-DRG relative weight reductions and corresponding proposed cap budget neutrality factor.
The basic methodology for determining LTCH PPS standard Federal payment rates is currently set forth at 42 CFR 412.515 through 412.533 and 412.535. In this section, we discuss the factors that we are proposing to use to update the LTCH PPS standard Federal payment rate for FY 2027, that is, effective for LTCH discharges occurring on or after October 1, 2026, through September 30, 2027. Under the dual rate LTCH PPS payment structure required by statute, beginning with discharges in cost reporting periods beginning in FY 2016, only LTCH discharges that meet the criteria for exclusion from the site neutral payment rate are paid based on the LTCH PPS standard Federal payment rate specified at 42 CFR 412.523. (For additional details on our finalized policies related to the dual rate LTCH PPS payment structure required by statute, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 49623).)
Prior to the implementation of the dual payment rate system in FY 2016, all LTCH discharges were paid similarly to those now exempt from the site neutral payment rate. That legacy payment rate was called the standard Federal rate. For details on the development of the initial standard Federal rate for FY 2003, we refer readers to the August 30, 2002, LTCH PPS final rule (67 FR 56027 through 56037). For subsequent updates to the standard Federal rate from FYs 2003
In this FY 2027 IPPS/LTCH PPS proposed rule, we present our proposed policies related to the annual update to the LTCH PPS standard Federal payment rate for FY 2027.
The proposed update to the LTCH PPS standard Federal payment rate for FY 2027 is presented in section V.A. of the Addendum to this proposed rule. The components of the proposed annual update to the LTCH PPS standard Federal payment rate for FY 2027 are discussed in this section, including the statutory reduction to the annual update for LTCHs that fail to submit quality reporting data for FY 2027 as required by the statute (as discussed in section IX.C.2.c. of the preamble of this proposed rule). We are proposing to make an adjustment to the LTCH PPS standard Federal payment rate to account for the estimated effect of the changes to the area wage level for FY 2027 on estimated aggregate LTCH PPS payments, in accordance with 42 CFR 412.523(d)(4) (as discussed in section V.B. of the Addendum to this proposed rule).
Historically, the Medicare program has used a market basket to account for input price increases in the services furnished by providers. The market basket used for the LTCH PPS includes both operating and capital-related costs of LTCHs because the LTCH PPS uses a single payment rate for both operating and capital-related costs. We adopted the 2022-based LTCH market basket for use under the LTCH PPS beginning in FY 2025. For additional details on the historical development of the market basket used under the LTCH PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53476), and for a complete discussion of the LTCH market basket and a description of the methodologies used to determine the operating and capital-related portions of the 2022-based LTCH market basket, we refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69435 through 69455).
Section 3401(c) of the Affordable Care Act provides for certain adjustments to any annual update to the LTCH PPS standard Federal payment rate and refers to the timeframes associated with such adjustments as a “rate year.” We note that, because the annual update to the LTCH PPS policies, rates, and factors now occurs on October 1, we adopted the term “fiscal year” (FY) rather than “rate year” (RY) under the LTCH PPS beginning October 1, 2010, to conform with the standard definition of the Federal fiscal year (October 1 through September 30) used by other PPSs, such as the IPPS (75 FR 50396 through 50397). Although the language of sections 3004(a), 3401(c), 10319, and 1105(b) of the Affordable Care Act refers to years 2010 and thereafter under the LTCH PPS as “rate year,” consistent with our change in the terminology used under the LTCH PPS from “rate year” to “fiscal year,” for purposes of clarity, when discussing the annual update for the LTCH PPS standard Federal payment rate, including the provisions of the Affordable Care Act, we use “fiscal year” rather than “rate year” for 2011 and subsequent years.
As previously noted, we adopted the 2022-based LTCH market basket for use under the LTCH PPS beginning in FY 2025. The 2022-based LTCH market basket is primarily based on the Medicare cost report data submitted by LTCHs and, therefore, specifically reflects the cost structures of LTCHs. For additional details on the development of the 2022-based LTCH market basket, we refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69435 through 69455). We continue to believe that the 2022-based LTCH market basket appropriately reflects the cost structure of LTCHs for the reasons discussed when we adopted its use in the FY 2025 IPPS/LTCH PPS final rule. Therefore, in this proposed rule, we are proposing to use the 2022-based LTCH market basket to update the LTCH PPS standard Federal payment rate for FY 2027.
Section 1886(m)(3)(A) of the Act provides that, beginning in FY 2010, any annual update to the LTCH PPS standard Federal payment rate is reduced by the adjustments specified in clauses (i) and (ii) of subparagraph (A), as applicable. Clause (i) of section 1886(m)(3)(A) of the Act provides for a reduction, for FY 2012 and each subsequent rate year, by “the productivity adjustment” described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the Affordable Care Act, defines this productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period). The U.S. Department of Labor's Bureau of Labor Statistics (BLS) publishes the official measures of productivity for the U.S. economy. The productivity measure referenced in section 1886(b)(3)(B)(xi)(II) is published by BLS as private nonfarm business total factor productivity ((TFP) previously referred to as multifactor productivity).
Section 1886(m)(3)(B) of the Act provides that the application of paragraph (3) may result in the annual update being less than zero for a rate year, and may result in payment rates for a rate year being less than such payment rates for the preceding rate year.
In accordance with section 1886(m)(5) of the Act, the Secretary established the Long-Term Care Hospital Quality Reporting Program (LTCH QRP). The reduction in the annual update to the LTCH PPS standard Federal payment rate for failure to report quality data under the LTCH QRP for FY 2014 and subsequent fiscal years is codified under 42 CFR 412.523(c)(4). The LTCH QRP, as required for FY 2014 and subsequent fiscal years by section 1886(m)(5)(A)(i) of the Act, requires that a 2.0 percentage points reduction be applied to any update under 42 CFR 412.523(c)(3) for an LTCH that does not submit quality reporting data to the Secretary in accordance with section 1886(m)(5)(C) of the Act with respect to such a year (that is, in the form and manner and at the time specified by the Secretary under the LTCH QRP under 42 CFR 412.523(c)(4)(i)). Section 1886(m)(5)(A)(ii) of the Act provides
Consistent with our historical practice, we estimate the market basket percentage increase and the productivity adjustment based on IHS Global Inc.'s (IGI's) forecast using the most recent available data. Based on IGI's fourth quarter 2025 forecast, the proposed FY 2027 market basket percentage increase for the LTCH PPS using the 2022-based LTCH market basket is 3.2 percent. The proposed productivity adjustment for FY 2027 based on IGI's fourth quarter 2025 forecast is 0.8 percentage point.
For FY 2027, section 1886(m)(3)(A)(i) of the Act requires that any annual update to the LTCH PPS standard Federal payment rate be reduced by the productivity adjustment, described in section 1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, we are proposing to reduce the FY 2027 market basket percentage increase by the FY 2027 productivity adjustment. To determine the proposed market basket update for LTCHs for FY 2027 we subtracted the proposed FY 2027 productivity adjustment from the proposed FY 2027 market basket percentage increase. (For additional details on our established methodology for adjusting the market basket percentage increase by the productivity adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771).) In addition, for FY 2027, section 1886(m)(5) of the Act requires that, for LTCHs that do not submit quality reporting data as required under the LTCH QRP, any annual update to an LTCH PPS standard Federal payment rate, after application of the adjustments required by section 1886(m)(3) of the Act, shall be further reduced by 2.0 percentage points.
In this FY 2027 IPPS/LTCH PPS proposed rule, in accordance with the statute, we are proposing to reduce the proposed FY 2027 market basket percentage increase of 3.2 percent (based on IGI's fourth quarter 2025 forecast of the 2022-based LTCH market basket) by the proposed FY 2027 productivity adjustment of 0.8 percentage point (based on IGI's fourth quarter 2025 forecast). Therefore, under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, consistent with 42 CFR 412.523(c)(3)(xvii), we are proposing to establish an annual market basket update to the LTCH PPS standard Federal payment rate for FY 2027 of 2.4 percent (that is, the proposed LTCH PPS market basket percentage increase of 3.2 percent less the proposed productivity adjustment of 0.8 percentage point). For LTCHs that fail to submit quality reporting data under the LTCH QRP, under 42 CFR 412.523(c)(3)(xvii) in conjunction with 42 CFR 412.523(c)(4), we are proposing to further reduce the annual update to the LTCH PPS standard Federal payment rate by 2.0 percentage points, in accordance with section 1886(m)(5) of the Act. Accordingly, we are proposing to establish an annual update to the LTCH PPS standard Federal payment rate of 0.4 percent (that is, the proposed 2.4 percent LTCH market basket update minus 2.0 percentage points) for FY 2027 for LTCHs that fail to submit quality reporting data as required under the LTCH QRP. Consistent with our historical practice, we also are proposing that if more recent data subsequently become available (for example, a more recent estimate of the market basket percentage increase and productivity adjustment), we would use such data, if appropriate, to determine the FY 2027 market basket percentage increase and productivity adjustment in the final rule. We note that, consistent with historical practice, we are also proposing to adjust the FY 2027 LTCH PPS standard Federal payment rate by an area wage level budget neutrality factor in accordance with 42 CFR 412.523(d)(4) (as discussed in section V.B.6. of the Addendum to this proposed rule).
In section IX. of the preamble of this proposed rule, we are seeking comment on and proposing changes to the following Medicare quality reporting programs:
• In section IX.B. of the preamble of this proposed rule, we have the following crosscutting quality program proposals or requests for comment:
++ Proposed Adoption of the Advance Care Planning Electronic Clinical Quality Measure for use in the Hospital Inpatient Quality Reporting Program, PPS-Exempt Cancer Hospital Quality Reporting Program, and Medicare Promoting Interoperability Program for Eligible Hospitals and Critical Access Hospitals (CAHs) (previously known as the Medicare EHR Incentive Program).
++ Proposed Modifications to Five Mortality Measures in the Hospital Inpatient Quality Reporting and Value-based Purchasing Programs.
++ Measuring Emergency Care Access and Timeliness in the Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing Programs—Request for Information.
++ Potential Future Use of the Adult Community-Onset Sepsis Standardized Mortality Ratio Measure in the Hospital Inpatient Quality Reporting Program—Request for Information.
• In section IX.C. of the preamble of this proposed rule, the Hospital Inpatient Quality Reporting Program.
• In section IX.D. of the preamble of this proposed rule, the PPS-Exempt Cancer Hospital Quality Reporting Program.
• In section IX.E. of the preamble of this proposed rule, the Long-Term Care Hospital Quality Reporting Program.
• In section IX.F. of the preamble of this proposed rule, the Medicare Promoting Interoperability Program for Eligible Hospitals and CAHs.
The 1990 Patient Self-Determination Act requires hospitals to inform patients of their rights regarding medical decisions and document the execution of an advance directive in medical records.
Many patients assume that their caregivers know their preferences regarding their care, but caregivers incorrectly predict the patients' preferences one-third of the time.
The Advance Care Planning electronic clinical quality measure (eCQM) calculates the proportion of adult patients with one or more inpatient hospitalizations during the measurement period who, by the time of hospital discharge for at least one encounter, have an advance care planning document or documentation of an advance care planning discussion resulting in a documented decision in the patient's electronic health record (EHR). This eCQM is intended to promote timely advance care planning by encouraging communication between patients and providers to elicit and document the patient's care preferences and surrogate decision-makers, thereby supporting age-friendly and goal-concordant care. The promotion of patient-centered care and utilization of EHRs to support health information exchange are important priorities across our quality reporting programs. Standardized advance care planning documentation in an EHR furthers these priorities to keep care aligned with patients' stated preferences across the care continuum. The Advance Care Planning eCQM allows for automated extraction of patient-level data directly from the EHR. We refer readers to the Electronic Clinical Quality Improvement Resource Center (eCQI) for detailed eCQM measure specifications and implementation guidance for each reporting period:
The measure numerator includes all adult patients with one or more inpatient encounters during the measurement period who have an advance care planning document or documentation of an advance care planning discussion resulting in a documented decision in the patient's EHR by the time of hospital discharge during at least one of the inpatient encounters. At this time, the numerator comprises any one of the following: (1) advance care planning document as evidenced by the following types of documents: designated health care agent (health care proxy or medical power of attorney for health care),
To be counted in the numerator, the advance care planning document must be available in the patient's EHR during any hospitalization in the measurement period. The measure does not require a date reflecting the document's origination or when it was last updated; however, we encourage hospitals to support their health care providers in discussing with the patient, or their surrogate, whether the document accurately reflects the patient's current preferences. In order to be counted as an advance care planning discussion leading to a decision, the documentation of the discussion with a decision must have a date in the EHR that occurs during an inpatient encounter in the measurement period. If a patient has multiple inpatient encounters during the measurement period, an advance care planning discussion with a decision occurring in any one of the inpatient encounters during the measurement period is counted toward the numerator. For a detailed list of the EHR data elements that comprise the numerator of this proposed eCQM, please refer to the CMS QualityNet website, where a list is posted under both the Hospital Inpatient Quality Reporting Program
The denominator includes all patients aged 18 years and older at the start of the measurement period who are discharged from an inpatient hospitalization during the measurement period, which is a 12-month period that would run from January 1 through December 31 of each applicable calendar year.
There are no numerator or denominator exclusions.
We note the PCH Quality Reporting Program currently uses another measure, Documentation of Goals of Care Discussions Among Cancer Patients measure (88 FR 59222 through 59224), which has some similar aims; however, it only evaluates whether specific oncology patients at a reporting PCH had documentation related to prognosis, treatment, and goals for care. The Advance Care Planning eCQM focuses on documenting condition-agnostic medical instructions and surrogate decision-makers among all adult patients, which are intended to remain applicable across care settings.
Updated data element feasibility has been tested in two EHR systems, and measure score reliability has been tested in 43 hospitals across three health systems.
The wide range and variation of results indicate room for quality improvement and aligns with evidence in the literature that advance care planning remains low. Test results indicated high measure reliability and validity (including agreement between data exported from the EHR and manual review of the patient chart). For detailed information on the measure specifications, please refer to:
We refer readers to the Partnership for Quality Measurement for details on the Pre-Rulemaking Measure Review process convened by the consensus-based entity (CBE), including the voting procedures used to reach consensus on measure recommendations.
Overall, the Pre-Rulemaking Measure Review Hospital Committee largely recognized the importance of advance care planning to improve communication and documentation of patient preferences and to promote patient-centered care. However, it raised concerns that the eCQM does not capture situations when patients decline or defer advance care planning and suggested inclusion of EHR codes that capture these instances. We understand the concerns of patients declining or deferring advance care planning discussions and include EHR codes for these situations. Specifically, hospitals can code for instances where a patient did not name a surrogate or provide an advance care plan; therefore, accommodating the situation where a conversation took place but no plan or proxy was named per the patient's preference.
A few Recommendation Group members who voted to recommend adoption of the Advance Care Planning eCQM recommended adding a length of stay (LOS) requirement to ensure trust between the patient and provider and studying the measure among young adults.
We appreciate the members' recommendations to add a length of stay requirement and to study it among young adults. We considered these recommendations and have determined that revision is not appropriate at this time as the goal of this measure is to establish advance care planning as a normalized, routine part of care regardless of health status and age. For patients facing imminent death as well as those expected to recover quickly, advance care planning is a priority as circumstances can change quickly. However, we will continue to evaluate these topics as additional information, experience, or analysis develops.
A Recommendation Group member who voted not to recommend adoption of the eCQM for the Programs stated it would function as a check-the-box exercise rather than meaningful integration of patient preferences into care. This member noted that hospitals already ask whether a DNR order or advance directive is in place and that care teams rarely review these documents or integrate patients' wishes into the care plan. The member stated that advance care planning should primarily occur with a primary care provider or a specialist managing the patient's chronic conditions. We appreciate this feedback, and we wish to emphasize that we consider eliciting and documenting patients' preferences for care and designation of surrogate decision-makers to be a fundamental element of providing high-quality, patient-centered, and goal-concordant care. While the eCQM assesses presence of EHR codes rather than the quality of underlying conversations, this documentation is critical for care teams to reliably locate and use advance care planning information when making clinical decisions. Furthermore, hospitalization is a critical touchpoint to initiate advance care planning or to confirm and update existing information.
Additionally, a few Recommendation Group members who voted not to recommend adoption of the eCQM for the Medicare Promoting Interoperability Program indicated that they supported implementing and evaluating the eCQM in the Hospital Inpatient Quality Reporting Program before considering it for the Medicare Promoting Interoperability Program. Another member stated that the eCQM was not sufficiently defined for use in the Medicare Promoting Interoperability Program but did not provide additional detail regarding this concern in their vote rationale.
As the measure specifications proposed for the Medicare Promoting Interoperability Program are the same as those proposed for the Hospital Inpatient Quality Reporting and PCH Quality Reporting Programs, we believe they are sufficiently defined and appropriate for use across all three programs. The eCQM underwent extensive analysis and measure specifications development required for the endorsement process. Test results indicated high measure reliability and validity (including agreement between data exported from the EHR and manual review of the patient chart).
After taking these recommendations and concerns into consideration, we propose to adopt the Advance Care Planning eCQM in the Hospital Inpatient Quality Reporting Program, PCH Quality Reporting Program, and the Medicare Promoting Interoperability Program.
We refer readers to the Partnership for Quality Measurement website for details on the measure endorsement and maintenance process, including the measure evaluation procedures the Endorsement and Maintenance Committees use to evaluate measures and whether they meet endorsement criteria. We propose to adopt this measure into the Hospital Inpatient Quality Reporting Program and the PCH Quality Reporting Program despite the measure not being endorsed by the CBE. Section 1886(b)(3)(B)(viii)(IX)(aa) of the Act requires that each measure specified by the Secretary for use in the Hospital Inpatient Quality Reporting Program be endorsed by the entity with a contract under section 1890(a) of the Act, and section 1866(k)(3)(A) of the Act imposes the same requirement for measures specified for use in the PCH Quality Reporting Program. Sections 1886(b)(3)(B)(viii)(IX)(bb) and 1866(k)(3)(B) of the Act state, however, that in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. We reviewed CBE-endorsed measures and were unable to identify any other CBE-endorsed measures on this topic, and, therefore, we believe the exceptions in sections 1886(b)(3)(B)(viii)(IX)(bb) and 1866(k)(3)(B) of the Act apply.
The proposed Advance Care Planning eCQM is specified in a standard electronic format, utilizing data extracted from EHRs, which would minimize errors due to manual abstraction of data.
Testing was performed to confirm the feasibility of the measure and data elements with manual review of EHR data against chart-abstracted data. Testing demonstrated that all critical data elements were reliably and consistently captured in the EHR.
In section IX.D.5. of this proposed rule, we are proposing to introduce eCQM reporting and submission requirements to the PCH Quality Reporting Program, under which PCHs would be required to use certified health IT to report and submit eCQMs. PCHs are specialized acute care settings that provide intensive inpatient oncology services. As the measure was successfully tested in a variety of inpatient hospital types and is specified using data elements expected to be available in certified EHR technology, we believe that the high level of feasibility, validity, and reliability observed in a blend of acute care hospitals is reasonably applicable to PCHs despite their specialty focus on cancer patients. Further, we would monitor implementation and measure performance in PCHs and consider refinements if setting-specific issues arise.
For the Hospital Inpatient Quality Reporting Program and the Medicare Promoting Interoperability Program, we propose to adopt the Advance Care Planning eCQM as part of the eCQM measure set beginning with the CY 2028 reporting period/FY 2030 payment determination. A hospital can self-select eCQMs to report from the eCQM measure set to meet the eCQM reporting requirement. We refer readers to sections IX.C.8.c. and IX.F.9. respectively of this proposed rule for a discussion of proposed eCQM form, manner, and timing of data submission and reporting requirements for these two programs. For the PCH Quality Reporting Program, we propose to adopt the Advance Care Planning eCQM beginning with the CY 2028 reporting period/FY 2030 program year. We refer readers to section IX.D.5. of this proposed rule for a discussion of proposed eCQM form, manner, and timing of data submission and reporting requirements for the PCH Quality Reporting Program.
If adoption of the Advance Care Planning eCQM is finalized, we propose to publicly report data as soon as it is feasible on CMS websites such as the Compare tool on Medicare.gov (
We invite public comment on our proposals.
In the CY 2007 OPPS/ASC final rule (71 FR 68205 through 68206), we began adopting condition-specific and procedure-specific mortality measures into the Hospital Inpatient Quality Reporting Program to more fully reflect patient outcomes following hospitalization. Beginning with the FY 2014 program year, we adopted mortality measures into the Hospital Value-Based Purchasing Program, under the Clinical Outcomes domain, specifically:
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure Hospitalization (MORT-30-HF) measure (76 FR 26495 through 26511);
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization (MORT-30-PN) measure (adopted at 76 FR 26495 through 26511; modified at 81 FR 56994 through 56996);
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (MORT-30-COPD) measure (80 FR 49557 through 49558); and
• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Coronary Artery Bypass Graft (CABG) Surgery (MORT-30-CABG) measure (81 FR 56996 through 56998).
For more details on these five mortality measures, we refer readers to the condition-specific and the procedure-specific mortality measures updates and specifications reports available at:
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41556 through 41558), after adopting these measures into a pay-for-performance program, the Hospital Value-Based Purchasing Program, we removed them from the Hospital Inpatient Quality Reporting Program, a pay-for-reporting program, under removal Factor 8, the costs associated with a measure outweigh the benefit of its continued use in the program. We subsequently removed these measures from the Hospital Inpatient Quality Reporting Program, while maintaining them in the Hospital Value-Based Purchasing Program, as a part of our ongoing effort to move the programs forward in the least burdensome manner possible, while maintaining parsimonious sets of quality measures and continuing to incentivize improvement in the quality of care provided to patients. These five mortality measures continue to provide meaningful information for patients on the quality and value of care provided at a hospital and continue to be included in the calculation of incentive payment adjustments for the Hospital Value-Based Purchasing Program. Table IX.B.3. summarizes our previously finalized policies for these five mortality measures in the Hospital Inpatient Quality Reporting and Value-Based Purchasing Programs.
In this proposed rule, we propose to adopt the modified versions of the MORT-30-AMI, MORT-30-HF, MORT-30-PN, MORT-30-COPD, and the MORT-30-CABG measures in the Hospital Inpatient Quality Reporting Program beginning with the FY 2028 payment determination. We would also modify these measures in the Hospital Value-Based Purchasing Program and remove them from the Hospital Inpatient Quality Reporting Program beginning with the FY 2032 payment determination. When these five mortality measures were previously adopted into the Hospital Inpatient Quality Reporting Program and Hospital Value-Based Purchasing Programs, they only included Medicare Fee-For-Service beneficiaries in the measure cohorts. Since the initial adoption of these measures, the proportion of Medicare Advantage beneficiaries has increased from 35 percent of the Medicare population to approximately 50 percent.
We are proposing two substantive modifications to these five mortality measures: (1) expand the measure inclusion criteria to include Medicare Advantage beneficiaries; and (2) shorten the performance period from 3 to 2 years. Inclusion of Medicare Advantage beneficiaries expands quality measurement of patient outcomes following hospitalization across all Medicare beneficiaries, enhances the reliability of measure scores, leads to more hospitals receiving results, and increases the chance of identifying meaningful differences in quality for some low-volume hospitals. Based on
Table IX.B.5. summarizes the proposed new performance periods for the Hospital Inpatient Quality Reporting Program and Hospital Value-Based Purchasing Program, beginning with the FY 2028 payment determination. We refer readers to section V.L.3. for more details on the baseline and performance periods in the Hospital Value-Based Purchasing Program for the FY 2032 program year and subsequent years.
For more details on the measure refinement methodology and results for these measures, we refer readers to the condition-specific and procedure-specific mortality measures updates and specifications reports available at:
The outcomes for the modified mortality measures, MORT-30-AMI, MORT-30-HF, MORT-30-PN, MORT-30-COPD, and MORT-30-CABG, would continue to measure 30-day, all-cause mortality.
The measures are calculated by first determining the ratio of the number of “predicted” deaths (the adjusted number of deaths at a specific hospital based on its patient population) to the number of “expected” deaths (the number of deaths if an average quality hospital treated the same patients) for each hospital and then multiplies the ratio by the national observed mortality rate. The ratio of predicted to expected deaths is greater than one for a hospital that has more deaths than would be expected for an average hospital with similar cases and less than one if the hospital has fewer deaths than would be expected for an average hospital with similar cases. This allows for a comparison of a particular hospital's performance to an average hospital's performance with the same case mix. This approach is analogous to a ratio of an “observed” or “crude” rate to an “expected” or risk adjusted rate used in other similar types of statistical analyses.
The numerator for this measure is 30-day, all-cause mortality. We define mortality as death from any cause within 30 days of the start of the index admission, including in-hospital death.
The cohort includes admissions for patients that meet all of the following inclusion criteria:
• Discharged from the hospital with a principal discharge diagnosis of AMI, HF, COPD, pneumonia, or a qualifying CABG procedure;
• Enrolled in Medicare Fee-For-Service Part A and Part B or Medicare Advantage for the first 12 months prior to the date of admission and enrolled in Part A or Medicare Advantage during the index admission;
• Aged 65 or older; and
• Not transferred from another acute care facility.
If a patient has more than one eligible AMI, HF, COPD, pneumonia, or CABG procedure hospitalization during the reporting period, then we randomly select one admission, or eligible procedure,
For more information regarding measure specifications, including denominator exclusion criteria, we refer readers to condition-specific and procedure-specific mortality measures methodology reports at:
We refer readers to the Partnership for Quality Measurement for details on the Pre-Rulemaking Measure Review process convened by the CBE, including the voting procedures used to reach consensus on measure recommendations.
For the Hospital Inpatient Quality Reporting Program, the Recommendation Group reached consensus and recommended the five modified mortality measures for adoption into the program. For the Hospital Value-Based Purchasing Program, the Recommendation Group reached consensus for four of the five modified mortality measures, the MORT-30-AMI, MORT-30-HF, MORT-30-PN, and MORT-30-COPD measures, and thus, recommended these measures for adoption into the Hospital Value-Based Purchasing Program. The Recommendation Group did not reach consensus to recommend the MORT-30-CABG measure for the Hospital Value-Based Purchasing Program, although the majority of the Recommendation Group did express some support.
The Recommendation Group largely supported the addition of Medicare Advantage beneficiaries to the measures' cohorts and underscored the importance of enhancing transparency and facilitating meaningful comparisons and high-quality care by including this population. The Recommendation Group also generally agreed that shortening the reporting period from 3 to 2 years would lead to more actionable insights. Some members recommended further analysis to ensure the effects of including Medicare Advantage beneficiaries to the measures' cohorts are understood. Some members that did not vote to recommend these measures emphasized the need to understand the impacts of including Medicare Advantage beneficiaries in hospital performance in the Hospital Value-Based Purchasing Program prior to implementation. We appreciate the member's recommendation to ensure the impacts of including Medicare Advantage beneficiaries in the measure' cohorts is understood and we wish to emphasize that, based on our analysis, the variation between the two cohorts did not vary significantly for mortality rates, and the reliability estimate for the modified measures showed satisfactory results.
Some Recommendation Group members who recommended adopting the modified mortality measures for the Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing Programs also provided considerations for strengthening the measures. Many of these recommendations included considerations for improving the risk adjustment model. Specifically, some members recommended adjusting for socioeconomic status in the risk model for all mortality measures. Some members that voted to recommend this measure suggested considering including the cause of death in the risk model to improve accuracy. Other members voted not to recommend these measures for the two programs, citing that additional evaluation of the updated risk model is needed.
Regarding the recommendation to add socioeconomic status factors to the risk adjustment model, we note that our analysis found that including these factors showed minimal impact to measure performance. This analysis also found that including these factors could result in negative impacts to vulnerable populations by lowering the expected mortality for these groups, and we decided to exclude these factors from our risk adjustment model. Regarding the recommendation to include the cause of death to improve the risk model, we thank the Recommendation Group members for this recommendation and will consider this in our routine measure maintenance.
Recommendation Group members emphasized that the modified measures should be re-submitted for endorsement prior to implementation as a rationale for not voting to recommend this measure for the Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing Programs. Other key reasons cited for not recommending these modified mortality measures included recommending a phased implementation approach for the measure modifications, as well as confidential reporting to ensure a clear understanding of measure impacts. Some members expressed concerns about whether small or rural hospitals would be able to meet volume thresholds for these measures with the reduced reporting period.
Regarding members' recommendation to re-submit the modified measures for endorsement, these measures are currently endorsed by the CBE and have been re-submitted for endorsement review with these measure modifications for the Spring 2026 cycle. In response to the members that recommended a phased implementation of the measures modifications as well as confidential reports, we note that we intend to provide hospitals with measure performance data with the expanded patient cohort based on data collected while the modified versions of these measures are in use in the Hospital Inpatient Quality Reporting Program via annual confidential hospital-specific reports beginning with the FY 2028 program year, as well as via annual Provider Participation Summary Reports under the Hospital Value-Based Purchasing Program beginning with the FY 2032 program year. Further, we propose the modified mortality measures take effect for the Hospital Value-Based Purchasing Program beginning with the FY 2032 program year, which will provide time and data to monitor for any unintended consequences. In addition, the FY 2032 Hospital Value-Based Purchasing Program performance standards for this measure would be published at least 60 days prior to the beginning of each applicable performance period as required by section 1886(o)(3)(C) of the Act. Regarding the concern about whether small or rural hospitals would be unduly burdened by the shortening of the reporting period from 3 to 2 years, we wish to note that the decrease in cohort size is largely offset with the addition of Medicare Advantage beneficiaries to measure cohorts; thus, we do not anticipate small or rural hospitals to be unduly burdened by this update.
Specifically for the MORT-30-CABG measure, one member cited the potential for unintended consequences for hospitals to refuse care for patients with complex co-morbidities as their rationale for not recommending this measure for either the Hospital Inpatient Quality Reporting Program or the Hospital Value-Based Purchasing Program. We appreciate the Recommendation Group member's concern about unintended consequences. Based on our analysis with the current risk adjustment methodology, which includes risk adjustment for patient frailty, we do not anticipate hospitals to be unfairly penalized for treating patients who may be more complex. We refer readers to Table IX.B.4., in section IX.B.2.b., and Table IX.B.9., in section IX.B.2.f., for more details on our analysis of measure reliability and the risk adjustment methodology. Further, as a part of routine measure maintenance, we conduct ongoing monitoring and evaluation analyses to watch for any unintended consequences.
After taking these recommendations and concerns into consideration, we propose to adopt the modified mortality measures in the Hospital Inpatient Quality Reporting Program beginning with the FY 2028 payment determination and subsequently modify the mortality measures in Hospital Value-Based Purchasing Program beginning with the FY 2032 program year.
We refer readers to the Partnership for Quality Measurement website for details on the measure Endorsement and Maintenance process, including the measure evaluation procedures the Endorsement and Maintenance Committees use to evaluate measures and whether they meet endorsement criteria. Table IX.B.8. summarizes the most recent endorsement status and the next planned Endorsement and Maintenance review for five modified mortality measures:
These measures would be calculated using administrative data from Medicare Fee-For-Service claims or hospital-submitted Medicare Advantage claims, and Medicare Advantage Organization-submitted encounter data. This data is routinely generated by hospitals and submitted to CMS for all Medicare beneficiaries, which includes Medicare Advantage and Medicare Fee-For-Service beneficiaries. Therefore, a hospital would not be required to report any additional data for this measure. Enrollment status would be obtained from the Medicare Enrollment Database which contains beneficiary demographic, benefit/coverage, and vital status information.
The proposed modified mortality measures would be calculated and publicly reported on an annual basis using a rolling 24 months of prior data for the measurement period, consistent with the approach currently used for the MORT-30-STK measure, the COMP-
We invite public comment on our proposals to adopt five modified mortality measures, MORT-30-AMI, MORT-30-HF, MORT-30-PN, MORT-30-COPD, and the MORT-30-CABG, into the Hospital Inpatient Quality Reporting Program from the FY 2028 payment determination through the FY 2031 payment determination, and subsequently remove these measures from the Hospital Inpatient Quality Reporting Program beginning with the FY 2032 payment determination, as a step towards substantively modifying them in the Hospital Value-Based Purchasing Program. We also invite public comment on our proposal to modify these five mortality measures in the Hospital Value-Based Purchasing Program beginning with the FY 2032 program year, contingent on our adoption of these changes in the Hospital Inpatient Quality Reporting Program.
We are also notifying the public of technical updates to the risk adjustment methodology for the five modified mortality measures' proposed for adoption in the Hospital Inpatient Quality Reporting Program, beginning with the FY 2028 payment determination, and for modification in the Hospital Value-Based Purchasing Program, beginning with the FY 2032 program year, to use individual International Classification of Diseases (ICD-10) codes instead of hierarchical condition categories (HCC) to improve the measure's risk adjustment methodology. The risk adjustment strategy currently in use involves grouping ICD-10 diagnosis codes from CMS's HCC system into clinically relevant categories (76 FR 26495 through 26511, 80 FR 49557 through 49558, and 81 FR 56994 through 56996). We then evaluate the HCCs for statistical association with the measures' outcomes. To better leverage the data and analytical advances since the measure was initially developed, we created a new approach to use individual ICD-10 codes for risk adjustment. Research has indicated that using individual ICD-10 codes in place of HCCs could significantly improve the model performance of the mortality measures. With this new approach, the ability of the risk adjustment model to account for condition-specific or procedure-specific severity was significantly better. See Table IX.B.9. for a summary of improvements to the risk adjustment models' performance for the five modified mortality measures.
Occupancy and boarding rates in EDs continue to worsen and exceed pre-pandemic levels. ED boarding, defined as holding a patient in the ED after the patient is admitted or placed into observation status at a hospital, is an outcome of misaligned incentives to deploy care delivery resources in a particular way,
Recent studies indicate that delays in the timeliness of ED care are associated with patient harm.
Studies have documented a significantly higher likelihood of boarding when hospital occupancy rates exceed 85 percent.
In line with this perspective, evidence suggests that hospitals which perform better on metrics related to ED boarding are more likely to adopt cross-departmental initiatives (for example, ED, radiology, laboratory services, hospitalist, surgery, housekeeping, nursing) to alleviate crowding.
Notably, the breadth and variation in these strategies makes it clear that no single intervention will solve the ED boarding crisis, particularly when considering the effectiveness of these actions is likely to vary across patient populations, health status and comorbidities, and case-mix. As such, it is important for throughput and patient flow to be viewed as a shared responsibility within the healthcare delivery system. To that end, quality measures should reflect and promote a culture of accountability.
The Emergency Care Access & Timeliness eCQM is currently specified for the hospital setting and calculates the proportion of four outcome metrics that quantify access to and timeliness of care in a hospital ED setting against specified thresholds, including: (1) patient wait time—1 hour; (2) whether the patient left the ED without being evaluated; (3) patient boarding time in the ED (as defined by a Decision to Admit (order) to ED departure for admitted patients)—4 hours; and (4) patient ED LOS (time from ED arrival to ED physical departure, as defined by the ED departure timestamp)—8 hours. Measure testing for the Emergency Care Access & Timeliness eCQM was conducted by the measure developer across 32 hospital-based EDs, representing a diverse mix of geographic regions, rurality, hospital size, teaching status, trauma level, and EHR vendors, demonstrating that the measure is reliable, valid, and feasible for all required data elements.
The measure numerator includes any ED encounter in the denominator where the patient experiences any one of the following: (1) the patient waited longer than 1 hour after arrival to the ED to be placed in a treatment room or dedicated treatment area that allows for audiovisual privacy during history-taking and physical examination; (2) the patient left the ED without being evaluated; (3) the patient boarded in the ED for longer than 4 hours; and (4) the patient had an ED LOS of longer than 8 hours.
These four outcomes were selected based on published literature demonstrating that each numerator component is associated with patient harm, as well as input from clinical experts including ED experts and statistical and methodological experts and a TEP that was convened by the measure developer.
The numerator thresholds were developed according to evidence and consensus-based clinical guidelines for ED time thresholds, including guidelines developed by The Joint Commission (TJC), the American College of Emergency Physicians (ACEP), and the Emergency Department Benchmarking Alliance as well as input from a TEP, literature reviews, and environmental scans. For example, the 4-hour threshold for numerator component (3), boarding time, was developed according to recommendations from TJC and ACEP.
The measure denominator includes all ED encounters associated with patients of all ages, for all-payers, during a 12-month period of performance. Patients can have multiple encounters during a period of performance, and each encounter is eligible to contribute to the calculation of the measure.
The measure score is first calculated at the individual ED level as the proportion of ED encounters where any one of the four outcomes occurred. Raw measure scores are then standardized by ED case volume using z-scores. The z-score, or standard score, indicates how many standard deviations a data point
The results of the Emergency Care Access & Timeliness eCQM are stratified into four groups, two by age (18 years and older, and under 18 years) and two by mental health diagnoses (with, and without).
We refer readers to the CY 2026 OPPS/ASC final rule, where the Emergency Care Access & Timeliness eCQM was adopted into the Hospital Outpatient Quality Reporting
We are considering how to best measure care access and timeliness among hospitals participating in its quality reporting and value-based purchasing programs. We recognize that this issue is not specific to one particular setting (that is, inpatient or outpatient), and that a higher-level approach may instead be needed. However, as currently designed, CMS's quality reporting programs are divided to separately monitor inpatient and outpatient settings. If proposed for future rulemaking, we could consider adopting the existing outpatient measure into the Hospital Inpatient Quality Reporting Program as currently specified, or we could make adjustments to tailor it more specifically for inpatient use. Such enhancements could include modifying specific numerator components or the overall denominator to be more applicable for the inpatient setting. However, this more targeted approach to inpatient quality measurement may be at odds with aligning access and timeliness at a systems-level as noted above.
We invite public comment on the potential use of the Emergency Care Access & Timeliness eCQM into the Hospital Inpatient Quality Reporting and Value-Based Purchasing Programs, in addition to the following questions:
• What are some of the key barriers and challenges faced by inpatient providers in supporting process changes that improve bed availability and reduce ED boarding?
• What are the best practices for providers within inpatient departments to actively engage with colleagues in other departments, as well as other settings that impact bed availability (for example, post-acute care facilities)? What barriers do providers face, especially rural providers, in establishing protocols for bi-directional communication?
• Are there any elements of this measure that are not applicable (for example, numerator components, denominator, exclusions, etc.) to inpatient care, or for which an inpatient hospital should not be held accountable, which would warrant removal or modification if the measure is proposed in the Hospital Inpatient Quality Reporting Program?
++ For example, numerator components (1), (2), and (4) of the measure can occur for care provided entirely outside of an inpatient setting. This may lead to concerns that hospital inpatient processes are being evaluated based on the care and outcomes of patients who are not admitted during their stay.
++ On the other hand, as discussed above, ED boarding resulting from processes within the inpatient department impacts the throughput of
• Given the overlap in patient cohort with the measure recently adopted for the Hospital Outpatient Quality Reporting Program, do stakeholders have concerns related to duplication of encounters in quality measures? Given the shared responsibility across units within the hospital, is it beneficial for the cohort (or a subset of the cohort) to be tracked across similar measures in both programs?
++ For example, we could consider developing separate measures for each program, where a version for use in inpatient quality reporting tracks access and timeliness amongst patients that were admitted during their stay, while an outpatient quality reporting measures version tracks those not admitted.
• Should CMS consider including this measure in the Hospital Value-Based Purchasing Program? If so, would it be beneficial to keep the current measure specifications as is, particularly as these programs may be better suited to capture broader, system-wide processes?
• Are there any potential unintended consequences CMS should be aware of related to introducing this measure into the Hospital Inpatient Quality Reporting and Value-Based Purchasing Programs?
• Are there other measure development/re-specification ideas or opportunities CMS should consider for how inpatient departments can address ED boarding and better measure patient outcomes, such as harm from delays to inpatient care?
Sepsis, or septicemia, is a life-threatening condition that results from the body's dysregulated response to infection and is a leading cause of mortality, hospitalization, and readmission in the United States.
Accurate tracking of sepsis incidence and outcomes can be challenging due to the lack of a definitive diagnostic test and wide variation in diagnosis and coding practices.
For the past several years, we have been working together with the CDC's National Healthcare Safety Network (NHSN) team to advance CMS's digital strategy through the use of digital quality measures (dQMs).
CMS and CDC are collaborating on the development of several FHIR-based dQMs which may be adopted into CMS hospital quality programs in the coming years. Of these, we have identified the Adult Community-Onset Sepsis Standardized Mortality Ratio measure as a high priority due to high Sepsis mortality and morbidity. This measure was reviewed in the 2025 Pre-Rulemaking Measure Review process and is currently being tested as a pilot with NHSN partner hospitals (more information available at:
The Adult Community-Onset Sepsis Standardized Mortality Ratio measure provides hospitals with a nationally benchmarked metric of community-onset sepsis mortality outcomes, which can be used to measure their progress on improving the care of patients with sepsis. The measure uses data from the EHR in combination with claims data to provide robust risk-adjustment. All data elements are in defined fields in electronic sources and align with United States Core Data for Interoperability (USCDI)
Empiric validity of the measure was tested by comparing hospital-level adult community-onset sepsis standardized mortality ratios (SMRs) to hospital-level process measures that are typically considered to reflect best practices for sepsis care in the first 3-6 hours (Severe Sepsis and Septic Shock Management Bundle [SEP-1]), Hospital 30-day, All-cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization (pneumonia mortality), and the CMS Overall Hospital Star Rating. SMRs correlated with pneumonia mortality (ρ=0.27, p<0.001) and quality star ratings (ρ=-0.29, p=0.001). The results support the rationale for the Adult Community-Onset Sepsis Standardized Mortality Ratio measure that encourages hospitals to focus on the full breadth of sepsis care, from presentation through discharge, and foster innovation in identifying additional measures that meaningfully impact sepsis outcomes. The CDC calculated signal-to-noise reliability across 433,065 persons from 265 hospitals and reported a median reliability of 0.921.
The measure assesses the annual risk-adjusted standardized mortality ratio (SMR) of adult inpatients with community-onset sepsis who died during their hospitalization or were discharged to hospice. The SMR is reported annually and is calculated by dividing the number of observed community-onset sepsis deaths by the number of predicted community-onset sepsis deaths.
The measure numerator is the number of annually observed adults with community-onset sepsis who died during hospitalization or were discharged to hospice. The following are excluded from the numerator:
• Patients <18 years of age
• Length of hospitalization >120 days
• Patients with prior enrollment in hospice
• Patients that transferred to another acute care hospital
The measure denominator is the number of annually predicted adults with community-onset sepsis who died during hospitalization or were discharged to hospice.
Hospital-level Standardized Mortality Ratio = (observed adult community-onset sepsis in-hospital mortality & discharge to hospice)/(predicted community-onset sepsis in-hospital mortality & discharge to hospice).
This measure utilizes a risk-adjustment model incorporating baseline patient characteristics (age, sex), comorbidities, and detailed clinical data (including vital signs, laboratory values, positive blood cultures and COVID-19 tests, body mass index, and infection source per ICD-10 codes).
We refer readers to the NHSN digital Quality Measure Resource Center at
Data are from EHRs that would be submitted via the FHIR-based NHSNLink API and augmented by claims data (specifically, ICD-10 codes) for specific components of the sepsis definition, certain exclusions, and part of the risk adjustment. Hospitals' claims data could be submitted directly to NHSN by uploading .csv files or through a third party vendor on a hospital's behalf and would be similar in process to how facilities currently report claims data for the NHSN Surgical Site Infection measures.
We refer readers to the Partnership for Quality Measurement for details on the Pre-Rulemaking Measure Review process convened by the CBE, including the voting procedures used to reach consensus on measure recommendations.
We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69458 through 69459) for details on the measure endorsement and maintenance process, including the measure evaluation procedures the Endorsement and Maintenance Committees use to evaluate measures and whether they meet endorsement criteria. Adult Community-Onset Sepsis Standardized Mortality Ratio measure will be submitted in a future cycle for endorsement by the CBE. Section 1886(b)(3)(B)(IX)(bb) of the Act provides an exception that, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. We reviewed CBE-endorsed measures and were unable to identify any other CBE-endorsed measures that specifically measure sepsis mortality, therefore we believe the exception in Section 1886(b)(3)(B)(IX)(bb) of the Act applies.
We invite public input on the potential use of the Adult Community-Onset Sepsis Standardized Mortality Ratio measure, in addition to the following questions:
• How feasible would it be for hospitals, especially those in rural areas, to implement and report on this measure using existing data and workflows? What data, workflow, or resource challenges do you anticipate? What is the single most important change you would recommend, if any?
• Do EHRs receive reconciled claims codes from payers or billing systems? Do EHR data reflect the claims-adjudicated codes or does it remain unchanged after claims are submitted? Are there any time lags or any other considerations for using the claims codes for sepsis surveillance and measure calculation as described above? If EHRs do receive reconciled claims from the billing systems, are they able to be represented in FHIR APIs?
• Do third-party vendors reconcile the claim codes? If so, how do these vendors receive data and submit data, what standards are used, and what is the frequency and cadence of data flow? Please consider third-party vendors such as quality measurement vendors, health information exchanges, aggregators, EHR intermediaries, etc. who may normalize or reconcile claims (ICD-10, CPT, HCPCS) with clinical or FHIR-based data for reporting purposes.
• What are anticipated challenges in mapping EHR data to the specified Sepsis measure FHIR profiles and value sets? Please focus on data elements that may be unstructured (for example, are in narrative form), may be represented in local codes, or exist outside of commonly used documents that map to FHIR profiles (for example, flowsheets and provider orders).We refer readers to the NHSN digital quality measure information available at:
• Are there any additional anticipated challenges or burden related to: (1) making the required EHR data available in FHIR, (2) accessing and linking claims data needed for exclusions and risk adjustment, or (3) working with vendors or NHSN to implement the dQM specifications referenced above? Please provide details.
• To what extent do you believe this measure allows for fair comparison across hospitals? What adjustments or stratifications, if any, would improve fairness?
• To what extent do you agree this measure meaningfully reflects quality/value of care such that CMS should consider including this measure in a pay-for-performance program, such as the Hospital Value-Based Purchasing Program?
• Are there any potential unintended effects of using this measure for payment adjustment (for example, risk variable selection, reduced access to care, documentation burden)? If yes or not sure, please describe.
The Hospital Inpatient Quality Reporting is a pay-for-reporting program intended to measure the quality of hospital inpatient services, improve the quality of care provided to Medicare beneficiaries, and facilitate public transparency. Section 1886(b)(3)(B)(viii) of the Social Security Act (the Act) states that subsection (d) hospitals participating in the Hospital Inpatient Quality Reporting Program that do not submit data required for measures selected with respect to such a year, in the form and manner required by the Secretary, will incur a 2.0 percentage point reduction to their annual payment update for the applicable fiscal year. We refer readers to our previous final rules for detailed discussions of the history of the Hospital Inpatient Quality Reporting Program, including statutory history, and for the measures we have previously adopted for the Hospital Inpatient Quality Reporting Program measure set.
We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41147 through 41148), in which we describe the Meaningful Measures Framework. In 2021, we launched Meaningful Measures 2.0 to promote innovation and modernization of all aspects of quality, addressing a wide variety of settings, interested parties, and measure requirements.
There are statutory requirements that the Secretary of HHS make public certain quality and efficiency measures that the Secretary is considering for adoption through rulemaking under Medicare.
We are proposing to adopt eight measures into the Hospital Inpatient Quality Reporting Program, three new measures, and five modified mortality measures as a step towards substantively modifying the mortality measures currently used in the Hospital Value-Based Purchasing Program: (1) Excess Days in Acute Care After Hospitalization for Diabetes measure beginning with the July 1, 2025 through June 30, 2027 performance period, associated with the FY 2029 payment determination; (2) Advance Care Planning electronic clinical quality measure (eCQM) beginning with the CY 2028 reporting period/FY 2030 payment determination; (3) Hospital Harm—Postoperative Venous Thromboembolism eCQM beginning with the CY 2028 reporting period/FY 2030 payment determination; (4) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction Hospitalization measure beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination; (5) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure Hospitalization measure beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination; (6) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization measure beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination; (7) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease Hospitalization measure beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination; and (8) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Coronary Artery Bypass Graft Surgery measure beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination. We provide more details on the proposed Excess Days in Acute Care After Hospitalization for Diabetes and the Hospital Harm—Postoperative Venous Thromboembolism eCQM in the subsequent sections of the preamble. Details on the proposed Advance Care Planning eCQM measure are in section IX.B.1., and details on the proposed five mortality measures are in section IX.B.2.
An estimated one in every three Americans 65 years or older has diabetes.
Hospitals can improve diabetes care quality with evidence-based, guideline-driven interventions. The American Diabetes Association recommends multiple key strategies as part of structured discharge planning, including diabetes self-management education, medication reconciliation, and scheduling follow-up appointments before the patient is discharged.
There are currently no publicly reported measures of post-discharge care utilization for patients hospitalized for diabetes in the Hospital Inpatient Quality Reporting Program. Given the prevalence, care burden, and cost of diabetes, as well as the availability of effective interventions,
The proposed Diabetes EDAC measure is a risk adjusted outcome measure that assesses the number of days a patient spends in acute care within 30 days of discharge from an inpatient hospitalization for a diagnosis of diabetes mellitus with complications. The measure is intended to improve the quality of care transitions provided to patients hospitalized for diabetes by collectively measuring different types of returns to the hospital (ED visits, observation stays, and unplanned readmissions), which are all adverse acute care outcomes that can occur at any time within 30 days of discharge.
Further, test results indicated measure reliability that meets accepted standards of reliability for a publicly reported measure.
The final risk adjusted Diabetes EDAC measure score is calculated as the difference, or “excess” days, between a hospital's “predicted” days (that is, the average number of days a patient spent in acute care after adjusting for the risk factors) and “expected” days (that is, the average number of risk adjusted days in acute care a patient would have been expected to spend if discharged from an average-performing hospital with the same case mix), per 100 discharges. The measure result is multiplied by 100, such that the final Diabetes EDAC measure score would represent excess days in acute care per 100 discharges and is reported as a rate.
The numerator for the proposed Diabetes EDAC measure is defined as the number of days a patient spends in acute care for any cause, within 30 days of discharge from the index hospitalization for diabetes. Days in acute care are defined as time spent in: ED visits without an associated admission, observation stays, and unplanned readmissions.
This measure denominator includes index admissions for patients who meet all of the following criteria:
• Principal discharge diagnosis of diabetes;
• Enrolled in Medicare Fee-For-Service or Medicare Advantage for the 12 months prior to the date of admission and during the index admission;
• Aged 65 or over;
• Discharged alive from a non-federal short-term acute care hospital; and
• Not transferred to another acute care facility.
The measure excludes the following index admissions from the measure cohort: (1) hospitalizations without at least 30 days of post-discharge enrollment in Medicare Fee-For-Service or Medicare Advantage; (2) discharged against medical advice; or (3) diabetes admissions within 30 days of discharge from a prior diabetes index admission. These exclusion criteria are similar to those of the existing EDAC measures in the Hospital Inpatient Quality Reporting Program.
To account for differences in case mix among hospitals, the measure risk adjusts for age, comorbidities, severity of illness, and frailty based on clinical status at the index admission. The measure's risk adjustment includes comorbidities present at admission or within the prior 12 months, excludes complications arising during hospitalization, and accounts for survival times shorter than 30 days post discharge to accurately reflect hospital performance.
For more information regarding the proposed Diabetes EDAC measure specifications, we refer readers to the Hospital Inpatient Proposed Measures web page at
We refer readers to the Partnership for Quality Measurement for details on the Pre-rulemaking Measure Review process convened by the CBE, including the voting procedures used to reach consensus on measure recommendations.
The voting results of the Recommendation Group for the proposed inclusion of the Diabetes EDAC measure in the Hospital Inpatient Quality Reporting Program were: 15 members (68 percent) recommended adopting the measure into the Hospital Inpatient Quality Reporting Program; 7 members (32 percent) voted not to recommend the measure for adoption.
Recommendation Group members who voted to recommend the measure for inclusion in the Hospital Inpatient Quality Reporting Program emphasized its importance for patients hospitalized for diabetes. Some Recommendation Group members provided considerations along with their vote to recommend this measure. Considerations included improved discharge planning and shortening the accountability window to a 7-day post-discharge period. Another member recommended adding sociodemographic risk factors to the risk adjustment model. Members also recommended expanding the measure to a hospital-wide approach, rather than a condition-specific approach.
Recommendation Group members who voted not to recommend the measure for inclusion in the Hospital Inpatient Quality Reporting Program provided the following rationales: (1) hospitals have limited control over outpatient access or follow-up care; (2) the 30-day post-discharge period may not be appropriate; (3) the risk adjustment should be evaluated to ensure it is sufficient; (4) the measure
Regarding concerns related to hospitals' limited control over outpatient access or follow-up care, we wish to emphasize that an effective strategy for improving avoidable post-discharge acute-care utilization is to connect patients to resources as part of discharge planning. For example, one of the key strategies recommended by the American Diabetes Association is scheduling follow-up appointments before the patient is discharged.
Regarding concerns and considerations related to the post-discharge period for accountability, the measure's 30-day timeframe is consistent with the existing 30-day readmission and EDAC measures in the Hospital Inpatient Quality Reporting Program, which have been endorsed by a CBE and publicly reported. The 30-day timeframe allows for a more complete reflection of the hospital's full discharge plan, including follow-up, care coordination, and self-management education.
Regarding concerns about the sufficiency of the measure's risk adjustment model, measure testing supported the current risk adjustment model. The Diabetes EDAC measure is risk adjusted for clinically relevant factors including patient functional status (frailty indicator), patient-level demographics (age), and patient-level health status and clinical conditions (case-mix adjustment, comorbidities, and severity of illness).
Regarding concerns about additional testing, a recommendation for clearer specifications, and concerns about lack of endorsement, we note that the measure underwent the same extensive analysis and measure specifications development needed for the endorsement process, and that the measure will be submitted to the CBE for endorsement review for the Spring 2026 review cycle.
Regarding the consideration to expand this measure to a hospital-wide approach, rather than a condition-specific approach, we thank the Recommendation Group for this consideration and will consider it for future measures.
After taking these recommendations and concerns into consideration, we propose to adopt the Diabetes EDAC measure into the Hospital Inpatient Quality Reporting Program beginning with the July 1, 2025 to June 30, 2027 performance period, associated with the FY 2029 payment determination.
We refer readers to the Partnership for Quality Measurement website for details on the measure endorsement and maintenance process, including the measure evaluation procedures the Endorsement and Maintenance Committees use to evaluate measures and whether they meet endorsement criteria. The Diabetes EDAC measure will be submitted to the CBE for endorsement review for the Spring 2026 cycle. Section 1886(b)(3)(B)(viii)(IX)(aa) of the Social Security Act (Act) generally requires that measures specified by the Secretary for use in the Hospital Inpatient Quality Reporting Program be endorsed by the entity with a contract under section 1890(a) of the Act. However, section 1886(b)(3)(B)(viii)(IX)(bb) of the Act states that in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. We reviewed CBE-endorsed measures and were unable to identify any CBE-endorsed hospital inpatient measures addressing post-discharge care utilization for patients hospitalized for diabetes. Therefore, the exception in section 1886(b)(3)(B)(viii)(IX)(bb) of the Act applies.
The proposed Diabetes EDAC measure uses claims data from Medicare Fee-For-Service and Medicare Advantage encounter data which are routinely generated by hospitals and Medicare Advantage plans and submitted to CMS. Therefore, hospitals would not be required to report any additional data for this measure. Enrollment status would be obtained from the Medicare Enrollment Database which contains beneficiary demographic, benefit/coverage, and vital status information.
While the existing EDAC measures in the Hospital Inpatient Quality Reporting
We invite public comment on our proposal to adopt the Diabetes EDAC measure into the Hospital Inpatient Quality Reporting Program beginning with the July 1, 2025 to June 30, 2027 performance period, associated with the FY 2029 payment determination.
Postoperative venous thromboembolism (VTE) includes both deep vein thrombosis (DVT), a thrombus (that is, blood clot) in the deep veins, most often in the legs, and pulmonary embolism (PE), when a thrombus travels through the venous circulation and the right side of the heart, and lodges in the lungs. VTE is considered to be a leading cause of preventable death following surgery, with as many as 70 percent of cases considered to be preventable.
There are established therapies that can reduce the risk of a VTE, but failure or delay in prescribing appropriate VTE prophylaxis can result in a higher risk of postoperative VTE. For example, one study found that delays or interruptions in thromboprophylaxis were associated with two to three times higher risk of VTE.
Preventing VTE and associated complications after hospitalization and incentivizing appropriate administration of VTE prophylaxis have been, and continue to be, important goals of the Hospital Inpatient Quality Reporting Program since the early days of the program. The current measure set contains two VTE eCQMs, Venous Thromboembolism Prophylaxis (VTE-1) eCQM and Intensive Care Unit Venous Thromboembolism Prophylaxis (VTE-2) eCQM, which were adopted as measures that hospitals could self-select beginning with the CY 2014 reporting period (78 FR 50807 through 50810). Replacing these two process measures with a single comprehensive outcome measure can reduce burden while continuing to address this consequential health care issue affecting postoperative patient outcomes.
We propose to adopt the Hospital Harm—Postoperative Venous Thromboembolism (hereafter referred to as Hospital Harm—Postoperative VTE) eCQM beginning with the CY 2028 reporting period/FY 2030 payment determination. We refer readers to section IX.C.4.a. for our proposal to remove the VTE-1 and VTE-2 eCQMs contingent upon the adoption of the Hospital Harm—Postoperative VTE eCQM.
The Hospital Harm—Postoperative VTE eCQM is a risk adjusted outcome measure that assesses the proportion of inpatient hospitalizations for patients age 18 and older who have at least one surgical procedure performed inside the operating room during the admission, and who suffer the harm of a postoperative VTE during hospitalization or within 30 days after the first surgical procedure. The intent of the measure is to improve patient safety by incentivizing hospitals to implement processes to reduce the occurrence of postoperative VTE. Accurately monitoring the rate at which postoperative VTE occurs will allow hospitals to improve quality and reduce VTE harm rates.
This outcome measure reports the proportion of inpatient hospitalizations for patients aged 18 years and older with a postoperative VTE within 30
• Dividing the number of inpatient hospitalizations in the numerator by the number of inpatient admissions in the denominator to determine the observed rate;
• Using the risk adjustment model to determine the hospital's expected VTE event rate based on the hospital's case mix; and
• Dividing the observed rate by the expected rate.
The numerator is the number of inpatient hospitalizations for adult patients who had a surgical procedure performed in the operating room during the hospitalization and experienced a VTE within 30 days of the surgical procedure. Postoperative VTE cases can be identified for inclusion in the numerator in multiple ways. For example, documentation in the medical record of a diagnosis of VTE that was not present when the patient was admitted to the hospital for an inpatient stay that included surgery would qualify the admission for the numerator. Alternatively, an inpatient admission in which a patient had surgery and subsequently had a diagnostic imaging procedure performed followed by an order for anticoagulation therapy would also qualify for the numerator. A postoperative VTE that occurs during a subsequent hospital stay within 30 days of the surgical procedure would count toward the numerator if there is documentation of a diagnosis of VTE and anticoagulation therapy ordered or prescribed during that hospital stay. We refer readers to the Partnership for Quality Measurement website (
The denominator is the number of adult patients who had a surgical procedure performed in the operating room during an inpatient hospitalization. The cohort includes inpatient hospitalizations for patients aged 18 and older where a surgical procedure was performed inside the operating room during the encounter. The cohort excludes inpatient encounters for:
• Patients with an obstetric-related diagnosis;
• A VTE diagnosis present on admission;
• Acute brain or spinal injury or hemorrhage present on admission;
• Extracorporeal membrane oxygenation during the inpatient encounter;
• A thrombectomy procedure before or on the same day as the first surgical procedure;
• Intracranial or spinal surgery where the patient was discharged less than five days after the end of the surgery; and
• Inpatient encounters with a duration of stay less than 2 days.
The risk adjustment model accounts for factors that affect risk of VTE, specifically age, sex, and eight clinical factors (bleeding disorders, cancer, catheter insertion, history of VTE, obesity, respiratory operations, stroke, and vascular surgeries). The risk adjustment model was developed using two consecutive years (CY 2022 through 2023) of electronic health record (EHR) data from a commercially available EHR database.
The sample to evaluate the risk adjustment model included 100,911 hospitalizations from 34 hospitals in six states during 2022 and 2023. Hospital-level characteristics were not available because the data uses anonymized hospital identifications. Hospitals included in the sample had hospitalizations ranging in number from 56 to 6,746 annually.
We refer readers to the Partnership for Quality Measurement website for details on the Pre-rulemaking Measure Review process convened by the CBE, including the voting procedures used to reach consensus on measure recommendations.
The voting results of the Recommendation Group for the proposed adoption of the Hospital Harm—Postoperative VTE measure in the Hospital Inpatient Quality Reporting Program were: 7 members (35 percent) recommended adopting the measure into the Hospital Inpatient Quality Reporting Program, and 13 members (65 percent) voted not to recommend the measure for adoption.
Some Recommendation Group members who voted to support adoption of the Hospital Harm—Postoperative VTE measure in the Hospital Inpatient Quality Reporting Program provided several considerations with their vote. These considerations were concerns regarding the proposed 30-day window, concern that the timeline for adoption is unclear, and a recommendation to test the measure in additional EHR systems.
Recommendation Group members who voted not to recommend provided the following rationales: (1) concerns regarding the proposed 30-day timeframe; (2) concerns regarding potential overlap with the PSI 12 measure; (3) concerns regarding potential unintended consequences; (4) recommendations for methodological refinements; (5) concerns regarding technical implementation within EHR systems; (6) lack of clarity regarding the measure's ability to meaningfully advance quality; and (7) concerns that the measure has not been endorsed by the Consensus Based Entity (CBE). We address each of these concerns in detail in the following paragraphs.
Regarding concerns that the timeline for adoption is unclear, we note that we are proposing to adopt the Hospital Harm—Postoperative VTE measure beginning with the CY 2028 reporting period/FY 2030 payment determination as an option for self-selection. That is, participating hospitals may select the Hospital Harm—Postoperative VTE measure as one of the three self-selected eCQMs to be reported in addition to three mandatory eCQMs. We refer readers to Table IX.C.5 for the full list of eCQMs available for self-selection. In addition, in section IX.C.8.c.(3). of the preamble of this proposed rule, we are proposing that Hospital Harm eCQMs would become mandatory after two years of being an option for self-selection. If that policy is finalized, the Hospital Harm—Postoperative VTE measure would become mandatory beginning with the CY 2030 reporting period/FY 2032 payment determination.
Regarding the recommendation to test the measure in additional EHR systems, we used test sites collectively using four EHR systems (specifically, Epic, Allscripts, Cerner, and Meditech) which represent the majority of EHR systems in the United States.
With respect to the 30-day timeframe, we note that 30 days post-discharge is a common window for assessing adverse events stemming from a hospital admission. The Hospital Inpatient Quality Reporting Program includes several measures that cover the 30-day period post discharge, such as the Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with Complications Measure and the Hybrid Hospital-Wide All-Cause Readmission Measure. With respect to using a 30-day timeframe for capturing postoperative VTE events, evidence shows that roughly one third of VTEs occur between postoperative day 14 and the end of the fourth week after surgery.
We understand the concern regarding potential overlap with PSI 12, which is a claims-based measure of perioperative PE and DVT rate included in the PSI-90 composite, and only captures care provided for Medicare beneficiaries. The Hospital Harm—Postoperative VTE measure is an all-payer eCQM, and therefore captures care provided for all patients rather than Medicare patients only. For this reason, we believe this measure has the potential to serve as a replacement for the claims-based PSI 12 measure in the future.
With respect to concerns about unintended consequences, including overtreatment and unnecessary use of anticoagulation therapies, we note that as a part of routine measure maintenance we conduct ongoing monitoring and evaluation of our measures to identify potential unintended consequences. Furthermore, we may consider adopting a measure focused on overuse of anticoagulation medication in future measure development and rulemaking.
Members of the Recommendation Group who suggested methodological refinements specifically recommended including clearer diagnostic criteria for VTE. The measure specifies that a stay must have documentation of both an imaging procedure to diagnose the VTE and initiation of anticoagulant therapy within 24 hours of the imaging procedure. The measure further requires that the anticoagulant therapy be delivered at a dose appropriate for therapeutic treatment of VTE, as opposed to a lower dose appropriate for VTE prophylaxis or maintenance therapy for atrial fibrillation. In concert, the three numerator requirements—(a) documentation of a diagnostic imaging procedure, (b) administration of anticoagulant therapy within 24 hours of the imaging procedure, and (c) for the anticoagulant to be provided at a dose consistent with VTE treatment—would minimize the chance for misclassification. We refer readers to the eCQI Resource Center (
Members of the Recommendation Group who had concerns regarding technical implementation in EHRs were concerned that hospitals in systems with a single enterprise-wide EHR may appear to perform worse on the measure because post-discharge VTE events are more likely to be captured. We note that
With respect to questions about how the Hospital Harm—Postoperative VTE measure advances quality, adopting a measure that evaluates the frequency of postoperative VTEs incentivizes hospitals to evaluate their current procedures and implement quality improvement initiatives to reduce the occurrences of this preventable condition.
With respect to concerns raised by Recommendation Group members that the measure had not been endorsed by the CBE, the Hospital Harm—Postoperative VTE measure was submitted to the CBE for the Fall 2025 endorsement cycle. We note that the CBE had not yet met to review the Hospital Harm—Postoperative VTE measure for endorsement at the time of the Recommendation Group review, but it subsequently did so and endorsed the measure. We refer readers to section IX.C.3.b.(4).(b). of this proposed rule for a further discussion of the results of the CBE's endorsement decision.
After taking these recommendations and concerns into consideration, we propose to adopt the Hospital Harm—Postoperative VTE measure in the Hospital Inpatient Quality Reporting Program beginning with the FY 2028 payment determination.
We refer readers to the Partnership for Quality Measurement website for details on the measure endorsement and maintenance process, including the measure evaluation procedures the Endorsement and Maintenance Committees use to evaluate measures and whether they meet endorsement criteria. The Hospital Harm—Postoperative VTE eCQM was submitted for review in the Fall 2025 cycle. The Management of Acute and Chronic Conditions Recommendation Group reviewed the Hospital Harm—Postoperative VTE eCQM (CBE# 5325e) on February 4, 2026. The voting results of the Recommendation Group were: 2 members (11 percent) voted to endorse the measure; 15 members (79 percent) voted to endorse the measure with conditions; and 2 members (11 percent) voted not to endorse the measure. With more than 75 percent of members voting to endorse the measure or endorse the measure with conditions, the Recommendation Group reached consensus to endorse the measure with conditions.
The Hospital Harm—Postoperative VTE eCQM uses data collected through hospitals' EHRs. The measure is designed to be calculated by the hospitals' certified health IT using the patient-level data and then submitted by hospitals to CMS. All data elements necessary to calculate the measure, including the numerator and denominator as well as to apply the risk adjustment model, are defined within value sets available in the Value Set Authority Center .
We refer readers to section IX.C.8.c. of this proposed rule for discussion of previously finalized eCQM reporting and submission policies, and our proposed modifications to establish mandatory reporting of all Hospital Harm eCQMs after an initial period of voluntary reporting in the program. Additionally, we refer readers to section IX.F.9. of this proposed rule for discussion of a similar policy to adopt this measure in the Medicare Promoting Interoperability Program.
We invite public comment on our proposal to adopt the Hospital Harm—Postoperative VTE eCQM beginning with the CY 2028 reporting period/FY 2030 payment determination.
We are proposing to remove three measures from the Hospital Inpatient Quality Reporting Program beginning with the CY 2028 reporting period/FY 2030 payment determination: (1) Venous Thromboembolism Prophylaxis eCQM; (2) Intensive Care Unit Venous Thromboembolism Prophylaxis eCQM; and (3) Discharged on Antithrombotic Therapy eCQM. We provide more details on each of these proposals in the subsequent section.
We refer readers to the FY 2014 IPPS/LTCH PPS final rule where we adopted the Venous Thromboembolism Prophylaxis (VTE-1) and Intensive Care Unit Venous Thromboembolism Prophylaxis (VTE-2) eCQMs beginning with the CY 2014 reporting period/FY 2016 payment determination (78 FR 50807 through 50810). These measures were originally adopted as chart-abstracted measures and were later specified as eCQMs, which we adopted as optional measures for hospitals to self-select. We propose to remove the VTE-1 and VTE-2 eCQMs from the Hospital Inpatient Quality Reporting Program, beginning with the CY 2028 reporting period/FY 2030 payment determination, under our measure removal factor 5, the availability of a measure that is more strongly associated with desired patient outcomes for the particular topic, as described at 42 CFR 412.140(g)(3)(i)(E), if the proposed Hospital Harm—Postoperative VTE
Patient safety topics such as appropriate VTE prophylaxis continue to be high priority topics for quality measurement in the hospital inpatient setting. Since introducing the VTE-1 and VTE-2 eCQMs into the Hospital Inpatient Quality Reporting Program over a decade ago, we have developed an outcome-focused VTE eCQM, Hospital Harm—Postoperative VTE eCQM, as proposed for adoption in section IX.C.3.b. of this proposed rule beginning with the FY 2030 payment determination. The Hospital Harm—Postoperative VTE eCQM is an outcome measure that builds upon the existing process measures and evaluates the incidence of postoperative VTE events, assessing the success of the VTE prophylaxis strategies measured by the VTE-1 and VTE-2 eCQMs, and thus is more strongly associated with desired patient outcomes for this particular topic. It also aligns with our efforts to reduce burden and refine the Hospital Inpatient Quality Reporting Program's measure set by replacing two process measures with a single outcome measure. In addition, the VTE-1 and VTE-2 eCQMs were retired from The Joint Commission's ORYX® requirements effective CY 2026.
We note that we are also proposing to remove the VTE-1 and VTE-2 eCQMs in the Medicare Promoting Interoperability Program beginning with the CY 2028 reporting period. For more information, we refer readers to section IX.F.9. of this proposed rule.
We invite public comment on our proposal to remove the VTE-1 and VTE-2 eCQMs beginning with the CY 2028 reporting period/FY 2030 payment determination.
We refer readers to the FY 2014 IPPS/LTCH PPS final rule where we adopted the Discharged on Antithrombotic Therapy (STK-02) eCQM into the Hospital Inpatient Quality Reporting Program eCQM measure set for self-selected reporting beginning with the CY 2014 reporting period (78 FR 50807 through 50810).
Over four of the most recent reporting periods, hospital performance has been so high and unvarying that it meets our criteria for “topped out” under measure removal factor 1 (83 FR 41540 through 41544), that is, statistically indistinguishable performance at the 75th and 90th percentiles, and truncated coefficient of variation ≤0.10, see Table IX.C.2. Since the STK-02 eCQM is a self-selected eCQM, meaning that not all hospitals are required to report it, we considered that the topped out status may not reflect national performance. However, the number of hospitals reporting on this measure has remained consistently high, with approximately two-thirds of the Hospital Inpatient Quality Reporting Program-eligible hospitals reporting since FY 2023. We therefore believe that the measure results represent most hospitals' performance on this measure. Further, the CBE recently selected this measure for review for potential removal from the Hospital Inpatient Quality Reporting Program as part of the Measure Set Review process and ultimately recommended its discontinuation due to minimal variation and stable median performance across hospitals.
Stroke has been and remains a priority topic for quality measurement in the hospital inpatient setting for over a decade due to its high prevalence and substantial impact on quality of life, disability, and death (76 FR 51633 through 51634).
We note that we are also proposing to remove the STK-02 eCQM in the Medicare Promoting Interoperability Program beginning with the CY 2028 reporting period. For more information, we refer readers to section IX.F.9. of this proposed rule.
We invite public comment on our proposal to remove the STK-02 eCQM beginning with CY 2028 reporting period/FY 2030 payment determination.
We propose modifications to three measures that are currently in the Hospital Inpatient Quality Reporting Program measure set beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination: (1) Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction measure; (2) Excess Days in Acute Care after Hospitalization for Heart Failure measure; and (3) Excess Days in Acute Care after Hospitalization for Pneumonia measure.
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49660 through 49690), we began including excess days in acute care quality measures in the Hospital Inpatient Quality Reporting Program to capture the quality of care transitions provided to discharged patients. The previously finalized EDAC measures are summarized:
• Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction (AMI EDAC) measure (adopted at 80 FR 49680 through 49690; modified at 87 FR 49269 through 49272).
• Excess Days in Acute Care after Hospitalization for Heart Failure (Heart Failure EDAC) measure (adopted at 80 FR 49682 through 49690).
• Excess Days in Acute Care after Hospitalization for Pneumonia (Pneumonia EDAC) (adopted at 81 FR 57142 through 57148).
For more details on these EDAC measures, we refer readers to the EDAC measures updates and specifications reports available at:
Since adoption into the Hospital Inpatient Quality Reporting Program, these EDAC measures have contributed to our assessment of care coordination and patient outcomes, providing a broader view of quality of care than can be captured by individual process-of-care measures. Safely transitioning patients from hospital to home requires a complex series of tasks which would be cumbersome to capture individually as process measures: timely and effective communication between providers, prevention of and response to complications, patient education about post-discharge care and self-management, timely follow-up, and more.
We propose to modify the AMI, Heart Failure, and Pneumonia EDAC measures with two substantive updates: (1) expand the measure inclusion criteria to include Medicare Advantage beneficiaries; and (2) shorten the performance period from 3 years to 2 years. Inclusion of Medicare Advantage beneficiaries expands quality measurement of care coordination outcomes across all Medicare beneficiaries, enhances the reliability of the measure scores, leads to more hospitals receiving results, and increases the chance of identifying meaningful differences in quality for some low-volume hospitals. Based on our analysis that included Medicare Advantage beneficiaries in addition to the Medicare Fee-For-Service measure cohort, we found that the measures could achieve a satisfactory level of reliability with a 2-year reporting period. Table IX.C.3. summarizes the reliability scores for the three modified EDAC measures for the CY 2022 through CY 2023 reporting period with the inclusion of Medicare Advantage beneficiaries:
The mean reliability for each of the EDAC measures exceeds the CBE established minimum of 0.6.
These measures capture the quality of care transitions provided to discharged patients hospitalized with AMI, heart failure, or pneumonia by collectively measuring different types of returns to the hospital (ED visit, observation stay, or readmission), which are all adverse acute care outcomes that can occur post-discharge. With the increase in Medicare Advantage beneficiaries to over half of all Medicare beneficiaries, these modifications would better reflect overall patient care coordination among a broader population of patients, improving measure reliability. Shortening the reporting period would allow measure results to reflect more recent hospital performance and provide more actionable insights for quality improvement.
The modified AMI, Heart Failure, and Pneumonia EDAC measures would continue to assess the number of days the patient spends in acute care within 30 days post-discharge from an inpatient hospitalization with a principal diagnosis of AMI, heart failure, or pneumonia. The measures adjust for factors including patient age, comorbid diseases, and indicators of patient frailty.
The numerator of the measure is a count of the number of days the patient spends in acute care within 30 days of discharge from an eligible index hospitalization for AMI, heart failure, or pneumonia. We define days in acute care as days spent in an ED, an observation stay, or admitted as an unplanned readmission for any cause to a short-term acute care hospital, within 30 days from the date of discharge from the index hospitalization. ED visits are counted as one whole day, regardless of how many hours the patient spends in the ED or whether the ED visit crosses more than one calendar date. Observation stays are counted by hours and rounded up to the nearest whole day.
To be included in the measure cohort, patients must meet the following inclusion criteria:
• Have a principal discharge diagnosis of AMI, heart failure, or pneumonia;
• Enrolled in Medicare Fee-For-Service Part A and Part B or Medicare Advantage for 12-months prior to the date of admission and enrolled in Part A or Medicare Advantage during the index admission;
• Aged 65 or older;
• Discharged alive from a non-federal short-term acute care hospital or Veterans Health Administration hospital; and
• Not transferred to another acute care facility.
For more detailed measure specifications, including denominator exclusions for each condition, we refer readers to the EDAC measure methodology reports available at:
We refer readers to the Partnership for Quality Measurement website for details on the Pre-rulemaking Measure Review process convened by the CBE, including the voting procedures used to reach consensus on measure recommendations.
The voting results of the Recommendation Group for the proposed modifications to the AMI EDAC measure were: 18 members (86 percent) recommended adopting the measure into the Hospital Inpatient Quality Reporting Program; three members (14 percent) voted not to recommend the measure for adoption. The voting results for the proposed modifications to the Heart Failure EDAC measure were: 19 members (90 percent) recommended adopting the measure into the Hospital Inpatient Quality Reporting Program; two members (10 percent) voted not to recommend the measure for adoption. The voting results for the proposed modifications to the Pneumonia EDAC measure were: 19 members (90 percent) recommended adopting the measure into the Hospital Inpatient Quality Reporting Program; two members (10 percent) voted not to recommend the measure for the adoption. Thus, the Recommendation Group reached consensus agreement to recommend the AMI EDAC, Heart Failure EDAC, and Pneumonia EDAC measures for use in the Hospital Inpatient Quality Reporting Program.
Overall, the Recommendation Group supported the addition of Medicare Advantage beneficiaries and the reduction of the performance period from 3 years to 2 years, noting these changes improved the comprehensiveness and timeliness of reporting. The Recommendation Group members who recommended these measures suggested adding risk adjustment factors for medically underserved and rural areas, where limited access to post-acute services may affect readmissions beyond a hospital's control. Recommendation Group members who voted not to recommend adoption of the measure for the Program provided the following rationales: (1) concerns that the 30-day post-discharge window may not be appropriate; and (2) concerns regarding AMI EDAC measure's complexity, diagnosis set, and the risk adjustment approach.
Regarding the suggestion to add additional risk adjustment factors, in alignment with other readmission measures, we do not adjust the EDAC measures for rurality or medically underserved populations. We note that Critical Access Hospitals (CAHs), which serve higher proportions of rural and medically underserved populations, are not required to report to the Hospital Inpatient Quality Reporting Program.
We note that the 30-day timeframe is consistent with the existing measure specifications that have been endorsed by a CBE and publicly reported. In addition, the EDAC measures were originally designed to complement condition specific 30-day readmission measures for the same conditions and therefore the 30-day outcome window is aligned. The 30-day timeframe allows for a more complete reflection of the hospital's discharge plan which includes follow-up, care coordination, and patient self-management education.
Regarding the AMI EDAC measure specifically, Recommendation Group members expressed concerns regarding its complexity and relatively narrow diagnosis set, noting a preference for other metrics to assess AMI care. While statistically complex, the AMI EDAC risk-model was determined by the CBE to indicate an effective model discrimination for a readmission-type measure with a c-statistic
Recommendation Group members highlighted potential shortcomings in the current risk adjustment approach for the AMI EDAC measure, particularly the
After taking these recommendations and concerns into consideration, we propose to modify the three EDAC measures in the Hospital Inpatient Quality Reporting Program beginning with the FY 2028 payment determination.
We refer readers to the Partnership for Quality Measurement website for details on the measure endorsement and maintenance process, including the measure evaluation procedures the Endorsement and Maintenance Committees use to evaluate measures and whether they meet endorsement criteria. The Heart Failure EDAC (CBE #2880) and Pneumonia EDAC (CBE #2882) measures were last endorsed in the Spring 2021 CBE review cycle and are planned for maintenance review in the Fall 2027 cycle.
The modified EDAC measures would be calculated using administrative data from Medicare Fee-For-Service claims or Medicare Advantage encounters, or both. This data is routinely generated by hospitals and submitted to CMS for all Medicare beneficiaries, which includes Medicare Advantage and Medicare Fee-For-Service beneficiaries. Therefore, a hospital would not be required to report any additional data for this measure. Enrollment status would be obtained from the Medicare Enrollment Database which contains beneficiary demographic, benefit/coverage, and vital status information. The proposed modified EDAC measures would be calculated and publicly reported on an annual basis using 24 months of prior data for the measurement period. We would then publicly report the measures results on the Compare tool, currently available at:
We invite public comment on our proposal to modify the AMI, Heart Failure and Pneumonia EDAC measures to include Medicare Advantage patients in the measure cohort and reduce the performance period from 3 years to 2 years, beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination.
We are also notifying the public of technical updates to the three EDAC measures' risk adjustment methodology in the Hospital Inpatient Quality Reporting Program, beginning with the FY 2028 payment determination, to use individual International Classification of Diseases, Tenth Revision (ICD-10) codes to improve the measure's risk adjustment methodology. The risk adjustment strategy currently in use involves grouping ICD-10 diagnosis codes from the CMS Hierarchical Condition Categories (HCC) system into clinically relevant categories.
This table IX.C.5. summarizes the previously finalized and newly proposed Hospital Inpatient Quality Reporting Program measures for the FY 2028 to FY 2031 payment determinations, which would remove the STK-02, VTE-1, and VTE-2 eCQMs discussed in section IX.C.4. of this proposed rule; modify three EDAC measures as discussed in section IX.C.5. of this proposed rule; add the Diabetes EDAC measure and the Hospital Harm—Postoperative VTE eCQM as discussed in section IX.C.3. in this proposed rule; and add the Advance Care Planning eCQM and five mortality measures as discussed in section IX.B.1. and IX.B.2. of this proposed rule:
We seek to develop a comprehensive set of quality measures to be widely available for informed decision-making and quality and cost improvements in the hospital inpatient setting. We have identified potential future measures that are focused on topics that are of importance to interested parties, but that are not currently included in the Hospital Inpatient Quality Reporting Program's measure set. We refer readers to section IX.B.3. for our request for comment on “Measuring Emergency Care Access and Timeliness in Hospital Inpatient Quality Reporting and Value-Based Purchasing Programs—Request for Information” and section IX.B.4. for our request for comment on “Potential Future Use of the Adult Community-Onset Sepsis Standardized Mortality Ratio Measure in the Hospital Inpatient Quality Reporting Program—Request for Information”.
We are also soliciting comments on our anticipated approach to potential scoring methodologies for the next phase of our Birthing Friendly Hospital designation. We will consider feedback we receive as we determine how best to further develop and refine the Hospital Inpatient Quality Reporting Program's measure set and to advance other quality improvement efforts that address important patient safety and health care quality topics.
In this request for information (RFI), we seek public input on potential modifications to the Birthing-Friendly Hospital Designation which was adopted in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49284 through 49290). In the FY 2023 IPPS/LTCH PPS final rule, we noted our intent to expand the Birthing-Friendly Hospital Designation with a more robust set of metrics in future years, and we intended for those additional metrics to potentially be derived from maternal care quality measures from the Hospital Inpatient Quality Reporting Program. This RFI aims to gather broad public input on: (1) the inclusion of the Cesarean Birth eCQM and the Severe Obstetric Complications eCQM in the criteria for awarding the Birthing-Friendly Hospital Designation; and (2) a modified scoring methodology developed for the expanded designation.
The Birthing-Friendly Hospital Designation (hereinafter referred to as “the Designation”), was created to identify hospitals that demonstrate the delivery of high-quality maternal care and a commitment to improving maternal health outcomes (87 FR 49284 through 49290). Despite the highest rate of spending on maternity care, maternal morbidity and mortality rates in the United States are high compared to other high-income countries. Every year in the United States, approximately 700 women die of complications related to pregnancy and childbirth, and over 25,000 women experience severe complications of pregnancy (severe maternal morbidity).
We believe the Designation is an important way to advance maternal care quality for patients and families and represents our sustained commitment to improving health outcomes. Interested parties expressed support for the Designation as a meaningful step to promote transparency and improve maternal health outcomes. When we proposed the Designation in the FY 2023 IPPS/LTCH PPS proposed rule, many commenters recommended using additional data to determine which hospitals would receive the Designation, including data from the Cesarean Birth and Severe Obstetric Complications eCQMs, rather than just the Maternal Morbidity Structural measure data (87 FR 49284 through 49290).
The Designation was created to be a consumer-friendly, publicly reported display signaling a hospital's commitment to improving maternal health. Hospitals that are awarded the Designation receive a Birthing-Friendly icon on the Compare tool on
Currently, the Designation is comprised of the Maternal Morbidity Structural measure adopted in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45361 through 45365). The Maternal Morbidity Structural measure is an attestation-based measure which includes one attestation, currently specified as a two-part question, that captures whether hospitals are: (1) currently participating in a structured state or national Perinatal Quality Improvement (QI) Collaborative; and (2) implementing patient safety practices or bundles as part of these QI initiatives.
Potential modifications to the Designation would include incorporating hospital performance on
The Cesarean Birth eCQM is an outcome measure that assesses the proportion of cesarean deliveries to nulliparous women (women giving birth for the first time) who delivered at 37 weeks' gestation or later with a live singleton baby (a single baby) in a vertex position (head-down). The hospital-level score is calculated as a proportion, for which a lower proportion is better; however, since cesarean delivery is a warranted emergency intervention in certain situations, scores are not expected, nor desired, to approach zero. For further details on the measure methodology, we refer readers to the methodology report available at:
The Severe Obstetric Complications eCQM is a risk-standardized measure that assesses severe maternal morbidity events and mortality during delivery hospitalizations for patients greater than or equal to 8 years and less than 65 years of age delivering stillborn or a live birth at greater than or equal to 20 weeks' gestation. The measure evaluates two outcomes: (1) any severe obstetric complications (as specified), and (2) severe obstetric complications excluding encounters for which blood transfusion was the only numerator event. For both outcomes, the hospital-level score is reported as a rate per 10,000 delivery hospitalizations, for which a lower score is better. For further details on the measure methodology, we refer readers to the methodology report available at:
Following careful assessment of various scoring approaches, we determined the composite score approach with k-means clustering to be a strong approach for calculating hospital Designation scores. The composite score approach with k-means clustering enables a tiered approach to award the Designation, thus allowing for a range of hospital performance while still recognizing high-performing hospitals. In addition, this approach allows for differential weighting, enabling more outcome related measures to have a stronger influence on the overall performance scores. This approach is similar to that used in the Overall Hospital Quality Star Rating methodology (85 FR 86193 through 86236).
To be eligible for the expanded Designation, hospitals would have to attest positively to the Maternal Morbidity Structural measure and report on both maternal outcome measures (Cesarean Birth and Severe Obstetric Complications eCQMs). Positive attestation to the Maternal Morbidity Structural measure would be required for Designation eligibility and would serve as a prerequisite to obtaining the Designation. Once hospital eligibility is determined, the methodology for aggregating hospital scores for the two maternal outcome measures into a composite and scoring for the Designation would include a series of steps. First, the direction of measure scores is changed so that a higher score indicates better performance for all the measures. Second, measure scores that do not follow a normal distribution are normalized by applying a log transformation, and then the data are standardized using Z-scores
For the current Birthing-Friendly Hospital Designation, hospitals receive the Designation for positively attesting to the Maternal Morbidity Structural measure. The potential new scoring methodology described previously would introduce a tiered approach to awarding the Designation by performance relative to other hospitals on multiple maternal quality measures, and shifts away from a binary approach that only identifies hospitals as “Birthing-Friendly” or, by default, as “non-Birthing-Friendly.” The potential new approach considers the range in maternal care performance among labor and delivery hospitals and allows for recognition of the highest-performing
Within delivery volume peer groups, hospitals would be assigned to one of three clusters based on composite score, where cluster three consists of hospitals with the highest level of performance (highest composite scores) and cluster one consists of hospitals with the lowest level of performance (lowest composite scores). Each cluster would be represented by a corresponding number of Birthing-Friendly icons (similar to a star rating) such that hospitals in cluster one would be identified with one Birthing-Friendly icon (identifying the lowest performing hospitals), hospitals in cluster two would be identified with two Birthing-Friendly icons, and hospitals in cluster three would be identified with three Birthing-Friendly icons (identifying the top performing hospitals).
The use of peer grouping by hospital delivery volume to award the Designation allows for comparison of like hospitals, grouping facilities with obstetric units of similar scale. Other variables for peer grouping the Designation were considered, with particular attention to using Maternal Levels of Care in anticipation that hospitals providing different levels of care vary in patient case mix. The Maternal Levels of Care, a classification system developed by the American College of Obstetricians and Gynecologists and Society for Maternal-Fetal Medicine to support risk-appropriate maternal care delivery, is used to classify hospitals providing labor and delivery services from “Basic Care” (Level I) for women with low to moderate-risk pregnancies to “Regional Perinatal Health Care Centers” (Level IV) for women inclusive of those at low-risk to the highest-risk pregnancies.
In preliminary testing of the modified Designation scoring methodology, 2,548 hospitals that reported at least one of the maternal measures for CY 2024 were identified (excluding hospitals that responded “not applicable (our hospital does not provide inpatient labor/delivery care)” to the Maternal Morbidity Structural measure). Among these, 1,976 hospitals were determined to have reported on all three measures and had 25 or more delivery hospitalizations during the measurement period, to align with the public reporting threshold for the maternal outcome measures. Of these hospitals, 1,920 (97.1 percent) hospitals attested positively to the Maternal Morbidity Structural measure and were included in testing of the modified Designation scoring methodology. Preliminary results indicate variation in mean composite scores for the Designation clusters across delivery volume categories (peer groups), most distinctly for the top delivery volume category (hospitals with greater than 2000 deliveries) that had a lower mean composite score within each cluster as compared to the mean composite scores of those clusters in lower delivery volume categories (see Table IX.C.6.).
Preliminary testing results for awarding Birthing-Friendly Hospital Designation icons indicate similar distributions across delivery volume categories (peer groups) for hospitals to receive one, two, and three Birthing-Friendly icons representing lowest to highest Birthing-Friendly hospital performance (see Table IX.C.7.).
The measure developer received feedback during winter 2025 from a TEP, including patients, patient advocates, technical experts, and clinicians, supporting the expansion of criteria for the Designation and the potential new scoring methodology.
We seek feedback on potential modifications to the current Birthing-Friendly Hospital Designation. We are requesting input from interested parties on the following potential modifications: (1) expanding the Designation to include two maternal care quality outcome measures: Cesarean Birth eCQM and Severe Obstetric Complications eCQM; (2) the outlined scoring methodology noted previously including use of peer grouping; and (3) the accompanying tiered approach to awarding Birthing-Friendly Hospital Designation icons. Specifically, we are requesting feedback on the following topics:
• Do you have feedback on the potential new scoring methodology outlined in this RFI for the Designation?
• With respect to the potential new scoring methodology, do you have any special considerations for small, rural, or safety net hospitals?
• Differential measure score weighting:
++ Do you have feedback on the higher weighting of the Severe Obstetric Complications eCQM (combined scores) at 55 percent compared to weighting of the Cesarean Birth eCQM at 45 percent?
++ Do you have feedback on the differential weighting of the two Severe Obstetric Complications eCQM outcomes (any severe obstetric complication equals 18 percent, severe obstetric complications excluding encounters for which blood transfusion was the only numerator event equals 37 percent)?
• Do you have feedback on a tiered approach to awarding the Designation for identifying levels of quality/performance?
• Approaches for peer grouping:
++ Do you have feedback on using delivery volume as a peer grouping variable?
++ Would the category “less than or equal to 500 deliveries” represent an appropriate peer grouping for hospitals with low birth volumes, such as those in rural areas?
++ Should there be a minimum number of births required in the peer grouping, such as “25-500 deliveries” instead of “less than or equal to 500 deliveries”?
++ Are there any other variables that would be appropriate for peer grouping? And if so, please provide information on data sources.
• Public reporting of the Designation results:
++ Do you have feedback on the presentation of the Designation on the Compare tool? Specifically, do you agree with using one to three Birthing-Friendly icons to represent summarized hospital performance?
++ Is the Designation easily interpreted by patients and consumers? Do you have suggestions on the messaging of the Designation on the Compare tool on Medicare.gov?
With these questions, we are seeking public input on potential modifications to the Birthing-Friendly Hospital Designation described previously, for consideration in future rulemaking.
We are proposing changes to our reporting and submission requirements for eCQMs and structural measures, as later discussed in this proposed rule.
We are not proposing any changes to the following requirements: procedural requirements; data submission requirements for chart-abstracted measures; data submission and reporting requirements for hybrid measures; sampling and case thresholds for chart-abstracted measures; HCAHPS Survey administration and submission requirements; data submission and reporting requirements for CDC National Healthcare Safety Network measures; and data submission and reporting requirements for Patient-Reported Outcome-Based Performance Measures. Accordingly, these requirements will not be repeated in the Form, Manner, and Timing of Quality Data Submission section. We refer readers to the QualityNet website at:
Section 1886(b)(3)(B)(viii)(I) and (b)(3)(B)(viii)(II) of the Act state that the applicable percentage increase for FY 2015 and each subsequent year shall be reduced by one-quarter of such applicable percentage increase (determined without regard to sections 1886(b)(3)(B)(ix), (xi), or (xii) of the Act) for any subsection (d) hospital that does not submit data required to be submitted on measures specified by the Secretary in a form and manner and at a time specified by the Secretary. To successfully participate in the Hospital Inpatient Quality Reporting Program, hospitals must meet specific procedural, data collection, submission, and validation requirements.
Section 412.140(c)(1) of title 42 of the CFR generally requires that a subsection (d) hospital participating in the Hospital Inpatient Quality Reporting Program must submit to CMS data on measures selected under section 1886(b)(3)(B)(viii) of the Act in a form and manner, and at a time, specified by CMS. The data submission requirements, specifications manual, measure methodology reports, and submission deadlines are posted on the QualityNet website at:
The CMS Annual Update for the Hospital Quality Reporting (HQR) Programs (Annual Update) contains the technical specifications for eCQMs. The updated measure specifications applicable to a reporting period are contained in the Annual Update issued in the year prior to the reporting period. For example, for the CY 2026 reporting period/FY 2028 payment determination, hospitals are collecting and will submit eCQM data using the May 2025 Annual Update and any applicable addenda. The Annual Update and implementation guidance documents are available on the Electronic Clinical Quality Improvement (eCQI) Resource Center website at:
Hospitals must register and submit quality data as described at 42 CFR 412.140(a).
Beginning with the CY 2016 reporting period, we began requiring hospitals to report on eCQMs with the goal of progressively increasing the number of eCQMs a hospital is required to report while also being responsive to concerns about timing, readiness, and burden associated with the increased number of measures (80 FR 49693 through 49698 and 81 FR 57150 through 57157). Over time we have gradually increased the number of eCQMs that we require
We refer readers to the QualityNet website for additional information on current and previous reporting and submission requirements for eCQMs at:
The Malnutrition Care Score eCQM was initially adopted in the FY 2023 IPPS/LTCH PPS final rule into the Hospital Inpatient Quality Reporting Program measure set from which a hospital could self-select beginning with the CY 2024 reporting period/FY 2026 payment determination (87 FR 49239 through 49246). In the FY 2025 IPPS/
In consideration of these public comments and in alignment with the administration's priority focus on well-being and nutrition, we are proposing mandatory reporting of the Malnutrition Care Score eCQM beginning with the CY 2028 reporting period/FY 2030 payment determination. This proposal also aligns with our ongoing strategy to transition to a fully digital quality measurement landscape that promotes interoperability, reduces reporting burden, and increases the value of reporting quality measure data (90 FR 36990 through 36996). If this proposal is finalized, hospitals would have an opportunity to continue to self-select this eCQM for the CY 2026 and CY 2027 reporting periods before mandatory reporting for all hospitals would begin with the CY 2028 reporting period/FY 2030 payment determination.
We previously implemented a stepwise approach to increase the number of required eCQMs in response to public comments noting the burden and resources necessary to implement new eCQMs (89 FR 69568 through 69573). This approach balances the need to prioritize more comprehensive reporting on important safety and preventable harm metrics with the need to provide hospitals and health IT vendors time to implement new eCQMs.
Currently, in the Hospital Inpatient Quality Reporting Program, we have adopted seven eCQMs aimed at addressing different types of and various aspects of preventable hospital harms: Hospital Harm—Severe Hyperglycemia; Hospital Harm—Severe Hypoglycemia; Hospital Harm—Opioid-Related Adverse Events; Hospital Harm—Pressure Injury; Hospital Harm—Acute Kidney Injury; Hospital Harm—Falls with Injury; and Hospital Harm—Postoperative Respiratory Failure. On average, less than 10 percent of hospitals self-select to report on a given eCQM in the first year it is available, and we assume a hospital tends to self-select a given eCQM because it will perform better on that eCQM compared to other eCQMs available to self-select. Because hospital harms remain a significant source of morbidity, mortality, and cost, and because of the importance of publicly reporting these metrics to promote patient safety, we propose to build on the stepwise approach for increasing the number of required eCQMs by modifying the eCQM reporting and submission requirements for Hospital Harm eCQMs. Specifically, we propose that beginning with the CY 2028 reporting period/FY 2030 payment determination, Hospital Harm eCQMs that have not yet been finalized for mandatory reporting would become mandatory in the third year of reporting.
Under this proposal, the Hospital Harm—Falls with Injury eCQM and the Hospital Harm—Postoperative Respiratory Failure eCQM would begin mandatory reporting in CY 2028 reporting period/FY 2030 payment determination. We also propose that the Hospital Harm—Postoperative VTE eCQM, proposed for adoption in section IX.C.3.b. of this proposed rule, would become mandatory to report beginning with the CY 2030 reporting period/FY 2032 payment determination, after being available for 2 years of self-selected reporting. Furthermore, we propose that in subsequent years, newly adopted Hospital Harm eCQMs would become mandatory eCQMs for reporting after 2 years of self-selected reporting in the Hospital Inpatient Quality Reporting Program and the Medicare Promoting Interoperability Program. We are not proposing changes to our previously finalized policy that progressively increases the number of mandatory eCQMs a hospital must report for the CY 2026 reporting period/FY 2028 payment determination or the CY 2027 reporting period/FY 2029 payment determination (89 FR 69568 through 69573).
This proposal would advance the transition to a fully digital quality measure set, standardize safety data collection, and improve patient safety by having all hospitals report these measures. By the CY 2028 reporting period/FY 2030 payment determination, hospitals will have had 12 years of progressive experience reporting eCQMs. We believe hospitals have built a strong foundation of eCQM reporting through this phased ramp-up to accommodate newly adopted Hospital Harm eCQMs into the mandatory measure set for the Hospital Inpatient Quality Reporting Program and the Medicare Promoting Interoperability Program after 2 years of self-selected reporting. By making the Hospital Harm eCQMs mandatory after 2 years of self-selected reporting, we ensure that we would receive a robust national dataset for measures on these important topics, and these measures could serve as potential replacements for claims-based measures, such as those reported within the Patient Safety and Adverse Events Composite (PSI 90).
We refer readers to section IX.C.6. for the full list of eCQMs by payment determination year in the Hospital Inpatient Quality Reporting Program. If a hospital does not have patients that meet the denominator criteria for any of the eCQMs included in this proposal, the hospital would submit a zero denominator declaration. The submission of a zero denominator declaration allows a hospital to meet the reporting requirements for a particular eCQM. We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50256 through 50259), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49705 through 49708), and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57169 and 57170) for our previously adopted eCQM file format requirements. A QRDA Category I file with patients meeting the initial patient population of the applicable measures, a zero denominator declaration, or a case threshold exemption all count toward a successful submission for eCQMs for the Hospital Inpatient Quality Reporting Program (82 FR 38387). The following Table IX.C.10. summarizes our proposed policies:
We invite public comment on our proposals to require hospitals to report on the Malnutrition Care Score eCQM and on all current and future Hospital Harm eCQMs after 2 years of self-selected reporting beginning with CY 2028 reporting period/FY 2030 payment determination. We refer readers to section IX.F.9. of this proposed rule, in which we propose the same reporting and submission requirements for eCQMs under the Medicare Promoting Interoperability Program for eligible hospitals and CAHs.
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51643 and 51644) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53538 and 53539) for details on the data submission requirements for structural measures.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45361 through 45365), we adopted the Maternal Morbidity Structural measure beginning with the FY 2023 payment determination. In this attestation-based measure, hospitals answer the following two-part question:
To improve the completeness and usefulness of the data collected, we propose updating the reporting requirements. Specifically, if a hospital answers “yes” to the measure as currently specified, the hospital would also need to report the name of the perinatal quality improvement collaborative program. In the HQR System, if a hospital selects “yes” in response to the measure, the hospital would also be prompted to report a response to the following: “Which Statewide and/or National Perinatal Quality Improvement Collaborative Program does the hospital participate in?” This change is intended to enhance our understanding of current practices and support targeted quality improvement efforts. This update to the reporting requirements of the measure would not impact measure performance, as the criteria for attesting “yes” to the measure remain the same. However, we would not consider a hospital which attested “yes” to the measure but did not provide the name of the perinatal quality improvement collaborative program in which they participate to have successfully reported all requirements for this measure. Therefore, such a hospital would be subject to a payment penalty. To report on this measure, hospitals would continue using the CMS-approved web-based collection tool available within the HQR System once annually, as they currently do to report for this and other Hospital Inpatient Quality Reporting Program structural measures (87 FR 49304 through 49305).
We invite public comment on our proposed update to the reporting requirements for the Maternal Morbidity Structural measure beginning with the CY 2026 reporting period/FY 2028 payment determination.
The PPS-Exempt Cancer Hospital (PCH) Quality Reporting Program, authorized by section 1866(k) of the Act, applies to hospitals described in section 1886(d)(1)(B)(v) of the Act (referred to as “PPS-Exempt Cancer Hospitals” or “PCHs”). We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53555 through 53567) for a general overview of the PCH Quality Reporting Program. We also refer readers to 42 CFR 412.24 for codified PCH Quality Reporting Program requirements.
We propose to adopt two new measures into the PCH Quality Reporting Program: (1) Advance Care Planning electronic clinical quality measure (eCQM) for a full year of reporting beginning with the CY 2028 reporting period/FY 2030 program year; and (2) Malnutrition Care Score eCQM for a full year of reporting beginning with the CY 2028 reporting period/FY 2030 program year. We provide more details on the proposed adoption of the Malnutrition Care Score eCQM in section IX.D.2.a. of the preamble of this proposed rule, while details on the proposed adoption of the Advance Care Planning eCQM measure appear in section IX.B.1. of the preamble of this proposed rule.
a. Proposed Adoption of the Malnutrition Care Score Electronic Clinical Quality Measure
Malnutrition is a common and high-risk condition characterized by unbalanced nutrition, encompassing both undernutrition and overnutrition.
PCHs have an opportunity to identify malnutrition early in the patient admission process and to address it efficiently and effectively with interventions individualized to the patient's cancer treatment plan that could optimize outcomes, including reduced complications and lengths of stay.
The Malnutrition Care Score eCQM assesses the percentage of adults aged 18 years and older at the start of the eligible encounter, with a length of stay equal to or greater than 24 hours, who received optimal malnutrition care appropriate to the specific patient's level of malnutrition risk and severity. Best practices related to the prevention and care of malnutrition recommend that for each eligible encounter, adult inpatients are: (1) screened for malnutrition risk or for a dietitian referral order to be placed; (2) assessed by a registered dietitian (RD) or registered dietitian nutritionist (RDN) to confirm findings of malnutrition risk, and if identified with a “moderate” or “severe” malnutrition status in the current performed nutrition assessment; (3) receive a “moderate” or “severe” malnutrition diagnosis by a physician or eligible clinician as defined by CMS; and (4) have a current nutrition care plan performed by an RD/RDN.
To improve clinical outcomes for patients and reduce health care costs, we adopted the Malnutrition Care Score eCQM (previously known as the Global Malnutrition Composite Score eCQM) into the Hospital Inpatient Quality Reporting and Medicare Promoting Interoperability Programs as one of the eCQMs that hospitals can select to report beginning with the CY 2024 reporting period (87 FR 49239 through 49246 and 87 FR 49361 through 49365, respectively). In the FY 2025 IPPS/LTCH PPS final rule, we modified the measure to include patients 18 years old and older in the measure cohort (89 FR 69557 through 69560 and 89 FR 69621 through 69623). In this rule, we are also proposing mandatory reporting of the Malnutrition Care Score eCQM in the Hospital Inpatient Quality Reporting and Medicare Promoting Interoperability Programs beginning with the CY 2028 reporting period. We refer interested readers to sections IX.C.8.c.(2). and IX.F.9.c. of the preamble of this proposed rule for further discussion of this proposal in the Hospital Inpatient Quality Reporting and Medicare Promoting Interoperability Programs, respectively.
The Malnutrition Care Score eCQM consists of four components, which are scored separately: (1) screening for malnutrition risk at admission; (2) completing a nutrition assessment for patients who screened for risk of malnutrition; (3) appropriate documentation of malnutrition diagnosis in the patient's medical record if a malnutrition risk of “moderate” or “severe” was indicated by the assessment findings; and (4) development of a nutrition care plan for malnourished patients including the recommended treatment plan. The malnutrition components are specified for use in electronic health records (EHRs). The Malnutrition Care Score eCQM numerator is comprised of four components that are individually scored at the encounter level for patients 18 years of age and older who are admitted to a PCH. Each eligible component is given a value of 0 if not documented, or 1 if documented, and then all values are summed to total the numerator. The measure denominator is the total eligible occurrences of the four components for patients aged 18 years and older who are admitted to a PCH. The only denominator exclusion for this measure population is patients whose length of stay is less than 24 hours. Details on the cohort for each component are specified in Table IX.D.1.
The score for each eligible encounter is calculated by dividing the numerator by the denominator. Results range from 0 to 100 percent, with higher percentages indicating better performance. The measure specifications for the Malnutrition Care Score eCQM can be found on the Electronic Clinical Quality Improvement (eCQI) Resource Center website, available at:
We refer readers to the Partnership for Quality Measurement website for details on the Pre-Rulemaking Measure Review process convened by the consensus-based entity (CBE), including the voting procedures used to reach consensus on measure recommendations.
The voting results of the Recommendation Group for the proposed inclusion of the Malnutrition Care Score eCQM in the PCH Quality Reporting Program were: 19 members (95 percent) recommended adopting the measure into the PCH Quality Reporting Program, and one member (5 percent) voted not to recommend the measure for adoption.
The Pre-Rulemaking Measure Review Hospital Committee overall agreed that this measure is particularly relevant for cancer patients, who often experience malnutrition. The Recommendation Group member who voted not to recommend the measure expressed concerns that (1) rural hospitals often lack sufficient registered dietitian staffing, even with telemedicine, and (2) whether documenting screening leads to meaningful improvements in post-discharge outcomes.
In response to the Recommendation Group member's first concern about rural hospitals, the hospitals participating in the PCH Quality Reporting Program consist of 11 total PCHs. All PCHs are affiliated with large academic medical centers, research institutions, or standalone premier cancer centers.
Regarding the Recommendation Group member's second concern about meaningful improvements, the Malnutrition Care Score eCQM measure was endorsed in the Spring 2024 review cycle with a condition for the measure steward to review implementation data to examine whether the measure is associated with improved nutritional status or related clinical endpoints when the measure returns for maintenance review in the Spring 2029 cycle.
We thank the committee for their recommendations and concerns. After taking them into consideration, we propose to adopt the Malnutrition Care Score eCQM in the PCH Quality Reporting Program beginning with the FY 2030 program year.
We refer readers to the Partnership for Quality Measurement website for details on the measure endorsement and maintenance process, including the measure evaluation procedures the Endorsement and Maintenance Committees use to evaluate measures and whether they meet endorsement criteria. The Malnutrition Care Score eCQM was recently reviewed by the Endorsement and Maintenance Initial Recognition and Management Committee as part of measure maintenance in the Spring 2024 review cycle. The Endorsement and Maintenance committee voted to endorse with conditions. The condition was for the measure steward to review implementation data (including the recently expanded cohort of patients 18 years and older) to examine whether the measure is associated with improved nutritional status or related clinical endpoint when the measure returns for maintenance review in the Spring 2029 cycle.
The Malnutrition Care Score eCQM uses data collected through a hospital's EHR. The measure is designed to be calculated by certified health information technology (IT) using the patient-level data and then submitted by the PCH to CMS. Table IX.D.2. outlines the data specification(s) and data sources for each of the four components.
We propose to adopt the Malnutrition Care Score eCQM in the PCH Quality Reporting Program beginning with the CY 2028 reporting period/FY 2030 program year. We refer readers to section IX.D.5.b. of this proposed rule for a discussion of proposed form, manner, and timing of data submission and reporting requirements for eCQMs in the PCH Quality Reporting Program.
Section 1866(k)(4) of the Act requires the Secretary to make quality measure information available to the public after PCHs have the opportunity to review their data. If adoption of the Malnutrition Care Score eCQM is finalized, we propose to publicly report data as soon as it is feasible on CMS websites such as the Compare tool on Medicare.gov (
We invite public comment on our proposal to adopt the Malnutrition Care Score eCQM into the PCH Quality Reporting Program beginning with the CY 2028 reporting period/FY 2030 program year.
We refer readers to the FY 2022 IPPS/LTCH PPS final rule where we adopted the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure (hereafter referred to as HCP COVID-19 Vaccination measure) into the PCH Quality Reporting Program (86 FR 45428 through 45434) and the FY 2024 IPPS/LTCH PPS final rule where we modified the HCP COVID-19 Vaccination measure to account for updated COVID-19 vaccine guidance (88 FR 59137 through 59144). The HCP COVID-19 Vaccination measure requires PCHs to report the COVID-19 vaccination status of HCP through the Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN). PCHs must collect current vaccination status for all employees, licensed independent practitioners, adult trainees, students,
We propose to remove the HCP COVID-19 Vaccination measure beginning with the CY 2026 reporting period/FY 2028 program year under removal factor 2, a measure does not align with current clinical guidelines or practice (§ 412.24(d)(3)(i)(B)). When we originally adopted this measure, the United States was in the midst of a Public Health Emergency (PHE) with millions of COVID-19 cases and over 550,000 COVID-19 deaths (86 FR 45428). In March 2021, when this measure was being proposed, the United States was averaging over 5,000 deaths per week. In April 2023, the last full month of the PHE, the weekly number of deaths due to COVID-19 averaged around 1,300.
With the end of the PHE and decrease in COVID-19 deaths, we believed the continued costs and burden to providers of reporting on this measure outweighed the benefit of continued information collection on HCP COVID-19 Vaccination in several settings. We have already removed this measure from the Hospital Inpatient Quality Reporting Program (90 FR 37010 through 37012), the Inpatient Psychiatric Facility Quality Reporting Program (90 FR 37657 through 37658), the Inpatient Rehabilitation Facility Quality Reporting Program (90 FR 37701 through 37702), the Ambulatory Surgical Center Quality Reporting Program (90 FR 53917 through 53919), and the Hospital Outpatient Quality Reporting Program (90 FR 53917 through 53919).
Since the end of the PHE, the CDC's clinical recommendations for COVID-19 vaccination have changed. In December 2020, the CDC's Advisory Committee on Immunization Practices (ACIP) recommended that HCP should receive a complete vaccination course.
However, these parameters no longer apply, due to evolving circumstances. The latest CDC COVID-19 vaccination recommendations for the 2025-2026 season are now based on shared clinical decision-making.
On this basis, we propose to remove the measure from the PCH Quality Reporting Program under removal Factor 2, a measure does not align with current clinical guidelines or practice. We refer readers to section IX.E.3. of this proposed rule for a similar proposal to remove the HCP COVID-19 Vaccination measure in the LTCH Quality Reporting Program.
If finalized, PCHs would not be required to report CY 2026 HCP COVID-19 Vaccination measure data for purposes of the FY 2028 program year. Any CY 2026 HCP COVID-19 vaccination data received by CMS would not be used for PCH Quality Reporting Program public reporting.
We invite public comment on our proposal to remove the COVID-19 Vaccination Coverage among Healthcare Personnel measure from the PCH Quality Reporting Program beginning with the CY 2026 reporting period/FY 2028 program year.
Table IX.D.3. summarizes the previously finalized and newly proposed PCH Quality Reporting Program measure set for the FY 2028 to FY 2031 program years. We propose to remove the COVID-19 Vaccination Coverage among HCP measure as discussed in section IX.D.3.a. of this proposed rule, add the Advance Care Planning eCQM as discussed in section IX.B.1. of this proposed rule and add the Malnutrition Care Score eCQM as discussed in section IX.D.2.a. of this proposed rule.
We refer readers to the CMS QualityNet website at
We propose to update program policies for introducing eCQMs into the PCH Quality Reporting Program by establishing eCQM data submission and reporting requirements, which would apply to the proposed Advance Care Planning eCQM and Malnutrition Care Score eCQM.
Section 412.24(c) of title 42 of the Code of Federal Regulations generally requires that a PCH participating in the PCH Quality Reporting Program must submit to CMS data on measures selected under section 1833(k)(3) of the Act in a form and manner, and at a time, specified by CMS. The data submission requirements, specifications manual, measure methodology reports, and submission deadlines are posted on the QualityNet website at:
In alignment with the Hospital Inpatient Quality Reporting Program, we propose that the technical specifications for eCQMs for the PCH Quality Reporting Program would be contained in the CMS Annual Update for the Hospital Quality Reporting Programs (Annual Update). The Annual Update and implementation guidance documents are available on the eCQI Resource Center website at:
We invite public comment on this proposal.
Collection and reporting of data through health IT streamlines quality reporting through automated electronic extraction and reporting. Certified health IT assists facilities in a variety of ways, such as by improving coordination of care with referring providers or labs,
We intend to transition to a fully digital quality measure (dQM) landscape, first by transitioning eCQMs to Health Level 7® Fast Healthcare Interoperability Resources® (FHIR®)-based eCQMs, to promote interoperability and increase the value of quality measure data.
We refer readers to sections IX.B.1. and IX.D.2.a. of the preamble of this proposed rule, where we propose to adopt the Advance Care Planning eCQM and the Malnutrition Care Score eCQM, respectively, into the PCH Quality Reporting Program measure set for a full year of reporting beginning with the CY 2028 reporting period/FY 2030 program year. If our proposals are finalized, the Advance Care Planning eCQM and the Malnutrition Care Score eCQM would be the first eCQMs in the PCH Quality Reporting Program; although, CMS began providing hospitals with the opportunity to voluntarily submit eCQM data in CY 2013 before required reporting in the Hospital Inpatient Quality Reporting and Medicare Promoting Interoperability Programs in CY 2016. Additionally, eCQMs are used in the Hospital Outpatient Quality Reporting Program, Rural Emergency Hospital (REH) Quality Reporting Program, Merit-Based Incentive Payment System for clinicians, and certain CMS Innovation Center models.
Introducing eCQM reporting in the PCH Quality Reporting Program involves establishing related policies and requirements, including eCQM certification requirements, data standards and formats, submission methods, and other program-specific requirements. In the following sections, we propose eCQM submission and reporting requirements for the PCH Quality Reporting Program that align with these other programs.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69569) and the CY 2025 OPPS/ASC final rule (89 FR 94418 through 94420), we summarized our requirements with respect to using technology meeting the Office of the National Coordinator for Health Information Technology's (ONC) health IT certification criteria for reporting eCQMs in the Hospital Inpatient Quality Reporting Program and the Hospital Outpatient Quality Reporting Program, respectively. We propose to adopt similar eCQM certification requirements in the PCH Quality Reporting Program, and to codify them by adding a new paragraph (g) “Requirements for submission of electronic clinical quality measures (eCQMs) under the PCHQR Program” to 42 CFR 412.24.
Under this approach, we propose to codify at § 412.24(g)(1) the requirement for PCHs to utilize health IT certified to the ONC Health IT Certification Program certification criteria, as adopted and updated at 45 CFR 170.315(c), which cover the elements necessary for eCQM reporting under the PCH Quality Reporting Program.
We also propose to codify at 42 CFR 412.24(g)(2) the requirement that PCHs use the certified health IT described in paragraph (g)(1) to calculate, export, and submit results for the eCQMs available to report under the PCHQR Program. Additionally, we propose to codify at § 412.24(g)(3) the requirement that PCHs use the eCQM electronic measure specifications for the applicable reporting period available on the eCQI Resource Center website at:
When EHRs and health IT systems capture data in standardized formats, the information is represented and interpreted consistently, enabling automated computation without manual interpretation. As described in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49701), these standards are referred to as content exchange standards because the standards detail how data should be represented and the relationships between data elements. This allows the data to be exchanged across EHRs and health IT systems while retaining their meaning. At this time, the Quality Reporting Document Architecture (QRDA) standard is the standard file format used for eCQM submission in CMS quality programs that rely on QRDA-based eCQM reporting. The QRDA standard provides a document format and standard structure to electronically report quality measure data, promotes consistent representation of the data, and enables calculation of eCQM measure results.
To utilize the same file format requirements currently applied in the Hospital Inpatient Quality Reporting Program (85 FR 58940), the Hospital Outpatient Quality Reporting Program (86 FR 63869), the REH Quality Reporting Program (90 FR 53954), and the Medicare Promoting Interoperability Program (80 FR 49706), we propose comparable file format requirements for the PCH Quality Reporting Program beginning with the CY 2028 reporting period/FY 2030 program year. Specifically, we propose that a PCH: (1) must submit eCQM data via the QRDA Category I (QRDA I) file format;
In addition, we propose that a PCH could meet the eCQM reporting requirements by submitting data via QRDA I files, submitting a zero-denominator declaration, or submitting a case threshold exemption. We discuss the zero-denominator declaration and case threshold exemptions in the subsequent sections. We also refer readers to section IX.D.5.a. of this proposed rule where we outline the maintenance of technical specifications including those for eCQMs.
We understand there may be situations in which a PCH does not have data to report on a particular eCQM. Therefore, we propose that if the PCH's health IT is certified to an eCQM but the PCH does not have patients that meet the denominator criteria of that eCQM, the PCH would submit a zero in the denominator for that eCQM. Submission of a zero in the denominator for such an eCQM would qualify as a successful submission for that eCQM.
We understand that in some cases, a PCH may not meet the case threshold of discharges for a particular eCQM to reliably calculate performance on the measure. We propose to align with the case threshold exemption policy from the Medicare Promoting Interoperability Program (77 FR 54080), the Hospital Inpatient Quality Reporting Program (79 FR 50323 and 50324), the Hospital Outpatient Quality Reporting Program (86 FR 63869), and the REH Quality Reporting Program (90 FR 53954). As stated for the Hospital Inpatient Quality Reporting Program, the case threshold exemption means that for each quality measure where the minimum number of patients that meet the patient population denominator criteria for the relevant reporting period is not met, a hospital could declare a “case threshold exemption.” We propose a PCH using certified health IT would be exempt from reporting on that eCQM if the PCH has 5 or fewer applicable inpatient encounters or discharges per quarter or 20 or fewer applicable inpatient encounters or discharges per year (Medicare and non-Medicare combined), with applicability defined by specifications for each eCQM's denominator population. Case threshold exemptions would be entered on the Denominator Declaration screen within CMS' Hospital Quality Reporting System available during the submission period. The exemption would not have to be used, and a PCH could report those individual cases if they elect to do so. However, the measure rate would not be publicly reported if below the case threshold. We propose to adopt the case threshold exemption for the PCH Quality Reporting Program beginning with the CY 2028 reporting period/FY 2030 program year.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57171 and 57172), the Hospital Inpatient Quality Reporting Program aligned its eCQM submission deadline with that of the Medicare Promoting Interoperability Program. The eCQM submission deadline we have established for those two programs is by the end of 2 months following the close of the calendar year reporting period.
To align with these existing programs, we propose to require eCQM data submission for the PCH Quality Reporting Program by the end of 2 months following the close of the calendar year for the CY 2028 reporting period/FY 2030 program year and for subsequent years. We believe that by aligning with these existing programs' deadlines we can minimize burden and simplify understanding of the data reporting requirements. For example, for the CY 2028 reporting period/FY 2030 program year, a PCH would be required to submit eCQM data to CMS by February 28, 2029, which is the end of 2 months following the close of the calendar year (December 31, 2028). If this date falls on a weekend or Federal holiday, the submission deadline would be moved to the next business day under established reporting practices.
We invite public comment on these eCQM submission and reporting proposals.
In alignment with the Hospital Inpatient Quality Reporting Program (86 FR 63870), we propose a review and corrections period for eCQM data which would run concurrently with the data submission period. The review and corrections period is from the time the submission period opens to the submission deadline. In the Hospital Quality Reporting System, providers can submit QRDA Category I test and production data files and can correct QRDA Category I test and production data files before production data are submitted for final reporting. We encourage early testing and the use of pre-submission testing tools to reduce errors and inaccurate data submissions in eCQM reporting. The Hospital Quality Reporting System does not allow data to be submitted or corrected after the annual deadline. We refer readers to the Hospital Quality Reporting System website (available at:
We invite public comment on our proposal.
The Long-Term Care Hospital Quality Reporting Program (LTCH QRP) is authorized by section 1886(m)(5) of the Act, and it applies to all hospitals
In this proposed rule, we are proposing the removal of two measures, specifically the COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP) measure and the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure, beginning with the FY 2028 LTCH QRP as described in sections IX.E.3. and IX.E.4. of the preamble of this proposed rule. In section IX.E.6.b, of the preamble of this proposed rule, we are also proposing to revise the LTCH QRP Data Submission Deadlines beginning with the FY 2029 LTCH QRP. We are also soliciting public comments on one Request for Information (RFI) on future measure concepts for the LTCH QRP in section IX.E.5 of the preamble of this proposed rule.
For a detailed discussion of the considerations we use for the selection of LTCH QRP quality, resource use, and other measures, we refer readers to the FY 2016 Inpatient Prospective Payment System (IPPS)/LTCH PPS final rule (80 FR 49728). The LTCH QRP currently has 18 adopted measures, which are set out in Table IX.E.-01. We did not propose to adopt any new measures for the LTCH QRP.
For a discussion of the factors we use to evaluate whether a measure should be removed from the LTCH QRP, we refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41624 through 41634) and to the regulations at § 412.560(b)(3).
We refer readers to the FY 2022 IPPS/LTCH PPS final rule where we adopted the COVID-19 Vaccination Coverage among HCP measure (HCP COVID-19 Vaccine measure) into the LTCH QRP (86 FR 45438 through 45446) and the FY 2024 LTCH PPS final rule where we modified the HCP COVID-19 Vaccine measure to account for updated COVID-19 vaccine guidance (88 FR 59138 through 59144). The HCP COVID-19 Vaccine measure requires LTCHs to report the COVID-19 vaccination status of HCP through the National Healthcare Safety Network (NHSN). LTCHs must collect current vaccination status for all employees, licensed independent practitioners, adult trainees, students, and volunteers, as well as certain contract personnel one week out of each month and report these data on a quarterly basis (88 FR 59139).
We are proposing to remove the HCP COVID-19 Vaccine measure beginning with the FY 2028 LTCH QRP under measure removal Factor 3; a measure does not align with current clinical guidelines or practice (§ 412.560(b)(3)(iii)). When we originally adopted this measure, the United States was in the midst of a Public Health Emergency (PHE) with millions of COVID-19 cases and over 550,000 COVID-19 deaths (88 FR 59138 and 59139). In March 2021, when this measure was being proposed, the United States was averaging over 5,000 deaths per week. In April 2023, the last full month of the PHE, the weekly number of deaths due to COVID-19 averaged around 1,300.
With the end of the PHE and decrease in COVID-19 deaths, we believed the continued costs and burden to providers of reporting on this measure outweighed the benefit of continued information collection on the HCP COVID-19 Vaccine measure in several settings. We have already removed this measure from the Hospital Inpatient Quality Reporting Program (90 FR 37010 through 37012), the Inpatient Psychiatric Facility Quality Reporting Program (90 FR 37657 through 37658), the Ambulatory Surgical Center Quality Reporting (90 FR 53917 through 53919), the Hospital Outpatient Quality Reporting Programs (90 FR 53917 through 53919), and the Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP) (
Since the end of the PHE, the CDC's clinical recommendations for COVID-19 vaccination have changed. In December 2020, the CDC's Advisory Committee on Immunization Practices (ACIP) recommended that HCP should receive a complete vaccination course.
However, these parameters no longer apply, due to evolving circumstances. The latest CDC COVID-19 vaccination recommendations for the 2025-2026 season are now based on shared clinical decision-making (also known as individual-based decision-making).
On this basis, we are proposing to remove the measure from the LTCH QRP under removal Factor 3, measure does not align with current clinical guidelines or practice.
If finalized as proposed, LTCHs would not be required to report CY 2026 HCP COVID-19 Vaccine measure data for purposes of the FY 2028 payment determination (that is, LTCHs that do not report CY 2026 HCP COVID-19 vaccine measure data would not be penalized for FY 2028 annual payment update under the LTCH QRP). Any CY 2026 HCP COVID-19 vaccine data received by CMS would not be used for LTCH QRP compliance or public reporting.
We invite public comment on our proposal to remove the COVID-19 Vaccination Coverage among Healthcare Personnel measure from the LTCH QRP beginning with the FY 2028 LTCH QRP.
We refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 59243 through 59250), where we finalized the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date (Patient/Resident COVID-19 Vaccine) measure for the FY 2026 LTCH QRP. The measure is an assessment-based process measure that reports the percent of stays in which patients in an LTCH are up to date on their COVID-19 vaccinations per the CDC's latest guidance. In the FY 2026 LTCH PPS final rule (90 FR 37033 through 90 FR 37034), we finalized a modification to the reporting requirements for this measure to exclude patients who expired in the LTCH beginning with the FY 2028 LTCH QRP.
We are proposing to remove the Patient/Resident COVID-19 Vaccine measure from the LTCH QRP beginning with the FY 2028 LTCH QRP under removal Factor 3: a measure does not align with current clinical guidelines or practice (§ 412.560(b)(3)(iii)).
When we originally adopted the Patient/Resident COVID-19 Vaccine measure, COVID-19 continued to be a major challenge for LTCHs, with older adults at a significantly higher risk of mortality, severe disease, and death following infection (88 FR 59243 and 59244). In August 2023, when this measure was adopted, CDC COVID-19 vaccination guidance emphasized population-level vaccination expectations for older adults and other high-risk groups, and the evidence base focused on demonstrating broad protective benefit at the population level. CDC data at that time showed that, among adults aged 50 years and older, individuals who had received a
At the time the Patient/Resident COVID-19 Vaccine measure was adopted, it was intended to capture routine, catch-up, and risk-based immunization recommendations. Due to evolving circumstances, the latest CDC COVID-19 vaccination recommendations for the 2025-2026 season are now based on shared clinical decision-making (also known as individual-based decision-making).
When there were more narrow parameters for receiving the COVID-19 vaccination, the Patient/Resident COVID-19 Vaccine measure promoted consumer transparency and choice by giving consumers clear information on the number of patients in an LTCH who were vaccinated. However, these parameters no longer apply in light of current CDC clinical guidance that recommends shared clinical decision-making for COVID-19 vaccination decisions. As a result, both vaccination and non-vaccination may reflect an “up to date” status using the guidance of shared clinical decision-making, and the Patient/Resident COVID-19 Vaccine measure may no longer provide information on the prevalence of COVID-19 vaccination in the LTCH setting. On this basis, we are proposing to remove the measure from the LTCH QRP under removal Factor 3: a measure does not align with current clinical guidelines or practice.
Removing this measure would bring LTCH in to alignment with other post-acute care settings since we have already removed this measure from the Home Health Quality Reporting Program (HH QRP) (90 FR 55416 through 55418) and the Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP) (90 FR 37702 through 37704).
We are proposing that beginning with patients discharged on or after October 1, 2026, LTCHs would no longer be required to collect and submit the Patient/Resident COVID-19 Vaccine measure data to CMS. We are also proposing to remove the Patient's COVID-19 vaccination is up to date data element (O0350) from the LCDS as of October 1, 2028, since it is not technically feasible to remove this data element earlier. However, under our proposal, this data element would become voluntary and LTCHs would not be required to collect and submit Patient/Resident COVID-19 Vaccine data beginning with patients discharged on or after October 1, 2026.
We invite public comment on our proposal to remove the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure from the LTCH QRP beginning with the FY 2028 LTCH QRP.
In the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27150 through 27153), we included a request for information (RFI) on a set of principles for selecting and prioritizing LTCH QRP measures, identifying measurement gaps and suitable measures for filling these gaps. We refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 59250 and 59251) for a summary of the public comments we received in response to the RFI.
We are seeking input on the importance, relevance, appropriateness, and applicability of the quality measure concept of advanced care planning for future years in the LTCH QRP. Advance care planning is a continuous process that supports people in understanding and communicating their goals, values, and preferences regarding future medical decisions.
As we review new measure concepts, we will prioritize evidence-based outcome measures that promote person-centered care practices. We are seeking input on the relevant aspects of advanced care planning and measures appropriate for the LTCH setting.
We refer readers to the regulatory text at § 412.560(b) for information regarding the current policies for reporting specified data for the LTCH QRP.
Sections 1886(m)(5)(E) and 1899B(f) and (g) of the Act require CMS to provide feedback to LTCHs and to publicly report their performance on quality and other measures specified under the LTCH QRP. More specifically, section 1899B(f)(1) of the Act requires the Secretary to provide confidential feedback reports to LTCHs on their performance on the quality, resource use, and other measures specified for the LTCH QRP. Section 1899B(f)(2) of the Act provides that, to the extent feasible, the Secretary must make these confidential feedback reports available not less frequently than on a quarterly basis, except in the case of measures reported on an annual basis, in which case the confidential feedback reports
For LCDS assessment-based measures, in the FY 2013 IPPS/LTCH PPS final rule (
We also finalized data submission deadlines for LTCH QRP measures that are submitted via the Centers for Disease Control and Prevention's (CDC) National Healthcare Safety Network (NHSN). In the FY 2014 IPPS/LTCH PPS final rule (
Public reporting of data collected under quality programs, such as the LTCH QRP, is designed to provide consumers and their families with the most current information to empower them to make quality-informed decisions about where to receive their care. We have identified that the time between when data on measures is submitted to us and when those data are publicly reported (approximately nine months) may be too long to provide the most accurate and up to date information for the public. For example, through technical expert panels (TEPs), we have received feedback from patient caregiver advocates that the aged data used in publicly reported quality measures diminishes their value to consumers.
Currently, the largest contributing factor to the nine-month lag between the end of the data collection period and when measures are publicly reported is the 4.5-month timeframe for data submission. Reducing the data submission timeframe from 4.5 months to 45 days could reduce this lag by up to three months, resulting in more timely public reporting of data for consumers and increasing the value of publicly reported data. Additionally, this timeframe provides LTCHs with more recent data in support of their quality improvement activities.
In the FY 2026 IPPS/LTCH PPS proposed rule, we included a request for information (RFI) on reducing the data submission deadline from 4.5 months to 45 days (
Beginning with the FY 2029 LTCH QRP, we are proposing that LTCHs must complete their data submissions and make corrections to their assessment data where necessary no later than the 15th day of the second month after the end of the calendar quarter. However, if the 15th day of the second month falls on a Friday, weekend, or Federal holiday, the date is delayed until 11:59 p.m. EST on the next business day. Specifically, we are proposing that LTCHs would follow the deadlines presented in Table IX.E.02 for the FY 2029 LTCH QRP. We also propose that similar calendar year data submission deadlines would apply to future years' payment determinations.
We believe that requiring LTCHs to submit LCDS assessment data by the 15th day of the second month after the end of the calendar quarter is reasonable. We conducted an analysis on the potential impact of reducing the timeframe by determining how many assessments are currently being submitted by this deadline, which is approximately within 45 days of the end of the quarter. Using 2024 data, we identified that 98.36 percent of all LCDS assessments were submitted to CMS within a 45-day timeframe. Of the remaining 1.64 percent submitted beyond 45 days, 0.08 percent were submitted after the current 4.5-month data submission deadline and would not be further impacted by a change in the data submission deadline. Therefore, only 1.56 percent of LCDS assessments would be impacted by changing the data submission deadline from 4.5 months to require data submission by the 15th day of the second month after the end of the calendar quarter.
Beginning with the FY 2029 LTCH QRP, we are proposing that LTCHs must complete their data submissions and make corrections to their CDC NHSN data where necessary no later than the 15th day of the second month after the end of the calendar quarter. However, if the 15th day of the second month falls on a Friday, weekend, or Federal holiday, the date is delayed until 11:59 p.m. EST on the next business day. Specifically, we are proposing that LTCHs would follow the deadlines presented in Table IX.E.03 for the FY 2029 LTCH QRP. We are also proposing that similar calendar year data submission deadlines would apply to future years' payment determinations.
We believe that requiring LTCHs to submit CDC NHSN assessment data by the 15th day of the second month after the end of the calendar quarter is reasonable. We note that there would be no change in the data submission deadline for the Influenza Vaccination Coverage among HCP measure, as the previously finalized data submission date is May 15th for each influenza season. We conducted an analysis on the potential impact of reducing the timeframe by determining how many LTCHs are currently reporting data by this deadline, which is approximately within 45 days of the end of the quarter. Using FY 2025 data, we identified that 88 percent of all LTCHs submitted CDC NHSN data within a 45-day timeframe.
On these bases, we believe revising the LTCH QRP data submission deadline for LCDS and CDC NHSN data to require LTCHs to submit CDC NHSN data by the 15th day of the second month after the end of the calendar quarter would improve the timeliness of public reporting by three months, which is beneficial to both consumers and LTCHs, with no change in burden to LTCHs.
We invite comment on this proposal to require LTCHs to submit LCDS assessment data and CDC NHSN data by the 15th day of the second month after the end of the calendar quarter beginning with the FY 2029 LTCH QRP.
For a more detailed discussion about our policies regarding public display of LTCH QRP measure data and procedures for the opportunity to review and correct data and information, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 57231 through 57236).
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45438 through 45446), we finalized our proposal to publicly report the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP COVID-19 Vaccine) measure beginning with the September 2022 Care Compare refresh on Medicare.gov. In section IX.E.3. of the preamble of this proposed rule, we are proposing to remove the HCP COVID-19 Vaccine) measure beginning with the FY 2028 LTCH QRP. If finalized as proposed, an LTCHs HCP COVID-19 measure data would be publicly reported for the last time with the September 2026 Care Compare refresh on Medicare.gov, based on data from Q4 of 2025. Thereafter, we would no longer display an LTCHs' HCP COVID-19 Vaccine measure data on the Care Compare tool at Medicare.gov.
We invite comment on our proposal to end public display of the HCP COVID-19 Vaccine measure data after the September 2026 Care Compare refresh on the Care Compare tool at Medicare.gov.
In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59243 through 59250), we finalized our proposal to begin publicly displaying data for the Patient/Resident COVID-19 measure beginning with the September 2025 Care Compare refresh. In section IX.E.4. of the preamble of this proposed rule, we are proposing to
We invite public comment on our proposal to end the public display of Patient/Resident COVID-19 Vaccine measure data after the September 2026 Care Compare refresh on
Sections 1886(b)(3)(B)(ix) and 1814(l)(4) of the Act (as amended by the Health Information Technology for Economic and Clinical Health Act, Title XII of Division A and Title IV of Division B of the American Recovery and Reinvestment Act of 2009 [ARRA], Pub. L. 111-5) authorize downward payment adjustments under Medicare, beginning with FY 2015 for eligible hospitals and CAHs that do not successfully demonstrate meaningful use of certified electronic health record technology (CEHRT) for the applicable electronic health record (EHR) reporting periods. Section 602 of Title VI, Division O of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) added subsection (d) hospitals in Puerto Rico as eligible hospitals under the Medicare EHR Incentive Program (now known as the Medicare Promoting Interoperability Program) and extended the participation timeline for these hospitals such that downward payment adjustments were authorized beginning in FY 2022 for section (d) Puerto Rico hospitals that do not successfully demonstrate meaningful use of CEHRT for the applicable EHR reporting periods.
In the Health Data, Technology, and Interoperability: ASTP/ONC Deregulatory Actions to Unleash Prosperity proposed rule (90 FR 60970) (HTI-5 proposed rule), which appeared in the
In the HTI-5 proposed rule, ONC identified 34 certification criteria for removal and 7 certification criteria for revision. ONC stated that removing or revising these criteria would reduce burden and costs for health IT developers and clinicians, partly due to the decreased necessity to maintain ongoing conformance with certification requirements (90 FR 60973).
We have summarized in Table IX.F.-01 the potential impact on Medicare Promoting Interoperability Program participants of the proposed certification criteria removals and revisions. Table IX.F.-01 describes how criteria that are the subject of HTI-5 proposals are incorporated into the definition of CEHRT in 42 CFR 495.4. In addition to the health IT certification criteria specified in the CEHRT definition in 42 CFR 495.4, the definition includes EHR technology certified under the ONC Health IT Certification Program that meets the Base EHR definition at 45 CFR 170.102 and technology certified to the criteria necessary to be a meaningful EHR user under the Medicare Promoting Interoperability Program. The criteria necessary to be a meaningful EHR user include criteria that are necessary to report on applicable objectives and measures under the Medicare Promoting Interoperability Program.
Several of the proposed changes in HTI-5 are described in further detail in associated proposals within this FY 2027 IPPS/LTCH PPS proposed rule. For more information, please see “Proposed Updates to the Definition of Certified Electronic Health Record Technology in the Medicare Promoting Interoperability Program” in section IX.F.2.b of this proposed rule and “Proposal to Remove the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information Measures” in section IX.F.4 of this proposed rule.
Proposed changes in the HTI-5 proposed rule would affect certification criteria referenced in the definition of CEHRT in 42 CFR 495.4 that applies to the Medicare Promoting Interoperability Program in several ways. First, several ONC proposals affect the ONC Health IT Certification Program certification criteria included within the Base EHR definition at 45 CFR 170.102, which is incorporated into the CEHRT definition at 42 CFR 495.4. Removal of these criteria from the ONC Health IT Certification Program and the Base EHR definition would therefore remove the requirement that an eligible hospital or CAH must use CEHRT that includes this functionality. ONC proposed to remove from the Base EHR definition the certification criteria at: 45 CFR 170.315(a)(14)—“implantable device list” (90 FR 60983), 45 CFR 170.315(h)(1)—“transport methods and other protocols—direct project” (90 FR 60998), and 45 CFR 170.315(h)(2)—“transport methods and other protocols—Direct Project, Edge Protocol, and XDR/XDM” (90 FR 60999). ONC also proposed to revise the following criteria referenced in the Base EHR definition: 45 CFR 170.315(a)(5)—“patient demographics and observations” (90 FR 60981 through 60982) and 45 CFR 170.315(b)(11)—“decision support interventions” (90 FR 60986 through 60987).
ONC also proposed to remove four certification criteria specified in the text
ONC also proposed to remove or revise other certification criteria that directly support certain Medicare Promoting Interoperability Program measures. For example, four certification criteria are identified as supporting the Provide Patients Electronic Access to Their Health Information measure: 45 CFR 170.315(e)(1), 45 CFR 170.315(g)(7), 45 CFR 170.315(g)(9), and 45 CFR 170.315(g)(10). Of these four criteria, three are impacted by the HTI-5 proposals. ONC proposed to revise 45 CFR 170.315(e)(1) (90 FR 60990 through 60991), and to remove 45 CFR 170.315(g)(7) and 45 CFR 170.315(g)(9) (90 FR 60998). If ONC finalizes these proposals, only the remaining criteria identified for the Provide Patients Electronic Access to Their Health Information measure (the revised 45 CFR 170.315(e)(1) and unaltered 45 CFR 170.315(g)(10)) would be necessary for eligible hospitals and CAHs to report the measure. The same would be true for all other measures for which removal or revision of applicable certification criteria are finalized in HTI-5. Table IX.F.-07, in section IX.F.8 of this proposed rule, contains a complete list of the Medicare Promoting Interoperability Program objectives and measures and their relevant ONC Health IT certification criteria, including the impact to individual certification criteria if HTI-5 proposals are finalized.
Regarding the Public Health Registry Reporting measure, ONC proposed to remove the only certification criterion (45 CFR 170.315(f)(7)—“transmission to public health agencies—health care surveys”) (90 FR 60994) that supports the measure. If the removal of the criterion is finalized, there will be no specific certification criteria identified for this measure. An eligible hospital or CAH would be able to use any available data exchange standard specified in 45 CFR part 170 subpart B to meet the measure. For example, the transmission could be in the form of a Consolidated Clinical Document Architecture (C-CDA) per 45 CFR 170.205(a)(4), or Quality Reporting Document Architecture (QRDA) per 45 CFR 170.205(h)(2).
Regarding the Electronic Case Reporting measure, ONC proposed to revise the criterion at 45 CFR 170.315(f)(5)—“transmission to public health agencies—electronic case reporting,” (90 FR 60992 through 60993) identified as supporting this measure. Regarding the Antimicrobial Use Surveillance and Antimicrobial Resistance Surveillance measures, ONC proposed to revise the criterion at 45 CFR 170.315(f)(6)—“transmission to public health agencies—antimicrobial use and resistance reporting,” (90 FR 60993) identified as supporting these measures. These proposals aim to update the certification criteria to focus on functional, rather than standards-based, requirements. While ONC's proposed updates, if finalized, would revise the requirements for health IT products certified to these criteria, eligible hospitals and CAHs would continue to need to use health IT certified to these criteria to report the Electronic Case Reporting, Antimicrobial Use Surveillance, and Antimicrobial Resistance Surveillance measures.
We also note that ONC proposed removing certain certification criteria such as 45 CFR 170.315(g)(3)—“safety-enhanced design” and 45 CFR 170.315(g)(4)—“quality management system,” (90 FR 60995 through 60997) and a series of criteria related to privacy and security functionality in 45 CFR 170.315(d)(1)—(13) (90 FR 60989 through 60990), which are included in the Health IT Module certification requirements at 45 CFR 170.550. These criteria represent capabilities found in certified health IT products used by eligible hospitals and CAHs. We note that the proposed removal of these criteria from the ONC Health IT Certification Program would not affect an eligible hospital's or CAH's obligations to ensure the privacy and security of patients' electronic health information under the Health Insurance Portability and Accountability Act of 1996 and other applicable laws.
Please see Table IX.F.-07. for a complete listing of ONC Health IT certification criteria that support each Medicare Promoting Interoperability Program measure, and which criteria ONC has proposed to remove or revise. In most cases, certification criteria that support measure reporting would remain part of the ONC Health IT Certification Program. For additional information regarding proposals in the HTI-5 proposed rule, please refer to the proposals at 90 FR 60970.
For CY 2019 and subsequent years, the definition of CEHRT for the Medicare Promoting Interoperability Program at 42 CFR 495.4 requires the use of EHR technology certified under the ONC Health IT Certification Program that meets the 2015 Edition Base EHR definition or subsequent Base EHR definition (as defined at 45 CFR 170.102) and has been certified to specified ONC health IT certification criteria, as adopted and updated in 45 CFR 170.315. In paragraph (2)(i), the definition further specifies that EHR technology must be certified to criteria for “family health history” (45 CFR 170.315(a)(12)) and “patient health information capture” (45 CFR 170.315(e)(3)). In paragraph (2)(ii), the definition specifies that EHR technology must be certified to ONC health IT certification criteria that are necessary to be a meaningful EHR user. Paragraph (2)(ii)(A) includes the applicable measure calculation certification criteria at 45 CFR 170.315(g)(1) or (2) for all certification criteria that support an objective with a percentage-based measure.
We are proposing to revise the definition of CEHRT at 42 CFR 495.4 for the Medicare Promoting Interoperability Program so the definition would be consistent with certain proposed modifications to ONC health IT certification criteria in the HTI-5 proposed rule. Specifically, we are proposing to remove references to the following certification criteria effective January 1, 2027:
• “family health history”—45 CFR 170.315(a)(12).
• “patient health information capture”—45 CFR 170.315(e)(3).
• “automated numerator recording”—45 CFR 170.315(g)(1).
• “automated measure calculation”—45 CFR 170.315(g)(2).
If finalized as proposed, effective January 1, 2027, these criteria would no longer be included in the CEHRT definition. The proposed revised definition in 42 CFR 495.4 would be, in relevant part, as follows:
(2) For 2019 and subsequent years, EHR technology (which could include multiple technologies) certified under the ONC Health IT Certification Program that meets the 2015 Edition Base EHR definition, or subsequent Base EHR definition (as defined at 45 CFR 170.102) and has been certified to the
(i) For 2019 through 2026, at 45 CFR 170.315(a)(12) (family health history) and 45 CFR 170.315(e)(3) (patient health information capture); and
(ii) Necessary to be a Meaningful EHR User (as defined in this section), including the following:
(A) For 2019 through 2026, the applicable measure calculation certification criterion at 45 CFR 170.315(g)(1) or (2) for all certification criteria that support a meaningful use objective with a percentage-based measure.
(B) Clinical quality measure certification criteria that support the calculation and reporting of clinical quality measures at 45 CFR 170.315(c)(2) and (c)(3)(i) and (ii) and can be electronically accepted by CMS.”
We note that while our proposal is consistent with the approach in the HTI-5 proposed rule (90 FR 60970), we do not believe that ONC must finalize its proposed revisions for us to finalize the changes proposed in this section for our regulatory definition of CEHRT for the Medicare Promoting Interoperability Program.
We believe that the longstanding presence of the criteria for “family health history” at 45 CFR 170.315(a)(12) and “patient health information capture” at 45 CFR 170.315(e)(3) in the ONC Health IT Certification Program and their incorporation into Medicare Promoting Interoperability Program requirements means that the functionality reflected in these criteria is fully embedded in certified health IT and is widely available and used by eligible hospitals and CAHs. ONC anticipates that health IT developers will continue to retain these capabilities in their Health IT Modules despite the absence of certification criteria for these functionalities (90 FR 60991 and 90 FR 60982). We note that these criteria are not identified as supporting any specific measures within the Medicare Promoting Interoperability Program.
Similarly, for the certification criteria needed for measure calculation (“automated numerator recording” and “automated measure calculation” certification criteria in 45 CFR 170.315(g)(1) and 45 CFR 170.315(g)(2)), health IT developers seeking to support customers participating in the Medicare Promoting Interoperability Program will need to continue to support reporting of numerators and denominators for certain Medicare Promoting Interoperability Program measures, including the Electronic Prescribing measure and Providing Patients Access to Their Health Information measure. We believe removing the requirements for certification to 45 CFR 170.315(g)(1) and 45 CFR 170.315(g)(2), by removing references to those criteria in the definition of CEHRT in 42 CFR 495.4, will reduce administrative burden for health IT developers associated with testing and certifying to this functionality without impacting reporting requirements for the Medicare Promoting Interoperability Program.
In summary, we are proposing to revise the definition of CEHRT for the Medicare Promoting Interoperability Program at 42 CFR 495.4. Specifically, we are proposing to remove the certification criteria for “family health history” (45 CFR 170.315(a)(12)), “patient health information capture” (45 CFR 170.315(e)(3)), “automated numerator recording” (45 CFR 170.315(g)(1)), and “automated measure calculation” (45 CFR 170.315(g)(2)) effective January 1, 2027 in alignment with the proposed timing to remove such criteria from the Code of Federal Regulations in the HTI-5 proposed rule.
We invite public comment on these proposals.
In the Medicare Program, Merit-Based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive Under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models final rule with comment period, which appeared in the
• ONC Direct Review attestation: Eligible hospitals and CAHs must affirm cooperation with ONC Direct Review of their CEHRT by: (1) acknowledging the requirement to cooperate in good faith with ONC direct review of their health information technology certified under the ONC Health IT Certification Program if a request to assist in ONC direct review is received; and (2) if requested, cooperate in good faith with ONC direct review of their health information technology certified under the ONC Health IT Certification Program.
• ONC-Authorized Certification Body (ONC-ACB) Surveillance attestation: Eligible hospitals and CAHs may also attest that they engaged in supporting providers with the performance of CEHRT activities by attesting that they: (1) acknowledge the option to cooperate in good faith with ONC-ACB surveillance of their health information technology certified under the ONC Health IT Certification Program if a request to assist in ONC-ACB surveillance is received; and (2) if requested, cooperated in good faith with ONC-ACB surveillance of their health information technology certified under the ONC Health IT Certification Program.
The ONC Direct Review attestation is currently a required element of the Medicare Promoting Interoperability Program; submitting a “Yes” response, or claiming an applicable exclusion are the only means to fulfill the requirements of the attestation. The submission of a “No” response results in the eligible hospital or CAH failing to meet the attestation. Thus, the eligible hospital or CAH would consequently fail to meet minimum program requirements and not be considered a meaningful EHR user for the EHR reporting period, subjecting it to a downward payment adjustment. The ONC-ACB Surveillance attestation is optional: a “Yes” response on the attestation, a “No” response on the attestation, or non-response are all acceptable answers with respect to whether an eligible hospital or CAH is considered a meaningful EHR user for the EHR reporting period. Both attestations are reported through a manual attestation (“Yes” or “No”) process via the CMS Hospital Quality Reporting (HQR) system.
We are proposing to remove the required ONC Direct Review attestation and the optional ONC-ACB Surveillance attestation from the Medicare Promoting Interoperability Program beginning with the EHR reporting period in CY 2026 and make conforming changes at 42 CFR 495.40(b)(2)(i)(I). These changes would be effective with the data submission period beginning January 1, 2027, because neither attestation requires any specific action to occur within the EHR reporting period. We believe this proposal advances our focus on high-value, outcome-oriented measures.
We continue to recognize the importance of ONC direct review and ONC-ACB surveillance activities and believe these mechanisms are important for mitigating issues with health IT products that may pose serious risks to public health or safety and continue to cooperate with ONC in supporting the ONC Health IT Certification Program. As stated in the CY 2017 Quality Payment Program final rule (81 FR 77020), efforts to strengthen surveillance and direct review of certified health IT are critical to the success of HHS programs and initiatives that require the use of certified health IT to improve health care quality and the efficient delivery of care. We do not anticipate that the commitment from ONC and the ONC-ACBs toward such goals will change.
When we initially finalized these attestations in November 2016 in the CY 2017 Quality Payment Program final rule, we believed that the attestations would complement and strengthen recent updates to ONC's ability to perform surveillance and direct review activities. Specifically in October 2015, ONC finalized the 2015 Edition Health Information Technology (Health IT) Certification Criteria, 2015 Edition Base Electronic Health Record (EHR) Definition, and ONC Health IT Certification Program Modifications final rule, which added requirements that ONC-ACBs conduct more frequent and more rigorous surveillance of certified technology and capabilities “in the field” (80 FR 62707). Additionally in October 2016, ONC published the ONC Health IT Certification Program: Enhanced Oversight and Accountability final rule, which established regulatory processes to facilitate ONC's direct review and evaluation of the performance of certified health IT in certain circumstances (81 FR 72406). In the CY 2017 Quality Payment Program final rule, we determined that surveillance and direct review activities provided greater assurance to health care providers that their certified EHR technology would perform in a manner that meets their expectations, but that this surveillance and direct review would not be effective unless health care providers cooperated with these activities, including by granting access to and assisting ONC-ACBs and ONC to observe the performance of production systems (81 FR 77020).
While these activities remain important, we no longer believe that the requirement for eligible hospitals and CAHs to attest “yes” to the ONC Direct Review attestation is necessary to demonstrate the meaningful use of CEHRT. Since 2016, the ONC direct review process has become known to eligible hospitals and CAHs, and the value of participation has become evident without dependence on an annual attestation. Likewise, we believe ONC-ACB Surveillance attestation, which is optional for attestation, is no longer necessary to collect because eligible hospitals and CAHs have been made aware of their ability to participate in OCB-ACB surveillance if asked. We believe that the burden of the attestations, even the minimal burden of the voluntary ONC-ACB Surveillance attestation, now outweighs their value. This proposal aligns with our goals of reducing administrative burden while simultaneously focusing on high-value, outcome-oriented measures. Specifically, removal of these attestations from the Medicare Promoting Interoperability Program represents an opportunity to reduce the number of discrete manual steps and reporting fields required for successful program participation without diminishing the integrity or central goals of the program. Although we are proposing to remove the attestations, we strongly encourage eligible hospitals or CAHs to continue participating in these oversight processes when assistance is requested by ONC or an ONC-ACB.
We are proposing the removal of the ONC Direct Review and ONC-ACB Surveillance attestations beginning with the EHR reporting period in CY 2026 to reduce burden as quickly as feasible. Since eligible hospitals and CAHs would not be reporting on these attestations until the submission period that opens January 1, 2027, we have determined that it would be feasible for both hospitals and CMS to implement this change. Therefore, if this proposal is finalized, eligible hospitals and CAHs would not have to report on these attestations by the March 1, 2027, submission deadline and there would be no effect on their FY 2028 payment determination or FY 2026 cost reimbursement, respectively.
We invite public comment on this proposal.
The Health Information Exchange objective and its associated measures encourage and leverage the interoperability of electronic health information on a broader scale and promote health IT-based care coordination. The Health Information Exchange objective currently includes five measures: Support Electronic Referral Loops by Sending Health Information, Support Electronic Referral Loops by Receiving and Reconciling Health Information, HIE Bi-Directional Exchange, Enabling Exchange Under the Trusted Exchange Framework and Common Agreement (TEFCA), and Electronic Prior Authorization. For background on this objective and its associated measures, we refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41656 through 41661), the FY 2020 IPPS/LTCH PPS final rule (84 FR 42596 through 42597), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58969), the FY 2022 IPPS/LTCH PPS final rule (86 FR 45465 through 45470), the FY 2023 IPPS/LTCH PPS final rule (87 FR 49327 through 49334), and the 2024 Interoperability and Prior Authorization final rule (89 FR 8926).
The Support Electronic Referral Loops by Sending Health Information measure requires, for at least one transition of care or referral, the eligible hospital or CAH that transitions or refers its patient to another setting of care or provider of care: (1) creates a summary of care record using CEHRT; and (2) electronically exchanges the summary of care record.
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The Support Electronic Referral Loops by Receiving and Reconciling Health Information measure requires, for at least one electronic summary of care record received using CEHRT for patient encounters during the EHR reporting period for which an eligible hospital or CAH was the receiving party of a
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Under current policy (87 FR 49334), an eligible hospital or CAH must satisfy the Health Information Exchange objective by using one of three reporting options: Option 1 (report on the Support Electronic Referral Loops by Sending Health Information measure AND the Support Electronic Referral Loops by Receiving and Reconciling Health Information measure), Option 2 (report on the HIE Bi-Directional Exchange measure), or Option 3 (report on the Enabling Exchange Under TEFCA measure). The Support Electronic Referral Loops by Sending Health Information measure and the Support Electronic Referral Loops by Receiving and Reconciling Health Information measure are each worth 15 points within the Health Information Exchange objective, and an eligible hospital or CAH may receive up to a maximum of 30 points by reporting on both measures. Eligible hospitals and CAHs must also attest “Yes” on the Electronic Prior Authorization measure beginning with the EHR reporting period in CY 2027 to meet all requirements for the Health Information Exchange objective (89 FR 8926 through 8927).
We have identified two ONC health IT certification criteria in 45 CFR 170.315 as supporting Support Electronic Referral Loops by Sending Health Information measure and the Support Electronic Referral Loops by Receiving and Reconciling Health Information measure. In the “Medicare and Medicaid Programs; Electronic Health Record Incentive Program-Stage 3 and Modifications to Meaningful Use in 2015 Through 2017” final rule, we finalized that eligible hospitals and CAHs must use the “transitions of care” certification criterion at 45 CFR 170.315(b)(1) for the measure (80 FR 62882) that we subsequently renamed as the Support Electronic Referral Loops by Sending Health Information measure (83 FR 41658). In the FY 2019 IPPS/LTCH PPS final rule, for the Support Electronic Referral Loops by Receiving and Reconciling Health Information measure, we finalized that eligible hospitals and CAHs must utilize both the “transitions of care” certification criterion at 45 CFR 170.315(b)(1) and the “clinical information reconciliation and incorporation” certification criterion at 45 CFR 170.315(b)(2) (83 FR 41661). These certification criteria, based upon the C-CDA standard, enable eligible hospitals and CAHs to complete the actions described in the measures around sending, receiving, and reconciling summary of care records.
In the HTI-5 proposed rule (90 FR 60984 through 60985), ONC proposed multiple updates to the ONC Health IT Certification criteria that facilitate reporting the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures. Notably, ONC proposed to reduce the scope of the “transitions of care” certification criterion at 45 CFR 170.315(b)(1) to focus its requirements on enabling the receipt of a C-CDA document to position the criterion for a future evolution to receipt of Fast Healthcare Interoperability Resources® (FHIR®)-formatted data. ONC also proposed to remove the “clinical information reconciliation and incorporation” certification criterion at 45 CFR 170.315(b)(2) based on its review of industry adoption of the criterion. ONC's review found that the capabilities of the criterion are widely implemented and used in health IT and thus are not likely to go away as a supported capability by developers of certified health IT based solely on removal of the criterion from the ONC Health IT Certification Program. For more details regarding these ONC proposals in the HTI-5 proposed rule, please see the HTI-5 proposed rule at 90 FR 60984.
We propose to remove the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures beginning with the EHR reporting period in CY 2028. This proposal would streamline reporting and reduce the complexity of multiple measure reporting options for the Health Information Exchange objective, while focusing program performance on measures that assess the adoption of newer health information technologies and more comprehensive methods of information-sharing. If our proposal to remove these measures is finalized, beginning with the EHR reporting period in CY 2028, eligible hospitals and CAHs would fulfill requirements in the Health Information Exchange objective by attesting “Yes” to either the HIE Bi-Directional Exchange measure or the Enabling Exchange Under TEFCA measure, as well as attesting “Yes” or claiming an Exclusion on the Electronic Prior Authorization measure.
The Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures have been present as measures of meaningful use since Stage 2 of the EHR Incentive Program, the precursor to the Medicare Promoting Interoperability Program (77 FR 54044). Since their initial adoption, these measures have supported widespread adoption of functionality in EHRs for supporting the exchange of summary care records using the C-CDA standard. Use of this functionality as advanced by the current measures and their predecessors has served as a key driver for the adoption and use of exchange capabilities across the health care landscape for over a decade.
With this baseline of functionality broadly available to eligible hospitals and CAHs, we began to explore additional measures that foster the availability of longitudinal care records for patients and facilitate enhanced care coordination across settings by adding
This transition is consistent with trends already underway in the program. Since the HIE Bi-Directional Exchange and Enabling Exchange Under TEFCA measures were adopted in the program, we have seen increased reporting of these measures to meet the Health Information Exchange objective. For the EHR reporting period in CY 2024, which is the most recent program data available, 68.8 percent of reporting eligible hospitals and CAHs reported on the HIE Bi-Directional Exchange measure and 4.6 percent of reporting facilities reported on the Enabling Exchange Under TEFCA measure, while only 26.6 percent of reporting eligible hospitals and CAHs reported on the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures. CAHs are disproportionately represented among the facilities that report the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures, with 33.1% of CAHs compared to 23.9% of eligible hospitals reporting the measures. However, this statistic also shows that a majority of both eligible hospitals and CAHs have been able to successfully report either the HIE Bi-Directional Exchange measure or the Enabling Exchange Under TEFCA measure. We believe that these measures of participation in network-based exchange are more comprehensive indicators of meaningful health information exchange than the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures. For example, exchanging information through an HIE or entity participating in TEFCA supports on-demand patient health information exchange to any location in an entire network of participants rather than the submission of a summary of care document to a single specified recipient. We therefore believe that removing the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures, although impacting the eligible hospitals and CAHs that report on those measures, benefits patients by assessing regional and national network-based longitudinal health information exchange among these eligible hospitals and CAHs rather than assessing the transmission of patient information to a single location at a single point in time. We also believe that all eligible hospitals, including small, rural hospitals, and CAHs benefit from increased access to patient health information for the patients they treat through increased participation in health information exchanges or TEFCA. Removal of these measures would also streamline reporting and reduce program complexity by decreasing the overall number of measures in the program. We welcome comments with respect to whether there are additional barriers beyond what we have mentioned that small hospitals, rural hospitals, or CAHs may encounter to successfully report either the HIE Bi-Directional Exchange measure or Enabling Exchange Under TEFCA measure.
Finally, we also believe that removing the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures, which are C-CDA-based measures, will encourage eligible hospitals and CAHs to further explore new exchange modalities that move away from document-centric standards and point-to-point exchange. The current Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures focus on the exchange of summary of care records using the C-CDA standard, but industry trends toward increased FHIR adoption have enabled easier scalability to support real-time data exchange and access to more discrete data elements when compared to the document-centric CDA standard.
We note that our proposal to remove these measures does not imply that the underlying exchange activities targeted by the Health Information Exchange objective are fully and effectively implemented at this time, including among eligible hospitals and CAHs. We are considering evaluating performance-based measures under the Health Information Exchange objective for future rulemaking. Specifically, we plan to continue to evaluate future potential changes to the current HIE Bi-Directional Exchange and Enabling Exchange Under TEFCA measures to transition from attestation-based to performance-based measures to drive further improvement around ongoing gaps in health information exchange among eligible hospitals and CAHs. We also note that we expect the use of C-CDA based exchange to continue to serve as an ongoing capability for health information exchange even though we have determined that the Medicare Promoting Interoperability Program no longer needs a measure of its adoption and use. While our proposal to remove these measures from the Medicare Promoting Interoperability Program seeks to encourage the use of new technology approaches that improve the function of electronic health records over time, we acknowledge the impact and value of these exchange methods.
We propose removing the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures beginning with the EHR reporting period in CY 2028, rather than in an earlier reporting period, to provide the 26.6 percent of eligible hospitals and CAHs currently reporting on these measures sufficient time to prepare for reporting on the HIE Bi-Directional Exchange measure or the Enabling Exchange Under TEFCA measure. Making these proposals effective in the EHR reporting period in CY 2028 would allow those eligible hospitals and CAHs time to plan, procure, configure, and validate new workflows for participation with an entity facilitating health information exchange, whether through the HIE Bi-Directional Exchange or the Enabling Exchange Under TEFCA measures. This additional lead time would support a safe and reliable transition, while eligible hospitals and CAHs that wish to transition earlier and report on HIE Bi-Directional Exchange or Enabling Exchange Under TEFCA, if they are not already doing so, will be able to do so for the EHR reporting period in CY 2026
Following the removal of these measures, we propose that eligible hospitals and CAHs would be required to satisfy the Health Information Exchange objective by reporting the HIE Bi-Directional Exchange measure or reporting the Enabling Exchange Under TEFCA measure. We propose to maintain the same scoring policy for these two measure options; attesting “Yes” to either the HIE Bi-Directional Exchange or Enabling Exchange Under TEFCA measure would result in a maximum score of 30 points. Additionally, eligible hospitals would be required to meet the Electronic Prior Authorization measure requirement in the Health Information Exchange objective, which we discuss in section IX.F.5 of this rule.
We invite public comment on these proposals.
In the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8909 through 8927), we adopted the Electronic Prior Authorization measure under the Health Information Exchange objective in the Medicare Promoting Interoperability Program. We finalized that eligible hospitals and CAHs would be required to attest to the Electronic Prior Authorization measure beginning with the EHR reporting period in CY 2027 (89 FR 8910). For purposes of the Electronic Prior Authorization measure, a prior authorization request must be made using a Prior Authorization Application Programming Interface (API) using data from CEHRT to attest “Yes” to the measure, unless the eligible hospital or CAH claims an applicable exclusion. We finalized the following text for the measure description (89 FR 8916):
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Only a “Yes” attestation, or claiming an applicable exclusion, fulfills the requirements of the measure. Additionally, we finalized that the measure will not be scored (that is, not assigned points for a “Yes” attestation) for the EHR reporting period in CY 2027. A “No” attestation will result in the eligible hospital or CAH not meeting the measure. The eligible hospital or CAH would therefore not meet minimum program requirements and not be considered a meaningful EHR user for the relevant EHR reporting period and be subject to a downward payment adjustment (89 FR 8911).
The 2024 CMS Interoperability and Prior Authorization final rule also finalized that Medicare Advantage plans, state Medicaid Fee-for-service (FFS) programs, state Children's Health Insurance Program (CHIP) FFS programs, Medicaid managed care plans, CHIP managed care entities, and Qualified Health Plans (QHP) issuers on the federally facilitated exchanges (collectively referred to as “impacted payers”) must implement and maintain a Prior Authorization API beginning in CY 2027 (by January 1, 2027 for MA organizations and state Medicaid and CHIP FFS programs; by the first rating period beginning on or after January 1, 2027 for Medicaid managed care plans and CHIP managed care entities; and for plan years beginning on or after January 1, 2027 for individual market QHP issuers on the FFEs) (89 FR 8759 through 8760). In that rule we also recommended, rather than required, specific FHIR Implementation Guides (IGs) to support the APIs (89 FR 8937).
In the Health Data, Technology, and Interoperability: Electronic Prescribing, Real-Time Prescription Benefit and Electronic Prior Authorization final rule (HTI-4 final rule), which was published as part of the FY 2026 IPPS/LTCH PPS final rule (90 FR 37164 through 37182), ONC finalized three ONC health IT certification criteria for electronic prior authorization, based on the following FHIR IGs:
• “Provider prior authorization API—coverage requirements discovery” in 45 CFR 170.315(g)(31);
• “Provider prior authorization API—documentation templates and rules” in 45 CFR 170.315(g)(32); and
• “Provider prior authorization API—prior authorization support” in 45 CFR 170.315(g)(33).
These certification criteria are based on three IGs developed by the HL7 Da Vinci project, which ONC adopted in the HTI-4 final rule
• HL7® FHIR® Da Vinci—Coverage Requirements Discovery (CRD) IG;
• HL7 FHIR Da Vinci—Documentation Templates and Rules (DTR) IG; and
• HL7 FHIR Da Vinci—Prior Authorization Support (PAS) IG.
Together, these certification criteria can enable multiple prior authorization workflows for healthcare providers. We refer readers to the HTI-4 final rule (90 FR 37162 through 37175) for a more detailed discussion of ONC's finalized certification criteria at 45 CFR 170.315(g)(31) through (33) and section XI.B.4.b (90 FR 36541 through 36542) of the same rule for a summary of all the finalized ONC policies.
We also recently released the “Medicare and Medicaid Programs; Patient Protection and Affordable Care Act; Interoperability Standards and Prior Authorization for Drugs for Medicare Advantage Organizations, Medicaid Managed Care Plans, State Medicaid Agencies, Children's Health Insurance Program (CHIP) Agencies and CHIP Managed Care Entities, and Issuers of Qualified Health Plans on the Federally-Facilitated Exchanges” proposed rule (2026 CMS Interoperability Standards and Prior Authorization for Drugs proposed rule). Among other policies, in the 2026 CMS Interoperability and Prior Authorization for Drugs proposed rule, we proposed to require impacted payers to implement and maintain Prior Authorization APIs that conform to the CRD, DTR, and PAS IGs adopted by ONC on behalf of the Secretary at 45 CFR 170.215(j)(1), (2), and (3). We proposed that compliance dates for impacted payers to conform to
The proposals in the 2026 CMS Interoperability Standards and Prior Authorization for Drugs proposed rule for impacted payers to implement and maintain the Prior Authorization APIs using the CRD, DTR, and PAS IGs, along with the provisions ONC finalized in the HTI-4 final rule to adopt the CRD, DTR, and PAS IGs and establish electronic prior authorization certification criteria for health IT developers, collectively support the Electronic Prior Authorization measure for eligible hospitals and CAHs and advance interoperability applying consistent standards across HHS programs. For more information, please see the 2026 CMS Interoperability Standards and Prior Authorization for Drugs proposed rule and the HTI-4 final rule for the three health IT certification criteria to support electronic prior authorization at 45 CFR 170.315(g)(31), (32), and (33) finalized by ONC in the HTI-4 final rule (90 FR 37169).
We propose making several changes to the Electronic Prior Authorization Measure, reflected in the following modified text for the measure description:
In this proposed measure update, we have revised the phrase “using data from CEHRT” to read “using CEHRT” because in section IX.F.5.c of this proposed rule we clarify the requirement to use health IT certified to specific certification criteria included in the definition of CEHRT for this measure. When we adopted the Electronic Prior Authorization measure, we did not identify specific ONC health IT certification criteria required to complete the actions specified in the measure (89 FR 8910 through 8915). We stated that gathering structured data from CEHRT would be achievable without additional certification criteria specific to the measure (89 FR 8925), which had not been proposed or finalized at the time of the 2024 CMS Interoperability and Prior Authorization final rule. The proposed update to the measure language to state that a prior authorization must be requested electronically “using CEHRT” is consistent with the availability of certified Health IT Modules that must be used to complete the action specified in the Electronic Prior Authorization measure.
We also propose to change the word “discharge” to “encounter” to more clearly delineate that a prior authorization request may occur at any time during the hospital encounter, rather than be associated temporally with the discharge, about which some stakeholders had expressed confusion regarding the measure. At this time, we are not proposing to modify the exclusion criteria finalized when we adopted the Electronic Prior Authorization measure (89 FR 8916).
We invite public comment on this proposal.
We also considered proposing to revise the measure to include a broader set of actions associated with the prior authorization process. Specifically, we considered whether to propose to revise the measure language so that an eligible hospital or CAH would be able to attest to the measure by using CEHRT to conduct a check for whether an item or service requires prior authorization, regardless of whether the query results in a request and approval of the prior authorization. We request comment on whether the added flexibility associated with such an alternative approach would make a meaningful difference for eligible hospitals and CAHs, especially those seeking to initially focus on adoption of the functionality in the “provider prior authorization API—coverage requirements discovery” criterion.
We also considered whether to include prior authorization for drugs administered during the hospitalization in the measure at this time. These actions could be supported by technology certified to the certification criteria in 45 CFR 170.315(g)(31), (32), and (33). We request comment on whether adding drugs to the measure would be of benefit.
In light of our proposal that an electronic prior authorization must be requested using CEHRT to satisfy the Electronic Prior Authorization measure, and the finalization of health IT certification criteria in 45 CFR 170.315(g)(31), (32), and (33) in the HTI-4 final rule, we are specifying the use of health IT certified to these certification criteria as required for the Electronic Prior Authorization measure. Use of certified health IT to support electronic prior authorization transactions included in the measure would ensure that eligible hospitals and CAHs have standards-based capabilities within their health IT systems to interact with Prior Authorization APIs established by impacted payers and successfully complete the measure.
As discussed above, the three certification criteria are based on the HL7 Da Vinci CRD, DTR, and PAS IGs, and address different parts of the electronic prior authorization workflow. The “provider prior authorization API—coverage requirements discovery” in 45 CFR 170.315(g)(31) enables a health care provider to request information from payers about coverage requirements. Where further information is needed to support a prior authorization request, the “provider prior authorization API—documentation templates and rules” criterion in 45 CFR 170.315(g)(32) provides a mechanism for clinicians and other EHR users to navigate and quickly assemble the information needed to support a prior authorization request according to a payer's requirements. Finally, the “provider prior authorization API—prior authorization support” in 45 CFR 170.315(g)(33) enables submission of prior authorization requests from health IT systems as well as checking the status of a previously submitted request. By finalizing each component of the workflow as a separate certification criterion, ONC sought to support a more dynamic health IT marketplace in which a health IT developer could develop Health IT Modules demonstrating conformance to all three IGs or focus on a specific element or elements (90 FR 37169).
Different prior authorization scenarios that allow an eligible hospital or CAH to successfully attest to the Electronic Prior Authorization measure may require the functionality of one, or more than one, Health IT Modules certified to the criteria in 45 CFR 170.315(g)(31), (32), and (33). For instance, an eligible hospital or CAH could successfully
In this hypothetical scenario, the prior authorization request is satisfied using only the capabilities represented with the “provider prior authorization API—coverage requirements discovery” certification criterion (45 CFR 170.315(g)(31)). The health care provider submitted a query for prior authorization, the payer responded that prior authorization was required, the prior authorization was approved, and the health care provider received a response indicating this approval from the payer using the payer's API. In this case, the receipt of an approval indicates that the health care provider effectively submitted a request for prior authorization, consistent with the requirements of the Electronic Prior Authorization measure.
However, in other scenarios, the initial prior authorization query from a health care provider to a payer could result in a response indicating the need for additional information before a determination as to whether prior authorization is approved or denied can be provided, based on the coverage requirements identified. Additional certified Health IT Modules supporting additional elements of the electronic prior authorization workflow would then need to be used to submit the prior authorization request after collecting the necessary documentation.
Consider another hypothetical scenario where an MA enrollee has been diagnosed with metastatic colorectal cancer. The beneficiary's oncologist, working in an eligible hospital or CAH, has ordered a PET-CT scan and immunotherapy infusion. In this scenario, the oncologist places the order for a PET-CT scan and immunotherapy infusion in the EHR, which is certified to the “provider prior authorization API—coverage requirements discovery” criterion (45 CFR 170.315(g)(31)) and automatically queries the beneficiary's MA plan's FHIR API. The EHR receives a response via CDS Hooks card indicating that prior authorization is required for both services and describes coverage criteria and documentation needs. Because the EHR is also certified to 45 CFR 170.315(g)(32), the certified health IT enables the oncologist to complete prior authorization following the DTR IG. An embedded SMART on FHIR app fetches the payer's specific documentation template and rules for oncology prior authorizations. For the PET-CT, the payer's documentation rules ask for the cancer staging information and previous imaging results; for immunotherapy, the payer's documentation rules require the patient's biomarker (for example, PD-L1 expression) status, prior treatment history, and recent lab results. Much of this information can be auto populated because the embedded DTR app uses Clinical Quality Language (CQL) logic and FHIR queries to pull the beneficiary's latest CT scan report and lab results from their medical record, and it confirms her cancer diagnosis and stage from the problem list. The oncologist answers a few additional questions (such as confirming the beneficiary has no contraindications and that a required biomarker test was positive) within the embedded DTR app. By the end of this step, the EHR has compiled all necessary supporting documentation for the prior authorization, ensuring the request will be complete.
Next, the oncologist's office submits the prior authorization request electronically using the capabilities under the “provider prior authorization API-prior authorization support” criterion (45 CFR 170.315(g)(33)) to bundle the request and documentation and send it to the MA plan's prior authorization endpoint. This bundle is transmitted via a FHIR RESTful interaction to the payer, as defined by the PAS IG. The EHR's certified Health IT Module ensures the request conforms to the required FHIR structure and sends it securely. Because all required information was provided up front and matched the plan's coverage criteria, the MA plan's system could potentially automatically adjudicate and approve the requests in near real-time. If that happened, the oncologist could now schedule the beneficiary's therapy without delay, confident that the services are covered.
Both scenarios described result in a prior authorization request that successfully satisfies the action required by the proposed Electronic Prior Authorization measure and therefore would allow the eligible hospital or CAH to successfully report the measure. However, each example utilized different combinations of Health IT Modules certified to electronic prior authorization certification criteria in 45 CFR 170.315(g)(31), (32), and (33). In the first scenario, the health care provider used a Health IT Module certified to the “provider prior authorization API—coverage requirements discovery” criterion (45 CFR 170.315(g)(31)) to complete actions necessary for the eligible hospital or CAH successfully attest “Yes” to the measure. In the second scenario, the health care provider used Health IT Modules certified to all three of the electronic prior authorization certification criteria to complete all actions for the eligible hospital or CAH to successfully attest “Yes” to the measure.
Consistent with these hypothetical examples, we note that an eligible hospital or CAH would be able to successfully attest to the measure using only those certified Health IT Modules necessary for the eligible hospital or CAH to complete the measure. Eligible hospitals and CAHs would not be required to adopt additional electronic prior authorization certified Health IT Modules if they are not needed for the purposes of successfully reporting the measure. We expect that the ability to utilize different combinations of certified Health IT Modules to meet the measure will afford eligible hospitals, CAHs, and health IT developers flexibility in how they deploy, adopt, and use different aspects of certified health IT functionality for electronic prior authorization.
We are proposing to modify our previously finalized requirement that an
Therefore, we are proposing to make the Electronic Prior Authorization measure, with the proposed measure updates, optional and eligible for 10 bonus points for eligible hospitals and CAHs that attest “Yes” to the measure for the EHR reporting period in CY 2027. Allocating 10 bonus points is an appropriate and effective incentive to promote the adoption and use of certified technology for requesting electronic prior authorizations among eligible hospitals and CAHs. Should we finalize this proposal to make the measure optional, an eligible hospital or CAH attesting “No” will not earn any bonus points, but attesting “No” will also not result in the eligible hospital or CAH failing to meet the measure, and, therefore, failing to meet minimum program requirements and not being considered a meaningful EHR user for the EHR reporting period in CY 2027. This would be a modification to the policy we adopted for this measure in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8911). Optional reporting for the first year is particularly important for small, rural, or otherwise under-resourced eligible hospitals and CAHs navigating new measure requirements while minimizing and balancing burden.
Should we finalize this proposal, exclusions would not be available for the Electronic Prior Authorization measure for the EHR reporting period in CY 2027, as exclusions are unnecessary for optional measures. Only those eligible hospitals and CAHs that attest “Yes” to the measure would receive the 10 bonus points. Given the time eligible hospitals and CAHs have had to become familiar with the Electronic Prior Authorization measure since the 2024 Interoperability and Prior Authorization final rule, we believe proposing this as an optional bonus measure solely for the EHR reporting period in CY 2027 would provide eligible hospitals and CAHs enough time to adopt and begin utilizing the certified health IT necessary to successfully report the Electronic Prior Authorization measure.
We invite public comment on these proposals.
When we adopted the Electronic Prior Authorization measure in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8909 through 8927), we finalized that eligible hospitals and CAHs would be required to attest to the Electronic Prior Authorization measure beginning with the EHR reporting period in CY 2027 (89 FR 8910) and that only a “Yes” attestation, or claiming an applicable exclusion, would fulfill the requirements of the measure. Additionally, we finalized that although the measure would not be scored (that is, not assigned points for a “Yes” attestation) for the EHR reporting period in CY 2027, a “No” attestation would result in the eligible hospital or CAH not meeting the measure. The eligible hospital or CAH would therefore not meet minimum program requirements and not be considered a meaningful EHR user for the relevant EHR reporting period and be subject to a downward payment adjustment (89 FR 8911).
As discussed in section IX.F.5.d, we are proposing to make the Electronic Prior Authorization measure optional for the EHR reporting period in CY 2027. Should we finalize the proposal to make the measure an optional bonus measure for the EHR reporting period in CY 2027, we are also proposing that eligible hospitals and CAHs would be required to attest “Yes” to the updated Electronic Prior Authorization measure beginning with the EHR reporting period in CY 2028. Consistent with the revised text we have proposed for the measure, we are proposing that an eligible hospital or CAH must request a prior authorization electronically using CEHRT to send a request through a payer's Prior Authorization API for at least one medical item or service (excluding drugs) ordered during a hospital encounter that occurs within the EHR reporting period to attest “Yes” to the measure, or else the eligible hospital or CAH must claim an applicable exclusion. Only a “Yes” attestation or claiming an applicable exclusion would fulfill the requirements of the measure. A “No” response would result in the eligible hospital or CAH not meeting measure requirements. And if an eligible hospital or CAH does not meet the measure requirements, it would not meet minimum program requirements nor be considered a meaningful EHR user for an EHR reporting period, and therefore, the hospital would be subject to a downward payment adjustment. This proposal mirrors the response requirements we adopted when we first adopted the measure but proposes to apply them to the EHR reporting period in CY 2028. We are proposing this modification to provide eligible hospitals and CAHs and additional time to prepare to successfully report the measure, consistent with our proposal to make the measure an optional bonus measure for the EHR reporting period in CY 2027.
The measure exclusions originally adopted in the 2024 Interoperability and Prior Authorization final rule (89 FR 8916 through 8923) would be available to eligible hospitals and CAHs for the EHR reporting period in CY 2028 and subsequent years. The available exclusions would be: (1) an eligible hospital or CAH did not order any medical item or services (excluding drugs) requiring prior authorization during the EHR reporting period; or (2) the eligible hospital or CAH only ordered medical items or services (excluding drugs) requiring prior authorization from a payer that does not offer an API that meets CMS's specified Prior Authorization API requirements during the applicable EHR reporting period.
When we adopted the Electronic Prior Authorization measure in the 2024 Interoperability and Prior Authorization final rule (89 FR 8909 through 8927), we finalized that eligible hospitals and CAHs would report the measure as an unscored attestation for only the EHR reporting period in CY 2027 (89 FR 8910), but we did not specify its scoring methodology for subsequent years because we determined that it would be more appropriate to determine the
We invite public comment on this proposal.
While we believe the current measure requirement of achieving “at least one” electronic prior authorization is appropriate for the initial inclusion of the measure in the Medicare Promoting Interoperability Program, we do not expect this minimal requirement to effectively increase electronic prior authorization usage over time. Therefore, we are seeking comments on potential future updates we could make to this measure to incentivize providers to use electronic prior authorization for a more substantial set of the electronic prior authorization requests that they submit over the course of an EHR reporting period. Consistent with statutory requirements in section 1886(n)(3)(A)(ii) of the Act, we envision that expanding the scope of the measure in future rulemaking would lead to increased interoperable exchange of data that would not only decrease administrative burden, but could improve the quality of health by reducing the time needed for a patient to get access to necessary medical services and items. Reducing delays in the exchange of data and as a result providing patients care more efficiently, drives better care coordination, which is a key objective of meaningful use. Additionally, because electronic prior authorization requires data sharing, this advances interoperability, which is a primary focus of meaningful use.
We also intend to drive consistent adoption of certified health IT capabilities supporting the complete electronic prior authorization workflow over time, by requiring eligible hospitals and CAHs to address a wider array of prior authorization requests that require more complex interactions with payers. The public input we receive will contribute to future considerations for potentially updating the Electronic Prior Authorization measure in a manner that helps achieve HHS's goals of promoting meaningful use of certified EHR technology, electronic exchange of health information, and submission of clinical quality measures.
We invite comments on how we can further strengthen the Electronic Prior Authorization measure in a manner that incentivizes progress while minimizing burden on eligible hospitals and CAHs. We also seek comment on barriers and challenges small, rural, or otherwise under-resourced eligible hospitals and CAHs might face reporting a performance-based electronic prior authorization measure.
Under section 519(f) of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 360i(f)), the Food and Drug Administration (FDA) issued regulations establishing a unique device identification system
FDA designed the UDI system to serve multiple public health objectives by enabling rapid and accurate device identification throughout distribution and use (78 FR 58786). UDIs can reduce medical errors by allowing healthcare providers to positively identify devices and access key attributes through GUDID rather than consulting multiple and potentially inconsistent sources, thus eliminating confusion that can lead to inappropriate device use. The UDI system also allows for accurate identification of devices associated with adverse events, enabling manufacturers and FDA to more rapidly aggregate and analyze related reports, isolate underlying problems, and develop appropriate solutions for safety issues. Routine inclusion of UDIs as discrete data elements in EHRs and registries would enable accurate identification of devices used during patient care delivery, facilitate rapid notification and follow-up care during recalls, and improve care coordination across providers. Additionally, discrete documentation of UDI strengthens real world data sources for use across the device lifecycle. This would improve FDA's ability to conduct post-market surveillance and outcomes-based research.
While the foundation for the UDI system is established with UDI present on device labels and data available in GUDID, the healthcare system has yet to achieve broad adoption of UDI documentation. Fully realizing the benefits of the UDI system depends on UDIs being integrated into data sources throughout the healthcare system, including the supply chain, EHRs, medical device registries, and claims.
However, capabilities to capture UDI in health IT systems have been widely adopted by eligible hospitals and CAHs. In the ONC Health IT Certification Program, the “implantable device list” certification criterion at 45 CFR 170.315(a)(14) requires Health IT Modules certified to the criterion to record and allow a user to access a list of UDIs associated with a patient's implantable devices. This certification criterion is currently included in the Base EHR definition and has been widely implemented in health IT products, with 341 Health IT Modules identified as certified to the criterion. Other certification criteria also support the use of UDI. Under the “standardized API for patient and population services” criterion in 45 CFR 170.315(g)(10), which is also included in the Base EHR definition, a certified Health IT Module must be able to make UDI information for a patient's implantable device(s) available using a standards-based API according to the HL7® FHIR® US Core Implementation Guide STU 6.1.0 FHIR Implementation Guide. Additionally, the criteria at 45 CFR 170.315(b)(1)—“transitions of care” and 45 CFR 170.315(b)(2)—“clinical information reconciliation and incorporation,” which have long been required for measures in the Health Information Exchange Objective, support the ability for providers to receive, send, and reconcile documents that contain UDI information.
Wide use of products certified to these criteria by eligible hospitals and CAHs indicates that eligible hospitals and CAHs have the ability to store and exchange UDIs if they document them.
The routine, electronic capture and discrete storage of UDIs for implantable medical devices directly advances the Secretary's core responsibility, articulated in the statutory authority for the Medicare Promoting Interoperability Program, to improve the use of electronic health records and health care quality over time. Such electronic capture and discrete storage of UDIs would advance the safety of health care, an essential element of health care quality. Broader use of UDIs is similarly aligned with the meaningful use of CEHRT through the Medicare Promoting Interoperability Program. A primary aspect of the meaningful use of CEHRT is whether valuable data are captured at the point of care and available for subsequent exchange and use by health care providers. For example, in the “Medicare and Medicaid Programs; Electronic Health Record Incentive Program” final rule (75 FR 44328), we implemented, in the precursor program to the Medicare Promoting Interoperability Program, multiple data capture-related measures such as “Record Smoking Status” and “Maintain Active Medication List” because, as we noted, the availability of pertinent clinical data is important to the meaningful use of CEHRT. Integrating a UDI-focused measure into the Program would foster consistent workflows for capturing device data as discrete EHR elements and strengthen the ability of eligible hospitals, CAHs, beneficiaries, and public health agencies to use interoperable health information to improve outcomes, manage risk, and respond rapidly to device-related safety concerns. Multiple studies and pilots have discussed the ease of UDI capture at the point of care through bar code scanning, storage in the EHR, and transmission to the health plan through claims.
Therefore, we are proposing to adopt the following Unique Device Identifiers for Implantable Medical Devices measure under the Public Health and Clinical Data Exchange objective. We believe this measure will additionally further public health surveillance benefits that would arise from capturing the UDI for implanted medical devices.
We are proposing to require eligible hospitals and CAHs to attest to this measure beginning with the EHR reporting period in CY 2027. For this measure, eligible hospitals and CAHs would be required to attest “Yes” or “No” to meet measure requirements or claim an applicable exclusion. Not providing a “yes” or “no” attestation would result in failure to meet minimum program requirements, and the eligible hospital or CAH would be subject to a downward payment adjustment. No points will be assigned to this measure; rather, it would be one of seven measures required to satisfy the Public Health and Clinical Data Exchange objective. We are proposing to allow both “Yes” and “No” responses to fulfill measure requirements as part of our proposal to initially adopt the measure, which would allow eligible hospitals and CAHs to become familiar with the concept of UDI and highlight its importance while avoiding undue burden. We also note that we specify in the proposed measure that it only applies to implantable medical devices subject to UDI requirements under 21 CFR 801.20(a) and 21 CFR part 830, subpart E, which represents most implantable medical devices. However, some devices, such as investigational devices, devices for research use only, and custom devices, are exempt from UDI requirements and would therefore also be exempt from this measure. We highlight here that we intend to propose modifying the measure in future rulemaking to further promote the
As discussed, there are numerous health IT certification criteria that reference UDI, including the “implantable device list” certification criterion in 45 CFR 170.315(a)(14) which would be required to support the measure. However, we note that ONC proposed to remove this criterion in the HTI-5 proposed rule (90 FR 60983), and if ONC finalizes removal of this criterion we would not reference this criterion as required to support the measure. Separate from this dedicated certification criterion, the UDI is a named data element within the US Core Data for Interoperability Version 3 as the “Unique Device Identifier(s) for a patient's implantable device(s)”
We invite public comment on these proposals. We also invite comments on the feasibility of the timeline and any additional exclusions that we should consider for this measure in future rulemaking.
Should we adopt the measure, we would also intend to consider future modifications to this measure and invite public comment on the following questions.
• How could we design a feasible performance-based measure (for example, with a numerator and denominator) to assess the meaningful use of UDI data? How should the denominator be defined (for example, all implantable devices used during patient care delivery, specific procedure codes, specific device categories)? Are there specific data sources or definitions that would be appropriate and less burdensome for identifying the denominator population?
• Are there categories of implantable devices for which UDI capture would be particularly challenging for a performance-based measure? If so, please describe the specific challenges.
• What performance measure can we utilize to ensure the data quality of the UDI captured during patient care delivery is valid and usable? Should we require that the CEHRT validate UDI accuracy and format against the GUDID?
• When multiple implantable medical devices are used on a given patient during a given care episode, would there be any challenges in complete documentation of all device UDIs for a performance-based measure? If so, please describe the specific challenges.
• Should we consider adopting a future measure that assesses whether the eligible hospital or CAH makes UDI data available for exchange via certified health IT, for example, using the standardized FHIR API for patient and population services?
• Should we require in a measure that an eligible hospital or CAH must record UDIs for relevant devices in patient discharge summaries, after-visit summaries, or in patient portals?
• What measures could we adopt to show that a health care provider working in an eligible hospital or CAH uses the UDI to compare quality among devices, track recalls, and coordinate patient follow-up care including across health systems and for revision surgery or explanation?
• Should CMS consider introducing a performance threshold for any such measure with a numerator and denominator? Should CMS consider phased-in implementation with increasing thresholds over time for a performance-based measure?
• Are there other CMS programs or care settings (for example, hospital outpatient, ambulatory surgery centers, nursing homes, skilled nursing facilities, rehabilitation centers or office-based practices) through which we should consider addressing appropriate UDI capture and exchange? What would be the most appropriate means to do so?
• What technical barriers, if any, exist that would prevent other care settings or non-hospital provider types from capturing UDIs at the point of care (for example, barcode scanning infrastructure, EHR system limitations, integration with surgical and supply chain systems)?
• Are there existing workflows or technologies that could reduce burden regarding better utilization of UDI data exchange while maintaining data quality (for example, automated scanning at point of use, integration with supply chain systems)?
Comments received in response to this RFI may inform future rulemaking.
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41636), we adopted a performance-based scoring methodology for eligible hospitals and CAHs reporting to the Medicare Promoting Interoperability Program beginning with the EHR reporting period in CY 2019. This methodology included a minimum scoring threshold that eligible hospitals and CAHs must meet in addition to the requirement to report on the objectives and measures of meaningful use under 42 CFR 495.24. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986), we finalized a proposal to increase the performance-based scoring threshold to 70 points for the EHR reporting period in CY 2025 and to 80 points beginning with the EHR reporting period in CY 2026.
As shown in Table IX.F.-02., as proposed for the EHR reporting period in CY 2027, the points associated with the required measures sum to 100 points, and reporting on one or more of the optional bonus measures (including the Electronic Prior Authorization measure should we finalize our proposal for that to be a bonus measure for CY 2027), offers up to an additional 15 bonus points. The scores for each of the required measures and bonus measures are added together to calculate a total score of up to 115 possible points for each eligible hospital or CAH. We refer readers to Table IX.F.-02. in this proposed rule, which reflects the objectives, measures, maximum points available, and whether a measure is required or optional for the EHR reporting period in CY 2027 based on our previously adopted policies and the proposals included in this proposed rule.
As shown in Table IX.F.-03., as proposed for the EHR reporting period in CY 2028 and subsequent years, the points associated with the required measures still sum to 100 points, although the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health
The maximum number of points available for each measure described in Tables IX.F.-02. and IX.F.-03. do not include the points that would be redistributed in the event an exclusion is claimed for a given measure. We are not proposing any changes to our policy for point redistribution in the event an exclusion is claimed. We refer readers to Tables IX.F.-04. in this proposed rule, which shows point redistribution among the objectives and measures for the EHR reporting period in CY 2027 in the event an eligible hospital or CAH claims an exclusion. Similarly, Table IX.F.-05. shows the redistribution for the EHR reporting periods in CY 2028 and subsequent years.
We note that we adopted and codified a measure suppression policy for the Medicare Promoting Interoperability Program beginning with the EHR reporting period in CY 2026 at § 495.24(f)(3) in the Medicare and Medicaid Programs; CY 2026 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B
Table IX.F.-06. lists objectives and measures for the Medicare Promoting Interoperability Program for the EHR reporting period in CY 2027 and reflects the proposals in this proposed rule as well as proposed changes that would go into effect for the EHR reporting period beginning with CY 2028. For measures that have differing information between the EHR reporting period in CY 2027 and the EHR reporting period in CY 2028 and subsequent years, then the applicable year will be noted in the measure column. Table IX.F.-07. lists the ONC health IT certification criteria required to meet specific objectives and measures.
Under sections 1814(l)(3)(A) and 1886(n)(3)(A) of the Act and the definition of “meaningful EHR user” under 42 CFR 495.4, eligible hospitals and CAHs must report on clinical quality measures (also referred to as electronic clinical quality measures, or eCQMs) selected by CMS using CEHRT as part of the Medicare Promoting Interoperability Program.
As we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38479), we intend to continue to align the eCQM reporting requirements and eCQM measure set for the Medicare Promoting Interoperability Program with similar requirements under the Hospital Inpatient Quality Reporting Program, to the extent feasible. Section 1886(n)(3)(B)(i)(I) of the Act requires the Secretary to provide preference for the selection of clinical quality measures that are also used in the Hospital Inpatient Quality Reporting Program or endorsed by the entity with a contract with the Secretary under section 1890(a) of the Act (referred to in this rule as the consensus-based entity (CBE)). Furthermore, aligning eCQM reporting requirements between the Medicare Promoting Interoperability Program and the Hospital Inpatient Quality Reporting Program allows for improved coordination, burden reduction, and the promotion of quality care.
As discussed in section IX.B.1., section IX.C.3., section IX.C.4., and section IX.C.8.c. of the preamble of this proposed rule, and in alignment with the Hospital Inpatient Quality Reporting Program, we are proposing to adopt and remove the same eCQMs for the Medicare Promoting Interoperability Program beginning with the CY 2028 reporting period. Specifically, we are proposing to adopt the following two eCQMs in the Medicare Promoting Interoperability Program eCQM measure set from which eligible hospitals and CAHs could self-select to report, beginning with the CY 2028 reporting period: (1) Hospital Harm—Postoperative Venous Thromboembolism; and (2) Advance Care Planning. Additionally, we are proposing to remove the following three eCQMs from the Medicare Promoting Interoperability Program eCQM measure set, beginning with the CY 2028 reporting period: (1) Discharged on Antithrombotic Therapy; (2) Venous Thromboembolism Prophylaxis eCQM; and (3) Intensive Care Unit Venous Thromboembolism Prophylaxis.
We invite public comment on these proposals.
Consistent with our goal to align the eCQM reporting periods and criteria in the Medicare Promoting Interoperability Program with the Hospital Inpatient Quality Reporting Program, eligible hospitals and CAHs are currently required to annually report data for each required eCQM and three self-selected eCQMs for the CY 2026 reporting period and subsequent years (85 FR 58975 through 58976, 86 FR 45496, 87 FR 49365 through 49367, and 89 FR 69623 through 69624). We are not proposing changes to our previously finalized policy that progressively increases the number of mandatory eCQMs a hospital must report for the CY 2026 reporting period or the CY 2027 reporting period (89 FR 69623 through 69624). In alignment with the Hospital Inpatient Quality Reporting Program, we are proposing changes to the reporting and submission requirements for eCQMs for the Medicare Promoting Interoperability Program beginning with the CY 2028 reporting period. Specifically, we propose to modify the eCQM reporting and submission requirements for the Hospital Harm eCQMs such that beginning with the CY 2028 reporting period these eCQMs would become mandatory for reporting after 2 years of self-selected reporting. Under this proposal, the Hospital Harm—Falls with Injury eCQM and the Hospital Harm—Postoperative Respiratory Failure eCQM would become mandatory for reporting beginning with the CY 2028 reporting period. Consistent with this proposed approach for the Hospital Harm eCQMs (that is, two years of self-selected reporting followed by mandatory reporting in the third year), the proposed Hospital Harm—Postoperative
Further, we propose to require mandatory reporting of the Malnutrition Care Score eCQM beginning with the CY 2028 reporting period. The Hospital Harm—Falls with Injury eCQM, the Hospital Harm—Postoperative Respiratory Failure eCQM, and the Malnutrition Care Score eCQM would continue to be available as self-selected measures for the CY 2027 reporting period. These proposed changes are intended to further incentivize improvements in patient safety and nutrition care. We refer readers to section IX.C.8.c. of the preamble of this proposed rule for more detailed discussion in the Hospital Inpatient Quality Reporting Program about our rationale.
We refer readers to Table IX.F.-9 for the full list of eCQMs available by reporting period. Table IX.F.-8 summarizes our proposed policies to modify reporting and submission requirements for eCQMs beginning with the CY 2028 reporting period.
We invite public comment on this proposal.
Table IX.F.-9 summarizes the previously finalized and newly proposed eCQMs available for eligible hospitals and CAHs to report under the Medicare Promoting Interoperability Program for the specified reporting periods, including whether the measure is mandatory or self-selected as further discussed in section IX.C.8.c. regarding proposed changes to this latter policy.
TEAM is a 5-year mandatory alternative payment model tested by the CMS Innovation Center that will began on January 1, 2026, and end on December 31, 2030. TEAM will test whether an episode-based pricing methodology linked with quality measure performance for select acute care hospitals reduces Medicare program expenditures while preserving or improving the quality of care for Medicare beneficiaries who initiate certain episode categories. Specifically, TEAM will test five surgical episode categories: Coronary Artery Bypass Graft Surgery (CABG), Lower Extremity Joint Replacement (LEJR), Major Bowel Procedure, Surgical Hip/Femur Fracture Treatment (SHFFT), and Spinal Fusion.
As discussed in greater detail in section X.A.1.b. of the preamble of this proposed rule, TEAM was established through notice and comment rulemaking. As a mandatory model, new policies or policy modifications require notice and comment rulemaking. In this proposed rule, we are seeking to make updates to TEAM that include the following modifications:
• Adding new Medicare Severity Diagnosis Related Groups (MS-DRGs) to the spinal fusion episode category.
• Adjusting episode attribution.
• Adjusting the measurement performance periods for certain quality measures.
• Adjusting the construction of the CQS baseline period.
• Capturing Ambulatory Payment Classification (APC) and MS-DRG changes in preliminary target prices.
• Adjusting the construction of the prospective normalization factor.
We are also soliciting public comment on two Requests for Information (RFI) in the following policy areas:
• Ambulatory Surgical Center (ASC) Episodes.
• Voluntary Hospital with Physician Ownership (POH) The policies in this proposed rule reflect our commitment to ensuring TEAM's incentives help to drive beneficiary quality of care improvements and reductions in Medicare spending.
Under the authority of section 1115A of the Act, through notice-and-comment rulemaking, the CMS Innovation Center established TEAM in the FY 2025 IPPS/LTCH PPS final rule that appeared in the August 28, 2024,
Under Original Medicare, Medicare makes separate payments to providers and suppliers for the items and services furnished to a beneficiary over the course of an episode of care. Because providers and suppliers are paid for each individual item or service delivered, providers may not be incentivized to invest in quality improvement and care coordination activities. As a result, care may be fragmented, unnecessary, or duplicative. By holding hospitals accountable for all items and services provided during an episode, providers would be better incentivized to coordinate patient care, avoid duplicative or unnecessary services, and improve the beneficiary care experience during care transitions.
Under TEAM, all acute care hospitals, with limited exceptions, located within the Core Based Statistical Areas (CBSAs) that CMS selected for model implementation are required to participate in TEAM. CMS allowed a one-time opportunity for hospitals that participate until the last day of the last performance period in the Bundled Payments for Care Improvement Advanced (BPCI Advanced) Model or the last day of the last performance year of the Comprehensive Care for Joint Replacement (CJR) Model, that are not located in a mandatory CBSA selected for TEAM participation, to voluntarily opt into TEAM. TEAM includes a 1-year glide path opportunity that allows TEAM participants to ease into full financial risk as well as three different participation tracks to accommodate different levels of financial risk and reward. Track 1 is an upside only risk track available for all TEAM participants in the first performance year and available to safety net hospitals for the first 3 performance years. Track 2 is a two-sided risk track that has lower financial risk and reward, relative to Track 3, and will be available to select TEAM participants in performance years 2 through 5.
Episodes include non-excluded Medicare Parts A and B items and services and begin with an anchor hospitalization or anchor procedure and will end 30 days after hospital discharge. TEAM participants continue to bill Medicare FFS as usual for items and services delivered to beneficiaries in an episode but will receive preliminary target prices for episodes prior to each performance year. Target prices are based on 3 years of baseline data, prospectively trended forward to the relevant performance year, and calculated at the level of Medicare Severity Diagnosis Related Group/Healthcare Common Procedure Coding System (MS-DRG/HCPCS) episode type and region. Target prices also include a discount factor and risk-adjustment. Participants will receive reconciliation (final) target prices that will incorporate a capped retrospective trend factor adjustment and a capped normalization factor.
Performance in the model will be assessed by comparing TEAM participants' actual Medicare FFS spending during a performance year to their reconciliation target price as well as by assessing performance on selected quality measures. TEAM participants may earn a payment from CMS, subject to a quality performance adjustment, if their spending is below the reconciliation target price. TEAM participants may owe CMS a repayment amount, subject to a quality performance adjustment, if their spending was above the reconciliation target price.
As indicated in the FY 2025 IPPS/LTCH PPS final rule, an episode has two significant dimensions: (1) a clinical dimension that describes which clinical conditions and associated services are included in the episode; and (2) a time dimension that describes the beginning and end of the episode, its length, and when the episode may be cancelled prior to the end of the episode (89 FR 69710). Under TEAM, episodes begin when a beneficiary is admitted for an
TEAM tests five episode categories, identified in Table X.A.-01, that represent high-expenditure, high-volume care delivered to Medicare beneficiaries. These episode categories also generally have a greater proportion of spending in the post-acute period relative to the anchor hospitalization or procedure, that present a greater opportunity to improve care transitions for beneficiaries and reduce unnecessary hospitalizations and emergency care.
Generally, CMS assesses MS-DRG classification changes on an annual basis with the fiscal year IPPS rulemaking cycle. These changes may result in the addition, modification, or deletion of MS-DRGs. Since inpatient episodes in TEAM rely on MS-DRG codes to identify when an anchor hospitalization is initiated, any changes to the MS-DRGs included in TEAM may affect episode volume and ultimately the number of beneficiaries included in the model. As described in section II.C of the preamble of this proposed rule, there are proposals to change certain MS-DRGs that affect the spinal fusion episode category in TEAM. Specifically, three new MS-DRGs are being proposed to better classify beneficiary acuity and resource utilization for a subset of spinal fusion procedures. If these new MS-DRGs are finalized, we propose to make conforming changes in TEAM, therefore we propose at § 512.525(d)(4)(i) that starting on October 1, 2026, MS-DRGs 523, 524, and 525 would be added to the spinal fusion episode category that would initiate a spinal fusion anchor hospitalization. We also propose at § 512.505 to update the spinal fusion definition to include these three new MS-DRGs. This means the other spinal fusion MS-DRGs remain unchanged and would initiate a spinal fusion anchor hospitalization starting on January 1, 2026. We believe it's important to include these proposed new MS-DRGs in TEAM so that hospitals can continue to have sufficient spinal fusion episode volume to pursue efficiencies in care delivery, spread financial risk, and increase the potential to maximize beneficiaries access to value-based care. Further, not including these proposed new MS-DRGs may reduce the scale and create evaluation challenges for the spinal fusion episode category. Lastly, we also believe it's important to capture proposed MS-DRG updates in TEAM to reflect current coding standards, ensuring consistency with IPPS policies.
We considered, but are not proposing, not to update the MS-DRGs in TEAM for the spinal fusion episode category. This would mean that only the spinal fusion MS-DRGs that remain unchanged would initiate a spinal fusion anchor hospitalization in TEAM. While this approach would minimize change during the model test, episode volume would remain a concern. Additionally, we believe it is also not a feasible long-term approach because it's not responsive to Medicare policy changes and prohibits beneficiaries from accessing the benefits of the model.
We seek comment on our proposals at§ 512.505 to update the spinal fusion definition and at § 512.525(d)(4)(i) to add MS-DRGs 523, 524, and 525 to the spinal fusion category.
In section X.C. of the preamble of this proposed rule, the Comprehensive Care for Joint Replacement Expanded (CJR-X) Model is being proposed as an expanded phase II model test under Section 1115A(c) of the Act. Similar to TEAM, CJR-X would be a mandatory episode-based payment model for acute care hospitals with a focus on Lower Extremity Joint Replacement (LEJR) episodes. Both TEAM and CJR-X test LEJR episodes, however TEAM tests a 30-day post-discharge period episode length while CJR-X would test a 90-day post-discharge period episode length. Given the model similarities and our desire to assess differences in outcomes between these two episode durations, the CJR-X model is proposing to exclude TEAM participants from participating in CJR-X, as described in section X.C.2.b.(2)(i) of the preamble of this proposed rule. While this exclusion would prevent a TEAM participant from being a CJR-X participant, it does not address instances where a beneficiary is in a CJR-X episode and receives care at a TEAM participant during the CJR-X 90-day post-discharge period. Therefore, we propose at § 512.537(b)(4) that if a beneficiary in a CJR-X episode has a procedure performed at a TEAM hospital that would initiate a TEAM episode during the CJR-X 90-day post-discharge period, then that procedure would not initiate a TEAM episode or be attributed to the TEAM participant and the spending from that procedure would be included in the CJR-X episode. We note that while this instance would result in the TEAM participant not being attributed the episode, the procedure and its associated spending would be included in TEAM target price construction, which relies on average episode spending and average trends across all MS-DRG/HCPCS region combinations. As noted in section X.C.2.(h)(2) of the preamble of this proposed rule, we considered TEAM precedence in this situation and dropping the CJR-X episode to initiate a TEAM episode to
We seek comment on our proposals at § 512.537(b)(4) to not attribute an episode to a TEAM participant if the beneficiary is in a CJR-X episode and has a procedure performed at a TEAM participant that would initiate an episode during the CJR-X 90-day post-discharge period.
As discussed in the FY25 and FY26 IPPS/LTCH PPS final rule (89 FR 68986 and 90 FR 36536), Medicare payment policy continues to move away from fee-for-service (FFS) payments that are not linked to quality of care. As previously noted in the prior rules, through the Medicare Modernization Act and the Affordable Care Act, we have implemented specific IPPS programs like the Hospital Inpatient Quality Reporting (IQR) Program (section 1886(b)(3)(B)(viii) of the Act), the Hospital Outpatient Quality Reporting (OQR) Program (section 1833(t)(17)(C) of the Act), the Hospital Value-Based Purchasing (VBP) Program (subsection (o) of section 1886), the Hospital-Acquired Condition (HAC) Reduction Program (subsection (q) of section 1886), and the Hospital Readmissions Reduction Program (subsection (p) of section 1886), where payment may reflect the quality of care delivered to Medicare beneficiaries or be impacted by the reporting of quality measures.
TEAM quality measures focus on care coordination, patient safety, and patient-reported outcomes (PROs), which are areas critical to patients undergoing acute procedures. To streamline reporting in this mandatory model, we align quality measures in TEAM with those used in existing CMS models and reporting programs wherever feasible. TEAM participants will not submit separate quality data to CMS for TEAM. Instead, CMS will utilize data already reported through established CMS quality reporting programs, eliminating duplicate reporting requirements. TEAM's finalized set of quality measures are used to calculate the Composite Quality Score (CQS). The CQS will be combined with the TEAM participants' reconciliation amount during the reconciliation process to tie quality performance to payment. We proposed and finalized seven quality measures due to their: (1) alignment with the goals of TEAM; (2) hospitals' familiarity with the measures due to their use in other CMS hospital quality programs, including the Hospital IQR, OQR and HAC Reduction Programs; and (3) alignment to CMS priorities, including the CMS National Quality Strategy, which has goals that support safety, outcomes, and engagement. We believe these quality measures reflect these goals and accurately measure hospitals' level of achievement on such goals.
The measures are—
• For all TEAM inpatient episodes in PY1-PY5: Hybrid Hospital-Wide All-Cause Readmission (Hybrid HWR) Measure with Claims and Electronic Health Record Data (CMIT ID #356), claims-only for PY1 and full hybrid for PY2-PY5;
• For all TEAM inpatient episodes in PY1: CMS Patient Safety and Adverse Events Composite (CMS PSI-90) (CMIT ID #135);
• For all TEAM inpatient LEJR episodes in PY1-PY5: Hospital-Level Total Hip and/or Total Knee Arthroplasty (THA/TKA) Patient-Reported Outcome-Based Performance Measure (PRO-PM) (CMIT ID #1618);
• For all TEAM inpatient episodes in PY2-PY5: Hospital Harm—Falls with Injury (CMIT ID #1518);
• For all TEAM inpatient episodes in PY2-PY5: Hospital Harm—Postoperative Respiratory Failure (CMIT ID #1788);
• For all TEAM inpatient episodes in PY2-PY5: Thirty-day Risk—Standardized Death Rate among Surgical Inpatients with Complications (ISCMR) (CMIT ID #134); and
• For all TEAM outpatient LEJR and Spinal Fusion episodes in PY3-PY5: Information Transfer Patient Reported Outcome-Based Performance Measure (Information Transfer PRO-PM) (CMIT ID #1797).
We believe the TEAM quality measure set provides CMS with sufficient measures to monitor quality and to calculate scoring on quality performance. As stated in the FY25 and FY26 IPPS/LTCH PPS final rules (89 FR 68986 and 90 FR 36536), we may adjust the measure set in future performance years via rulemaking if we determine those adjustments to be appropriate at the time.
As stated previously, TEAM aims to, whenever possible, align with existing reporting requirements so as not to introduce additional burden to participants. In the FY25 IPPS/LTCH PPS final rule (89 FR 68986), we finalized the Hospital Harm—Falls with Injury, Hospital Harm—Postoperative Respiratory Failure, and Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with Complications (ISCMR) and stated these measures would align with the hospital reporting programs. At that time, we stated our intent to align these measures with the performance periods used in the Hospital IQR Program. However, we did not propose or finalize the specific measurement performance periods for these measures within TEAM.
In this proposed rule, we propose establishing measurement performance periods for these three quality measures. For Hospital Harm—Falls with Injury and Hospital Harm—Postoperative Respiratory Failure, we propose alignment with the Hospital IQR Program's calendar year reporting requirements, utilizing a one-year measurement performance period. For ISCMR, we propose alignment with the Hospital IQR Program's two-year rolling measurement performance period. Table X.A-02 displays the proposed measurement performance periods for these specific quality measures in TEAM. We believe these measurement performance periods are consistent with other CMS quality reporting programs and therefore would help minimize TEAM participant confusion.
We seek comment on the proposed measurement performance period timeframes for TEAM performance years 2 through 5 for the Hospital Harm—Falls with Injury and Hospital Harm—Postoperative Respiratory Failure, and ISCMR quality measures.
In the FY25 IPPS/LTCH PPS final rule (89 FR 68986), we established fixed CQS baselines for calculating CQS performance that would remain constant throughout the model's duration, using calendar year (January-December) CQS baseline periods for all quality measures. The CQS baselines are national distributions of quality measure scores against which TEAM participants are ranked. After evaluating this approach and considering alignment with existing CMS hospital quality reporting programs, we are proposing two changes to the CQS baseline methodology: (1) establishing a sliding historical CQS baseline methodology and (2) aligning CQS baseline periods with the CMS hospital reporting program timeframes for specific measures that are currently not aligned.We propose at § 512.547(a)(1)-(3) replacing the current fixed CQS baseline approach with a sliding historical CQS baseline methodology for all quality measures except the CMS PSI-90 measure which applies only in TEAM PY1 and therefore does not require advancement of baseline periods beyond that performance year. The proposal to change to a sliding historical CQS baseline would be effective beginning with TEAM PY1. Under this proposed approach, CQS baselines would be calculated using a rolling window of historical performance data that updates annually, rather than remaining fixed throughout the model's tenure. This approach would allow CQS baselines to evolve with improvements in care delivery, providing a responsive quality assessment framework.
Considering the proposed shift from fixed to sliding historical CQS baselines, we also propose at § 512.547(a)(1)-(3) to update the baseline periods from a calendar year to a July to June period for the Hybrid HWR, CMS PSI-90, THA/TKA PRO-PM, and the ISCMR measures, Specifically, we propose to align the CQS baseline periods with the hospital program required measurement periods of July-June timeframe rather than the previously finalized calendar year (January-December) periods. This proposed alignment is consistent with the Hospital IQR and HAC programs requirement of July-June measurement periods. Aligning TEAM CQS baseline periods with these established timeframes ensures consistency and reduces confusion. This proposal does not affect the Hospital Harm—Falls with Injury and Hospital Harm—Postoperative Respiratory Failure or the Information Transfer PRO-PM, which will continue to use calendar year CQS baseline periods as originally finalized, consistent with their respective hospital reporting program requirements. These measures maintain calendar year CQS baseline periods because their respective hospital reporting program requirements utilize calendar year measurement periods, ensuring consistency between TEAM CQS baselines and the established reporting infrastructure for these specific measures. Additionally, aligning the CQS baseline periods with existing hospital measure timeframes ensures that the necessary data are available and validated according to established timelines. Using the same measurement periods for the existing hospital reporting and TEAM CQS baselines periods leverages this existing data infrastructure and ensures timely availability of baseline data for CQS calculations.
We believe it is important to implement this alignment beginning in TEAM PY1 and to apply it consistently throughout the duration of the model. Beginning this alignment in TEAM PY1 avoids introducing a mid-model change in CQS baseline period timeframes that could create confusion and complicate longitudinal performance assessment. It also ensures that TEAM participants' quality performance is evaluated under a single, transparent methodological framework for the entire duration of the model. In addition, because certain TEAM PY1 measures are not calculated on a calendar-year basis within their respective hospital reporting programs, it would be operationally challenging to re-specify and recalculate these measures solely for TEAM. Aligning TEAM CQS baseline periods with the Hospital IQR and HAC Reduction Program timeframes from the start of the model leverages validated data already calculated for existing programs and minimizes TEAM participant confusion.
We also considered an alternative approach under which the transition from fixed CQS baselines to the sliding historical CQS baseline methodology would begin in TEAM PY2 rather than TEAM PY1. Under this alternative, TEAM PY1 would continue to use the fixed CQS baseline methodology finalized in the FY25 IPPS/LTCH PPS final rule, and the sliding historical CQS baseline methodology (including the July through June baseline period alignment described above) would begin with TEAM PY2 and apply for the remainder of the model. Under this alternative, all CQS baseline periods and methodologies finalized in the FY25 IPPS/LTCH PPS final rule would apply unchanged for TEAM PY1, and the July through June baseline alignment and sliding historical methodology would first apply to TEAM PY2 measurement and CQS calculations. We considered this alternative because beginning the transition in TEAM PY2 could reduce operational and participant risk associated with implementing a baseline methodology change at model launch. Specifically, this risk refers to the potential for operational disruptions, such as insufficient time for participants
We recognize that updating to the proposed CQS baseline periods beginning in TEAM PY1 means that different months of performance may be reflected in the CQS baseline compared to a calendar-year approach. For example, if a hospital's performance improved during the latter half of calendar year (CY) 2025, those improvements would be included under the proposed July through June CQS baseline period rather than excluded based solely on a calendar-year cutoff. While this proposed change in baseline timeframe could result in differences in PY1 CQS scoring compared to a CY CQS baseline, improved performance captured within the aligned reporting timeframe would be incorporated as the proposed sliding historical CQS baseline updates in subsequent performance years. See Table X.A-03 for the proposed CQS baseline periods.
Under the proposed approach, the Hybrid HWR measure will use the same CQS baseline period (July 1, 2025 through June 30, 2026) for both TEAM PY2 and PY3. This is necessary because the measure transitions from claims-only methodology in TEAM PY1 to hybrid methodology beginning in TEAM PY2. To ensure valid performance assessment, each methodology requires its own CQS baseline period using comparable data. TEAM PY1 will use a claims-only CQS baseline (July 1, 2024 through June 30, 2025), while TEAM PY2 will establish the hybrid CQS baseline (July 1, 2025 through June 30, 2026). TEAM PY3 maintains the same CQS baseline period as TEAM PY2 because it serves as the initial reference point for the proposed sliding historical CQS baseline methodology, which then advances annually starting in TEAM PY4 (July 1, 2026 through June 30, 2027) and PY5 (July 1, 2027 through June 30, 2028). Similarly, under this proposed approach, the THA/TKA PRO-PM will use the same CQS baseline period (July 1, 2024 through June 30, 2025) for both TEAM PY1 and PY2. This approach is necessary because July 1, 2024 through June 30, 2025 represents the first mandatory reporting period for this measure in the Hospital IQR Program. Using this initial reporting period as the CQS baseline for both TEAM PY1 and PY2 ensures the baseline is established using complete, validated data. Beginning in TEAM PY3, the THA/TKA PRO-PM CQS baseline advances to July 1, 2025 through June 30, 2026, which serves as the initial reference point for the proposed sliding historical CQS baseline methodology. The CQS baseline then advances annually for TEAM PY4 (July 1, 2026 through June 30, 2027) and PY5 (July 1, 2027 through June 30, 2028), consistent with the proposed sliding historical CQS baseline approach.
We believe that adopting sliding historical baselines for CQS measurement offers several advantages over the current fixed baseline approach. Specifically, a sliding historical CQS baseline methodology would enable TEAM to capture and reflect evolving trends in quality performance over time. As quality improvement initiatives advance, this baseline approach would ensure that performance benchmarks remain
We propose implementing the sliding historical CQS baseline methodology beginning with TEAM PY1. We believe beginning implementation of this methodology change in TEAM PY1 is appropriate for several reasons. TEAM PY1 CQS calculations and reconciliation will not occur until Fall 2027. This allows the implementation of this methodology before the calculations occur. Also, all TEAM participants were able to select Track 1 for TEAM PY1 and participants who did not actively select a track were assigned to Track 1 by default. Track 1 does not involve downside financial risk during TEAM PY1. Additionally, the proposed changes align CQS baseline timeframes with existing hospital reporting program requirement timeframes, meaning hospitals are already collecting and validating data during these timeframes for reporting purposes. Additionally, implementing the proposed sliding historical CQS baseline approach beginning in TEAM PY1 ensures consistent CQS baseline methodology throughout the model's duration and avoids mid-model transitions that could create confusion or complicate performance tracking. This proposed approach, starting in TEAM PY 1, provides participants with clarity and predictability regarding how their quality performance will be assessed throughout all performance years. This consistency supports participants' ability to develop and implement long-term quality improvement strategies that align with both TEAM goals and existing hospital quality reporting requirements.
We considered, but are not proposing, the implementation of a rolling concurrent CQS baselines for quality measures throughout all TEAM performance years. Under a rolling concurrent CQS baseline methodology, the CQS baseline for a given TEAM performance year would be identical to the applicable TEAM measurement period for that year. In other words, the national distribution of measure performance scores against which TEAM participants are ranked would be derived from contemporaneous performance-year data.
This concurrent baseline methodology would require quality performance benchmarks to be recalculated annually using contemporaneous data. For each performance year, the national distribution of measure performance, including risk-adjusted scores, expected-value parameters, and national averages specified in the measure methodology, would be recalibrated based on that same performance year's data before CQS scoring is finalized.
While the proposed sliding historical CQS baseline approach also recalculates benchmarks annually, it uses historical data, in most instances, rather than contemporaneous data. In this context, the reference to “in most instances” reflects that, under the proposed sliding historical approach, the CQS baseline for a given TEAM performance year would generally be based on a completed historical measurement period that precedes the applicable performance year, as reflected in Table X.A-03. For certain measures and performance years identified in Table X.A-03, however, the same CQS baseline period may apply to more than one performance year or may rely on the first available validated measure reporting period to ensure methodological consistency and the use of complete, validated data.
A concurrent CQS baseline approach offers several advantages, such as capturing real-time performance, encouraging continuous quality improvement, and addressing concerns about outdated benchmarks. In addition, since concurrent CQS baselines compare quality measure scores to baseline scores from the same year, the measure scores and baseline scores are calculated using the same methodology. This methodological alignment is particularly relevant for TEAM quality measures that incorporate expected values with formulas that are recalibrated annually and rely on national averages of hospitals' performance in that year.
However, under a concurrent CQS baseline, improvement would always be assessed relative to a moving CQS baseline. A concurrent CQS baseline, like a sliding historical CQS baseline, would introduce uncertainty for participants because final CQS baseline calculations, including risk adjustment coefficients and national averages used in mapping raw measure scores, would not be available in advance of the applicable performance year. Because the national distribution would be constructed from the same performance-year data, participants would not know the final percentile thresholds or scaling parameters until after the measurement period concludes and national data are finalized.
We recognize that similar timing limitations apply under the sliding historical CQS baseline approach, given the lag between baseline construction and finalization of national performance data. We recognize that several limitations apply to both the concurrent and proposed sliding historical CQS baseline approaches. However, because the proposed sliding historical CQS baseline relies on completed historical data, in most instances, rather than contemporaneous data, it may provide comparatively greater stability relative to a fully concurrent CQS baseline approach. Although we are not proposing a concurrent CQS baseline methodology, we are considering this approach and we seek comment on its potential implementation. Additionally, we are considering whether such an approach, if adopted, should begin in TEAM PY1 or TEAM PY2, and we seek comment on those timing options. Beginning in TEAM PY1 would avoid a
We considered, but are not proposing at this time, an alternative approach that would maintain a fixed historical CQS baseline methodology while changing the CQS baseline periods from calendar year to July through June timeframes for the Hybrid HWR, CMS PSI-90, THA/TKA PRO-PM, and the ISCMR measures. Under this alternative fixed CQS baseline approach with updated timeframes, the Hybrid HWR CQS baseline would be established concurrently with the measurement performance period for TEAM PY1 and would be July 1, 2024 through June 30, 2025, using claims only data and would be updated once more for TEAM PY2 and would be July 1, 2025 through June 30, 2026, using hybrid data to account for the measure's transition from claims-only to hybrid methodology, after which it would remain fixed for TEAM PY3 through PY5. The CMS PSI-90 measure, which is only used in TEAM PY1, would have a CQS baseline period of July 1, 2023 through June 30, 2025, concurrent with its TEAM PY1 measurement period. The THA/TKA PRO-PM would have a concurrent CQS baseline and measurement period for TEAM PY1 of July 1, 2024 through June 30, 2025, which would then remain fixed throughout TEAM PY2 through
The fixed historical CQS baseline approach has several benefits. It offers stable targets that provide greater certainty for participants, as performance benchmarks are known in advance whenever possible. This approach facilitates tracking of long-term quality improvement goals from the start of the model and eliminates the need for annual CQS baseline recalculations, reducing administrative complexity compared to sliding historical CQS baselines. However, we determined that the fixed historical CQS baseline approach presents significant disadvantages. The fixed CQS baselines can become outdated and less reflective of current performance conditions over time. Fixed CQS baselines may also reduce incentives for continuous improvement once participants meet initial targets. Additionally, data anomalies, such as missing or incomplete data from the CQS baseline period, cannot be adjusted under a fixed CQS baseline approach, which could result in inequitable performance assessments throughout the model's duration. These limitations led us to propose the sliding historical CQS baseline methodology instead, which we believe better supports ongoing quality improvement and maintains relevant performance benchmarks throughout the model.
We seek comment on our proposal at § 512.547(a)(1)-(5) for the proposed changes to the CQS baseline methodology in TEAM to include the transition from fixed CQS baseline periods to sliding historical CQS baselines periods and the change from calendar year to July to June timeframe for the Hybrid HWR, CMS PSI-90, THA/TKA PRO-PM, and ISCMR measures. We also seek comment on whether beginning the transition to the sliding historical CQS baseline methodology in TEAM PY2, rather than TEAM PY1, would be preferable. We also seek comment on whether either a fixed historical CQS baseline methodology or a concurrent CQS baseline methodology, each incorporating the updated July through June timeframes for applicable measures as described above, would be preferable to the proposed sliding historical CQS baseline methodology. With respect to the concurrent CQS baseline methodology specifically, we seek comment on whether, if adopted, implementation should begin in TEAM PY1 or TEAM PY2.c. Pricing Methodology
As finalized in the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986), TEAM participants will be provided with target prices for each MS-DRG/HCPCS episode type. These target prices will be calculated using 3 years of rolling baseline episode spending, trended forward with 2 additional historical years to the performance year, at the level of MS-DRG/HCPCS episode type and region, with updates to be made using the performance year data during the reconciliation process. The regions are defined as the nine U.S. census divisions and the MS-DRG/HCPCS episode type is based on the episode categories that will be tested in the model: Coronary Artery Bypass Graft (CABG), Lower Extremity Joint Replacement (LEJR), Major Bowel Procedure, Surgical Hip Femur Fracture Treatment (SHFFT), and Spinal Fusion.
Episode spending will be capped at the 99th percentile for each of the 29 MSDRG/HCPCS episode types and 9 regions, and the benchmark price will be calculated as the average capped and standardized spending in the most recent baseline year dollars for each MS-DRG/HCPCS episode type in each region, resulting in 261 benchmark prices. Benchmark prices will be calculated using all hospitals in a region, regardless of TEAM participation status. CMS will apply a prospective trend factor and a discount factor to benchmark prices. During reconciliation, these preliminary target prices will be modified by updating the trend (subject to a cap) and normalization factor (subject to a cap) and by adjusting for each participant's realized performance year case mix.
Risk adjustment factors will be calculated and made available to TEAM participants prior to the start of each performance year, so TEAM participants will be able to use them to estimate their episode-level target prices. Risk adjusters finalized in the FY 2025 IPPS/LTCH PPS final rule and FY 2026 IPPS/LTCH PPS final rule include age group, Hierarchical Condition Category (HCC) count, and beneficiary economic risk, as well as episode category-specific HCC adjusters and hospital-level adjusters including a hospital bed size factor and a safety net hospital factor. The risk adjustment factors will be calculated at the MS-DRG/HCPCS level using a weighted linear regression where episodes are weighted differentially based on whether they belong to year 1, 2, or 3 of the baseline periods. As finalized in the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986), episodes from baseline year 1 will be weighted at 17 percent, baseline year 2 at 33 percent, and baseline year 3 at 50 percent. The risk adjustment factors will be fixed and applied to performance year episodes at reconciliation based on the realized case mix of the TEAM Participant in the performance year.
After risk adjusting for the performance year case-mix, CMS will normalize the target prices to ensure that the average of the total risk-adjusted preliminary target price does not exceed the average of the total non-risk adjusted preliminary target price. The final normalization factor will be calculated as the mean of the benchmark price for each MS-DRG/HCPCS episode type and region divided by the mean of the risk-adjusted benchmark price for the same MS-DRG/HCPCS episode type and region. As finalized in the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986) it will be capped should this ratio exceed ±5 percent of the prospective normalization factor. The final target prices will include a retrospective trend factor, which will be capped at being within 3 percent of the prospective trend, as finalized in the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986). The retrospective trend factor will be calculated as the average capped performance year episode spending at the MS-DRG/HCPCS episode type and region level divided by the capped average baseline episode spending in the most recent baseline year dollars at the MS-DRG/HCPCS episode type and region level (that is, national mean benchmark price).
The reconciliation (final) target price will be calculated as the product of the capped mean baseline episode spending in the most recent baseline year dollars, the discount factor, the risk adjustment multiplier using the performance year case-mix, the capped final normalization factor, and the capped retrospective trend factor.
TEAM participants will have the opportunity to achieve a reconciliation payment amount, after accounting for quality performance, if their performance year spending is below the reconciliation target price, or they may owe a repayment amount if their spending is above the reconciliation target price.
TEAM relies on the Medicare Severity Diagnosis Related Group (MS-DRG) and Healthcare Common Procedure Coding System (HCPCS) codes to identify procedures to initiate an anchor hospitalization or anchor procedure. MS-DRG and HCPCS codes, and more specifically the assignment of HCPCS codes to Ambulatory Payment Classifications (APCs), may be modified because of changes in treatment patterns, technology, and any other factors that may change the relative use of hospital and provider resources. Typically, CMS proposes and finalizes coding changes, as applicable, through established annual payment rules. MS-DRG changes are generally aligned with the fiscal year (FY) in the IPPS/LTCH proposed and final rules, while HCPCS and APC changes generally align with the calendar year (CY) in the Outpatient Prospective Payment System (OPPS)/Ambulatory Surgical Center (ASC) proposed and final rules.
Because TEAM uses 3 years of rolling baseline episode spending, with 2 additional historical trend years, to construct target prices for a given performance year, changes in the MS-DRG or HCPCS-APC mappings and weights after the baseline period and either prior to or during the performance year may result in target prices that do not appropriately reflect episode spending in the performance year. Additionally, any new code established prior to or during the performance year that did not exist in the baseline period would not have a target price. In the FY 2026 IPPS/LTCH PPS final rule (90 FR 36536), we finalized the definition of a scaling factor at § 512.505 and methodology at § 512.540(a)(2)(i) through (iii) to account for changes to MS-DRGs and HCPCS between the baseline period and the performance year using a three-step mapping and scaling approach. The scaling factor, calculated as the ratio of MS-DRG or APC weight in the performance year to that in the baseline year, accounts for relative weight changes for MS-DRGs in the inpatient setting and APCs for HCPCS in the outpatient setting. However, this approach does not address changes that may arise after preliminary target prices are released to TEAM participants.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986), we established that preliminary target prices would be constructed only once per performance year and shared with TEAM participants prior to each performance year, which covers a calendar year timeframe. Therefore, due to the availability of data and timing of when target prices are released to TEAM participants, target prices are constructed using the previous calendar year HCPCS-APC mappings and weights (that is, the year prior to the performance year) and only the first three quarters of the current fiscal year's MS-DRG definitions and weights. TEAM target prices do not account for any MS-DRG definition or weight changes that are implemented in the last quarter of the performance year because fiscal years span October 1 to September 30. For example, performance year 1 (January 1, 2026-December 31, 2026) preliminary target prices are constructed using calendar year 2025 (January 1, 2025-December 31, 2025) HCPCS-APC mappings and weights and fiscal year 2026 (October 1, 2025-September 30, 2026) MS-DRG definitions and weights. HCPCS-APC mappings and weight changes in the CY OPPS/ASC and MS-DRG definition or weight changes in the FY IPPS/LTCH final rules would alter observed and scaled spending in the baseline period. Further, MS-DRG definition or weight changes may shift which code would initiate an anchor hospitalization and subsequently change the composition of inpatient episodes. As a result, benchmark and target prices would not reflect changes between calendar years (for instance, if HCPCS codes are reassigned to different APC weights during a performance year) or between fiscal years (for instance, MS-DRG definition changes between the first and second fiscal years of a performance year). At reconciliation, these changes may not be sufficiently accounted for by the retrospective trend factor which is capped at ±3 percent. Additionally, there may not be benchmark prices or other target price components available for episodes with anchor hospitalization end dates in the second fiscal year. To avoid these inconsistencies we propose application of the following APC and MS-DRG update factors in final target price calculations beginning in performance year 1, to ensure the final target price and reconciliation amounts align with payment rates and weights that are applied during each performance year.
We propose to update the Definitions at § 512.505 and the pricing methodology at § 512.540(b)(7) to add an APC update factor to the calculation of the prospective trend factor and at § 512.545(f)(1) to the retrospective trend factor. We propose to define the APC update factor at § 512.505 as the component applied to the prospective trend factor to ensure that the APC weights corresponding to the performance year are incorporated into the final target price calculations. The APC update factor, as set forth in 512.540(b)(7), would be calculated at the MS-DRG/HCPCS episode type and region level as the ratio of the benchmark prices calculated with APC weights corresponding to the calendar year of the performance year (CY 2026 for performance year 1) to the preliminary benchmark prices calculated with the APC weights corresponding to the calendar year prior to the performance year (CY 2025 for performance year 1). The APC update factor would be calculated after the CY OPPS/ASC final rule is published each year and would be shared with TEAM participants to ensure that all information that is used to calculate final target prices is available. The APC update factor would be applied as a multiplier to the prospective trend factor, creating an updated prospective trend factor, which will be applied during final target price calculations. Specifically, we propose to update § 512.545(f)(1) such that the retrospective trend factor is capped relative to the updated prospective trend factor to ensure that final target prices are aligned with performance year payment rates and weights.
We believe this would be a straightforward approach to account for calendar year changes in APC weights by directly applying the corresponding changes to the prospective trend factor, without creating and distributing multiple preliminary target prices. For example, TEAM participants would only need to multiply the APC update factor to the prospective trend factor as compared to receiving a new preliminary target price with other updated pricing components. We note that if the APC relative weights decrease between calendar years, the application of the APC update factor may result in a decrease in benchmark prices. Additionally, risk adjustment coefficients are not updated and may not reflect changes between calendar years. Internal analysis assessed the impact of using outdated APC weights on TEAM benchmark prices, comparing the average scaled and winsorized spending in the most recent baseline year at the MS-DRG/HCPCS episode type and region level using CY 2025 and CY 2026 APC weights. Findings from this internal analysis indicate that episodes with APC assignment changes
Though we anticipate only minor adjustments to APC weights during the calendar year, internal analyses indicate that benchmark prices and therefore the final target price calculations at reconciliation would not account for code reassignments that significantly change relative APC weights. We considered but will not propose applying the APC update factor beginning in performance year 2. As detailed below, APC update factors would be shared in advance of final target price calculations and would improve target price accuracy, aligning reconciliation amounts with payment rates and weights applied during the performance year. Given this, we propose adjusting the prospective trend factor methodology at § 512.540(b)(7) and the retrospective trend factor methodology at § 512.545(f)(1) to account for changes in relative APC weights between calendar years in the TEAM performance year.
To account for changes in MS-DRG mapping and weights between the first and second fiscal years in a TEAM performance year, we propose updates to the Definitions at § 512.505 and the pricing methodology at § 512.540, § 512.545, and § 512.550 to adjust the target price and reconciliation amount accordingly. Specifically, we propose updating methodology at § 512.540(b)(7) to add a MS-DRG update factor to the calculation of the prospective trend factor for episodes with anchor end dates in the fourth quarter of the performance year. We propose to define the MS-DRG update factor at § 512.505 as the component applied to the prospective trend factor for episodes with anchor hospitalization or anchor procedure end dates in the fourth quarter of the performance year to account for changes in MS-DRG definitions and weights between the first and second fiscal years in the performance year. The MS-DRG update factor would be calculated at the MS-DRG/HCPCS episode type and region level as the ratio of benchmark prices calculated with the second fiscal year inputs (FY 27 MS-DRG definitions and weights for performance year 1) to preliminary benchmark prices calculated with the first fiscal year inputs (FY 26 MS-DRG definitions and weights for performance year 1). The MS-DRG update factor would be calculated after the FY IPPS/LTCH final rule is published each year and would be shared with TEAM participants as a multiplier to the prospective trend factor to ensure that all information that is used to calculate final target prices is available.
When TEAM initiating MS-DRGs change between the first and second fiscal years in a performance year, the reconciliation target price for episodes with anchor end dates in the fourth quarter of the performance year will be calculated using MS-DRG mappings and weights from both fiscal years. As proposed at § 512.550(c), initiating MS-DRGs with anchor end dates in the second fiscal year of a performance year would be mapped and assigned a first fiscal year MS-DRG. We propose updating methodology at § 512.545 to specify the fiscal year MS-DRG(s) of each reconciliation target price component for episodes with anchor end dates in the fourth quarter of the performance year. Components derived from baseline data, such as the benchmark price and the risk adjustment coefficients, would be calculated using MS-DRG mappings and weights from the assigned first fiscal year in a performance year (as described in § 512.545(a) through (d)). The final normalization factor, described at § 512.545(e) would be calculated specific to the assigned first and second fiscal year MS-DRG and region combination, and cannot exceed ±5 percent of the prospective normalization factor, as specified at 512.540(b)(6), for the assigned first FY MS-DRG. For instance, if two TEAM initiating MS-DRGs are mapped to one MS-DRG in the second fiscal year, the normalization factor will be calculated using the benchmark price and risk adjustment coefficients of the assigned first fiscal year MS-DRG applied to the realized case mix of the second fiscal year MS-DRG. The retrospective trend factor described at § 512.545(f) would be calculated with performance year spending specific to the second fiscal year MS-DRG mapping combination, and cannot exceed ±3 percent of the updated prospective trend factor. The updated prospective trend factor would be the product of the prospective trend factor and the corresponding APC update factor and MS-DRG update factor. We propose at § 512.505 to define the updated prospective trend factor as the multiplier incorporated into the preliminary target price to estimate changes in spending patterns between the baseline period and the corresponding calendar year and fiscal year in the performance year. See Table X.A-05 for summary of target price components and applicable fiscal year MS-DRGs.
Further, for performance years in which diagnosis or procedure codes are mapped to different TEAM initiating MS-DRGs between the first and second fiscal years, we propose updating methodology at § 512.550(c) to add a step to assign a first fiscal year MS-DRG to episodes with anchor end dates in the fourth quarter. Based on logic described
As previously noted, some MS-DRG definition changes may result in preliminary benchmark prices and target price components not being available. See Table X.A-06 for a summary of the possible MS-DRG mapping scenarios between the first and second fiscal year of a TEAM performance year. For example, a non-TEAM MS-DRG, meaning a MS-DRG that does not initiate a TEAM anchor hospitalization, in the first fiscal year is mapped to a TEAM MS-DRG, meaning a MS-DRG that initiates a TEAM anchor hospitalization, in the second fiscal year of a performance year (scenario 4). In this situation, we would not be able to produce a final target price for the episode, as preliminary benchmark prices and target price components would not be available for the non-TEAM MS-DRG based on the first fiscal year inputs. Therefore, we propose that TEAM participants would not be accountable for episodes with anchor end dates in the fourth quarter of the performance year that are initiated by anchor hospitalizations that would have been assigned a non-TEAM MS-DRGs in the first three quarters of the performance year.
We believe adding the MS-DRG update factor to the calculation of prospective trend factors for episodes with anchor end dates in the fourth quarter of the performance year is an effective way to account for fiscal year changes in MS-DRG definitions and weights without reissuing preliminary target prices and reduces TEAM participant burden by not having to manage multiple preliminary target prices within a given performance year. We acknowledge that, depending on the magnitude of changes between the fiscal years in the performance year, some target prices may lack precision or may not be available. Specifically, the risk adjustment coefficients are not updated and will be more reflective of the first fiscal year case mix. Internal analysis used fiscal years 2024 and 2025 inputs to assess the impact of MS-DRG mapping and weight changes between fiscal years on TEAM benchmark prices. This assessment demonstrated that conducting reconciliation calculations using target prices solely based on FY 2024 inputs, without accounting for FY 2025 MS-DRG mappings and weight changes, may penalize participants. Specifically, five spinal fusion MS-DRGs were deleted in FY 2024 and mapped to 10 new spinal fusion MS-DRGs in FY 2025. As a result, 72 percent of final TEAM spinal fusion episodes were without available FY 2024 benchmark prices, and differences in scaled inpatient stay costs ranged from −56 percent to 71 percent.
As previously noted, the APC and MS-DRG update factors would be calculated after the CY OPPS/ASC and the FY IPPS/LTCH final rules are published and would be shared with TEAM participants to ensure that all information that is used to calculate final target prices is available. Table X.A-07 provides an example operational timeline of APC and MS-DRG update factor availability. We note that the operational timeline is subject to change contingent on finalization and publication of the CY OPPS/ASC and FY IPPS/LTCH rules.
We considered but are not proposing to update and deliver preliminary target prices to TEAM participants for each calendar and fiscal year final rule. We believe managing three different preliminary target prices in a given
We seek comment on our proposal at § 512.505 to add definitions of the APC update factor, MS-DRG update factor, and updated prospective trend factor. We also seek comment on our proposal at § 512.540(b)(7) to add APC and MS-DRG update factors in the calculation of the prospective trend factor to account for changes in HCPCS-APC and MS-DRG mappings and weights during a TEAM performance year. We also seek comment on our proposals for performance years in which diagnosis or procedure codes are mapped to different TEAM triggering MS-DRGs between the first and second fiscal years. At § 512.545 to specify the FY MS-DRG(s) that each reconciliation target price component reflects for episodes with anchor end dates in the fourth quarter of the performance year. At § 512.550(c) to add a step to assign a first fiscal year MS-DRG to performance year episodes with anchor end dates in the fourth quarter and modify the calculations to the assigned first and second fiscal year MS-DRG/HCPCS episode type.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986) that established TEAM, a normalization factor was included in the calculation of preliminary and reconciliation target prices to ensure that the average benchmark price after risk adjustment does not exceed the average benchmark price prior to risk adjustment. The FY26 IPPS/LTCH PPS final rule (90 FR 36536) revised the language at § 512.505 to clarify that the prospective normalization factor will be calculated using the benchmark prices rather than using preliminary target prices. Additionally, the FY26 IPPS/LTCH PPS final rule modified §§ 512.540(b)(6) and 512.545(e)(1)(i) to calculate the prospective and final normalization factors at the MS-DRG/HCPCS episode type and region level rather than at national level.
For each MS-DRG/HCPCS episode type and region combination, the normalization factor is calculated as the average benchmark price divided by the average risk-adjusted benchmark price. The risk-adjusted benchmark price is the product of the benchmark price and a risk adjustment multiplier, which accounts for variation in spending due to hospital and beneficiary characteristics. The risk adjustment multiplier, as defined in current policy at § 512.540(b)(6)(i), is calculated by applying risk adjustment coefficients to the most recent baseline year episodes. Since the baseline period, as defined in § 512.505 and further addressed in § 512.540(b)(2), is a rolling three-year period, the most recent baseline year for a given performance year would always be baseline year 3. The construction of the normalization factor relying on the most recent baseline year was designed to maintain simplicity while using the most recent data available. However, we have concerns that only using the most recent baseline year may not accurately reflect all the episodes used to calculate the benchmark price. Nor does using only the most recent baseline year consistently recenter the risk adjusted benchmark prices back to the average of the total non-risk adjusted benchmark price.
To improve predictive accuracy, better represent all episodes used in benchmark price construction, and recenter the risk adjusted benchmark price to the average of the total non-risk adjusted benchmark price, we propose that starting with performance year 2 to update the definition at § 512.540(b)(6) to calculate the prospective normalization factor at the MS-DRG/HCPCS episode type and region level based on the applicable episodes in the baseline period. We propose to update § 512.540(b)(6)(i) to apply the risk adjustment coefficients to all applicable baseline year episodes, rather than restricting application to the most recent baseline year episodes, in the calculation of the risk adjustment multiplier. This should improve the accuracy of the multiplier and help to smooth short-term fluctuations, if any, in the most recent baseline year. An internal analysis compared the observed and expected average hospital-level spending for each MS-DRG/HCPCS episode type and region using clinical episodes with start dates on or after January 1, 2022, and anchor end dates on or before December 31, 2024. Findings demonstrated that the multipliers and normalization factors constructed with all the baseline episodes improved predictive accuracy compared to those constructed using only the most recent baseline year episodes. We note the difference between the MS-DRG/HCPCS episode type and region-level normalization factors calculated using only the most recent baseline year episodes and the normalization factors calculated using all baseline year episodes ranged from -0.03 to 0.02 (-3.46 percent to 2.56 percent). While this difference was small, we believe using all baseline episodes to construct the normalization factor is a more sound mathematical approach and will recenter average expected spending around average observed spending.
We considered but are not proposing to calculate the normalization factor using an additional two years of data prior to the baseline period, similar to the trend factor construction. However, this would not recenter the risk adjusted benchmark prices and would not improve predictive accuracy.
We seek comment on our proposal at § 512.540(b)(6) and (b)(6)(i) to calculate the risk adjustment multiplier and
CMS is exploring Ambulatory Surgical Center (ASC) participation in the Transforming Episode Accountability Model (TEAM), beginning as early as CY2028 (that is, Performance Year 3). We acknowledge previously soliciting public comment on inclusion of ASCs in Lower Extremity Joint Replacement (LEJR) focused models (85 FR 10537) in the Comprehensive Care for Joint Replacement Model Three-Year Extension and Changes to Episode Definition and Pricing proposed rule. Certain orthopedic procedures, such as total knee arthroplasty (TKA), were covered by Medicare in the ASC setting beginning January 1, 2020 (84 FR 61253). However, given its recent addition to the ASC covered procedure list, there was not a significant volume of TKA procedures performed in the ASC setting at the time and the CJR model did not add procedures in ASC settings to its episodes. We recognize that since that RFI the health care landscape has changed and more procedures, including certain procedures that initiate episodes in TEAM, are being performed more regularly in the ASC setting. Therefore, we recognize the importance of soliciting additional public feedback on inclusion of ASC episodes in TEAM.
Beyond systemic differences in payment policy and beneficiary populations, ASCs do not have the same relationship to hospitals as inpatient (IP) and outpatient (OP) hospital departments. Thus, procedures in ASCs would need to be incorporated into TEAM differently than procedures performed in the OP setting. We also recognize that testing TEAM in the ASC setting will likely impact the evaluation of TEAM by changing the health care landscape within which hospital participation in TEAM is evaluated. These impacts may occur in various ways including possible changes in the patient mix and volume in various settings for covered procedures. This request for information (RFI) seeks public input on model structure, participant roles and financial accountability, episode and target price construction, and quality measurement. Through this RFI, we intend to gather public input on the parameters under which ASCs could be incorporated into TEAM, including the degree to which the addition of ASCs would necessitate a separate model test. Any future incorporation of ASCs in TEAM, whether as an additional participant population under the current model test or as a distinct model test with the TEAM episode structure applied, would be pursued through notice-and-comment rulemaking under the authority of section 1115A of the Act. Feedback on this RFI will inform potential future rulemaking to incorporate ASCs in TEAM in a manner that promotes both efficient and high-quality care, safeguards appropriate patient selection, and aligns incentives across care settings.
• Participation and Financial Accountability.
++ What operational challenges would ASCs face participating in an episode-based payment model such as TEAM? Are there any unique challenges to treating patients in an ASC compared to IP/OP hospital settings? How might these challenges impact model participation?
++ What steps could CMS take to support ASC readiness to participate in episode-based payment models such as TEAM?
++ What programmatic waivers may be necessary to ensure ASCs have successful participation in TEAM?
++ What entity should be held financially accountable for episodes initiated at ASCs?
++ How should CMS account for financial and ownership relationships between hospitals and ASCs or both?
++ What barriers are there to partnerships between hospitals and ASCs that are not owned by hospitals?
++ What opportunities, if any, exist for ASCs to achieve efficiency gains under TEAM? What model features could support or enhance these opportunities?
• Episode Construction.
++ What additional surgical episode types should CMS consider if TEAM is modified to include the ASC setting?
• Risk Adjustment and Target Pricing.
++ If CMS incorporates ASCs into multi-setting episode types, how can CMS adapt the beneficiary-level risk adjustment methodology to ensure appropriate site-of-service decisions?
++ Could including ASCs in TEAM create barriers to care for any Medicare beneficiaries? What could CMS do to mitigate this?
• Model Overlap.
++ How should CMS handle TEAM ASC episode overlap with other value-based care initiatives or payment models focused on the same procedures at either ASCs or hospitals?
• Quality Measures.
++ What quality measures would reasonably capture performance and outcomes of TEAM ASC episodes?
++ On what quality metrics can ASCs and hospital outpatient departments be fairly compared?
++ What opportunities, if any, exist for quality improvement at ASCs for procedures included in (or suggested for inclusion in) TEAM?
A hospital with physician ownership (POH) is any hospital in which a physician, or an immediate family member of a physician, has an ownership or investment interest in the hospital. Ownership or investment interest may be through equity, debt, or other means, and includes an interest in an entity that holds an ownership or investment interest in the hospital.
Section 1877 of the Social Security Act (the Act) (42 U.S.C. 1395nn), also known as the physician self-referral law (and commonly referred to as the “Stark” law):
• Prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship, unless the requirements of an applicable exception are satisfied; and
• Prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third-party payor) for any improperly referred designated health services.
A financial relationship may be an ownership or investment interest in the entity or a compensation arrangement with the entity. The statute establishes a number of specific exceptions and grants the Secretary of the Department of Health and Human Services (HHS) the authority to create regulatory exceptions for financial relationships that do not pose a risk of program or patient abuse.
Section 1877(d) of the Act sets forth exceptions related to ownership or investment interests held by a physician (or an immediate family member of a physician) in an entity that furnishes designated health services. Section 1877(d)(2) of the Act provides an exception for ownership or investment interests in rural providers (the “rural provider exception”). To use the rural provider exception, an entity must furnish substantially all of the
Section 6001(a) of the Affordable Care Act effectively eliminated the exceptions for physician ownership or investment in hospitals, although hospitals with physician ownership or investment and a Medicare provider agreement on December 31, 2010, are grandfathered and able to continue using the rural provider exception, if applicable, and the whole hospital exception.
Section 6001(a)(3) of the Affordable Care Act amended the rural provider exception and the whole hospital exception to provide that a hospital with physician ownership or investment may not increase the number of operating rooms, procedure rooms, and beds beyond that for which the hospital was licensed on March 23, 2010 (or, in the case of a hospital that did not have a Medicare provider agreement in effect as of this date, but did have a provider agreement in effect on December 31, 2010, the effective date of such provider agreement). However, the Secretary may grant an exception from the prohibition on facility expansion.
To avoid the underlying concerns of the physician self-referral law, including but not limited to overutilization, patient steering, cherry-picking, and lemon-dropping, current law limits expansion of POHs. However, there is some evidence that suggests that POHs may help control costs, maintain or improve patient outcomes, and prevent hospital consolidation.
Designed as a mandatory model, voluntary participation in TEAM has cost and evaluation implications on the model. We noted concerns with voluntary participation in TEAM when the model was initially proposed (89 FR 36390) and believe that guardrails must be in place if voluntary participation were permitted in the model. This is because self-selection of voluntary participants may result in net costs to Medicare or reduce anticipated savings. Further, the voluntary participation of POHs in the TEAM model risks the integrity of the evaluation design and may lead to biased findings undermining the model test. While certain hospitals were permitted to voluntarily opt into TEAM (42 CFR 512.510), they could only be located in strata 17 or 18 (42 CFR 512.515), and we did inhibit their ability to voluntarily exit the model and required participation in all episode categories to curtail self-selection and participation attrition concerns. We anticipate that any potential future voluntary participation opportunities would include similar parameters to ensure model integrity and minimize losses to Medicare.
We request feedback on the following questions:
• Should CMS allow a voluntary opt-in period to include POHs in TEAM; why or why not? Should the option to participate in TEAM be limited to those POHs that are grandfathered under the Affordable Care Act to use the rural provider or whole hospital exception to the physician self-referral law?
• Should POHs that wish to voluntarily opt into TEAM be required to meet the geographic eligibility criteria described previously and in 42 CFR 512.515 and be subject to participation requirements described in 42 CFR 512.510? What inclusion criteria, if any, should be added for POHs opting to participate in TEAM?
• What programmatic waivers may be necessary to ensure POHs have successful participation in TEAM (for example, restrictions on expansion of facility capacity, service limitations, etc.)? Provide justification for any waiver that you believe may be necessary. Please explain how the waiver will not undermine the TEAM model by allowing Medicare payment for services furnished by POHs where such payments are not currently allowed because the POHs are not grandfathered in to use the rural provider or whole hospital exception to the physician self-referral law.
• Waivers of law, if provided and necessary to test a model, are temporary and generally end when the model expires or the participant's agreement is terminated. How will POHs continue any successful actions taken under TEAM once they must comply with all applicable statutes and regulations, including the physician self-referral law?
• How can CMS ensure that, upon the termination of TEAM and any associated waivers specific to POHs, if granted, that POHs remain compliant with existing mandates? For example, if TEAM waives Section 6001(a)(3) of the Affordable Care Act to allow a POH to expand beyond its baseline number of operating rooms, procedure rooms, and beds (as defined at 42 CFR 411.363(a)) without requesting an expansion from the Secretary as required at 42 CFR 411.362(b)(2), how can CMS ensure that the POH reduces its facility capacity to its baseline number of operating rooms, procedure rooms, and beds?
• What additional program integrity requirements should CMS consider to avoid beneficiary steering, cherry-picking, and lemon-dropping and ensure beneficiary choice is not compromised if waivers are offered to POHs?
• Should any episode categories be excluded from episode initiation, or should any items and services be
• What episode categories, beyond the episode categories currently tested in TEAM should CMS consider testing for POHs?
The Medicare law lists the types of facilities that are regarded as providers of services but does not use or define the term “provider-based” (section 1861(u) of the Act). However, since the beginning of the Medicare program, some providers, referred to as
Program Memorandum A-967, published on August 27, 1996, provided instructions for specific entity types from previously published documents consolidated into a general instruction for the designation of provider-based status for all facilities or organizations. That Program Memorandum was subsequently reissued, without substantive change, as Program Memoranda A-98-15 and A99-24 and, in October 1999, was manualized by the Provider Reimbursement Manual, Part I, Transmittal 411 (adding new section 2446), and the State Operations Manual, Transmittal 11 (replacing previous section 2003 and adding new section 2004). The Medicare rules regarding provider-based status of facilities and organizations are set forth at 42 CFR 413.65 and have been revised and updated on numerous occasions since initial issuance on April 7, 2000 (65 FR 18504). We note that implementation of the April 7, 2000 regulations was delayed for many providers by Public Law 106-554 in the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), which further amended the criteria for determining provider-based status, as implemented in a final rule published in the
Since the initial creation and implementation of the provider-based rules, CMS included requirements that the facility or organization seeking provider-based status and the main provider either be located on the same “campus,” as defined in regulations,
Section 404(b) of BIPA further amended the immediate vicinity criterion by stating that the facility or organization must be located within a 35-mile radius of the potential main provider. The legislation also maintained the criteria previously finalized by CMS to demonstrate that a facility or organization serves the “same patient population” as the potential main provider (the “75 percent” tests). And to encourage delivery of care to uninsured, low-income individuals, BIPA added alternative qualification criteria for certain hospitals with a disproportionate share adjustment greater than 11.75 percent.
In the FY 2001 IPPS/LTCH PPS final rule (65 FR 18517 through 18518), commenters requested that the requirement to serve the same patient population be modified to exclude off-campus inpatient facilities of hospitals because these facilities provide similar types of service as the main provider but serve patient populations from different geographic areas. We responded by stating that CMS recognizes there may be some cases in which a main hospital and another facility or organization seeking provider-based status may meet most or all other determining criteria in the regulations yet not qualify under the same patient population tests. We disagreed that this result should lead us to abandon the same patient population test, however, and pushed back on the commenter's assumption that because the program memorandum and proposed rule were issued in response to situations primarily involving outpatient facilities, they can apply only to such facilities. In that rule, we expressed specific concerns regarding payment implications for certain potential arrangements that we believed warranted application of the provider-based rules to both outpatient and inpatient locations. Specifically, we stated that the establishment of off-campus facilities excluded from the inpatient PPS could lead to payment abuses, such as circumvention of certain payment caps. We further addressed more general requests to exempt off-campus inpatient facilities from provider-based rules in the FY 2003 IPPS/LTCH PPS final rule (67 FR 50081 through 500082), reaffirming our position that provider-based rules should apply to both inpatient and outpatient facilities and organizations.
To satisfy the location criterion set forth at § 413.65(e)(3)(iii), the regulation requires the facility or organization demonstrate that it serves the “same patient population” as the main provider by submitting records showing that, during the immediately preceding 12-month period, and for each subsequent 12-month period, that either: at least 75 percent of the patients served by the facility or organization reside in the same zip code areas as at least 75 percent of the patients served by the main provider (§ 413.65(e)(3)(iii)(A)); or at least 75 percent of the patients served by the facility or organization who required the type of care furnished by the main provider received that care from that provider (§ 413.65(e)(3)(iii)(B)). The provision at § 413.65(e)(3)(iv) provides a
Within the text of § 413.65(e)(3)(iii)(B), an example is utilized to illustrate that to meet the requirement a hospital must demonstrate that at least 75 percent of the patients of a rural health clinic (RHC) seeking provider-based status received inpatient hospital services from the main provider hospital. This example describes a
For these reasons, we are proposing to limit the application of § 413.65(e)(3)(iii)(B) to outpatient departments only. When a patient that “required the type of care furnished by the main provider” is referenced, it was contemplated that the encounter(s) at the proposed provider-based location would deliver outpatient services rather than inpatient services. We believe that this proposed revision maintains the original intent of the policy by permitting a proposed provider-based outpatient practice location to exceed the 35-mile radius in circumstances where inpatient services are not readily available in the area. And eliminates the aforementioned potential for arguably unwarranted payment advantages by certain hospitals. Accordingly, we are proposing to revise § 413.65(e)(3)(iii)(B) to specify that at least 75 percent of the patients served by an outpatient facility or organization who required the type of care furnished by the main provider received that care from that provider. An inpatient facility or organization, by contrast, would be excluded from utilizing this test to meet the location requirement altogether. Further, we are proposing the addition of clarifying language at § 413.65(e)(3)(iii)(A) to make explicit that provision may still be utilized by either an inpatient or outpatient facility or organization.
We seek comment on this proposal.
CJR was a mandatory alternative payment model tested by the Center for Medicare and Medicaid Innovation (Innovation Center) between April 1, 2016, and December 31, 2024 in all eligible acute care hospitals within selected Metropolitan Statistical Areas (MSAs). Based on evaluation results indicating the model successfully reduced spending without reducing quality of care and the Secretary determining that the model has met the requirements for expansion, as described in section X.C.1.c. of this proposed rule, we are proposing to expand CJR to all eligible acute care hospitals nationwide. The proposed CJR model expansion, referred to as the Comprehensive Care for Joint Replacement Expanded (CJR-X) Model, presents an opportunity to further improve the quality of care for lower extremity joint replacements (LEJRs) furnished to Medicare beneficiaries nationwide by incentivizing hospitals, physicians, and post-acute care providers to work together to improve the quality and coordination of care from the initial hospitalization or procedure through recovery. If finalized, all eligible acute care hospitals would be required to participate in the CJR-X model beginning October 1, 2027.
In order to distinguish our discussion of proposed policies for CJR-X from our discussion of the initial CJR Model test, we will refer to the latter as “the CJR Model”. Additionally, we note that the CJR Model was initially designed to end on December 31, 2020, but was extended with modifications to the methodology, as described in section X.C.1.b. of this proposed rule. As a result, some of the policies we discuss in this proposed rule will have been applicable only prior to the extension while others will have been applicable only during the extension period (for example, the extension period broadened the definition of episodes to include outpatient episodes and modified the target price methodology). To distinguish the timeframe in which these particular policies applied, we will henceforth use the term “original CJR Model” for the former and “CJR Extension” for the latter. For specific policies that were consistent across both the original and extension periods, or discussion of the CJR Model test as a whole, we will continue to use the term “the CJR Model.” To distinguish the performance years in the CJR Model as defined at § 510.2 from our proposed definition of performance years (PYs) in CJR-X at § 512.605, we will refer to the former as “CJR Model PYs.”
The Innovation Center implemented the CJR Model under the authority of section 1115A of the Act, through notice-and-comment rulemaking. The Innovation Center issued a final rule titled “Medicare Program; Comprehensive Care for Joint Replacement Payment Model for Acute Care Hospitals Furnishing Lower Extremity Joint Replacement Services” (referred to as the “2015 CJR final rule”), which appeared in the November 24, 2015
The CJR Model tested quality and spending accountability for an episode of care associated with hip and knee replacements to encourage hospitals, physicians, and post-acute care providers to work together to improve the quality and coordination of care from the initial hospitalization through recovery. Specifically, the CJR Model was a retrospective bundled payment model where CMS provided participant hospitals with a target price for each CJR episode type (based on the MS-DRG assigned to the hospitalization and the presence or absence of a hip fracture in the original CJR Model and the MS-DRG or HCPCS code assigned to the hospitalization or procedure in the CJR Extension), prior to the start of each CJR Model PY. All providers and suppliers furnishing LEJR episodes of care to patients throughout the year were paid under existing Medicare payment systems. The target price included a discount that served as Medicare's portion of reduced expenditures from the LEJR episode, and initially incorporated a blend of historical, hospital-specific spending and regional spending for LEJR episodes, with the regional component of the blend increasing over time and eventually being 100 percent regional for PYs 4 through 8. Following the end of a CJR Model PY, actual total spending for a hospital's episodes was compared to the target price for those episodes. Depending on the participant hospital's quality and episode spending performance, the hospital could receive an additional payment from Medicare if spending was less than the target price or be required to repay Medicare for a portion of the episode spending that exceeded the target price.
In the January 2017 final rule (82 FR 180) and the December 2017 final rule (82 FR 57066), CMS implemented revisions to the CJR Model, including creating an Advanced APM track within the model and finalizing technical refinements and clarifications for certain payments, reconciliation and quality provisions. Additionally, in the December 2017 final rule, CMS offered rural and low-volume hospitals selected for participation in the CJR Model, as well as those hospitals located in 33 of the 67 MSAs, a one-time option to choose whether to continue their participation in the model until the initial CJR Model end date of December 31, 2020. All other participating hospitals in the remaining 34 MSAs continued to be mandatory participants (henceforth referred to as “mandatory hospitals”).
While initial evaluation results for the first and second year of the CJR Model indicated that the model was having a positive impact on lowering episode costs when CJR participant hospitals were compared to non-CJR hospitals (with no negative impacts on quality of care), changes in program payment policy and national care delivery patterns had occurred since the CJR Model began.
In order to update the original CJR Model to address those changes to policy and care delivery patterns and improve the model's ability to demonstrate savings, CMS issued a proposed rule titled “Medicare Program: Comprehensive Care for Joint Replacement Model Three-Year Extension and Changes to Episode Definition and Pricing” (referred to as the “2020 CJR 3-Year Extension proposed rule”), which appeared in the February 24, 2020
Shortly before the 2020 CJR 3-Year Extension proposed rule was published, on January 31, 2020, Secretary of Health and Human Services Alex M. Azar II determined that a public health emergency (PHE) existed and had existed nationwide since January 27, 2020 due to confirmed cases of the 2019 Novel Coronavirus (2019-nCoV, hereafter referred to as “COVID-19”).
Subsequently, CMS issued the November 2020 interim final rule with comment period (IFC) (85 FR 71142), which implemented several changes to the CJR Model. Among them, CMS made a technical change to include MS-DRGs 521 and 522 in the CJR episode definition to ensure that the model continued to include the same inpatient LEJR procedures, despite the introduction in FY 2020 of new MS-DRGs to describe those procedures. CMS also finalized a more targeted application of the extreme and uncontrollable circumstances policy to episodes with a COVID-19 diagnosis. This change increased the likelihood of model savings while providing participants with financial protection against COVID-19 episodes after the COVID-19 PHE ended.
Evaluation results from the first four years of the CJR Model indicated that mandatory hospitals generated $72 million in savings to Medicare while maintaining quality, although the savings were not statistically significant. But in PY 5, reconciliation payments substantially increased, generating $95.4M in statistically significant Medicare losses, due to adjustments made to the model during the COVID-19 PHE. CMS implemented these temporary adjustments, which effectively waived downside risk for all CJR episodes, in order to minimize any financial burden associated with model participation given the financial challenges and uncertainties hospitals faced early in the COVID-19 PHE. These adjustments resulted in reconciliation payments being triple what they were in previous years, which reversed the savings trajectory and resulted in statistically significant losses to Medicare for mandatory hospitals. The losses in CJR Model PY 5 were large enough to offset total estimated savings prior to the PHE.
In order to return the model to a savings trajectory, CMS published the final rule titled “Medicare Program: Comprehensive Care for Joint Replacement Model Three-Year Extension and Changes to Episode Definition and Pricing; Medicare and Medicaid Programs; Policies and Regulatory Revisions in Response to the COVID-19 Public Health Emergency” in the May 3, 2021
By 2024, CMS continued to believe the CJR Model could demonstrate savings after extending the model with modifications to account for policy and practice pattern changes. However, assessing the impact of these modifications on the potential for certification and expansion of the CJR Model would require additional time to collect and analyze evaluation data. Although preliminary evaluation results for CJR Model PY6 suggested that the modifications would result in Medicare savings, preliminary evaluation results for the full 3-year CJR Extension would not be available until late 2025. In the meantime, CMS sought to continue the care transformation efforts that we had promoted through both the CJR and Bundled Payments for Care Improvement Advanced (BPCI Advanced) Models. To achieve this goal, CMS finalized the Transforming Episode Accountability Model (TEAM) in the FY 2025 IPPS/LTCH PPS final rule, which appeared in the August 28, 2024
The LEJR episode and payment methodology currently being tested in TEAM are similar to the CJR Model in many ways, but there are a few key differences between the models. For example, TEAM episodes include the 30-day period after the discharge date (for inpatient procedures) or procedure date (for outpatient procedures), rather than the 90-day post-acute period included in the CJR Model. TEAM incorporates a more comprehensive set of risk adjustment factors into episode target prices as compared to the CJR Extension. TEAM also includes provisions for safety net hospitals (as defined at § 512.505) and hospitals with a low volume of episodes during the applicable baseline period to protect those hospitals from disproportionate financial risk. As stated previously, each element of TEAM that differs from either original CJR Model or the CJR Extension was included based on evaluation findings from the CJR and BPCI Advanced Models or stakeholder feedback, including responses to the July 2023 “Request for Information; Episode-Based Payment Model”.
The final CJR Model PY ended on December 31, 2024, and the first TEAM performance year began on January 1, 2026. In the interim period between the end of the CJR Model and the beginning of TEAM, final evaluation results for the CJR Model PYs 6 and 7 and preliminary evaluation results for CJR Model PY 8 became available, due to the time required after a given CJR Model PY to allow for claims run out, the reconciliation process, and data analysis. Evaluation results for CJR Model PYs 6 through 8 indicated that the modifications in the CJR Extension, along with the more targeted application of the extreme and uncontrollable circumstances policy to COVID-19 episodes, had succeeded in returning the CJR Model to a positive savings trajectory. The seventh annual evaluation report found that the CJR Model had produced $112.7 million in net savings to Medicare across CJR Model PYs 6 and 7 while maintaining quality of care.
Given the success of the CJR Model in achieving savings for Medicare across CJR Model PYs 6 through 8 while maintaining quality of care resulting from the CJR Extension policy modifications, CMS is proposing to expand the CJR Model to all eligible acute care hospitals nationwide. For hospitals currently participating in TEAM, which includes an LEJR episode, CMS is proposing that those TEAM participant hospitals would be exempt from CJR-X until the end of the TEAM model test. We are proposing minor modifications in CJR-X that will align with some of the policies we implemented in TEAM because we believe these changes represent improvements to the CJR Model methodology, as we discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69631) and will discuss in further detail in the following sections of this proposed rule. We are proposing to codify CJR-X policies at §§ 512.600 through 512.695, as discussed in more detail in the sections that follow.
Section 1115A(c) of the Act provides the Secretary with the authority to expand (including implementation on a nationwide basis), through rulemaking, the duration and the scope of a model that is being tested under section
Consistent with our statutory authority, we propose to continue to test and evaluate the CJR Model as CJR-X. We note that CJR-X would not be considered a Phase I model, as described under section 1115A(b) of the Act, but rather it would be a Phase II model under section 1115A(c) of the Act. As a nationally expanded Phase II model, we would continue to assess whether the expanded implementation of CJR-X is either continuing to reduce Medicare spending without reducing quality of care or improving the quality of patient care without increasing spending. We note that we may modify CJR-X as appropriate through future notice and comment rulemaking.
We propose that CJR-X would begin on October 1, 2027. Under this proposal, CJR-X performance years would align with fiscal years (FYs), in contrast the CJR Model, which aligned with calendar years (CYs). While we considered proposing a January 1, 2028 start date to align with CY and be consistent with the CJR Model, we believe that changing to FY is more appropriate given that the IPPS is aligned to an FY cycle, and we anticipate potential future policy changes to CJR-X would be proposed in the IPPS rulemaking cycle. Therefore, we propose that the first PY of CJR-X would run from October 1, 2027 through September 30, 2028, and the proceeding performance years would follow the same cadence.
We also considered a later start date to allow additional time for CJR-X participants to prepare for the model. However, we believe it beneficial to limit the amount of time between the final CJR Model PY and the continuation of the model test as CJR-X. In addition, the proposed start date provides more lead time for participants than the CJR Model did when finalized in November 2015. Despite the CJR Model beginning when hospitals had less experience with episode-based payment models, participants were able to successfully implement the model for the first performance year in April 2016. With the October 1, 2027 start date, hospitals would have more than 1 year to prepare for CJR-X participation. We also anticipate that many hospitals will have prior experience with LEJR episodes given that the Innovation Center has tested episode-based payment models for over a decade and Medicare Advantage organizations and commercial insurers often include episode-based contracts for high-volume procedures. We seek comment on our proposal at § 512.605 to define “performance year” as aligning with FYs and our proposal at § 512.630(a) to begin the model on October 1, 2027. We also seek comment on alternative start dates.
The CJR Model was a mandatory model for acute care hospitals within certain selected MSAs. However, for CJR-X, we propose that all eligible acute care hospitals nationwide would be required to participate, as described in section X.C.1.b. of this proposed rule. As we stated in section X.C.1.c. of this proposed rule, the CJR Model has met the requirements for expansion as a nationwide model by reducing spending and maintaining quality of care among mandatory hospitals, and the CMS Chief Actuary has certified its nationwide expansion as a mandatory model.
The CJR Model incentivized coordination between hospitals, clinicians, and PAC providers (that is, home health agencies (HHAs), skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs), and long-term care hospitals (LTCHs), as defined at section 1899B(a)(2) of the Act)
Consistent with the CJR Model, we propose that hospitals would be the model participants in CJR-X. Because it is the hospital that furnishes the surgical procedure, we believe it is most straightforward and appropriate for the hospital to be the model participant. Hospital staff already manage discharge needs and placement recommendations as part of post-procedural or post-discharge care for beneficiaries. In addition, hospitals are more likely than other providers or suppliers to have access to the resources to appropriately manage and coordinate care throughout the episode and have an adequate volume of episodes to warrant investment in more robust care coordination. For the purposes of CJR-X, the term “hospital” means a hospital as defined in section 1886(d)(1)(B) of the Act, which includes only acute care hospitals and excludes certain specialty hospitals, such as psychiatric and cancer hospitals. Although the CJR Model was confined to certain geographic areas, we propose at § 512.610(a) that CJR-X participation would be mandatory for all acute care hospitals nationwide, provided they meet the proposed “CJR-X participant” definition.
We propose to define a “CJR-X participant” as an acute care hospital located in any of the 50 United States, District of Columbia, or U.S. Territory that initiates LEJR episodes and is paid
Further, we propose at § 512.610(a)(2) that CJR-X participants will remain CJR-X participants, unless they no longer meet the definition of CJR-X participant, CMS terminates CJR-X or the CJR-X participant receives notice of termination from CJR-X in accordance with § 512.165.
We considered but did not propose including Ambulatory Surgery Centers (ASCs) as CJR-X participants. Including ASCs would present a significant departure from the CJR Model test and introduce overwhelming uncertainty to the CMS Chief Actuary's certification. We note that CMS issued a request for information regarding ASC inclusion in TEAM in section X.A.2.d. of this proposed rule. Should ASCs be included in TEAM in the future and subsequent TEAM evaluation reports produce data to support ASC inclusion in CJR-X, any such participation change would be proposed through future notice and comment rulemaking.
We seek comment on our proposal at § 512.605 to define “hospital” as defined in section 1886(d)(1)(B) of the Act and “CJR-X participant” as a hospital located in any of the 50 States, District of Columbia, and U.S. Territories that initiates LEJR episodes and is paid under both the IPPS and OPPS. We also seek comment on our proposals at § 512.610(a) that CJR-X participation would be mandatory for all eligible acute care hospitals nationwide and that CJR-X participants will remain CJR-X participants, unless they no longer meet the definition of CJR-X participant, CMS terminates CJR-X, or the CJR-X participant receives notice of termination from CJR-X in accordance with § 512.165.
We propose at § 512.610(b)(1) to exclude hospitals that are TEAM participants. Although LEJR episodes in TEAM are similar to the proposed LEJR episodes in CJR-X, there are a few key differences. Most notably, TEAM tests 30-day episodes, while CJR-X would continue testing 90-day episodes that demonstrated savings in the CJR Model. Excluding TEAM participants from CJR-X would allow us to compare the impacts of 30- and 90-day episodes on savings and quality of care, while maintaining a consistent methodology across all five TEAM episodes. Moreover, we believe that subjecting TEAM participants to CJR-X rules for LEJR episodes and TEAM rules for the remaining four TEAM episodes would create confusion for providers and deviate from a consistent testing methodology.
We note that the TEAM exclusion applies to both mandatory and voluntary TEAM participants, as voluntary TEAM participants must remain in the model until its conclusion per § 512.510(a). We also note that this exclusion would expire at the conclusion of the TEAM test or if at any point a TEAM participant no longer meets the TEAM participant definition, at which point TEAM participants that meet CJR-X participant definition at § 512.605 would become CJR-X participants. In addition, while it is too early to make assumptions about the model test, should TEAM be expanded in the future, we would evaluate whether to continue LEJR in either TEAM or CJR-X, as we do not envision LEJR episodes being expanded in both concurrently.
We propose at § 512.610(b)(2) to exclude acute care hospitals in the State of Maryland because of its unique rate-setting authority, as described in section X.C.2.f.(3)(a) of this proposed rule. We do not believe that the regional pricing methodology used in CJR-X would accurately reflect episode spending for Maryland hospitals. We acknowledge that the State of Maryland is participating in the Achieving Healthcare Efficiency through Accountable Design (AHEAD) model, with which CJR-X would allow concurrent participation. Further, we are aware that Maryland's rate setting authority is in transition and will conclude at the end of 2027. Therefore, we may consider, through future notice and comment rulemaking, modifications to our proposed policy to exclude Maryland from CJR-X and our proposed policy to permit concurrent participation with the AHEAD model.
We seek comment on our proposals at § 512.610(b) to exclude TEAM participants and Maryland hospitals from CJR-X.
We propose at § 512.620(a) that the beneficiaries whose care would be included in CJR-X would include those who meet the following beneficiary inclusion criteria at the time of their admission for an anchor procedure or anchor hospitalization:
• Is enrolled in Medicare Part A and Part B;
• Has Medicare as their primary payer;
• Is not eligible for Medicare on the basis of end-stage renal disease, as described at § 406.13;
• Is not enrolled in any managed care plan (for example, Medicare Advantage, Health Care Prepayment Plans, cost-based health maintenance organizations);
• Is not covered under a United Mine Workers of America health plan, which provides health care benefits for retired mine workers; and
• Is in an episode, as defined at § 512.605.
We believe this is the most appropriate Medicare population to include in CJR-X because it aligns with the CJR Model population tested. Excluding beneficiaries enrolled in managed care or covered by payment systems other than the IPPS and OPPS ensures that CMS has complete and consistent claims data across the full episode of care, including inpatient, outpatient, physician, and post-acute services, which is essential for setting target prices, calculating episode spending, and assessing quality performance. In addition, excluding beneficiaries with Medicare eligibility based on end-stage renal disease and those with other primary payers helps reduce clinical and financial heterogeneity that could compromise comparability across episodes and participant hospitals. Together, these eligibility criteria ensure that CJR-X hospitals are held accountable only for episodes over which Medicare has primary payment responsibility and complete data visibility.
We recognize that a CJR-X episode could be initiated for a beneficiary who ceases to meet the beneficiary inclusion criteria at some point during the episode. In this case, we propose at § 512.620(b) that we would cancel the episode. We seek comment on the proposed beneficiary inclusion criteria and the proposal to cancel episodes if a
We are proposing CJR-X because we believe it offers an opportunity to improve quality of care. We believe that the policies of the model would make care more easily accessible to consumers when and where they need it and increase consumer engagement and beneficiary choice. For example, under this model we are proposing certain waivers which would offer CJR-X participants additional flexibilities with respect to furnishing telehealth services and care in SNFs, as discussed in section X.C.2.j. of this proposed rule. Conversely, we do note that these same opportunities could be used to try to steer beneficiaries into lower cost services without an appropriate emphasis on maintaining or increasing quality given the incentives to reduce Medicare spending in the model.
We believe that existing Medicare provisions would be effective in protecting beneficiary freedom of choice and access to appropriate care under CJR-X. Further, since CJR-X would be expanded nationally, diverting care to hospitals not in the model would be less of an issue given CJR-X's broad scale. Because we have proposed mandatory hospital participation, individual beneficiaries would not be able to opt out of CJR-X when they receive care from a CJR-X participant. Moreover, allowing beneficiaries to opt out would be inconsistent with other Medicare policies. For example, we do not allow beneficiaries to opt out of a payment system, such as the IPPS. Moreover, we do not believe that an ability to opt out of a payment system is a critical factor in upholding beneficiary choice if other safeguards are in place. Specifically, we do not believe this would be an issue for CJR-X, given that this model does not increase beneficiary cost-sharing. However, CJR-X beneficiaries are not precluded from seeking care from providers or suppliers who do not participate in CJR-X. We do believe that full notification and disclosure of the payment model and its possible implications is critical for CJR-X beneficiary understanding and protection. It is important to create safeguards for CJR-X beneficiaries to ensure that care recommendations are based on clinical needs and not inappropriate cost savings. It is also important for CJR-X beneficiaries to know that they can raise any concerns with their clinicians, with 1-800-MEDICARE, or with their local Quality Improvement Organizations (QIOs).
This proposed CJR-X model would neither limit a CJR-X beneficiary's ability to choose providers nor limit Medicare's coverage of items and services available to the CJR-X beneficiary. CJR-X beneficiaries may continue to choose any Medicare participating provider, or any provider who has opted out of Medicare, with the same costs, copayments and responsibilities as they have with other Medicare services. As proposed in section X.C.2.(m) of this proposed rule, CJR-X participants would be subject to the standard provisions at §§ 512.100 through 190, including the beneficiary protections noted in § 512.120 that cover beneficiary freedom of choice, availability of services, and descriptive model materials and activities.
Further, the proposed model would allow CJR-X participants to enter into CJR-X sharing arrangements with certain providers, as proposed in section X.C.2.i.(4) of this proposed rule, and these preferred providers may be recommended to CJR-X beneficiaries as long as those recommendations are made within the constraints of current law. However, CJR-X participants may not limit CJR-X beneficiaries to a preferred or recommended providers list that is not compliant with restrictions existing under current statutes and regulations.
Moreover, as proposed in section X.C.2.i.(3) of this proposed rule, CJR-X participants may not charge any CJR-X collaborator a fee to be included on any list of preferred providers or suppliers, nor may the hospital accept such payments, which would be considered to be outside the realm of risk-sharing agreements. Thus, this proposed payment model does not create any restriction of beneficiary freedom to choose providers, including surgeons, hospitals, post-acute care or any other providers or suppliers. Moreover, we anticipate that care pathway redesign occurring in response to the model will increase coordination of care, improve the quality of care, and decrease cost for all patients, not just for Medicare beneficiaries. As it would be unlikely that providers would treat individuals differently based on health care insurance, we anticipate care delivery impacts to promote consistent treatment of all beneficiaries.
We propose at § 512.622(a)(1) that every CJR-X participant must provide written notification to each CJR-X beneficiary of his or her inclusion in the CJR-X model. We believe that appropriate beneficiary notification should explain the model, advise patients of both their clinical needs and their care delivery choices, and should clearly identify any CJR-X collaborator, as defined at § 512.605. That is, the CJR-X participant would be required to disclose any providers, suppliers, or other entities with which the CJR-X participant holds a sharing arrangement as a “financial partner of the hospital for the purposes of participation in CJR-X.”
We believe that this notification would enhance CJR-X beneficiaries' understanding of their care and is an important safeguard for ensuring CJR-X beneficiaries receive all medically necessary services. It is also an important clinical opportunity to better engage CJR-X beneficiaries in shared decision-making and understanding competing benefits, even as they are presented with cost-saving recommendations. Therefore, we propose at § 512.622(a)(4) that the CJR-X beneficiary notification must:
• Explain the CJR-X model and how it might be expected to affect the CJR-X beneficiary's care;
• Inform CJR-X beneficiaries that they retain freedom of choice to choose providers, suppliers, and services;
• Explain how the CJR-X beneficiary can access care records and claims data through an available patient portal and through sharing access to care-givers to their Blue Button® electronic health information;
• Explain that CJR-X participants may receive beneficiary-identifiable claims data;
• Advise CJR-X beneficiaries that all standard Medicare beneficiary protections remain in place, including the ability to report concerns of substandard care to QIOs and 1-800-MEDICARE; and
• Provide a list of the CJR-X collaborators with which the CJR-X participant has a sharing arrangement.
We recognize that an exhaustive list of CJR-X collaborators may lengthen the beneficiary notification, unnecessarily. Therefore, this requirement may be fulfilled by the CJR-X participant including in the detailed notification a publicly available web address where CJR-X beneficiaries may access the CJR-X collaborators list.
After carefully considering the appropriate timing and circumstances for the necessary CJR-X beneficiary notification, we are proposing at § 512.622(a)(2) that CJR-X participants must provide the CJR-X beneficiary notification prior to discharge from either the anchor hospitalization or the anchor procedure for a Medicare beneficiary who would be included under the model. The purpose of this proposed policy is to ensure that all CJR-X beneficiaries receive the beneficiary notification materials, and
We also considered whether to require CJR-X participants to provide this information at the point of admission, as hospitals provide other information concerning patient rights and responsibilities at that time. However, we recognize that, due to a CJR-X beneficiary 's condition, it may not be feasible to provide notification at such time. We invite comment on ways in which the timing and source of beneficiary notification could best serve the needs of CJR-X beneficiaries without creating unnecessary administrative work.
In addition, we propose at § 512.622(b) that CJR-X participants must require every CJR-X collaborator to provide written notice, to applicable CJR-X beneficiaries that describes the existence of a sharing arrangement with the CJR-X participant and the basic quality and payment incentives under the model. We propose that the notice must be provided no later than the time at which the beneficiary first receives an item or service from the CJR-X collaborator during an episode. We recognize that due to the patient's condition, it may not be feasible to provide notification at such time, in which case the notification must be provided to the beneficiary or his or her representative as soon as is reasonably practicable. If the beneficiary notification policy is finalized, CMS would post a CJR-X collaborator template for use by CJR-X participants on the CJR-X website.
We considered, but are not proposing, requiring the CJR-X beneficiary notifications only during the years that both CJR-X and TEAM are implemented. After TEAM ends, then we would no longer require CJR-X beneficiary notifications since all hospitals nationwide, barring any excluded hospitals from CJR-X, would be held accountable for LEJR episodes. We also considered, but are not proposing, not requiring the CJR-X beneficiary notifications. We acknowledge other CMS initiatives, such as the Hospital Value Based Purchasing Program or the Expanded Home Health Value-Based Purchasing Model, do not require entities participating in those initiatives to provide beneficiary notifications. We recognize a model that is expanded nationally, such as the proposed CJR-X, would become standard practice for hospitals to manage beneficiaries in a LEJR episode of care. Therefore, the beneficiaries' experience or treatment options should not materially change between participating hospitals, nor would beneficiaries' or out-of-pocket costs, freedom of choice, or access to care differ. Further, we recognize that beneficiaries already receive a significant amount of information on discharge from the hospital or hospital outpatient department and a beneficiary notification may go unnoticed or be redundant. That is because we believe the CJR-X participant would already be communicating to the CJR-X beneficiary the hospital's responsibility to manage the CJR-X beneficiary during the episode, including in the 90-day post-discharge period. Thus, the administrative burden of notification may outweigh its value.
We invite public comment on our proposed requirements for notification to CJR-X beneficiaries at § 512.622. We also seek comment on our consideration to not require CJR-X beneficiary notifications.
A key design feature of episode-based payment models is the definition of the episodes included in the model. The episode definition has two significant dimensions—(1) a clinical dimension that describes which clinical conditions and associated services are included in the episode; and (2) a time dimension that describes the beginning and end of the episode, its length, and when the episode may be cancelled prior to the end of the episode.
In testing payment models, we recognize the importance of there being clear potential for participating hospitals to successfully drive care improvements by streamlining care pathways and transitions between clinical settings. We aim to design models with episodes that are clinically similar, for which episode spending is more predictable. We also note that episodes with a greater proportion of spending in the post-acute period relative to the anchor hospitalization or procedure offer greater opportunity for improved care transitions for beneficiaries to reduce unnecessary hospitalizations and emergency care.
Given the promising findings for LEJR in the CJR Model and BPCI Advanced, we believe there is value in an expansion of the CJR Model test through CJR-X, particularly given the high volume of LEJR procedures among the Medicare population. Based on 2021 Medicare claims data, LEJR episodes were the highest volume, highest cost of the BPCI Advanced surgical episode categories. There were 204,160 episodes with a total cost of $5.01 billion, with more than 40 percent of spending occurring in the post-acute period. Moreover, based on the CJR Model evaluation, LEJR episodes continue to offer opportunities for improvement.
We propose to define “episode” to mean all Medicare Part A and B items and services described in § 512.625(b) (and excluding the items and services described in § 512.625(c)) that are furnished to a beneficiary described in § 512.620 during the time period that begins on the date of the beneficiary's admission to an anchor hospitalization or the date of the anchor procedure, as described at § 512.625(a), and ends on the 90th day following the date of discharge from the anchor hospitalization or anchor procedure, with the date of discharge or date of the anchor procedure itself being counted as the first day in the 90-day post-discharge period, as described at § 512.630. In the case that an anchor hospitalization for the same episode type occurs within 3 days of an anchor procedure (for example, an outpatient procedure is later converted to an inpatient admission), the anchor procedure episode is canceled, and the episode start date for the anchor hospitalization is the same as the outpatient procedure. This episode definition aligns with the CJR Model and with TEAM, at § 510.2 and § 512.505, respectively, which provides consistency across Innovation Center models. In addition, this proposed policy aligns with Medicare's 3-day payment guidelines that require hospitals to bundle the technical component of outpatient services with the inpatient claim if they are related to the same condition and occur in the 3 days preceding inpatient admission, in compliance with section 1886 of the Act.
We seek comment on our proposed episode definition at § 512.605.
We believe that a straightforward approach for identifying CJR-X episodes is important for the care redesign that is required for model success. As was done in the CJR Model, hospitals participating in the proposed CJR-X would be able to identify episodes
We propose to identify LEJR episodes by certain MS-DRGs and HCPCS codes included on claims. Specifically, IPPS discharges under MS-DRG 469, 470, 521, or 522; and OPPS claims for HCPCS codes 27130 or 27447, would trigger LEJR episodes in CJR-X. This approach offers operational simplicity for both providers and CMS and is consistent with the approach taken by previous models to identify episodes.
We seek comment on our proposal at § 512.625(a) to identify LEJR episodes with MS-DRGs and HCPCS in CJR-X.
We propose that, consistent with the CJR Model, LEJR episodes in CJR-X would include inpatient hip, knee, and ankle replacement procedures paid through the IPPS under select MS-DRGs and hospital outpatient hip and knee replacement procedures billed under select HCPCS codes through the OPPS. We propose to exclude from CJR-X ankle replacements performed in the outpatient setting. Total ankle arthroplasty (TAA) was on the IPO list until 2021 and, therefore, was not included in BPCI Advanced or the CJR Model. Although we did consider including outpatient TAAs in CJR-X, to do so at this time would represent too great a departure from the CJR Model to meet the limits of OACT certification. However, we are currently testing outpatient TAAs, as identified by HCPCS code 27702, in TEAM. If we consider adding outpatient TAAs to CJR-X at some point in the future based on TEAM evaluations, we would propose that change through notice and comment rulemaking.
We seek comment on the MS-DRG and HCPCS codes proposed for inclusion in CJR-X at § 512.625(a) and our proposal to exclude outpatient TAA from the LEJR episode category.
We propose that, if a beneficiary meets the beneficiary inclusion criteria at § 512.620, an LEJR episode would begin when a beneficiary is admitted for an anchor hospitalization for one of the following MS-DRGs or an anchor procedure indicated by one of the following HCPCS codes on an outpatient claim (specifically, a hospital's institutional claim for an included outpatient procedure billed through the OPPS):
MS-DRGs and HCPCS—
• 469 (Major joint replacement or reattachment of lower extremity with major complications or comorbidities (MCC)).
• 470 (Major joint replacement or reattachment of lower extremity without MCC).
• 521 (Hip replacement with principal diagnosis of hip fracture with MCC).
• 522 (Hip replacement with principal diagnosis of hip fracture without MCC).
• 27447 (Total knee arthroplasty).
• 27130 (Total hip arthroplasty).
We propose that the episode start date would be the day of the anchor procedure for outpatient procedures and the date of admission for an inpatient hospitalization. However, if an anchor hospitalization is initiated on the same day as or within 3 days of an outpatient LEJR procedure, we propose to begin the episode on the date of the outpatient procedure rather than the date of the inpatient admission.
We recognize there could potentially be episodes initiated as a result of a beneficiary being transferred from one CJR-X participant hospital to another. In this case, and in alignment with the CJR Model and TEAM, these would be viewed as two separate hospitalizations. Specifically, if the initial inpatient admission is for an MS-DRG in CJR-X, then a transfer to another hospital would not initiate a new anchor hospitalization, rather it would be included in the LEJR episode initiated from the first hospitalization. However, if a beneficiary is admitted to a hospital for an MS-DRG not included in CJR-X, and subsequently transferred to another CJR-X hospital from which they are discharged under an MS-DRG that is included in CJR-X, the second hospitalization would initiate the LEJR episode at the second CJR-X hospital.
We seek comment on our proposal at § 512.630(c) for initiating CJR-X episodes.
Like previous episode-based payment models, CJR-X would incentivize comprehensive, coordinated, patient-centered care through inclusive episodes. We propose to include in the episode all items and services paid under Medicare Part A and Part B during the performance period, unless such items and services fall under a proposed exclusion described in section X.C.2.d.(3)(c). of this proposed rule.
We propose to include all Part A services furnished during the 90-day post-discharge period of the episode, other than certain excluded hospital readmissions, as including post-discharge Part A services, such as post-acute care, would ensure the episode is comprehensive in nature. In particular, we believe that claims for services with diagnosis codes that are directly related to LEJR episodes or the quality and safety of care furnished during the episode (for example, surgical would infection) should be included in an episode. Thus, we propose that items and services for episodes would include all items and services paid under Medicare Part A and Part B, subject to the proposed exclusions in section X.C.2.d.(3)(c) of this proposed rule. For example, the following is a non-exhaustive list of services included in episodes:
• Physicians' services.
• Inpatient hospital services, including services paid through IPPS operating and capital payments.
• Inpatient psychiatric facility (IPF) services.
• Long-Term Care Hospital (LTCH) services.
• Inpatient Rehabilitation Facility (IRF) services.
• Skilled Nursing Facility (SNF) services.
• Home Health Agency (HHA) services.
• Hospital outpatient services.
• Outpatient therapy services.
• Clinical laboratory services.
• Durable medical equipment.
• Part B drugs and biologics except for those excluded under § 512.625(c) as proposed.
• Hospice services.
• Part B professional claims dated in the 3 days prior to an anchor hospitalization if a claim for the surgical procedure is not detected as part of the hospitalization because the procedure was performed by the participant on an outpatient basis but the patient was subsequently admitted as an inpatient.
These items and services are similar to those included in the CJR Model and reflect the full range of Medicare-covered services that would be furnished to a CJR-X beneficiary during an episode. As joint replacement episodes frequently involve services across multiple providers and settings, we believe excluding these services would fragment financial accountability and undermine the model's ability to promote care coordination and cost containment. Moreover, including these services aligns incentives for hospitals to manage transitions of care, post-acute utilization, and complication-related services.
We seek comment on the items and services we are proposing to include in CJR-X at § 512.625(b).
We propose to exclude from episodes certain Part A and B items and services that are clinically unrelated to an LEJR procedure. The proposed exclusions would be applicable to episodes included during the baseline period, the three-year historical period used to construct target prices, as described in section X.C.2.f.(3)(a). of this proposed rule, and episodes initiated during a performance year. We propose to use these exclusions based on several years of experience with them and their suitability for LEJR episodes. The rationale for the proposed exclusions is consistent with the rationale for exclusions in the CJR Model (80 FR 73303) and TEAM (89 FR 69722) but differ slightly from both.
We propose to exclude from episodes all Part A and B items and services for hospital admissions and readmissions, for both the baseline period and performance years, for specific categories of diagnoses, such as oncology, trauma medical admissions, organ transplant, and ventricular shunts determined by MS-DRGs, as well as all of the following excluded Major Diagnostic Categories (MDC):
• MDC 02 (Diseases and Disorders of the Eye).
• MDC 14 (Pregnancy, Childbirth, and Puerperium).
• MDC 15 (Newborns).
• MDC 25 (Human Immunodeficiency Virus).
We propose to exclude from episodes IPPS new technology add-on payments for drugs, technologies, and services identified by value code 77 on IPPS hospital claims for episodes in the baseline period and performance years.
We also propose to exclude from episodes OPPS transitional pass-through payments for medical devices as identified through OPPS status indicator H for episodes in the baseline period and performance years. Through the established OPPS review process, we have determined that these technologies have a substantial cost but also lead to substantial clinical improvement for Medicare beneficiaries. This proposal is consistent with the CJR Model final exclusions policy (80 FR 73308 and 73315).
We propose to exclude hemophilia clotting factors (§ 412.115), identified through HCPCS code, diagnosis code, and revenue center on IPPS claims for episodes in the baseline period and performance years. In contrast to other drugs and biologics that are administered during an inpatient hospitalization and paid through the MS-DRG, hemophilia clotting factors are paid separately by Medicare in recognition of clotting factors being costly, yet essential, to care for certain beneficiaries. Because we do not believe that there are any spending efficiencies to be gained by including hemophilia clotting factors, we propose to exclude these high-cost drugs from episodes initiated during the baseline period and performance year.
We also propose to exclude from episodes certain Part B payments for high-cost drugs and biologics, low-volume drugs, and blood clotting factors for hemophilia patients billed on outpatient, carrier, and durable medical equipment claims for episodes in the baseline period and initiated in the performance years.
• For episodes included during the baseline period—
++ Drug/biologic HCPCS codes that are billed in fewer than 31 episodes in total across all episodes in CJR-X during the baseline period;
++ Drug/biologic HCPCS codes that are billed in at least 31 episodes in the baseline period, and have a mean allowed cost of greater than $25,000 per episode in the baseline period; and
++ HCPCS codes corresponding to clotting factors for hemophilia patients, identified in the quarterly average sales price file for certain Medicare Part B drugs and biologics as HCPCS codes with clotting factor = 1, HCPCS codes for new hemophilia clotting factors not in the baseline period, and other HCPCS codes identified as hemophilia.
• For episodes initiated during a performance year, in addition to those listed in the previous bullet, Part B payments for high-cost drugs and biologics, low-volume drugs, and blood clotting factors for hemophilia billed on outpatient, carrier, and durable medical equipment (DME) claims, including, but not limited to—
++ Drug/biologic HCPCS codes that were not included in the baseline period, and appear in 10 or fewer episodes in the performance year;
++ Drug/biologic HCPCS codes that were not included in the baseline period, appear in more than 10 episodes in the performance year, have a mean cost of greater than $25,000 per episode in the performance year;
++ Drug/biologic HCPCS codes that were not included in the baseline period, appear in more than 10 episodes in the performance year, have a mean cost of $25,000 or less per episode in the performance year, and correspond to a drug/biologic that appears in the baseline period list but was assigned a new HCPCS code between the baseline period and performance year; and
++ HCPCS codes for new hemophilia clotting factors not in the baseline period.
Complete lists of proposed excluded MS-DRGs for readmissions and proposed excluded HCPCS codes for Part B services furnished during episodes after beneficiary discharge from an anchor hospitalization would be posted on the CMS CJR-X web page within the Innovation Center website at
We seek comment on the proposed excluded services, the lists of excluded services, and the process for updating the lists of excluded services for CJR-X included in §§ 512.625(c), (d), and (e).
The proposed episodes would cover the surgical procedure and a subsequent period that is marked by significant PAC needs, potential complications of surgery, and short-term, intense management of chronic conditions that may be destabilized by a joint replacement. We believe that hospitals have substantial ability to influence the quality and efficiency of care that Medicare beneficiaries receive over the weeks and months following a procedure. For this reason, the CJR Model utilized a 90-day post-discharge episode duration. It is during this period that beneficiaries are provided the most intensive care for their recovery, including physical therapy and interventions to prevent complications. Notably, the professional payments to the surgeon under the PFS for the procedures included in LEJR are also paid as a global payment covering a 90-day period.
The 90-day episode tested under the CJR Model demonstrated savings while maintaining quality, although some stakeholders have stated a shorter episode length would be more appropriate. Specifically, shorter episodes exhibit less spending variability due to medical events outside the intended scope of the model and conditions unrelated to the joint replacement become more prevalent in the later stage of an episode. In addition, longer episodes increase the potential for ACO overlap (where a beneficiary aligned or assigned to an ACO has an episode included in CJR-X). In the TEAM final rule (89 FR 69727), we agreed that a 30-day episode could position the specialist as the principal provider near the anchor event with a hand-off back to the primary care provider for longitudinal care management and we believe that ACOs are better equipped to address the population health needs of Medicare beneficiaries. For these reasons, the Innovation Center is currently testing a 30-day episode duration in TEAM. Through future evaluations and direct comparison between TEAM and CJR-X, we can determine the optimal episode length to balance spending reductions and outcomes.
Based on the rationale noted earlier, we propose to end episodes 90 days after discharge from the anchor hospitalization or anchor procedure and that day 1 of the 90-day post-acute portion of the episode is the date of the anchor procedure or the date of discharge from an anchor hospitalization. To the extent that a Medicare payment for services included in an episode spans a period of care that extends beyond the episode duration, we propose that these payments would be prorated so that only the portion attributable to care during the fixed duration of the episode is attributed to the episode spending.
We seek comment on our proposal at § 512.630(d) to maintain a 90-day post-discharge episode length.
Similar to the CJR Model, we propose that, once an episode begins, the episode would continue until the end of the episode as described in section X.C.2.d.(3)(d). of this proposed rule, unless the episode is cancelled for certain reasons.
First, an episode would be canceled if the beneficiary ceases to meet any of the general beneficiary inclusion criteria described in section X.C.2.c. of this proposed rule. When a beneficiary's status changes during the episode, the episode target price would still reflect full payment for the episode. However, we would not have full Medicare episode payment data for the beneficiary to reconcile against the target price. Therefore, the episode would be canceled.
Second, in the case that a beneficiary has a subsequent inpatient admission for an episode on the same day as or within 3 days of an outpatient LEJR procedure, the outpatient episode would not initiate an anchor procedure and the outpatient procedure would instead initiate an anchor hospitalization. That is, the anchor hospitalization start date will be that of the outpatient procedure. We are proposing this policy because we believe that an inpatient episode should take precedence over an outpatient procedure performed on the same day, given the likelihood of higher spend associated with the inpatient episode and potential for higher clinical acuity.
Third, we propose to cancel the episode if a beneficiary dies at any point during the CJR-X episode. As discussed in the EPM proposed rule (81 FR 50841), we consider mortality to be a harmful beneficiary outcome that should be targeted for improvement through care redesign. We also believe holding participants responsible for episodes during which a beneficiary dies could encourage participants to actively reduce beneficiaries' risk of death. However, we acknowledge that the likelihood that a death that is unrelated to an LEJR procedure occurs is increased the further out from the anchor procedure or anchor hospitalization. Therefore, we believe that holding participants responsible for death during a 90-day episode would create too much uncertainty and variability for participants.
We note that TEAM only cancels episodes if death occurs during the anchor hospitalization or anchor procedure, but not if the death occurs in the post-discharge period (89 FR 69730). As we discussed in the CJR final rule (80 FR 73318), there would be limited incentive for efficiency that could be expected when death occurs during the anchor hospitalization itself. We considered aligning the CJR-X policy
Finally, we propose that episodes subject to extreme and uncontrollable circumstances (EUC) would be canceled, meaning that the services associated with the episode would continue to be paid through Original Medicare, but the episode would not be reconciled against a target price. We propose to base the CJR-X EUC definition on the definition finalized in the CJR 2018 final rule (83 FR 26604), which was designed to address the extreme and uncontrollable costs associated with natural disasters such as hurricanes, flooding, and wildfires. Specifically, we propose that the EUC policy would apply to CJR-X participants with a CCN address located in a county where both: (1) a major disaster has been declared under the Stafford Act; and (2) section 1135 waivers have been issued. We believe that it is appropriate for our EUC policy to apply only in the narrow circumstance of a major disaster, which is catastrophic in nature and tends to have significant impacts on infrastructure, rather than the broader grounds for which an emergency could be declared.
We considered alternative approaches to EUC policy that would allow mandated participants to meet the model's objectives when one or more campuses of a hospital system is in a disaster area but would fail to meet the requirements set forth here. Specifically, we recognize that some hospital systems span across regions or state lines and a location that is not identified by the “CCN address” could be in a disaster area. Therefore, we considered alternative methods of identifying CJR-X participants at an individual level using NPI, TIN, or a combination of CCN and another identifier. While we are proposing to continue using CCN address until and unless an alternative is determined to be appropriate, any change would first be proposed through notice and comment rulemaking.
Separately, we acknowledge that stakeholders have requested that emergency flexibilities be extended to cybersecurity attacks. We also realize that the difficulties such a scenario would cause for CJR-X participants would extend well beyond this model. Therefore, we would consider conforming to any future CMS policy that addresses emergent cybersecurity issues, as needed, through future notice and comment rulemaking.
We acknowledge this proposed EUC policy deviates from how the CJR Model addressed the COVID-19 PHE which fell under a major disaster declaration. During the PHE, the CJR Model effectively waived downside risk, which resulted in substantial losses to Medicare. We believe our proposed policy to cancel the episode, rather than waive downside risk, is a better long-term policy that avoids significant losses and gives flexibility to the CJR-X participant to manage a beneficiary's care and rely on FFS payments rather than be held accountable to spend below a target price. In regard to determining the start date of episodes to which the EUC would apply, we believe that episodes initiated during an emergency period or in the 30 days before the start date of an emergency period (as defined in section 1135(g) of the Act) should reasonably capture those beneficiaries whose high episode costs could be attributed to extreme and uncontrollable circumstances.
We also propose canceling a CJR-X episode if the beneficiary is in in the 30-day post-discharge period following a TEAM anchor hospitalization or anchor procedure (that is, for an episode at a non-CJR-X hospital). Further discussion of this proposal is discussed in section X.C.2.h.(2). of this proposed rule.
In summary, we propose that the following circumstances would cancel an episode:
• The beneficiary no longer meets the criteria for inclusion.
• The beneficiary dies during the episode.
• The CJR-X participant is subject to the EUC policy.
• The beneficiary is in a TEAM episode and has a LEJR procedure at a CJR-X participant during the 30-day post-discharge period after a TEAM anchor hospitalization or anchor procedure.
When an episode is canceled, we propose that the services furnished to beneficiaries prior to and following the episode cancellation would continue to be paid by Medicare as usual but there would be no episode spending calculation that would be reconciled against the target price (see section X.C.2.f.(5). of this proposed rule). As discussed in section X.C.2.j. of this proposed rule, waivers of program rules applicable to beneficiaries in episodes would apply to the care of beneficiaries who are in episodes at the time the waiver is used to bill for a service that is furnished, even if the episode is later canceled.
We seek comment on our proposal at § 512.630(e) to cancel episodes once they have begun but prior to the end of the 90-day post-discharge period under certain conditions.
The Medicare Modernization Act of 2003, the Affordable Care Act of 2010, and the Tax Relief and Healthcare Act of 2006 led to the implementation of several hospital quality reporting programs where payment reflects the quality of care delivered to Medicare beneficiaries. The CJR Model also tied quality to payment. We believe that future episode-based payment models, including the proposed CJR-X, should continue to link quality and payment to ensure ongoing incentives to improve patient outcomes and lower health care spending. This would be particularly important in an expanded model where some CJR-X participants will be new to episode-based payment models.
The CJR Model relied on data already reported to the Hospital Inpatient Quality Reporting (IQR) Program (section 1886(b)(3)(B)(viii) of the Act) to assess quality without additional reporting burden for CJR participants. Measures used in the CJR Model included a joint replacement-specific measure and a general patient experience survey of the hospital stay. Specifically, the CJR Model utilized the Hospital-level Risk-Standardized Complication Rate (RSCR) following elective primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) and the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure, further discussed in Section X.C.2.e.(3) of this proposed rule. In addition to the two HIQR measures, the CJR Model offered participants an opportunity to receive additional points towards their quality score for voluntarily submitting THA/TKA patient-reported outcomes (PROs) and limited risk variable data following eligible elective primary THA/TKA procedures.
We expect CJR-X will incentivize hospitals to engage in care redesign activities to reduce post-surgical complications and hospital readmissions and enhance patient
The quality measures we are proposing for CJR-X are a natural outgrowth of the CJR Model and maintain focus on patient safety, patient experience, and health outcomes for beneficiaries undergoing hip and knee arthroplasty. The proposed measures will sustain efforts to improve quality and health outcomes across a beneficiary's care journey and incentivize hospitals to better align and coordinate care across various programs and care settings. We believe the measures used for CJR (80 FR 73465 through 73507) remain appropriate for assessing care and propose to continue utilizing those measures for inpatient LEJR episodes in CJR-X. However, we propose two notable variations from the CJR Model measures, which are discussed in detail in sections X.C.2.e.(3). of this proposed rule.
First, we propose to weight the THA/TKA PRO more heavily. CMS is committed to increased use of PROs, whenever possible, as these measures provide valuable insights into the patient's perspective of care received. PROs assessing health status as a result of care are a critical type of outcome needed for health care quality assessment. The use of PRO measures (PROMs), standardized instruments that query patients' self-assessments of their health, provide a direct way to capture patients' experience of care and the results of that care. PROMs can assess multiple health domains, including physical health, emotional well-being, and social functioning through measuring outcomes relevant to each domain, such as symptoms, functional status, and mental status. As a result, they provide rich information on how care affects multiple dimensions of patients' well-being.
Broadly, patient-reported data includes PROs and electronic PROs (ePROs), which is the electronic capture of this data; PROMs, which reflect how the PRO data is reported (for example, a survey or questionnaire); and patient-reported outcome-based performance measures (PRO-PMs), which are reliable and valid quality measures of aggregated PRO data reported through a PROM and potentially used for performance assessment. In support of this goal, the HIQR now includes a THA/TKA PRO performance measure (PRO-PM), which was developed using the PRO data voluntarily submitted under the original CJR Model. Therefore, CJR-X would use THA/TKA PRO-PM data submitted to the HIQR for the purpose of scoring model performance.
Second, CJR-X would adopt two additional measures to account for the high percentage of hospital outpatient LEJRs procedures. Outpatient same-day surgery has become commonplace in the United States. Nearly 70 percent of all surgeries are now performed in the outpatient setting. In fact, by the end of the CJR Model, outpatient procedures accounted for nearly three in four THA and TKA episodes. For this reason, we believe it necessary to supplement the previous measure set to include metrics which capture complications and patient experience related to outpatient surgery. Therefore, we propose to use additional quality measures that are currently reported under the Hospital Outpatient Quality Reporting (HOQR) Program (section 1833(t)(17)(C) of the Act).
The proposed measures would be used to determine hospital quality of care in the form of a composite quality score (CQS), as described in section X.C.2.e.(5). of this proposed rule. As observed in the 7th annual evaluation of the CJR model, the proportion of hospitals achieving “Good” or “Excellent” quality ratings has increased over the course of the CJR Model.
The measures we propose are as follows:
• Hospital-level Risk-Standardized Complication Rate (RSCR) following elective primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA).
• Hospital Visits Within 7 days of Hospital Outpatient Department (HOPD) Surgery.
• Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS).
• Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems Survey (OAS CAHPS).
• Hospital-Level Total Hip and/or Knee Arthroplasty (THA/TKA) Patient Reported Outcome (PRO)-Based Performance Measure.
We believe the CJR-X proposed measure set would provide CMS with sufficient information to monitor quality performance related to care provided to beneficiaries undergoing a hip or knee replacement and for the purposes of model evaluation. However, should we determine the need to adjust the measure set in future performance years, we would propose any changes through notice and comment rulemaking.
We seek comment on additional measures that should be considered for CJR-X.
THA and TKA are commonly performed procedures for the Medicare population that improve quality of life and are generally considered safe. However, as discussed in the 2015 CJR final rule (80 FR 73473 through 73477), post-operative complications related to these procedures do exist. The hospital-level risk-standardized complication rate (RSCR) following elective primary THA and/or TKA, also referred to as the THA/TKA Complications measure, was finalized for use in the CJR Model to measure a hospital's rate of mortality, myocardial infarction, pneumonia, sepsis, pulmonary embolism, bleeding, infection, and mechanical failure following inpatient surgery.
The goal of this measure is to improve patient outcomes by providing patients, physicians, hospitals, and policy makers with information about complication rates following inpatient primary elective THA and/or TKA at a given hospital. Measurement of patient outcomes allows for a broad view of quality of care that encompasses more than what can be captured by individual process-of-care measures. Complex and critical aspects of care, such as communication between providers, prevention of and response to complications, patient safety, and coordinated transitions to the outpatient
The THA/TKA Complications measure captures the most common complications following inpatient THA and TKA. The outcome (complication) is defined as any one of the specified complications (not already present on admission) that occurs from the date of admission to 90 days following admission. Complications are counted in the measure only if they occur during the index hospital admission or during a readmission. The complication outcome is a dichotomous (yes/no) outcome. If a patient experiences one or more of these complications in the applicable time period, the complication outcome for that patient is counted in the measure as a “yes”: acute myocardial infarction (AMI), pneumonia or other acute respiratory complication, or sepsis/septicemia/shock during the index admission or within seven days of the start of the index admission; surgical site bleeding or other surgical site complication, pulmonary embolism, or death during the index admission or within 30 days of the start of the index admission; mechanical complication or periprosthetic joint infection/wound infection or other wound complication during the index admission or within 90 days of the start of the index admission.
In the 2015 CJR final rule (80 FR 73473 through 73477), we described our reasoning for adopting the THA/TKA Complications measure. We shared historical information about the development of the measure, its implementation in CMS programs, and its public display. Our rationale for its continued use is unchanged. Given the clinical alignment with the LEJR episode and its use in the CJR Model, the measure is well established and minimizes complexity since it is familiar to hospitals. Further, the measure reflects the full episode of care, and, given it is risk-standardized, reduces the incentive to avoid higher-risk patients. We believe this measure is beneficially actionable, at both the hospital and care team level, to influence performance through preoperative optimization, standardizing perioperative protocols, and incorporating post-acute care coordination and early complication management.
Therefore, we propose at § 512.635(a)(1) to use hospital-level RSCR following elective inpatient primary THA and/or TKA (CMIT ID #350) to assess episode quality performance starting in PY1 of CJR-X. We seek comment on the inclusion of this measure in the CJR-X measure set.
There are well-described and potentially preventable adverse events that occur after outpatient surgery, such as uncontrolled pain, urinary retention, infection, bleeding, and venous thromboembolism, which can result in unexpected hospital visits. Similarly, non-clinical patient considerations, such as lack of transport home upon discharge and delayed start of surgery, are primary causes of unanticipated yet preventable hospital admissions following same-day surgery.
National estimates of hospital visit rates following surgery vary from 0.5 to 9.0 percent based on the type of surgery, outcome measured (admissions alone or admissions and emergency department visits), and timeframe for measurement after surgery. Additionally, these rates may vary among HOPDs, suggesting variation in surgical and discharge care quality. Therefore, using a quality measure of hospital visits following outpatient same-day surgery can improve transparency, inform patients and providers, and foster quality improvement.
The Hospital Visits within 7 days of Hospital Outpatient Department (HOPD) Surgery measure assesses quality of care following surgery or cystoscopy performed in the hospital outpatient setting for Medicare beneficiaries. The measure outcome is any of the following hospital visits: (1) an inpatient admission directly after the surgery; or (2) an unplanned hospital visit (inpatient admission, observation stay, or emergency department visit) occurring after discharge or within 7 days of the surgery. The measure score is a ratio of the predicted to expected number of post-surgical hospital visits among the HOPD's patients. The denominator is the expected number of hospital visits given the HOPD's case mix and surgical procedure mix. The numerator is the number of hospital visits predicted for the HOPD's patients accounting for its observed rate, the number of surgeries performed at the HOPD, the case mix, and the surgical procedure mix. A score of less than one indicates the HOPD's patients were estimated as having fewer post-surgical visits than expected compared to HOPDs with similar surgical procedures and patients. A ratio of greater than one indicates the HOPD's patients were estimated as having more visits than expected.
Although it is not specific to outpatient LEJRs, we believe the Hospital Visits within 7 Days of HOPD Surgery measure is an appropriate quality measure for inclusion in CJR-X model because it captures early, unplanned hospital utilization following outpatient surgical procedures, including elective total hip and total knee arthroplasty. It assesses complications similar to several of those included in the THA/TKA Complications measure and, for that reason, is a good complement to the original CJR inpatient measure. As joint replacement care is primarily furnished in outpatient settings, we believe this measure would help ensure that quality accountability under CJR-X reflects current clinical practice across care settings. The measure assesses early post-operative safety and care coordination by identifying emergency department visits, observation stays, and unplanned inpatient admissions shortly after discharge—events that are often associated with potentially preventable complications or gaps in discharge planning and post-operative support. We believe performance on this measure is actionable for hospitals and clinicians and complements the existing CJR-X inpatient complications measure in supporting the model's goals of improving quality, enhancing patient safety, and reducing avoidable episode spending.
We propose at § 512.635(a)(2) to use the Hospital Visits within 7 days of HOPD Surgery (CMIT ID #344, OP-36) measure to assess outpatient episode quality performance starting in PY1 of
The Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS) is a national, standardized, publicly-reported survey instrument and data collection methodology for measuring patients' perceptions of their hospital experience.
HCAHPS is a 32-item survey instrument that produces 11 publicly reported measures: 7 multi-item measures (communication with doctors, communication with nurses, restfulness of hospital environment, care coordination, responsiveness of hospital staff, communication about medicines, and discharge information); and 4 single-item measures (cleanliness of the hospital environment, information about symptoms, overall rating of the hospital, and recommendation of hospital). The FY 2025 IPPS/LTCH PPS final rule describes HCAHPS survey measure updates starting with January 2025 discharges.
The HCAHPS Survey asks recently discharged patients about aspects of their hospital experience that they are uniquely suited to address. The core of the survey contains 20 items that ask how often or whether patients experienced a critical aspect of hospital care, rather than whether they were satisfied with their care and two global questions about rating and recommending the hospital. Also included in the survey are three screener items that direct patients to relevant questions, five items to adjust for the mix of patients across hospitals, and two items that support Congressionally-mandated reports. Hospitals may include additional questions after the core HCAHPS items. HCAHPS is administered to a random sample of adult inpatients between 2 to 42 days after discharge. Patients admitted in the medical, surgical and maternity care service lines are eligible for the survey; HCAHPS is not restricted to Medicare beneficiaries. Hospitals may use an approved survey vendor or collect their own HCAHPS data if approved by CMS to do so. HCAHPS can be implemented in six survey modes: mail, telephone, mail with telephone follow-up, web with mail follow-up, web with telephone follow-up, or web with mail and telephone follow-up, each of which requires multiple attempts to contact patients. Hospitals must survey patients throughout each month of the year. IPPS hospitals must achieve at least 300 completed surveys over four calendar quarters.
We believe the HCAHPS survey (CMIT ID #338) is an appropriate quality measure for inclusion in CJR-X because it relies on patient-reported experiences of hospital care, including communication with providers, responsiveness of staff, and discharge information, which are critical to successful joint replacement episodes. We believe patient experience is particularly relevant in the context of episode-based payment models, as effective communication and care transitions are closely associated with adherence to post-acute care plans, rehabilitation participation, and reduced risk of avoidable utilization. Because HCAHPS is a standardized, nationally-validated survey, it allows for consistent comparison of hospital performance. Moreover, the current use of this measure in the HIQR removes the need for CJR-X to introduce additional reporting burden. Including this measure would help ensure that incentives under CJR-X continue to support patient-centered care and balance cost containment with accountability for quality and beneficiary experience.
For the reasons specified previously, we propose at § 512.635(a)(3) to use the HCAHPS (CMIT ID #338) survey to assess inpatient episode quality performance starting in PY1 of CJR-X. We seek comment on the inclusion of this measure in the CJR-X measure set.
The OAS CAHPS is the complement to the HCAHPS used for inpatient episodes. The OAS CAHPS survey collects feedback on patients' experiences or care in Medicare-certified HOPDs and ambulatory surgery centers (ASCs).
We believe the OAS CAHPS survey is an appropriate quality measure for inclusion in CJR-X because it captures beneficiaries' experiences with care in outpatient surgery settings, which are the primary setting for elective total hip and total knee arthroplasty. The inclusion of this measure would ensure that patient experience accountability is measured under CJR-X, regardless of setting. The survey assesses key domains such as communication with providers, information provided before and after surgery, pain management, and care coordination, all of which are critical to safe recovery and successful post-operative outcomes. OAS CAHPS is a standardized, nationally developed instrument that allows for consistent comparison of performance and its inclusion supports CJR-X's goals of promoting patient-centered care, care coordination, and high-quality outcomes across the episode.
We considered but did not propose the Patient Understanding of Key Information Related to Recovery After a
This measure was also considered because it is used in TEAM and, as we have previously stated, we attempted, where feasible, to align CJR-X policies with TEAM to ensure a more reliable and valid comparison between the two models. Moreover, for reasons previously discussed, we strive to use PROs wherever possible to ensure patient voice is appropriately reflected in assessing quality of care. However, as a new measure, there is insufficient data available to reasonably estimate how CJR-X participants might perform on the Information Transfer PRO-PM. Because the CMS Chief Actuary requires a high level of certainty for estimating participant performance in order to certify a model for expansion, we were limited to established measures with sufficient historical data available for analysis. Until adequate data for the Information Transfer PRO-PM is available (which could potentially be attained through TEAM evaluations), we will use the OAS CAHPS measure. Should we propose to utilize the Information Transfer PRO-PM in the future, we would propose such a change through notice and comment rulemaking.
Therefore, we propose at § 512.635(a)(4) to use the OAS CAHPS (CMIT #162, OP-46) to assess outpatient episode quality performance starting in PY1 of CJR-X. We seek comment on the inclusion of this measure in the CJR-X measure set.
Administrative claims-based THA/TKA Complications and hospital readmission measures have been publicly reported since 2013. However, neither of these measures capture the reasons for which patients undergo elective THA and TKA (for example, Will quality of life be improved after undergoing the procedure?). Therefore, a quality measure based upon PRO data provides both patients and providers with a unique and critical perspective on care.
As the goal of the procedures is to improve quality of life, THA and TKA are ideal candidates for assessing PROs. The original CJR model included voluntary reporting of PRO data. In order to meet the requirements for successful submission of PRO data, hospitals had to submit the Veterans RAND 12 Item Health Survey (VR-12) or Patient-Reported Outcomes Measurement Information System (PROMIS) Global-10 generic PRO survey; and the (HOOS Jr.)/(KOOS Jr.) or HOOS/KOOS subscales PRO survey for patients undergoing eligible elective primary THA/TKA procedures.
Using the data collected from CJR participants, CMS developed the THA/TKA PRO-PM (CMIT ID #1618) to assess the quality of care delivered to Medicare beneficiaries undergoing elective THA or TKA.
The Hospital-Level THA/TKA PRO-PM measure is an appropriate quality measure for inclusion in CJR-X because it directly assesses improvements in patients' pain, physical function, and health-related quality of life following elective joint replacement. Unlike utilization- or complication-based measures, this measure captures outcomes that matter most to beneficiaries and reflects the primary clinical goal of total hip and knee arthroplasty. The measure evaluates change in patient-reported outcomes from before surgery to after recovery, which provides a meaningful assessment of episode-level effectiveness and complements existing CJR-X quality measures. In addition, because the measure is risk-adjusted and allows for fair comparison across hospitals, it would support accountability while minimizing incentives to avoid higher-risk patients. Including this measure would strengthen alignment between the CJR-X financial incentives and patient-centered care and support the model's goals of improving quality, value, and beneficiary experience across the episode of care.
As stated, THA/TKA PRO-PM reporting is currently only mandatory in the HIQR. However, we believe the inpatient measure provides an overall reflection of hospital performance related to LEJR care and can appropriately be used to infer quality of care for outpatient episodes even in the absence of outpatient-specific PRO collection. Therefore, we do not propose to require PRO submission for outpatient CJR-X episodes but will use the inpatient THA/TK PRO-PM to assess quality of care for all LEJR episodes, regardless of setting.
We note that voluntary THA/TKA PRO reporting to the HOQR (OP-42) has already begun for procedures performed in CY 2025 and mandatory reporting will begin for procedures performed in CY 2028 (2031 payment determination).
Therefore, we propose at § 512.635(a)(5) to use the Hospital-Level THA/TKA PRO-PM (CMIT ID #1618) to assess inpatient and outpatient LEJR episode quality performance starting in PY1 of CJR-X. We seek comment on the inclusion of this measure in the CJR-X measure set and alternatives to our proposal to apply the PRO-PM to outpatient episodes.
We believe that the display of measure results is an important way to educate the public on hospital performance and increase the transparency of the model. We propose
We also recognize that measure performance periods would not align perfectly with performance years based on availability of data needed to assess quality performance in CJR-X. We propose the following measure performance periods, summarized in Table X.C.-01. While only 5 performance years are displayed in the table, we are proposing that the measure performance periods would continue at the same cadence each performance year. Where possible, these proposed measure performance periods align with existing CMS quality reporting program measure performance periods to minimize CJR-X participant confusion. We also acknowledge that the measure performance periods do not exactly line up with the performance years used in CJR-X. While this creates some disparity between measure performance periods and model performance years, we believe this approach is the least burdensome to CJR-X participants because it does not require them to report on these measures separately for CJR-X. Additionally, this approach is similar to how some measures were captured in the original CJR model as well as TEAM.
We seek comment on our proposals at § 512.635(e) on how quality measures in CJR-X would be displayed and the quality measure performance periods.
We believe it is important to be transparent and to outline the form, manner, and timing of quality measure data submission so that accurate measure results are provided to hospitals, and that timely and accurate calculation of measure results are consistently produced to determine reconciliation payment amounts and repayment amounts. We propose that data submission for the Hospital-Level RSCR Following Elective Primary THA and/or TKA (CMIT ID #350), the HCAHPS survey (CMIT ID #338), and the Hospital-Level THA/TKA PRO-PM (CMIT #1618) would be accomplished through existing Hospital Inpatient Quality Reporting Program processes. Since these measures are reported to the Hospital IQR or other CMS quality reporting programs, CJR-X participants would not need to submit additional data for CJR-X.
For measures in the outpatient setting, we propose that data submission for the Hospital Visits within 7 days of HOPD Surgery (CMIT ID #344, OP-36) and the OAS CAHPS (CMIT #162) survey be accomplished through the existing Hospital Outpatient Quality Reporting Program. Therefore, CJR-X participants would not need to submit additional data for CJR-X.
We believe that the proposed CJR-X provides another mechanism for CJR-X participants to improve quality of care, while also achieving cost efficiency. Incentivizing high-value care through episode payments for LEJR is a primary objective of the model. Therefore, incorporating quality performance into the episode payment structure is an essential component of CJR-X, just as it was for the CJR Model (80 FR 73370) and for TEAM (89 FR 69774). We believe it is important for CJR-X to link the financial reward opportunity with performance in the quality of care for Medicare beneficiaries in a LEJR episode.
As discussed in section X.C.2.f. of this proposed rule, which outlines the pricing methodologies for CJR-X, we propose setting a target price for LEJR episodes. We would apply the CJR-X participant's discount factor, based on the participant's quality performance for the performance year, to calculate the reconciliation target price for LEJR episodes. We refer to section X.C.2.f.(5)(e). of this proposed rule for further discussion of the relationship between a CJR-X participant's quality performance and the discount factor. A CJR-X reconciliation target price would represent expected spending on all related Part A and Part B items and services furnished during a LEJR episodes and would incorporate the
We propose a composite quality score methodology for linking quality and payment in CJR-X that is similar to, but not the same, as the methodology that was finalized for the CJR Model (80 FR 73363 through 73381). We propose to define the “composite quality score” at § 512.605 as a score computed for each CJR-X participant to summarize the CJR-X participant's level of quality performance on specified quality measures as described in § 512.635. Notably different is the inclusion of outpatient quality measures in CJR-X and thus the assessment of these measures in the composite quality score. The CJR-X composite quality score methodology would allow performance on each required quality measure to be meaningfully valued in the CJR-X's pay-for-performance methodology, incentivizing and rewarding cost savings in relation to the quality of episode care provided by the CJR-X participant.
Although performance on each measure would be valued in the CJR-X composite quality score methodology, it is the CJR-X participant's overall quality performance under the CJR-X that would be considered in the pay-for-performance approach, rather than performance on each quality measure individually determining the financial opportunity under CJR-X. The composite score methodology also provides a framework for incorporating additional measures of meaningful outcomes in the future. Finally, while we believe that high performance on all of the quality measures represents goals of clinical care that should be achievable by all CJR-X participants that heighten their focus on these measures, we appreciate that many CJR-X participants would have room for significant improvement in their current measure performance. The composite score methodology would provide the potential for financial reward for CJR-X participants that reach “good” or “excellent” quality performance, thus incentivizing their continued efforts to improve the quality and efficiency of LEJR episodes.
We believe that assessing measure performance by comparing CJR-X participants against a national distribution for the proposed CJR-X measures would be the most appropriate way to incorporate quality performance into CJR-X. Moreover, we believe that hospitals nationally are currently working to improve their performance on quality measures on an ongoing basis as some of these measures are included in other CMS programs such as the Hospital Inpatient Quality Reporting and Hospital Value-Based Purchasing Programs. Therefore, we expect that CJR-X participants would have a heightened focus on performance on these measures as a result of the financial incentives resulting from the CJR-X payment methodology.
Thus, at the time of reconciliation for a performance year, we propose at § 512.635(c) to assign each CJR-X participant's measure point estimate from the measure performance period, as discussed in section X.C.2.e.(5)(d). of this proposed rule, to a performance percentile based on the national distribution of measure results for hospitals that are eligible for payment under the IPPS reporting the measure, as discussed in section X.C.2.e.(5)(d). of this proposed rule, that meets the minimum patient case or survey count. This proposal applies to the Hospital-Level RSCR Following Elective Primary THA and/or TKA (CMIT ID #350); the Hospital Visits within 7 days of HOPD Surgery (CMIT ID #344, OP-36); the HCAHPS Survey (CMIT ID #338); the OAS CAHPS Survey (CMIT #162); and the Hospital-Level THA/TKA PRO-PM (CMIT #1618). The measure-specific parameters for minimum case/survey count that would apply to developing the national distributions are displayed in Table X.C-02.
We propose at § 512.635(d) to assign any CJR-X participant without a reportable value for the measure, new hospitals that are identified as CJR-X participants, or CJR-X participants where CMS has suppressed the measure value due to an error in the data used to calculate the measure to the 50th performance percentile of the measure result, so as not to disadvantage a CJR-X participant based on its lack of applicable cases because that CJR-X participant may in actuality provide high quality care. We believe that relative measures of quality performance are most appropriate for CJR-X as hospitals continue to make progress nationally on improving patient outcomes and experience. This approach is also consistent with the CJR Model.
We seek comment on our proposals at §§ 512.635(c) and (d) to determine quality measure performance based on assigning the CJR-X participant's measure point estimate to a measure performance percentile based on the national distribution of measure results from hospitals eligible for payment under the IPPS.
We recognize the CJR Model rewarded CJR participant hospitals for quality improvement, similar to the pay-for-performance policies under other programs such as the Hospital Value-Based Purchasing Program, in order to provide an incentive for quality improvement for CJR participant hospitals at all levels of quality performance (70 FR 73379). As in the CJR Model, we believe the heightened
We considered, but are not proposing, to include a policy that provides CJR-X participants quality improvement points when there is improvement of 2 deciles or more in comparison to the national distribution of measure results from the prior year, based on a comparison of relative quality measure performance over the most recent 2 years of available quality measure result data. CJR-X participants who are able to demonstrate quality improvement, could be awarded 10 percent of the maximum measure performance score, with a cap for the overall composite quality score at 20 points. This is the same methodology as was used in the CJR Model.
However, we are not proposing to include quality improvement points in CJR-X because we believe CJR-X is structured to emphasize absolute quality performance on clinically meaningful outcomes, rather than short-term year-over-year changes that may reflect random variation or changes in case mix. Further, we believe focusing on achievement-based performance promotes consistent accountability for patient safety, experience, and outcomes across CJR-X participant hospitals.
In addition, CJR-X already provides incentives for improvement through its financial reconciliation structure, as hospitals can benefit from lower episode spending while maintaining quality thresholds. Excluding improvement points also supports transparency and predictability in quality scoring, allowing hospitals to better understand how quality performance affects reconciliation payments and to invest in sustained, long-term care redesign strategies. Lastly, this approach aligns with TEAM as quality improvement points are not included in the model's composite quality score calculation. Thus, we believe not including quality improvement points aligns with the goals of the model by balancing fairness, administrative simplicity, and accountability for high-quality, patient-centered care.
We seek comment on not including a policy for quality measure improvement for CJR-X.
We propose adopting a similar calculation of the CJR Model composite quality but with modifications to account for outpatient quality measures. The CJR Model CQS was constructed based on the performance of two inpatient quality measures and one voluntary inpatient measure. The measures were weighted 50 percent for the complications measure, 40 percent for patient experience measure, and 10 percent for the patient reported outcomes measure with the sum of quality points capped at 20 points. Given the greater proportion of episodes initiating in the outpatient setting, CJR-X has proposed adopting two outpatient quality measures to capture quality performance for episodes in the outpatient setting. The CJR-X CQS methodology would account for these two measures by constructing an outpatient measure composite quality score that mimics the CJR Model weighting and quality point cap. Specifically, we propose placing each of the five proposed quality measures, as described in section X.C.2.g. of this proposed rule, into one of three quality domains. The domains would be complications, patient experience, and patient reported outcomes. We propose for inpatient measures and outpatient measures to weight the complications domain at 50 percent, the patient experience domain at 40 percent, and the patient reported outcomes domain at 10 percent. We believe the approach to weighting the quality domains represents a balanced and equitable approach to assessing hospital performance under CJR-X and aligns with the CJR Model. The complications quality domain would be weighted most heavily because it reflects serious, clinically significant outcomes that directly affect patient safety, recovery, and episode spending, and are supported by mature, well-validated, claims-based measures. Patient experience measures receive substantial weight because effective communication, discharge planning, pain management, and care coordination are critical drivers of post-acute utilization and successful recovery in joint replacement episodes. Lastly, patient-reported outcome measures are included to capture improvements in pain and function that matter most to beneficiaries, while being weighted more modestly to reflect ongoing considerations related to response rates, data completeness, and measure stability. Together, this weighting approach promotes accountability for safety and outcomes while ensuring that patient-centered perspectives meaningfully inform quality performance, supporting a fair, reliable, and comprehensive assessment aligned with the goals of CJR-X. Table X.C-03 displays the proposed quality measures and associated quality domain weights.
Under this approach, we propose we would score each CJR-X model participant on the five proposed quality measures based on the CJR-X participant's performance percentile as compared to the national distribution of hospitals that are eligible for payment under the IPPS measure performance, assigning points according to the
We believe that small point increments related to higher measure performance deciles would be the most appropriate way to assign more points to reflect meaningfully higher quality performance on the measures. The absolute differences for each decile among the five measures reflect the intended weight of the measure in the composite quality score.
After determining the point value for each measure, we propose summing the performance points for the inpatient measures to construct the inpatient measure composite quality score and sum the outpatient measures to construct the outpatient measure composite quality score. We propose at § 512.605 to define the “inpatient measure composite quality score” as the sum of inpatient quality measure point values capped at 20 points. Likewise, we propose at § 512.605 to define the “outpatient composite quality score” as the sum of outpatient quality measure points values, capped at 20 points.
We propose to assign each CJR-X participant an “overall composite quality score,” defined at § 512.605 as the sum of the weighted average of the inpatient measure composite quality score and the outpatient measure composite quality score, capped at 20 points. The inpatient and outpatient composite quality score would be weighted based on the proportion of inpatient to outpatient episodes. For example, if a CJR-X participant with 90 percent outpatient episode volume earned a 17.00 on their inpatient composite quality score and a 14.00 on their outpatient composite quality score, then their overall composite quality score would be calculated as follows:
• Inpatient measure composite quality score = 17.00.
• Outpatient measure composite quality score = 14.00.
• Inpatient/outpatient episode volume proportion—
++ 10 percent inpatient; and
++ 90 percent outpatient.
• Overall composite quality score = ((0.10)*(17.00)) + ((0.90)*(14.00)) = 14.3.
We believe the proposed composite quality score methodology for CJR-X is a sound approach because it combines multiple, complementary quality measures into a single assessment of hospital performance across the episode of care, reflecting the multidimensional nature of quality in joint replacement. By incorporating measures of patient safety, patient experience, and patient-reported outcomes, the composite score avoids over-reliance on any single metric and improves the reliability and stability of quality assessment by mitigating the effects of random variation in individual measures. The methodology recognizes quality achievement and incentivizes meaningful progress across all CJR-X participants. This standardized and transparent approach promotes equitable comparisons across CJR-X participants, enhances predictability in reconciliation outcomes, and aligns financial incentives with the patient-centered quality goals of the model.
The proposal for the methodology to calculate the composite quality score is included in § 512.635(b)(1) and (2). We seek comment on our proposed methodology to calculate the composite quality score and on our definitions for the composite quality scores at § 512.605.
Given that we are proposing CJR-X as an expansion of the CJR Model, as opposed to a new model concept, our initial foundation for the pricing and payment methodology is the set of policies from the CJR Extension. As initially discussed in section X.C.1.b. of this proposed rule, we are proposing several, minor modifications for CJR-X that will align with some of the policies we enacted in TEAM, which we believe represented improvements to the CJR Model methodology.
As we developed the methodologies for the CJR and BPCI Advanced Models, and refined them over time in response to observed changes in nationwide spending trends and payment system changes (such as the removal of TKA and THA from the IPO list, and the reclassifications of certain MS-DRGs), each new iteration drew from lessons learned in the previous iteration. With TEAM, we aimed to find a balance between simplicity and predictive accuracy of target prices, blending and building upon methods from both the original CJR Model and BPCI Advanced Model. Our goal was to choose a payment methodology that was as transparent and understandable as possible for participants of varying levels of statistical background and knowledge, but robust and statistically sophisticated enough to accurately predict performance period spending.
For CJR-X, we aim to achieve a similar balance between simplicity and predictive accuracy, but with an added focus on long-term sustainability. As an expanded, national model, CJR-X is unique from the other models discussed
It is also important to note that, whereas the goal for new (Phase I) models is to test and generate evidence on a novel payment policy design, the goal of model expansion (Phase II) is to take a payment policy design that has already proven effective and apply it to a larger scope of episodes. Thus, while we are proposing several minor adjustments to the CJR Model pricing and payment methodology, in order to improve upon the policies that were tested, we must adhere to the general design and structure that was tested in and for which we can confidently predict the long-term effects on both quality and spending.
When designing the CJR Model payment methodology, some of the primary goals were simplicity and clarity, given that it was a mandatory model covering only one episode category. The original CJR Model payment methodology included a 3-year baseline period that rolled forward every 2 years. Target prices used a blend of participant-specific and regional spending, which shifted towards 100 percent regional spending for PYs 4 and 5. Downside risk was waived for the first performance year of the model to allow participants time to enact practice changes that would help them succeed in the model. Beginning in PY 2, participants were subject to both upside and downside risk, within stop-loss and stop-gain limits that increased to a maximum of 20 percent by PY 3 for most hospitals. The stop-loss and stop-gain limits were designed to ensure that participants would neither be subject to an unmanageable level of risk, nor be incentivized to stint on care to achieve savings. The original CJR Model payment methodology is described in detail in the 2015 CJR final rule, (
The original CJR Model payment methodology was modified in the 2021 CJR 3-Year Extension final rule. The CJR Model's 3-year extension and modification was due to a number of factors, as described in detail starting at
The changes to the model increased the complexity in some ways (for example, the addition of risk adjustment multipliers) while simplifying it in other ways (for example, the removal of update factors) in order to calculate target prices that would more accurately reflect performance period spending. A retrospective Market Trend Factor was applied to target prices at reconciliation to capture changes in spending patterns that occurred nationally during the performance period. This market trend factor, in combination with the change from a 3-year baseline to a 1-year baseline, negated the need for setting-specific update factors that we had used previously to set purely prospective target prices. At the same time, our added risk adjustment increased target prices for episodes with more complex patients, to better reflect the higher costs associated with those patients. The changes to the original CJR Model payment methodology are described in detail in the 2021 CJR 3-Year Extension final rule (
The TEAM methodology, as discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69748) and FY 2026 IPPS/LTCH PPS final rule (90 FR 37092), was designed with the goal of blending the most successful elements from the different CJR and BPCI Advanced Model iterations in order to strike a balance between predictability and accuracy. TEAM sets preliminary target prices at the MS-DRG/HCPCS episode type- and region-level using a 3-year baseline, trended forward to the performance year. Preliminary target prices are updated using the performance year data during the reconciliation process to account for updated spending trends (subject to a 3 percent cap) and normalization factor (subject to a 5 percent cap) and by adjusting for each participant's realized performance year case mix.
TEAM's risk adjustment includes adjusters for age group, Hierarchical Condition Category (HCC) count, and beneficiary economic risk, as well as episode category-specific HCC adjusters and hospital-level adjusters including a hospital bed size factor and a safety net hospital factor. The risk adjustment factors will be calculated at the MS-DRG/HCPCS level using a weighted linear regression where episodes are weighted differentially based on whether they belong to year 1, 2, or 3 of the baseline periods. After risk adjusting for the performance year case mix, target prices are normalized to ensure that the average of the total risk-adjusted preliminary target price does not exceed the average of the total non-risk adjusted preliminary target price.
TEAM participants will have the opportunity to achieve a reconciliation payment amount, after accounting for quality performance, if their performance year spending is below the reconciliation target price, or they may owe a repayment amount if their spending is above the reconciliation target price.
While we describe each element of the pricing and payment methodology in detail in the following sections, here we present an overview of the proposed CJR-X pricing and payment methodology. At proposed § 512.640, we are proposing to use 3 years of baseline data, trended forward to the performance year, to calculate target prices at the level of MS-DRG/HCPCS episode type and region. We propose to group episodes from the baseline period by applicable MS-DRG for episode types that include only inpatient hospitalizations, and by applicable MS-DRG or HCPCS code for episode types that include both inpatient hospitalizations and outpatient procedures. For episode types that include both inpatient hospitalizations (identified by MS-DRGs) and outpatient procedures (identified by HCPCS codes), HCPCS codes are combined for purposes of target pricing with the applicable MS-DRG representing an inpatient hospitalization without Major Complications and Comorbidities, as we expect those beneficiaries to have similar clinical characteristics and costs. After capping high-cost outlier episodes at the 99th percentile for each of the 4 proposed MS-DRG/HCPCS episode types, we propose to use average standardized spending for each MS-DRG/HCPCS episode type in each region as the benchmark price for that MS-DRG/HCPCS episode type for that
We note that construction of the reconciliation target price, as discussed in section X.C.2.f.(5)(d). of this proposed rule, would account for realized patient case mix and spending trends and result in updates to the trend factor and normalization factors.
As described in detail in the following sections, many of the payment and pricing policies that we are proposing for CJR-X represent minor deviations from the policies that were tested in the original CJR Model and the CJR Extension. Many of the proposed policy adjustments are intended to align with specific policies enacted in TEAM, which we believed would improve upon the CJR Model methodology in a manner that was predictable and would not fundamentally alter the general structure of the model that was tested. As discussed in section X.C.2.f.(1)(c). of the proposed rule, TEAM was designed, in large part, based on the lessons that had been learned from the CJR Model test. It drew from the strongest elements of the CJR Model and improved upon the weaker elements. Given that TEAM launched on January 1, 2026, we have not yet evaluated the effectiveness of the TEAM policies versus the CJR Model policies, nor have we received any evidence to discredit the rationale for these policy improvements.
We propose using 3 years of baseline episode spending to calculate benchmark prices, which we would further adjust as described in section X.C.2.f.(4). of this proposed rule to create preliminary target prices. Specifically, at § 512.605, we propose to define “baseline period” as the 3-year historical period used to construct the preliminary target price and reconciliation target price for a given performance year. We also propose to define “baseline episode spending” as total episode spending by all providers and suppliers associated with a given MS-DRG/HCPCS episode type for all hospitals in a given region during the baseline period. We propose to roll this 3-year baseline period forward every year. Specifically, we propose the following:
• To determine baseline episode spending for PY1, CMS would use baseline episode spending for episodes with anchor hospitalization start dates or anchor procedure dates beginning on or after October 1, 2023 and anchor hospitalization discharge dates or anchor procedure dates between October 1, 2023 and September 30, 2026.
• To determine baseline episode spending for PY2 and future performance years, CMS would use same 3-year cadence to roll the baseline period forward a year.
• For example, to determine baseline episode spending in PY2, CMS would use baseline episode spending for episodes with anchor hospitalization start dates or anchor procedure dates beginning on or after October 1, 2024 and anchor hospitalization discharge dates or anchor procedure dates between October 1, 2024 and September 30, 2027.
The use of 3 years of baseline episode spending is consistent with our initial CJR methodology, as described in the 2015 CJR final rule (80 FR 73340). In that case, the 3-year baseline period moved forward every 2 years. However, in combination with the lack of a retrospective trend factor, the use of a 3-year baseline period that only moved forward every 2 years meant that our methodology was not able to capture the degree to which spending on LEJR episodes was decreasing nationwide, both among CJR and non-CJR hospitals. As a result, we believe our target prices partially reflected spending decreases that were not due specifically to participation in CJR.
Subsequently, in the 2021 CJR 3-Year Extension final rule, we finalized a policy to use a 1-year baseline period that would move forward every year (with the exception of skipping data from 2020 due to COVID-19 irregularities) (86 FR 23514). In combination with a retrospective market trend factor, using 1 year of baseline episode spending updated every year meant that our target prices would not be inflated as they had been under the initial CJR methodology. BPCI Advanced employs a strategy that blends elements of both CJR approaches, with a longer baseline period (4 years) similar to the initial CJR methodology, but shifting forward every year, as we do in the CJR extension.
Participants in episode-based payment models have expressed concerns about a concept known as the “ratchet effect” when choosing the baseline period from which to calculate target prices. That is, participants do not want to be penalized for achieving lower spending by having lower target prices in subsequent years. The use of fewer years of the most recent baseline episode spending, as well as more frequent rebasing, will generally
In TEAM, we finalized a revised version of the BPCI Advanced strategy with a shorter, 3-year baseline that was rebased annually and temporally weighted to place greater emphasis on more recent years. As initially described in final rule establishing TEAM (89 FR 69748), we believe this approach will achieve a balance between providing target prices that sufficiently reflect up-to-date spending trends and mitigating the ratchet effect by allowing prices to adjust more gradually over time. Additionally, as discussed in section X.C.2.f.(3)(b). of this proposed rule, we are proposing regional target prices based on regional average spending making CJR-X an achievement-based model. In this framework, CJR-X participants would not compete against their historical selves but rather strive to outperform their regional peers. Individual improvements will not affect future target prices in a substantive way as the future benchmark is being calculated based on the performance of several hospitals. We believe a 3-year baseline period constructed using all hospital's spending would help produce a fair pricing approach that balances accuracy, simplicity, and mitigates CJR-X participants being penalized for successful past performance.
For CJR-X, we propose to adjust baseline episode spending to trend all episode spending to the most recent year of the baseline period. The adjustment would reflect the impact of inflation and any changes in episode spending due to evolving patterns of care, Medicare payment policies, payment system updates, and other factors during the baseline period. At § 512.605(e) propose to define a “baseline year” as any of the 3 fiscal years during a given baseline period. For example, baseline year 1 for PY 1 will be FY 2024 (October 1, 2023-September 30, 2024), baseline year 2 will be FY 2025 (October 1, 2024-September 30, 2025), and baseline year 3 will be FY 2026 (October 1, 2025-September 30, 2026). We propose to calculate the adjustment factors for baseline years 1 and 2 by dividing average episode spending for baseline year 3 episodes by average episode spending for episodes from baseline years 1 and 2, respectively. We would then apply the applicable adjustment factors to the episode spending of each episode in baseline years 1 and 2. This adjustment would bring all baseline episode spending forward to the most recent baseline year, so that baseline year 1 and 2 spending would be expressed in baseline year 3 dollars. This method would be consistent with how we calculated the baseline trend factor for CJR in the performance years that used the 3-year baseline period, as described in the 2015 CJR final rule (
In recognition of the fact that baseline episode spending from more recent years are likely to be a better predictor of performance year spending, we propose to weight recent baseline episode spending more heavily than episode spending from earlier baseline years. Specifically, we propose to weight episode spending from baseline year 1 at 17 percent, baseline year 2 at 33 percent, and baseline year 3 at 50 percent. This method of weighting would mean that the most recent episode spending patterns, expected to be the most accurate predictor of performance year spending, would contribute most strongly to the benchmark price at 50 percent. The remaining 50 percent would be divided into thirds, with baseline year 2 contributing approximately
We seek comment on our proposed definitions at § 512.605 and our proposals at § 512.640(b)(2) and (3) to use 3 years of baseline episode spending, rolled forward for each performance year, with more recent baseline years weighted more heavily, to calculate CJR-X target prices.
We are proposing to provide target prices to CJR-X participants for each proposed MS-DRG/HCPCS episode type and region based on 100 percent regional data for all CJR-X participants prior to each PY. This approach would be consistent with PYs 4 through 8 of the CJR Model and aligns with the approach implemented in TEAM (89 FR 69751). While CJR target prices used a blend of two-thirds hospital-specific data and one-third regional data for PYs 1 and 2, and one-third hospital-specific data and two-thirds regional data for PY 3, we stated our reasons in the 2015 CJR final rule for moving towards fully regional target pricing as participants gained more experience in the model (80 FR73347). Target prices based on hospital-specific data would require a CJR-X participant to compete against its own previous performance and improve over that performance to receive a reconciliation payment. Conversely, target prices based on regional data would require a CJR-X participant to compete against its peers in that region, such that only a specific level of achievement, as opposed to improvement alone, would result in a reconciliation payment. For historically inefficient CJR-X participants, compared to their peers, hospital-specific target prices would be higher than regional target prices because hospital-specific baseline episode spending would be greater than average baseline episode spending for the region. For CJR-X participants that are historically efficient compared to their peers, hospital-specific target prices would be lower than regional target prices because hospital-specific baseline episode spending would be lower than average baseline episode spending for the region. We noted in the 2015 CJR final rule that if we used 100 percent hospital-specific pricing in CJR, historically efficient hospitals could have fewer opportunities for achieving additional efficiencies under the model and would not be rewarded for maintaining high quality and efficiency, whereas less efficient hospitals would be rewarded for improvement even if they did not reach the same level of high quality and efficiency as the more historically efficient hospitals.
We seek comment on our proposal at § 512.640(b)(1) to provide regional target prices to all CJR-X participants for each PY.
As we are proposing a fixed 90-day post-discharge episode length as discussed in section X.C.2.d.(3)(d) of this proposed rule, we recognize that there may be some instances where a service included in the episode begins during the episode but concludes after the end of the episode and for which Medicare makes a single payment under an existing payment system. An example would be a beneficiary in an episode who is admitted to a SNF for 30 days, beginning on day 65 post-discharge from the CJR-X anchor hospitalization or anchor procedure. The first 25 days of the SNF admission would fall within the episode, while the subsequent 5 days would fall outside of the episode. We propose that, to the extent that a Medicare payment for included episode services spans a period of care that extends beyond the episode, these payments would be prorated so that only the portion
We seek comment on our proposed methodology at § 512.655 for prorating services that extend beyond the episode.
Given that we are proposing episodes with a 90-day post discharge period, we recognize that some episodes will begin during one performance year and end during the following performance year. We propose that all episodes would receive the target price associated with the date of discharge from the anchor hospitalization or the anchor procedure, as applicable, regardless of the episode end date. We note that the assignment of target prices based on the date of discharge from the anchor hospitalization or the anchor procedure is different from the CJR model, where the target price was assigned based on the episode start date rather than the discharge date, but this proposed policy is consistent with BPCI Advanced. This slight modification of using the anchor hospitalization and anchor procedure date of discharge ensures the same approach is applied to target price assignment and reconciliation of episodes. As noted in section X.C.2.f.(5)(a). of this proposed rule, annual reconciliation is based on episodes with a date of discharge from the anchor hospitalization or a date of discharge from the anchor procedure during that PY. So, if an episode starts in one PY and has an anchor hospitalization discharge date that extends past the end of a PY, that episode would factor into the next PY's reconciliation, which is consistent with TEAM.
We seek comment on our proposal at § 512.640(a)(3) for applying target prices to an episode that begins in one performance year and ends in the subsequent performance year.
Given the broad proposed episode definition and 90-day proposed post-discharge period, we want to ensure that hospitals have some protection from the downside risk associated with especially high payment episodes, where the clinical scenarios for these cases each year may differ significantly and unpredictably. As we stated in the 2015 CJR final rule (
We seek comment on our proposal at § 512.605 to define “high-cost outlier cap” and our proposal at § 512.640(b)(4) for calculating and applying the high-cost outlier cap.
Target prices are derived from a prediction based on previous Medicare spending patterns, but it is not possible to perfectly predict how Medicare spending patterns may change over the course of the performance year. In the original BPCI model, prospective target prices were not provided to participants, so the trend factor was calculated retrospectively based on the observed spending during the performance period. Quarterly reconciliations in BPCI meant that participants could gain a sense of how their target prices tended to change over time and get relatively frequent feedback on their performance in the model. However, BPCI participants expressed concern with the uncertainty of not knowing their target prices in advance.
In the initial CJR methodology and Model Years 1 through 3 of BPCI Advanced, CMS provided fully prospective target prices to participants. Participants appreciated the certainty of prospective target prices, where we predict in advance how spending patterns might shift and hold those target prices firm even if we underpredicted or overpredicted spending. This methodology included applying update factors to account for setting-specific payment system updates, allowing us to estimate how a given set of services performed during the baseline would be priced had those same services been subject to the fee schedules in effect during the performance period.
In CJR, we originally overpredicted performance period spending, not accounting for the overall decline in spending on LEJR episodes nationwide that occurred outside of the model during its first few performance years. In BPCI Advanced, we similarly overpredicted performance period spending for certain episodes because our methodology was unable to account for medical coding changes that occurred between the baseline and performance period, or during the performance period itself. For instance, in FY 2016, changes to medical coding guidance were made for Inpatient Congestive Heart Failure, such that certain patients who during the baseline would have been coded as the less expensive MS-DRG 292, were instead coded as the more expensive MS-DRG 291. This was done in spite of having the same clinical characteristics. This meant that many beneficiaries who received a target price associated with the more expensive MS-DRG 291, actually had the lower performance period costs previously associated with the less expensive MS-DRG 292. The use of a fully prospective trend factor was unable to capture these changes in both practice patterns and coding guidelines.
Subsequently, we modified both models' methodologies to include a retrospective trend adjustment. Starting in model year 4, we continued to provide BPCI Advanced participants with a prospective target price using an estimated trend factor, but we adjusted the target price at reconciliation based on the retrospective calculation of the trend factor using performance period data. Initially, this policy included guardrails around the magnitude of the retrospective trend factor adjustment of +/−10 percent. In response to participant feedback, we lowered the maximum level of the retrospective trend factor adjustment to +/−5 percent starting in model year 6.
In the CJR Extension, the retrospective trend was known as the market trend factor adjustment. It was fully retrospective and calculated at reconciliation, meaning that the unadjusted target price we posted on the CJR website prior to the performance year did not include a prospective trend factor. In response to participant requests, we provided estimates of the market trend factor on the CJR website based on the most recently available data to help participants estimate their potential target prices. The market trend factor was calculated separately for each MS-DRG/region combination. For the PY 8 reconciliation (corresponding to episodes that ended between January 1, 2024 and December 31, 2024), the highest market trend factor was 1.307 for MS-DRG 469 episodes in the Mountain region, while the lowest market trend factor was 0.998 for MS-DRG 470 episodes in the New England region.
In TEAM, we initially proposed a fully prospective trend factor adjustment based on the percentage difference between average regional MS-DRG/HCPCS episode type expenditures for baseline year 3 (the most recent baseline year) and baseline year 1 (the earliest baseline year) (89 FR 36430). Based on stakeholder feedback, we ultimately revised this approach to align more closely with the modified BPCI Advanced methodology. As described in the TEAM final rule (89 FR 69755), TEAM participants receive a preliminary target price that incorporates a prospective trend factor adjustment for each MS-DRG/HCPCS episode type and region, which reflects the average annual change in episode spending over the baseline period both regionally and nationally. At reconciliation, a retrospective trend factor adjustment is applied to preliminary target prices based on the average capped performance year episode spending vs. the average capped baseline episode spending. This retrospective adjustment is capped at +/− 3 percent of the prospective trend adjustment in order to maintain predictability for participants. TEAM also further refined their prospective trend approach in the FY 2026 IPPS/LTCH PPS final rule (90 FR 37099) to incorporate a linear regression that includes all years in the baseline period to construct the trend, rather than a trend that only looked at the change from baseline year 1 to baseline year 3. TEAM also finalized the addition of two trend years to capture more years of data in the construction of the trend.
For CJR-X, we are proposing to apply a “prospective trend factor”, defined at proposed § 512.605, as the multiplier incorporated into the preliminary target price to estimate changes in spending patterns between the baseline period and the performance year. We also propose to apply a +/−3 percent capped “retrospective trend factor”, defined at proposed § 512.605, as the multiplier incorporated into the reconciliation target price to estimate realized changes in spending patterns during the performance year. This methodology would be similar to the approach used in TEAM. The key difference from TEAM is that CJR-X will not include the two trend years in the prospective trend factor, because we want to keep consistent the time frame of data we are sharing with CJR-X participants to the data used to construct target prices. For example, CJR-X would share three years of baseline data with CJR-X participants which would align with the baseline period used to construct the prospective trend, whereas TEAM shares three years of data that encompasses their baseline period but TEAM participants do not receive data associated with the two trend years. We believe using an approach similar with TEAM's, specifically applying a prospective trend with a +/−3 percent capped retrospective trend factor, will better
Given our proposal to use a prospective trend factor to predict future spending for the purposes of pricing stability, we considered but are not proposing to include update factors that take into account Medicare payment system updates for each FY or CY and could improve pricing accuracy. Specifically, we considered a methodology similar to BPCI Advanced and Performance Years 1-5 of the CJR Model, where preliminary target prices were updated to reflect the most current FY and CY payment system rates using setting-specific update factors for payment system, including the IPPS, OPPS, Physician Fee Schedule (PFS), Home Health Prospective Payment System (HH PPS), Medicare Economic Index (MEI), the IRF PPS, and the SNF PPS. However, updating target prices using setting-specific update factors would result in CJR-X participants receiving more than one target price for an MS-DRG/HCPCS episode type in a performance year which can increase complexity. Further, while including update factors would generally increase target prices, it also decreases pricing stability since the preliminary target price would change due to the application of update factors. However, we are interested in capturing the most accurate episode spending in CJR-X that captures these payment system updates. We have included a proposal in section X.C.2.f.(5)(d). of this proposed rule to account for this by updating the preliminary target price when constructing the reconciliation target price that avoids sharing update factors and having CJR-X participants manage multiple preliminary target prices within a given performance year.
We also considered, but are not proposing, alternative caps on the retrospective adjustment, including +/−5 percent and +/−10 percent of the prospective trend adjustment. Ultimately, we believe that a narrower adjustment range would improve stability and predictability for CJR-X participants. A lower cap on retrospective adjustments also mitigates the risk that target prices will be disproportionately impacted by performance year shifts in spending patterns that could not have been foreseen.
We seek comment on our proposal at § 512.640(b)(7) to apply a prospective trend factor to preliminary target prices and our proposal at § 512.645(f) to apply a retrospective trend factor with a +/−3 percent cap. We seek comment on our proposals at § 512.605 to define “prospective trend factor” and “retrospective trend factor.”
We are also requesting comment on alternative ways to calculate the trend factor to both increase accuracy of prospective target prices and to mitigate the ratchet effect. We recognize that spending on LEJR episodes has been decreasing over time and may reach a point where further decreases in spending could compromise quality and patient safety. The downward trend in LEJR episode spending we observed in the early years of CJR has stabilized in more recent years, suggesting that there may no longer be as much of an opportunity for participant savings as there was in the early years of CJR. In the case where spending has been decreasing but has since stabilized, trending the episode target price forward based on previous years' trends could result in target prices that are too low. In such a scenario, a retrospective trend adjustment might actually result in a higher target price than a fully prospective trend. We are seeking comment on ways to construct a trend factor that can result in a reasonable target price regardless of whether spending has been increasing, decreasing, or stabilizing.
For example, in the CY 2023 Physician Fee Schedule final rule, CMS finalized a policy to include a prospectively-determined component, the Accountable Care Prospective Trend (ACPT), in the factor used to update the benchmark to the performance year for ACO agreement periods starting on or after January 1, 2024 (see
In addition to the prospective trend factor, at proposed § 512.640(b)(8) we propose to apply a discount factor, defined at proposed § 512.605, to the benchmark price when calculating preliminary target prices. Specifically, we propose to apply a 2 percent discount factor to the benchmark price to serve as Medicare's portion of reduced expenditures from the episode. This discount would be similar to the 2 percent discount factor applied to LEJR episode target prices in TEAM.
In both the CJR Model and BPCI Advanced, we applied a 3 percent discount to benchmark prices when calculating preliminary target prices for LEJR episodes. However, based on evidence and participant feedback from the final performance years of the CJR Extension, we believe that a 3 percent discount would not be sustainable for an expanded model and could result in more price ratcheting over a longer time horizon.
We also considered but are not proposing lower discount factors including 1.5 percent, 1 percent, or no discount factor. In addition, we considered linking the discount to variability in episode spending during the baseline, such that an episode with minimal variability in baseline spending might have a lower discount percentage, given that lower variability in baseline spending might indicate fewer opportunities for savings. We also considered but are not proposing to incrementally reduce the discount rate over a predetermined timeline and different ways to adjust the Medicare discount over time or based on differential savings opportunities for different episode types.
We seek comment on our proposal at § 512.605 to define “discount factor” and on our proposal at § 512.640(b)(8) to apply a 2 percent discount factor to preliminary episode target prices for CJR-X. We also seek comment on alternative discounts and discount adjustments.
In both the CJR Model and BPCI Advanced, we recognized that hospitals that perform a number of episodes below a certain volume threshold would have insufficient volume to receive a target price based on their own baseline data. In the 2015 CJR final rule (
In the CJR Model, we set the low volume threshold as fewer than 20 LEJR episodes across the 3-year baseline years of 2012 through 2014. Low volume hospitals received target prices based on 100 percent regional data, rather than a blended target price that incorporated their participant-specific data, because a target price based on limited data is less likely to be accurate and reliable. These hospitals were also subject to the lower stop-loss limits that we offered to rural hospitals, in recognition of the fact that they might be less prepared to take on downside risk than hospitals with higher episode volume. In the CJR 2017 final rule that reduced the number of mandatory MSAs, low volume hospitals were among the types of hospitals that were required to opt in if they wanted to remain in the model (
In BPCI Advanced, our low volume threshold policy was to not provide a target price for a given clinical episode category if performed at a hospital that did not meet the 41 clinical episode minimum volume threshold during the 4-year baseline period. This meant that no BPCI Advanced episodes would be triggered for that particular clinical episode category during the applicable performance period at that hospital. However, participants could continue to trigger other clinical episode categories for which they had enrolled and for which there was sufficient baseline volume. Additionally, clinical episodes that occurred at the hospital during the performance period, though not triggering a BPCI Advanced episode, would count toward the low volume threshold when that year became part of the baseline. Therefore, as the baseline shifted forward each year, bringing a more recent year into the baseline and dropping the oldest year, a hospital could potentially meet the volume threshold and receive a target price for the clinical episode category for a subsequent performance period.
In TEAM, if a TEAM participant does not meet the minimum baseline threshold of at least 31 episodes in a given episode category during the baseline period, the hospital's episodes are included in reconciliation calculations, but the hospital will not be held financially accountable for spending that exceeds the target price for that episode category in that performance year. This effectively waives downside financial risk for the hospital for any episode categories in which it did not meet the low-volume threshold, providing protection against undue financial exposure while still allowing the hospital to participate in the model and benefit from savings, if applicable. We believe this policy is appropriate for TEAM given the increased number of episode categories mandatorily tested compared to the original CJR model and its time-limited test compared to longer-term CMS initiatives.
For CJR-X, we are proposing a low volume policy that aligns with the approach we tested in BPCI Advanced because low volume hospitals were voluntary and ultimately removed from participation at the time of CJR Extension. We do not believe removing or excluding low volume hospitals is a good long-term policy for CJR-X since we recognize episode volumes can change over time. Also, there also may be instances when a hospital is just starting out and may have low volumes but then ramp up operations and see a substantial number of beneficiaries for LEJR procedures. Thus, we believe a better policy for CJR-X would be to have a low volume policy that is responsive to episode volume changes year over year and acknowledges hospitals with low volume may not have the ability to spread risk when there is an insufficient number of procedures being performed. We propose at § 512.605 to define “low-volume hospital” as a hospital with fewer than 31 LEJR episodes performed during the applicable baseline period. We propose at § 512.640(a)(4) that low-volume hospitals would be excluded from reconciliation for the performance year. As in BPCI Advanced, hospitals that do not meet the minimum volume threshold for a given performance year would not trigger CJR-X episodes or receive a target price. Any LEJR episodes performed at these hospitals during the performance year would be excluded from regional benchmark calculations, although they would count toward the low volume threshold when that year becomes part of the baseline. Therefore, as the baseline shifts forward each year, bringing a more recent year into the baseline and dropping the oldest year, a hospital could potentially meet the volume threshold and trigger CJR-X episodes for a subsequent performance period.
We considered implementing minimum episode volume thresholds during the performance year. Specifically, we considered excluding CJR-X participants from reconciliation if they initiate fewer than 10 or 15 LEJR episodes during that performance year. However, we are concerned that including minimum episode volume thresholds during the performance year may introduce program integrity issues where CJR-X participants steer CJR-X beneficiaries to other providers to be below the threshold and not be accountable for episodes in CJR-X.
We seek comment on our proposal at § 512.605 to define “low-volume hospital” and our proposal at § 512.640(a)(4) for setting and applying the low volume threshold at reconciliation.
We propose to define “preliminary target price” as the target price provided to the CJR-X participant prior to the start of the performance year, which is subject to adjustment at reconciliation. We propose at § 512.640(b)(9) that CMS would provide preliminary target prices to CJR-X participants, in a form and manner specified by CMS, prior to the start of each performance year. For instance, since the earliest episodes for a given performance year would end on January 1, and most of these episodes would have been initiated by an anchor hospitalization or anchor procedure that occurred near the end of November or the beginning of December of the previous calendar year, we propose to provide preliminary target prices to the CJR-X participant by the end of November prior to each performance year. We propose that preliminary target prices would be based on regional episode spending during the baseline period. CJR-X participants would receive the preliminary target prices for each MS-DRG/HCPCS episode type that corresponded to their region. We propose that these preliminary target prices would incorporate a prospective
We seek comment on our proposal at § 512.640(b)(9) to provide preliminary target prices to CJR-X participants prior to the start of each performance year.
In the original CJR Model methodology, we first proposed that risk adjustment be limited to providing separate target prices for episodes initiated by MS-DRG 469 versus MS-DRG 470, because MS-DRGs under the IPPS are designed to account for some of the clinical and resource variations that exist and that impact hospitals' costs of providing care (
In the 2021 CJR 3-Year Extension final rule, we acknowledged the need for further risk adjustment to account for beneficiary-level factors that tend to impact spending in a way that is beyond the control of the provider. We introduced age bracket (less than 65 years, 65 to 74 years, 75 to 84 years, and 85 years or more), CJR HCC count (zero, one, two, three, and four or more), and dual eligibility (receiving both full Medicare and Medicaid benefits) as beneficiary-level risk adjustment factors that would be applied to each episode at reconciliation. The definition of these risk adjustment variables, and our reasoning for incorporating them into the risk adjustment methodology, is described in detail at
The coefficients for the risk adjustment variables in the CJR Extension were calculated prospectively, prior to the beginning of each performance year, using a linear regression model. As we stated at
At reconciliation, after applying the high-cost episode cap to remove outliers, the risk adjustment coefficients for the three risk adjustment variables were applied to the episode-level target price based on the applicable episode region and MS-DRG. However, since age, CJR HCC count, and dual eligibility status are inherently included in the regional target price, since regions with beneficiaries who are older, more medically complex, and socioeconomically disadvantaged tend to have higher average episode costs, we applied a normalization factor to remove the overall impact of adjusting for age, CJR HCC count, and dual eligibility on the national average target price, as described at
By contrast, BPCI Advanced used a more complex risk adjustment model that included many more risk adjustment coefficients, including both patient and provider characteristics. Categories of patient characteristics included (but were not limited to): HCCs (individual flags, interactions, and counts), recent resource use, and demographics. Provider characteristics, which were used to group hospitals into peer groups, included bed size, rural vs. urban, safety net vs. non-safety net, and whether or not the participant was a major teaching hospital. The first stage of the BPCI Advanced risk adjustment methodology used a compound log-normal model in order to account for the substantial right skew of the distribution of episode costs. This means that it combined two log-normal distributions in order to capture costs associated with both low-cost episodes (which were the majority of episodes) and very high-cost episodes (which were fewer in number but exerted a strong influence on spending averages). However, participants found this risk adjustment model difficult to interpret, particularly since it was not widely used in other research or healthcare models.
For TEAM, in an effort to simplify the risk adjustment methodology and allow participants to more easily calculate an episode-level estimated target price, we based our methodology on the CJR Extension methodology, with a few key differences. Rather than calculating one national set of risk adjusters across all MS-DRGs for a given episode category, we calculate risk adjustment coefficients at the MS-DRG/HCPCS episode type level. We considered calculating risk adjustment at the MS-DRG/HCPCS episode type/region level, but we believed that, when further subdivided into regions, the low volume of episodes for certain MS-DRG/HCPCS episode types would be insufficient to create accurate and reliable risk adjustment multipliers.
In the TEAM proposed rule, we initially proposed to use three beneficiary-level risk adjustment variables that were similar to the CJR Extension methodology, with two key differences. First, instead of using the annual HCC file to calculate the HCC count variable, we proposed to conduct a 90-day lookback of FFS Medicare claims for each beneficiary, beginning with the day prior to the anchor hospitalization or anchor procedure, and count the number of HCC flags assigned. We subsequently revised this to a 180-day lookback in the final rule (90 FR 37105). Second, instead of a dual-eligibility risk adjustment variable, we proposed a more comprehensive approach which accounted for dual eligibility status, as well as Low Income Part D Subsidy qualification and area-level socioeconomic deprivation. As discussed in the TEAM final rule (90 FR 37103), this beneficiary economic risk adjustment functions as a binary (yes=1, no=0) variable, with a value of 1 being assigned to episodes where the beneficiary meets at least one of the following three criteria as of the first day of the episode: (1) resides in an area that exceeds the 80th percentile threshold for National Community Deprivation Index; (2) eligible for Medicare Part D Low Income Subsidy; and (3) eligible for full Medicaid benefits.
In addition to the three initially proposed risk adjustment variables, several additional beneficiary and participant-level risk adjustments were added to the TEAM target price methodology in response to public comments. This includes hospital-level adjustments for bed size (250 beds or fewer, 251-500 beds, 501-850 beds, or 851+ beds) and safety net status, as
Another key difference between the TEAM and CJR Extension risk adjustment methodologies is that, in TEAM, we provide a prospective normalization factor with preliminary target prices. This prospective normalization factor is subject to a limited adjustment at reconciliation based on the observed case mix, up to +/−5 percent. This allows participants to better estimate their target prices, as it incorporates the normalization factor prospectively, rather than only introducing the normalization factor at reconciliation. We believe that this approach strikes a balance between predictability and protecting TEAM participants and CMS from significant shifts in patient case mix between the final baseline year and the performance year.
For CJR-X, we are proposing at § 512.645 to use the same risk adjustment methodology and variables, as defined at proposed § 512.605, that are used in TEAM. Specifically, we propose the following:
• To risk adjust target prices at the hospital level using a hospital bed size risk adjustment factor and a safety net risk adjustment factor.
• To risk adjust target prices at the beneficiary level using a 180-day lookback period to construct a “CJR-X HCC count risk adjustment factor”, an “age bracket risk adjustment factor”, a “beneficiary economic risk adjustment factor”, and based on certain conditions or HCCs in the 180-day lookback period including—
++ Ankle procedure or reattachment, partial hip procedure, partial knee arthroplasty, total hip arthroplasty or hip resurfacing procedure, and total knee arthroplasty;
++ Disability as the original reason for Medicare enrollment;
++ Prior post-acute care use;
++ HCC 17: Cancer Metastatic to Lung, Liver, Brain, and Other Organs; Acute Myeloid Leukemia Except Promyelocytic;
++ HCC 36: Diabetes with Severe Acute Complications;
++ HCC 37: Diabetes with Chronic Complications;
++ HCC 48: Morbid Obesity;
++ HCC 125: Dementia, Severe;
++ HCC 126: Dementia, Moderate;
++ HCC 127: Dementia, Mild or Unspecified;
++ HCC 151: Schizophrenia;
++ HCC 155: Major Depression, Moderate or Severe, without Psychosis;
++ HCC 199: Parkinson and Other Degenerative Disease of Basal Ganglia;
++ HCC 224: Acute on Chronic Heart Failure;
++ HCC 225: Acute Heart Failure (Excludes Acute on Chronic);
++ HCC 226: Heart Failure, Except End-Stage and Acute;
++ HCC 238: Specified Heart Arrhythmias;
++ HCC 253: Hemiplegia/Hemiparesis[
++ HCC 267: Deep Vein Thrombosis and Pulmonary Embolism;
++ HCC 280: Chronic Obstructive Pulmonary Disease, Interstitial Lung Disorders, and Other Chronic Lung Disorders;
++ HCC 326: Chronic Kidney Disease, Stage 5;
++ HCC 327: Chronic Kidney Disease, Severe (Stage 4);
++ HCC 383: Chronic Ulcer of Skin, Except Pressure, Not Specified as Through to Bone or Muscle;
++ HCC402: Hip Fracture/Dislocation.
• Include a “prospective normalization factor” that would be subject to a limited adjustment at reconciliation based on the observed case mix, up to +/−5 percent to construct the “final normalization factor”. This is inclusive of TEAM's proposal to include the full baseline period in the construction of the prospective normalization factor, as discussed in section X.A.2.c.(3) of this proposed rule.
As described in section X.C.2.f.(1)(c) of this proposed rule, TEAM was designed to blend and improve upon policies from both BPCI Advanced and the CJR Model based on the cumulative evidence from both model tests. For CJR-X, we propose adopting the TEAM risk adjustment methodology as it represents a balanced evolution from prior models. The original CJR approach, while straightforward, was deficient in accounting for key patient and provider complexities. In contrast, the BPCI Advanced model offered precision but proved too complex for participants to interpret. The TEAM methodology synthesizes the best of both, integrating more precise adjustments for specific conditions and socioeconomic factors—thus improving upon CJR's simplicity—without sacrificing the transparency that was lost in BPCI Advanced. This balanced approach makes TEAM the superior foundation for CJR-X, ensuring target prices are both equitable and actionable.
We considered, but are not proposing, a more nuanced approach to the safety net hospital risk adjustment that segmented hospitals into 3 or more groups based on the share of FFS inpatient episodes provided to dual-eligible beneficiaries. We recognize that a binary risk adjustment for safety net hospitals may not accurately reflect the financial challenges for participants with a high percentage of dual-eligible episodes that do not meet the threshold for being classified as a safety net hospital, as defined in proposed § 512.605. For example, the financial challenges faced by hospitals that fall just below the threshold are likely similar to those for hospitals that fall just above it. Furthermore, we recognize that for participants on the margin, their status as a safety net hospital may change from year to year due to random variance and that this may not reflect the more persistent nature of the underlying challenges that the risk adjustment is attempting to address. However, we are concerned that the further segmentation of hospitals into smaller groups may result in sample size and accuracy problems. We propose that a safety net hospital in CJR-X is a hospital in the top 25th percentile in their region for percentage of FFS LEJR inpatient episodes provided to dually eligible beneficiaries during the applicable baseline period. We seek comment on the proposal § 512.605 to use a binary safety net hospital risk adjustment.
To summarize, for CJR-X we propose a risk adjustment methodology based on the TEAM methodology. As in both TEAM and the CJR Extension, we propose to use baseline data to calculate risk adjustment multipliers and hold them constant at reconciliation. We propose that participants would be provided with these risk adjustment multipliers prior to the start of the performance year and would be able to
We seek comment on our proposals at § 512.645(a-d) for risk adjusting episodes and at § 512.605 for the definitions of “age bracket risk adjustment factor”, “beneficiary economic risk adjustment factor”, “CJR-X HCC count risk adjustment factor”, “final normalization factor”, “prospective normalization factor”, and “safety net hospital”.
In the CJR Model, we performed an annual reconciliation calculation to compare CJR Model PY spending for a CJR participant to a reconciliation target price in order to determine if CMS owed the CJR participant a reconciliation payment, or if the CJR participant owed CMS a repayment. This section outlines our proposals for conducting an annual reconciliation process in CJR-X. As was the case in the CJR Model, we propose to incorporate the participant's quality performance into the reconciliation calculation by adjusting the reconciliation target price for quality based on the CJR-X participant's CQS, which would be constructed from their performance on the proposed quality measures discussed in section X.C.2.e. of this proposed rule. The proposed quality adjustment is discussed in more detail in section X.C.2.f.(5)(f). of this proposed rule. We propose to update the trend factor as discussed in section X.C.2.f.(3)(f). of this proposed rule, and apply episode-level risk adjustment and update the normalization factor as discussed in X.C.2.f.(4). of this proposed rule. We propose to calculate the difference between the participant's aggregated reconciliation target price across all episodes and their episode spending to create the raw NPRA. We propose to apply stop-loss/stop-gain limits to the raw NPRA to determine the CJR-X participant's NPRA. Finally, we propose to subtract the post-episode spending amount from the NPRA, when applicable, to determine the reconciliation payment or repayment amount.
We refer readers to section X.C.2.d.(3). of this proposed rule for our definition of related services for our episodes, to section X.C.2.a of this proposed rule for our definition of performance years, and to section X.C.2.f.(3) of this proposed rule for our approach to establish preliminary target prices.
As we did in the CJR Model, we propose to conduct an annual reconciliation calculation that would compare performance year spending on episodes with a date of discharge from the anchor hospitalization or a date of discharge from the anchor procedure during that PY with reconciliation target prices for those episodes to calculate a reconciliation amount for each CJR-X participant. We would reconcile, on an annual basis, all episodes attributed to a CJR-X participant that end in a given fiscal year during the performance period. As we stated in the 2015 CJR final rule that finalized the CJR Model (80 FR 73385) and reiterated in the FY 2025 IPPS/LTCH PPS final rule that finalized TEAM (89 FR 69773), we believe that one annual reconciliation accommodates the need for regular performance feedback while minimizing the administrative burden of more frequent reconciliations.
We seek comment on this proposal at § 512.650 to conduct one reconciliation for each performance year.
We propose to conduct the annual reconciliation of each CJR-X participant's actual episode payments against the target price(s) roughly 6 months after the end of the performance year, consistent with the 6 months of claims runout we allowed for the reconciliation in the CJR Extension for CJR Model PYs 6 through 8. As we stated in the 2021 CJR 3-Year Extension final rule that finalized the CJR Extension (85 FR 23519) and reiterated in the FY 2025 IPPS final rule that finalized TEAM (89 FR 69773), we believe that 6 months is sufficient time for claims runout given that an internal review of Medicare claims data found that 98.71 percent of IP claims had been received, and 89.96 percent were considered final, by 6 months after the date of service.
We seek comment on our proposal at § 512.560(b) to perform reconciliation 6 months after the end of the performance year.
In the CJR Model, we recognized that there could be CJR participants that experience a reorganization event during a given performance year. We are proposing to align CJR-X policies for reorganization events with those of the CJR Model. At proposed § 512.605, we propose to define a “reorganization event” as a merger, consolidation, spin-off or other restructuring that results in a new hospital entity under a given CCN. As a result of such an event, the CJR-X participant may begin billing under a different CCN, or an additional entity could be incorporated into the CJR-X participant's existing CCN, resulting in a new hospital entity. For instance, CJR-X participant A may merge with, or be purchased by, CJR-X participant B and begin billing under CJR-X participant B's CCN. In this case, we propose to perform separate reconciliation calculations for CJR-X participant A and CJR-X participant B for those episodes where the anchor hospitalization admission or the anchor procedure occurred before the effective date of the merger or purchase. We propose to reconcile episodes where the anchor hospitalization admission or the anchor procedure occurred on or after the effective date of the merger or purchase under the new or surviving CCN that applies to the blended entity. We are proposing this policy in recognition that the blended entity may have different spending patterns, or a different overall patient case mix, than the two separate entities prior to the merger. In a different instance, if a CJR-X participant merges into or is purchased by a hospital that is excluded from CJR-X participation as specified in proposed § 512.610(b) and begins billing under the CCN of the non-CJR-X participant, we propose to reconcile episodes for the CJR-X participant where the anchor hospitalization admission or the anchor procedure occurred before the effective date of the merger or purchase. This policy would allow for the CJR-X participant to earn a reconciliation payment or owe a repayment for the episodes that
We seek comment on our proposal at § 512.650(b)(2) for conducting reconciliations for CJR-X participants that experience a reorganization event during a given performance year.
As discussed in sections X.C.2.f.(3)(f). and X.C.2.f.(4). of this proposed rule, we are proposing to apply beneficiary-level risk adjustment and a limited adjustment to the prospective trend factor and normalization factor, as applicable, to increase the accuracy of our reconciliation calculations. At the time of reconciliation, we would apply these adjustments, if applicable, to the preliminary target prices we calculated and communicated to CJR-X participants prior to the applicable performance year, as described in Section X.C.2.f.(5)(d). of this proposed rule. Additionally, preliminary target prices would be adjusted for geographic wage factor updates, similar to the CJR Model, to convert target prices, which were previously expressed in standardized dollars, into “real” or unstandardized amounts. Application of these adjustments to the preliminary target price, in addition to the Composite Quality Score adjustment described in section X.C.2.f.(5)(e). of this proposed rule, will result in the reconciliation target price. We note that in some cases, the final target price applied to an episode in a given performance year at reconciliation will not change. In addition, in some cases the reconciliation target price will increase from the preliminary target price provided prior to the performance year, potentially benefiting CJR-X participants. For instance, if the prospective trend was 0.98 and the prospective normalization factor were calculated as 0.85, but the realized spending trends and beneficiary case mix during the performance year differed from the values constructed for preliminary target prices, such that the capped retrospective trend adjustment factor was 1.10 and the capped final normalization factor were calculated as 0.87, the reconciliation target price would incorporate these updated factors and therefore be higher than the preliminary target price.
Furthermore, we recognize that due to the availability of data and the timing of when preliminary target prices would be shared with CJR-X participants, the most up-to-date payment data from CMS payment rules, including the Calendar Year OPPS/ASC rule and the Fiscal Year IPPS/LTCH PPS rule would not be captured in the prices. Typically, CMS proposes and finalizes coding or rate changes, as applicable, through established annual payment rules. While we recognize the retrospective trend factor adjustment will take into account realized spending trends during the performance year, given the proposed 3 percent cap, we are concerned the retrospective trend factor adjustment may not capture payment rate changes or other changes, such as ambulatory payment classification (APC) or MS-DRG changes that arise from these payment rules. Therefore, we propose at § 512.645(g) during reconciliation target price construction to update the preliminary target price to account for updated payment rule changes to reflect episode spending during the performance year. We recognize that accounting for payment rule changes during reconciliation target price construction rather than sharing updated preliminary target prices during the performance year may result in CJR-X participants not having the most updated information during the performance year. We note this methodology differs from TEAM's proposal in section X.A.2.c.(2). of this proposed rule. We believe this approach is appropriate for CJR-X given the single episode category tested in CJR-X and anticipate fewer coding changes affecting the LEJR episode. We considered but are not proposing to update and deliver preliminary target prices to CJR-X participants for each calendar and fiscal year final rule. We believe managing three different preliminary target prices in a given performance year will increase participant burden and pricing methodology complexity. Lastly, we also considered but are not proposing removing the 3 percent capping of the retrospective trend factor adjustment. Applying a full retrospective trend factor to reconciliation target prices, rather than capping at 3 percent would account for actual performance year spending and would incorporate payment rule changes not captured in preliminary target prices. However, we recognize that removing the 3 percent cap may introduce target price instability making it more difficult for CJR-X participants to predict reconciliation target prices and assess spending performance in the model.
We seek comment on our proposal at § 512.645(g) to account for payment system changes during the construction of reconciliation target prices.
Similar to the CJR Model, we proposed in section X.C.2.f.(3)(g). of this proposed rule to include a discount factor for all CJR-X participants that would be incorporated into preliminary target prices. While the CJR Model included a 3.0 percent discount factor (80 FR 73353), we are proposing a 2.0 percent discount factor for CJR- X that takes into consideration the opportunity for CJR-X participants to find savings and acknowledges the reductions in LEJR spending since the CJR Model was implemented. CJR-X participants that provide high-quality episode care would have the opportunity to reduce the effective discount factor used to calculate their reconciliation target price. As in the CJR Model, we are proposing to adjust the discount factor based on the CJR-X participant's composite quality score by categorizing them into one of four categories, specifically “Excellent,” “Good,” “Acceptable,” and “Below Acceptable,” for each performance year. Based on where the CJR-X participant is categorized, then they may receive a reduction to their discount factor, no reduction to their discount factor, or no reduction and ineligibility to receive a reconciliation payment.
We propose to incorporate the composite quality score, as described in section X.C.2.e.(6) in this proposed rule, in the CJR-X pricing methodology by (1) requiring a minimum composite quality score for reconciliation payment eligibility if the CJR-X participant's actual episode payments are less than the reconciliation target price and (2) determining the effective discount factor included in the reconciliation target price experienced by the CJR-X participant in the reconciliation process.
Under this methodology, we propose CJR-X participants must achieve a minimum composite quality score of >=6.1 to be eligible for a reconciliation payment if actual episode spending were less than the reconciliation target price based on the 2.0 percent maximum discount factor. We propose at § 512.645(h)(4) that CJR-X
We propose at § 512.645(h)(3) that CJR-X participants with an “acceptable” composite quality score of greater than or equal to 6.1 and less than or equal to 12.0 would be eligible for a reconciliation payment if actual episode spending were less than the reconciliation target price but would not be eligible for a discount factor reduction. Therefore, acceptable performance would be based on a 2.0 percent discount factor because their quality performance was at the acceptable level established for the model. These CJR-X participants would be eligible to receive a reconciliation payment if actual episode spending were less than the reconciliation target price.
We propose at § 512.645(h)(2) that CJR-X participants with a “good” composite quality score of greater than or equal to 12.1 and less than or equal to 17.0 would be eligible for a reconciliation payment if actual episode spending were less than the reconciliation target price and would be eligible for a 1.0 percent discount factor that reflects their good quality performance. Thus, participants achieving this level of quality would either have less repayment responsibility (that is, the reduced discount factor would offset a portion of their repayment responsibility) or receive a higher reconciliation payment (that is, the reduced discount factor would increase the reconciliation payment) at reconciliation than they would have otherwise if the 2.0 discount factor were maintained.
Finally, we propose at § 512.645(h)(1) CJR-X participants with an “excellent” composite score quality score of greater than or equal to 17.1 would be eligible to receive a reconciliation payment if actual episode spending was less than the reconciliation target price and would be eligible for a 0.0 percent discount factor that reflects their excellent performance. Thus, participants achieving this level of quality would either have less repayment responsibility (that is, the reduced discount factor would offset a portion of their repayment responsibility) or receive a higher reconciliation payment (that is, the reduced discount factor would increase the reconciliation payment) at reconciliation than they would have otherwise if the 2.0 discount factor were maintained.
Under this methodology, the proposed stop-loss and stop-gain limits discussed in section X.C.2.f.(5)(g) of this proposed rule would not change. We believe this approach to quality incentive payments based on the composite quality score could have the effect of increasing the alignment of the financial and quality performance incentives under CJR-X to the potential benefit of CJR-X participants and their collaborators as well as CMS and would be consistent with the original CJR model methodology linking quality and payment.
The proposed CJR-X composite quality score ranges are displayed in Table X.C.-05.
We seek comment on our proposal at § 512.650(g) to link quality to payment by adjusting the discount factor for reconciliation target prices.
Consistent with the original CJR model, after the completion of a performance year, we propose to retrospectively calculate a CJR-X participant's actual episode performance based on the episode definition. We note that episode spending would be subject to proration for services that extend beyond the episode (as described in section X.C.2.f.(3)(c). of this proposed rule). We propose to cap performance year spending at the high-cost outlier cap as described in section X.C.2.f.(3)(e). of this proposed rule. We propose to apply the high-cost outlier cap to episodes in the performance year similarly to how we propose to apply it to baseline episodes, using the 99th percentile for each MS-DRG/HCPCS episode type and region as the maximum. Any performance year episode spending amount above the high-cost outlier cap would be set to the amount of the high-cost outlier cap. Similar to the CJR Model, we would apply geographic wage factors to total capped episode spending to convert the amount from standardized dollars into “real” or unstandardized amounts. We then propose to compare each CJR-X participant's performance year spending to its reconciliation target prices, calculated as discussed in X.C.2.f.(5)(d). of this proposed rule. We note that, as discussed in section X.C.2.f.(3)(i). of this proposed rule, a CJR-X participant would have multiple target prices for episodes ending in a given performance year, based on the MS-DRG/HCPCS episode type and the performance year
We seek comment on our proposal at § 512.650(c)(1) through (c)(5) for calculating the raw NPRA.
As we did in the CJR Model, we propose to include both stop-loss and stop-gain limits on the total amount that a CJR-X participant could owe to CMS as a repayment or receive from CMS as a reconciliation payment. As we stated in the 2015 CJR final rule (80 FR 73398), we acknowledge that CJR-X participants vary with respect to their readiness to function under an episode payment model with regard to their organizational and systems capacity and structure, as well as their beneficiary population served. Conversely, we also note that CJR-X participants may be incentivized to excessively reduce or shift utilization outside of the CJR-X episode, even with the proposed quality requirements discussed in section X.C.2.e. of this proposed rule. In order to ensure that CJR-X participants would neither be subject to an unmanageable level of risk nor be incentivized to stint on care to achieve savings, we propose limiting a CJR-X participant's NPRA through the application of symmetrical stop-loss and stop-gain limits, calculated as a percentage of the hospital's aggregate reconciliation target price. We note that the stop-loss limit would not apply to any post-episode spending amount as discussed in section X.C.2.f.(5)(h). of this proposed rule.
Consistent with the CJR Model, we propose a stop-loss and stop-gain limit of 20 percent for most CJR-X participants. We believe maintaining consistency with the CJR Model's 20 percent stop-loss and stop-gain limits for most CJR-X participants provides an appropriate balance of financial risk and reward to promote spending reductions with reasonable risk thresholds. However, we also acknowledge that certain groups of CJR-X participants may have lower risk tolerance and less infrastructure and support to achieve efficiencies for high-cost episodes, as we stated in the 2015 CJR final rule (80 FR 73403). Therefore, we propose to provide additional safeguards to certain categories of CJR-X participants, largely consistent with the CJR Model. We propose to apply a 5 percent stop-loss for CJR-X participants that are rural hospitals as defined at proposed § 512.605, Medicare-dependent, small rural hospitals (MDH), and sole community hospitals (SCH). We also propose to apply a 5 percent stop-loss for CJR-X participants that meet the proposed definition of safety net hospitals, as defined at proposed § 512.605. Although we did not apply this additional stop-loss protection to safety net hospitals in the CJR Model, evaluation results indicated that this category of hospital was disproportionately likely to owe repayments to Medicare, as we discuss in section X.C.2.f.(4). of this proposed rule.
We seek comment on our proposal at § 512.650(c)(6)(i) and (ii) to apply 20 percent stop-loss and stop-gain limits to most CJR-X participants, and our proposal at § 512.650(c)(6)(iii) to apply a 5 percent stop-loss limit to certain categories of CJR-X participants.
As we noted in the 2015 CJR final rule that finalized the post-episode spending policy for the CJR Model (80 FR 73398), while the CJR episode extended 90-days post-discharge from the anchor hospitalization, some hospitals may have had an incentive to withhold or delay medically necessary care until after an episode ended to reduce their actual episode payments. We did not believe this would be likely in the CJR Model, especially given the relatively long episode duration, and we continue to believe that this will not be likely in CJR-X. However, in order to identify and address such inappropriate shifting of care, we are proposing to maintain the CJR Model post-episode spending policy in CJR-X. Specifically, we propose to calculate the total Medicare Parts A and B expenditures in the 30-day period following completion of each episode for all services covered under Medicare Parts A and B for each performance year, regardless of whether the services are included in the episode definition proposed in this proposed rule (as discussed in section X.C.2.d.(2). and (3). of this proposed rule). Because we based the episode definition on exclusions, identified by MS-DRGs for readmissions and ICD-10-CM diagnosis codes for Part B services as discussed in section X.C.2.d.(3)(c). of this proposed rule, and Medicare beneficiaries may typically receive a wide variety of related (and unrelated) services during episodes, there is some potential for CJR-X participants to inappropriately withhold or delay a variety of types of services until the episode concludes regardless of whether the service is included in the episode definition, especially for Part B services where diagnosis coding on claims may be less reliable. This inappropriate shifting could include both those services that are related to the episode (for which the CJR-X participant would bear financial responsibility as they would be included in the actual episode spending calculation) and those that are unrelated (which would not be included in the actual episode spending calculation), because a CJR-X participant engaged in shifting of medically necessary services outside the episode for potential financial benefit may be unlikely to clearly distinguish whether the services were related to the episode or not.
This calculation would include prorated payments for services that extend beyond the episode as discussed in section X.C.2.f.(3)(c). of this proposed rule. Specifically, we would identify whether the average 30-day post-episode spending for a CJR-X participant in any given performance year is greater than three standard deviations above the regional average 30-day post-episode spending, based on the 30-day post-episode spending for episodes attributed to all CJR-X participants in the same region. Similar to the CJR Model, post-episode spending would be adjusted for geographic wage factors to express spending in “real” or unstandardized amounts. We propose that if the CJR-X participant's average post-episode spending exceeds this threshold, the CJR-X participant would repay Medicare for the amount that exceeds such threshold. Consistent with the CJR Model, this amount would not be subject to the proposed stop-loss limits discussed in section X.C.2.f.5.(g). of this proposed rule.
We seek comment on our proposal at § 512.650(c)(7) to make CJR-X participants responsible for making repayments to Medicare based on high spending in the 30 days after the end of the episode and for our proposed methodology to calculate the threshold for high post-episode spend.
Consistent with the CJR Model, we propose that after subtracting a CJR-X participant's post-episode spending amount from their NPRA as applicable, as described previously in this section, if the resulting amount is positive, the CJR-X participant would receive the amount as a one-time lump sum reconciliation payment from Medicare. If the amount is negative, Medicare
We seek comment on our proposal at § 512.650(d) to make reconciliation payments to, and collect repayment amounts from, CJR-X participants as a one-time, lump sum payment.
We believe that it is necessary to have a process by which CJR-X participants may appeal the reconciliation report. Therefore, we propose at § 512.660(a) to permit CJR-X participants to submit a notice of calculation error regarding the calculations contained within the CJR-X reconciliation report if the CJR-X participant believes an error occurred in calculations due to data quality or other issues, or if the CJR-X participant believes an error occurred in calculations due to misapplication of methodology. We note that the CJR-X participant would still be subject to the same limitations on review as stipulated at § 512.170. We also propose at § 512.660(b)(1) that if a CJR-X participant believes the CJR-X reconciliation report contains a calculation error, then the CJR-X participant would be required to submit a timely error notice in writing documenting the suspected calculation error within 30 calendar days of issuance of the CJR-X performance report. We also propose that CMS may specify different requirements for the form, manner, or deadline for submission of the error notice. If the CJR-X participant does not provide such timely error notice in accordance with the timelines and processes specified by CMS, then we propose at § 512.660(b)(2) that the CJR-X reconciliation report would be deemed final and the CJR-X participant would be precluded from later contesting those elements of the CJR-X reconciliation report for that performance year. Additionally, we propose that only an CJR-X participant may submit a timely error notice according to the provisions at proposed § 512.660(b)(3).
The proposed 30-day window to review and appeal CMS calculations aligns with the length of time we have finalized for submitting appeals in other mandatory Innovation Center models, such as TEAM, the Ambulatory Specialty Model, and the Increasing Organ Transplant Access Model.
We propose at § 512.660(c) that if CMS receives a timely notice of a calculation error, we would issue an initial determination in writing within 30 calendar days to either confirm that there was an error in the calculation or verify that the calculation is correct. We note that CMS would reserve the right to an extension of the time for providing its initial determination upon written notice to the CJR-X participant.
If a CJR-X participant disagrees with and wishes to dispute the results of the initial determination, under proposed § 512.660(d), the CJR-X participant or CMS may request a reconsideration of the initial determination by following the reconsideration review process described in the standard provisions at § 512.190.
We seek comment on our proposed appeals process for CJR-X at § 512.660.
When determining the best strategy for addressing concurrent participation in multiple CMS models or initiatives, we recognize we need to consider how to promote meaningful collaboration between providers and CJR-X participants as the model expands. Historically, the overlap policies of CMS Innovation Center models, including the original CJR (80 FR 73274), were intended to avoid duplicative incentive payments or giving precedence to a single accountable entity. However, what resulted were confusing methodologies or misaligned incentives which were difficult to navigate. Participants from prior models have also cited confusion with identifying all of the model(s) to which a beneficiary may be aligned or attributed.
Earlier episode-based payment models, such as the original CJR Model (80 FR 73274) in certain circumstances, and BPCI, are examples of this well-meaning but potentially confusing overlap policy. In these models, CMS addressed overlap by implementing a complex calculation and recouping a portion of the pricing discount for providers also participating in certain ACO initiatives. The recoupment was intended to prevent duplicate incentive payments for the same beneficiary's care; however, some participants perceived the resulting recoupment as a financial loss, discouraging providers from participating in both initiatives. We believe it is important to learn from previous episode-based payment model policies, as discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69786), so that CJR-X can implement a sustainable long-term policy to account for interactions with other CMS models and initiatives.
We propose that a beneficiary could be in an episode in CJR-X, as described in section X.C.2.d. of this proposed rule, by undergoing a procedure at an acute care hospital participating in CJR-X, and be attributed to a provider participating in a total cost of care or shared savings model or program. For example, a beneficiary may be attributed to a provider participating in the Shared Savings Program for an entire performance year, as well as having initiated an episode in CJR-X during the ACO's performance year. Each model or program incorporates a reconciliation process, where total included spending during the performance period or episode are calculated, as well as any potential savings achieved by the model or program. We propose to allow any savings generated on an episode in CJR-X and any contribution to savings in the total cost of care model be retained by each respective participant. This would mean the episode spending in CJR-X would be accounted for in the total cost of care model's total expenditures, but CJR-X's reconciliation payment amount or repayment amount would not be included in the total cost of care model's total expenditures. Likewise, the total cost of care model's savings payments or losses would not be included in the episode spending in CJR-X.
This approach deviates slightly from the latter years of the CJR Model, where concurrent participation in total cost of care models was permitted, except for the ENHANCED track of the Medicare Shared Savings Program because the ENHANCED track offered greater financial accountability as compared to the BASIC track or predecessor tracks. As we discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69787), by allowing a beneficiary aligned to a total cost of care model participant, such as the Medicare Shared Savings Program or other ACO initiatives, to also initiate a CJR-X episode, we would be eliminating complexities experienced in prior models where it was difficult for participants to know when a beneficiary would trigger an episode and when the episode would be excluded. Furthermore, this would match the procedure used in newer models such as TEAM, increasing policy design similarity between models. We hope that this uniform decision will increase simplicity. We also believe that allowing concurrent participation for
In addition, there are other potential benefits to allowing overlap between a beneficiary who is aligned to a total cost of care model and who initiates an episode in CJR-X, such as strengthening the volume of episodes a CJR-X participant is responsible for. We know from prior experience that low episode volume creates challenges for participants to generate meaningful savings and manage outlier cases with unusually high episode expenditures. Allowing CJR-X episodes to trigger despite the beneficiary being aligned to a total cost of care model will increase CJR-X episode volume to mitigate these low volume challenges.
We also acknowledge that certain ACOs may prefer that their aligned beneficiary population not be included in CJR-X. Since ACOs are accountable for total cost of care, they may prefer to manage their beneficiaries and have full control over all expenditures and beneficiary care instead of sharing that responsibility with a CJR-X participant. However, we believe the benefits of episode-based payment models in combination with ACO models will ultimately improve Medicare beneficiary care, and episode-based payment models will not be disruptive to ACO practices.
However, we are proposing that CJR-X would not allow for concurrent participation with TEAM. We proposed in section X.C.2.b.(2)(i). of this proposed rule not to allow TEAM participants to be CJR-X participants because TEAM and CJR-X both test bundled payments for LEJRs and are running concurrently. If an LEJR episode occurs at an acute care hospital participating in TEAM, we discussed in section X.C.2.b.(i). of this proposed rule, that TEAM participants would be excluded from CJR-X participation which means that TEAM supersedes the CJR-X model and those LEJR procedures will trigger a TEAM episode rather than a CJR-X episode. Further, we propose at § 512.630(e) that if a beneficiary in a TEAM episode has a LEJR procedure performed at a CJR-X hospital during TEAM's 30-day post-discharge period, then the LEJR procedure will not initiate a CJR-X LEJR episode and the spending from the LEJR procedure will be included in the TEAM episode. We note that while this instance would result in the CJR-X participant not being attributed the episode, the episode that would have been triggered in CJR-X in the absence of the overlapping TEAM episode would still remain in the national set of episodes used in the calculation of various CJR-X target price components. This is because the national set of LEJR episodes in CJR-X includes all MS-DRG/HCPCS region combinations and therefore all LEJR episodes would need to be retained in the national set. We anticipate this occurrence to be rare given TEAM's shorter post-discharge period and the reduced likelihood that a beneficiary would have another procedure performed within such a short time period if not clinically appropriate. Additionally, in section X.A.2.a.(3). of this proposed rule, we propose that if a beneficiary in a CJR-X episode has a procedure performed at a TEAM hospital that would initiate a TEAM episode during the CJR-X 90-day post-discharge period, then that procedure would not initiate a TEAM episode and the spending from that procedure would be included in the CJR-X episode. We considered giving TEAM precedence in this situation and dropping the CJR-X episode to initiate a TEAM episode to support episode volume in TEAM, but we believe it is important to hold the anchoring provider of the initial procedure accountable for spending and care coordination, especially given the investments that hospitals employ to manage a beneficiary's care. We believe this policy would avoid duplicative calculations for the same procedure in a model that is similar in overall design. We also considered allowing a CJR-X and a non-LEJR TEAM episode to run concurrently. For example, if a beneficiary in a CJR-X episode has a procedure performed at a TEAM hospital during the CJR-X 90-day post-discharge period, then that procedure would initiate a TEAM episode. While we believe this situation would be very rare, we are concerned there could be double payment of savings and may make it difficult to determine which model and hospital were the driver to any realized savings or losses. We are also concerned this situation could make it challenging for the beneficiary to have two accountable episode-based entities potentially providing different guidance on who is managing their care.
We acknowledge there may be new models or programs that could have overlap with CJR-X. This could occur because a beneficiary may trigger an episode in CJR-X while being aligned to a new CMS model or program or because a CJR-X participant also participates in another CMS model or program. We would plan to assess each new model to determine if the structure of payment and savings calculation would need any additional overlap requirements to account for the new model and would propose a policy in future notice and comment rulemaking, as necessary.
We believe certain financial and beneficiary incentives could help a CJR-X participant reach their quality and efficiency goals under the model and benefit both beneficiaries and the Medicare Trust Fund through reductions in hospital readmissions, complications, days in acute care, and mortality. We also believe there is value in offering flexibilities to CJR-X participants that could support their performance in CJR-X and enable them to meet the needs of beneficiaries. The flexibilities outlined in this section include allowing CJR-X participants to share all or some of their reconciliation payment amount or repayment amount with non-model participants and offer beneficiary incentives to encourage engagement and adherence to recommended treatment throughout recovery.
CJR-X participants may wish to enter into financial arrangements with certain providers and suppliers that support CJR-X activities to share their reconciliation payment amount or repayment amount resulting from participation in CJR-X. We believe allowing such arrangements to align financial incentives would support high quality care, improve health outcomes, and reduce Medicare spending through improved beneficiary care transitions and reduced fragmentation following surgery. We expect that CJR-X participants would identify key providers and suppliers caring for beneficiaries in the surrounding communities with whom to establish partnerships to promote accountability for the quality, cost, and overall care for beneficiaries, including managing and coordinating care; encouraging investment in infrastructure, enabling technologies, and redesigning care processes for high quality and efficient service delivery; and carrying out other obligations or duties under CJR-X.
These providers and suppliers may invest substantial time and other resources in these activities, yet they
We recognize that there are numerous arrangements that CJR-X participants may wish to enter other than the financial arrangements described in the proposed regulations for which safe harbor protection may be extended that could be beneficial to the CJR-X participants. For example, CJR-X participants may choose to engage with organizations that are neither providers nor suppliers to assist with matters such as data analysis; local provider and supplier engagement; care redesign planning and implementation; beneficiary outreach; beneficiary care coordination and management; monitoring CJR-X participants' compliance with the model's terms and conditions; or other model-related activities. Such organizations may play important roles in a CJR-X participant's plans to implement the model based on the experience these organizations may bring, such as prior experience with episode-based payment models, care coordination expertise, familiarity with a particular local, or knowledge of bundled data. We expect that all relationships established between CJR-X participants and these organizations for purposes of the model would be those permitted only under existing law and regulation, including any relationships that would include the CJR-X participant's sharing of the reconciliation payment amount or repayment amount. We would expect these relationships to be solely based on the level of engagement of the organization's resources to directly support the CJR-X participants' model implementation.
As proposed, CJR-X is a two-sided financial risk model and the CJR-X participant would bear sole financial risk for any repayment amount to CMS in the absence of financial arrangements. However, given the incentive to reduce episode spending to earn a reconciliation payment amount, as described in section X.C.2.f.(5) of this proposed rule, a CJR-X participant may want to engage in financial arrangements with providers and suppliers or participants in Medicare ACO initiatives who are making contributions to the CJR-X participant's performance in the model. Such arrangements would allow the CJR-X participant to share reconciliation payment amounts or repayment amounts with individuals and entities that have a role in the CJR-X participant's performance in the model. We propose to use the term “CJR-X collaborator” to refer to these individuals and entities.
Because CJR-X participants would be accountable for spending and quality during the anchor hospitalization or anchor procedure and the 90-day post discharge period, as described in section X.C.2.d.(3)(b) of this proposed rule, providers and suppliers other than the CJR-X participant may furnish services to the beneficiary during the model. As such, for purposes of the Federal anti-kickback statute safe harbor for CMS-sponsored model arrangements (42 CFR 1001.952(ii)), we propose at § 512.605 to define “CJR-X collaborator” as any of the following types of providers and suppliers that is Medicare-enrolled and eligible to participate in Medicare or entities that are participating in a Medicare ACO initiative may be CJR-X collaborators:
• SNF.
• HHA.
• LTCH.
• IRF.
• Physician.
• Nonphysician practitioner.
• Therapist in a private practice.
• Comprehensive Outpatient Rehabilitation Facility (CORF).
• Provider or supplier of outpatient therapy services.
• Physician Group Practice (PGP).
• Hospital.
• Critical Access Hospital (CAH).
• Non-physician provider group practice (NPPGP).
• Therapy group practice (TGP).
• Medicare ACO.
We seek comment on the proposed definition of “CJR-X collaborator” and any additional Medicare-enrolled providers or suppliers, that should be included in this definition. For example, we considered rural emergency hospitals (REHs), rural clinics, and Federally Qualified Health Centers (FQHCs) because CJR-X would hold CJR-X participants accountable for cost and quality of care during a 90-day episode, and this would include rural beneficiaries that may receive a LEJR procedure. We anticipate rural beneficiaries would receive pre- and post-operative care locally through these sites and allowing these providers to participate in financial arrangements would align incentives across all entities influencing episode outcomes and would encourage better care transitions and follow-up.
Similar to the original CJR Model (42 CFR 510.500), we propose that certain financial arrangements between a CJR-X participant and a CJR-X collaborator be termed “sharing arrangements.” For purposes of the Federal anti-kickback statute safe harbor for CMS-sponsored model arrangements (42 CFR 1001.952(ii)), we propose that a sharing arrangement would be to share reconciliation payment amounts or repayment amounts. We propose at to define “sharing arrangement” as a financial arrangement between a CJR-X participant and a CJR-X collaborator for the sole purpose of making gainsharing payments or alignment payments under CJR-X. Where a payment from a CJR-X participant to a CJR-X collaborator is made pursuant to a sharing arrangement, we propose to define that payment as a “gainsharing payment,” which is discussed in section X.C.2.i.(4)(c) of this proposed rule. Where a payment from a CJR-X collaborator to a CJR-X participant is made pursuant to a sharing arrangement, we propose to define that payment as an “alignment payment,” which is discussed in section X.C.2.i.(4)(c) of this proposed rule. A CJR-X participant must not make a gainsharing payment or receive an alignment payment except in accordance with a sharing arrangement. We propose that a sharing arrangement
We propose that the CJR-X participant must develop, maintain, and use a set of written policies for selecting individuals and entities to be CJR-X collaborators. To safeguard against potentially fraudulent or abusive practices, we propose that the selection criteria determined by the CJR-X participant must include the quality of care delivered by the potential CJR-X collaborator. Moreover, the selection criteria cannot be based directly or indirectly on the volume or value of referrals or business otherwise generated by, between or among the CJR-X participant, any CJR-X collaborator, any collaboration agent, or any individual or affiliated with a CJR-X participant, CJR-X collaborator, or collaboration agent. In addition to including quality of care in their selection criteria, CJR-X participants must also consider selection of CJR-X collaborators based on criteria that include the anticipated contribution to the performance of the CJR-X participant in the model by the potential CJR-X collaborator to ensure that the selection of CJR-X collaborators takes into consideration the likelihood of their future performance.
Finally, we propose that if a CJR-X participant enters a sharing arrangement, its compliance program must include oversight of sharing arrangements and compliance with the applicable requirements of the model. Requiring oversight of sharing arrangements to be included in the compliance program provides a program integrity safeguard. We note CMS would monitor CJR-X participants for compliance, as permitted under § 512.150, especially if we believe the requirement is not being met as indicated through monitoring activities such as documentation requests, interviews, and site visits.
We seek comment on the proposed “sharing arrangement” definition at § 512.605, the sharing arrangement proposals at § 512.670(a), and whether additional or different safeguards are needed to ensure program integrity, protect against abuse, and ensure that the goals of the model are met.
We propose several requirements for sharing arrangements to help ensure that their sole purpose is to create financial alignment between CJR-X participants and CJR-X collaborators toward the goals of the model while maintaining adequate program integrity safeguards. We propose that the sharing arrangement must be in writing, signed by the parties, and entered into before care is furnished to CJR-X beneficiaries under the sharing arrangement. In addition, participation in a sharing arrangement must be voluntary and without penalty for nonparticipation. It is important that providers and suppliers rendering items and services to beneficiaries during the model have the freedom to provide medically necessary items and services to beneficiaries without any requirement that they participate in a sharing arrangement to safeguard beneficiary freedom of choice, access to care, and quality of care. The sharing arrangement must set out the mutually agreeable terms for the financial arrangement between the parties to guide and reward model care redesign for future performance toward model goals, rather than reflect the results of model performance years that have already occurred and where the financial outcome of the sharing arrangement terms would be known before signing.
We propose that the sharing arrangement must require the CJR-X collaborator and its employees, contractors, and subcontractors to comply with certain requirements that are important for program integrity under the arrangement. We note that the terms contractors and subcontractors include collaboration agents as defined later in this section. The sharing arrangement must require all of the individuals and entities party to the arrangement to comply with the applicable provisions of this proposed rule, including proposed requirements regarding beneficiary notifications, at proposed § 512.622(b), and access to records and record retention and participation in any evaluation, monitoring, compliance, and enforcement activities performed by CMS or its designees, in accordance with the standard provisions for Innovation Center models at § 512.135, because these individuals and entities all would play a role in model care redesign and be part of financial arrangements under the model as proposed. The sharing arrangement must also require all individuals and entities party to the arrangement who are providers or suppliers to comply with the applicable Medicare provider enrollment requirement at § 424.500, including having a valid and active TIN or NPI, during the term of the sharing arrangement. This proposed requirement is to ensure that the individuals and entities have the required enrollment relationship with CMS under the Medicare program, although we note that they are not responsible for complying with requirements that do not apply to them. Finally, the sharing arrangement must require individuals and entities to comply with all other applicable laws and regulations.
We propose that the sharing arrangement must not pose a risk to beneficiary access, beneficiary freedom of choice, or quality of care so that financial relationships between CJR-X participants and CJR-X collaborators do not negatively impact beneficiary protections under the model. The sharing arrangement as proposed must require the CJR-X collaborator to have a compliance program that includes oversight of the sharing arrangement and compliance with the requirements of the model, just as we require CJR-X participants to have a compliance program that covers oversight of the sharing arrangement for this purpose as a program integrity safeguard. We seek comment on the anticipated effect of the proposed compliance program requirement for CJR-X collaborators, particularly with regard to individual physicians and nonphysician practitioners, small PGPs, NPPGPs, and TGPs and whether alternative compliance program requirements for all or a subset of CJR-X collaborators should be adopted to mitigate any effect of the proposal that could make participation as a CJR-X collaborator infeasible for any provider, supplier, or other entity on the proposed list of types of CJR-X collaborators.
It is necessary that CJR-X participants have adequate oversight over sharing arrangements to ensure that all arrangements meet the requirements of this section and provide program integrity protections. Therefore, we propose that the board or other governing body of the CJR-X participant have responsibility for overseeing the CJR-X participant's' participation in the model, its arrangements with CJR-X collaborators, its payment of gainsharing payments, its receipt of alignment payments, and its use of beneficiary incentives in the model. Additionally, we propose that the CJR-X participant and CJR-X collaborator must document this agreement in writing and, as part of the model's monitoring and compliance activities as proposed in
For purposes of sharing arrangements under the model, we propose at § 512.605 to define “CJR-X activities” as activities related to promoting accountability for the quality, cost, and overall care for CJR-X beneficiaries and performance in the model, including managing and coordinating care; encouraging investment in infrastructure and redesigned care processes for high quality and efficient service delivery; or carrying out any other obligation or duty under the model. In addition to the quality of care provided during episodes, we believe the activities that would fall under this proposed definition encompass the totality of activities upon which it would be appropriate for sharing arrangements under the model to be based in order to value the contributions of providers, suppliers, and other entities toward meeting the performance goals of the model. We seek comment on the proposed definition of “CJR-X activities” as an inclusive and comprehensive framework for capturing direct care and care redesign that contribute to performance toward model goals.
We propose that the written agreement memorializing a sharing arrangement must specify the following parameters of the arrangement:
• The purpose and scope of the sharing arrangement.
• The identities and obligations of the parties, including specified CJR-X activities and other services to be performed by the parties under the sharing arrangement.
• The date of the sharing arrangement.
• Management and staffing information, including type of personnel or contractors that will be primarily responsible for carrying out CJR-X activities.
• The financial or economic terms for payment, including the following:
++ Eligibility criteria for a gainsharing payment.
++ Eligibility criteria for an alignment payment.
++ Frequency of gainsharing or alignment payment.
++ Methodology and accounting formula for determining the amount of a gainsharing payment that is solely based on quality of care and the provision of CJR-X activities.
++ Methodology and accounting formula for determining the amount of an alignment payment.
Finally, we propose to require that the terms of the sharing arrangement must not induce the CJR-X participant, CJR-X collaborator, or any employees, contractors, or subcontractors of the CJR-X participant or CJR-X collaborator to reduce or limit medically necessary services to any beneficiary or restrict the ability of a CJR-X collaborator to make decisions in the best interests of CJR-X beneficiaries, including the selection of devices, supplies, and treatments. These requirements are to ensure that the quality of care for beneficiaries is not negatively affected by sharing arrangements under the model.
We seek comment on the “CJR activities” definition and the sharing arrangement requirements at § 512.670.
We propose several conditions and limitations for gainsharing payments and alignment payments as program integrity protections for the payments to and from CJR-X collaborators. We propose to require that gainsharing payments be derived solely from a CJR-X participant's reconciliation payment amounts, internal costs savings, or both; that they be distributed on an annual basis, not more than once per calendar year; that they not be a loan, advance payment, or payment for referrals or other business; and that they be clearly identified as a gainsharing payment at the time they are paid.
We believe that gainsharing payment eligibility for collaborators should be conditioned on two requirements—(1) quality of care criteria; and (2) the provision of CJR-X activities. With respect to the first requirement, we propose that to be eligible to receive a gainsharing payment, the collaborator must meet quality of care criteria during the performance year for which the participant earned a reconciliation payment amount that comprises the gainsharing payment. We propose that these quality of care criteria will be included in the sharing arrangement and mutually agreed upon by the CJR-X participant and CJR-X collaborator. With regard to the second requirement, to be eligible to receive a gainsharing payment, or to be required to make an alignment payment, a collaborator other than a PGP, NPPGP, or TGP must have directly furnished a billable item or service to a beneficiary during the same performance year for which the participant earned a reconciliation payment amount or repayment amount. For purposes of this requirement, we consider a hospital, CAH or post-acute care provider to have “directly furnished” a billable service if one of these entities billed for an item or service for a CJR-X beneficiary in the performance year for which the CJR-X participant earned a reconciliation payment amount or repayment amount. The phrase “episode” refers to all Part A and B items and services described in section X.C.2.d.(3)(b) of this proposed rule (excluding the items and services described in section X.C.2.d.(3)(c)) of this proposed rule that are furnished to a beneficiary described in section X.C.2.c of this proposed rule. During the time period that begins with the beneficiary's admission to an anchor hospitalization or the date of the anchor procedure, as applicable, and ends on the 90th day of either the date of discharge from the anchor hospitalization or the date of service for the anchor procedure. These requirements ensure that there is a required relationship between eligibility for a gainsharing payment and the direct care for CJR-X beneficiaries during an episode for these CJR-X collaborators. We believe the provision of direct care is essential to the implementation of effective care redesign, and the requirement provides a safeguard against payments to CJR-X collaborators other than a PGP, NPPGP, or TGP that are unrelated to direct care for CJR-X beneficiaries during the model's performance year.
We propose to establish similar requirements for PGPs, NPPGPs and TGPs that vary because these entities do not themselves directly furnish billable services. To be eligible to receive a gainsharing payment or required to make an alignment payment for a given performance year, a PGP, NPPGP or TGP must have billed for an item or service that was rendered by one or more members of the PGP, NPPGP or TGP to a CJR-X beneficiary during the episode that is attributed to the same performance year for which the CJR-X participant earned a reconciliation payment amount or repayment amount. Like the proposal for CJR-X collaborators that are not PGPs, these proposals also require a link between the CJR-X collaborator that is the PGP, NPPGP or TGP and the provision of items and services to beneficiaries during the episode by PGP, NPPGP or TGP members.
Moreover, we further propose that, because PGPs, NPPGPs and TGPs do not directly furnish items and services to beneficiaries, in order to be eligible to receive a gainsharing payment or be required to make an alignment payment, for a given performance year the PGP, NPPGP or TGP must have contributed to CJR-X activities and been clinically involved in the care of beneficiaries during an episode that is attributed to the same performance year for which
We propose that the amount of any gainsharing payments must be determined in accordance with a methodology that is solely based on quality of care and the provision of CJR-X activities. We considered whether this methodology could substantially, rather than solely, be based on quality of care and the provision of CJR-X but ultimately determined that basing the methodology solely on these two elements creates a model safeguard where gainsharing aligns directly with the model goal of quality of care and with CJR-X activities. The gainsharing methodology may take into account the amount of such CJR-X activities provided by a CJR-X collaborator relative to other CJR-X collaborators. While we emphasize that financial arrangements may not be conditioned directly or indirectly on the volume or value of referrals or business otherwise generated by, between or among CJR-X participants, any CJR-X collaborator, any collaboration agent, or any individual or entity affiliated with a CJR-X participant, CJR-X collaborator, or collaboration agent so that their sole purpose is to align the financial incentives of the CJR-X participant and CJR-X collaborators toward the model, we believe that accounting for the relative amount of CJR-X activities by CJR-X collaborators in the determination of gainsharing payments does not undermine this objective. Rather, the proposed requirement allows flexibility in the determination of gainsharing payments where the amount of a CJR-X collaborator's provision of CJR-X activities (including direct care) to CJR-X beneficiaries during a performance year may contribute to the CJR-X participant's reconciliation payment amount that may be available for making a gainsharing payment. Greater contributions of CJR-X activities by one CJR-X collaborator versus another CJR-X collaborator that result in greater differences in the funds available for gainsharing payments may be appropriately valued in the methodology used to make gainsharing payments to those CJR-X collaborators in order to reflect these differences in CJR-X activities among CJR-X collaborators.
However, we do not believe it would be appropriate to allow the selection of CJR-X collaborators or the opportunity to make or receive a gainsharing payment or an alignment payment to take into account the amount of CJR-X activities provided by a potential or actual CJR-X collaborator relative to other potential or actual CJR-X collaborators because these financial relationships are not to be based directly or indirectly on the volume or value of referrals or business otherwise generated by, between or among the CJR-X participant, any CJR-X collaborator, any collaboration agent, or any individual or entity affiliated with a CJR-X participant, CJR-X collaborator, or collaboration agent. Specifically, with respect to the selection of CJR-X collaborators or the opportunity to make or receive a gainsharing payment or an alignment payment, we do not believe that the amount of model activities provided by a potential or actual CJR-X collaborator relative to other potential or actual CJR-X collaborators could be taken into consideration by the CJR-X participant without a significant risk that the financial arrangement in those instances could be based directly or indirectly on the volume or value of referrals or business generated by, between or among the parties. Similarly, if the methodology for determining alignment payments was allowed to take into account the amount of CJR-X activities provided by a CJR-X collaborator relative to other CJR-X collaborators there would be a significant risk that the financial arrangement could directly account for the volume or value of referrals or business generated by, between or among the parties and, therefore, we propose that the methodology for determining alignment payments may not directly take into account the volume or value of referrals or business generated by, between or among the parties.
We also considered whether the methodology for gainsharing payments should be based substantially on quality of care and the provision of CJR-X activities, rather than solely on these two elements and whether the methodology could take into account the amount of CJR-X activities provided by a CJR-X collaborator relative to other CJR-X collaborators. We were particularly interested in whether this standard would provide sufficient additional flexibility in the gainsharing payment methodology to allow the financial reward of CJR-X collaborators commensurate with their level of effort that achieves model goals Ultimately, we are proposing to follow the CJR Model and TEAM gainsharing methodologies.
We propose that for each performance year, the aggregate amount of all gainsharing payments that are derived from a reconciliation payment amount by the CJR-X participant must not exceed the amount of the reconciliation payment amount. In accordance with the prior discussion, no entity or individual, whether a party to a sharing arrangement or not, may condition the opportunity to make or receive gainsharing payments or to make or receive alignment payments on the volume or value of referrals or business otherwise generated by, between or among the CJR-X participant, any CJR-X collaborator, any collaboration agent, or any individual or entity affiliated with a CJR-X participant, CJR-X collaborator, or collaboration agent. We propose that a CJR-X participant must not make a gainsharing payment to a CJR-X collaborator that is subject to any action for noncompliance by CMS or any other federal or state entity or subject to noncompliance with any other federal or state laws or regulations, or for the provision of substandard care to beneficiaries or other integrity problems. Finally, the sharing arrangement must require the CJR-X participant to recover any gainsharing payment that contained funds derived from a CMS overpayment on a reconciliation payment amount or was based on the submission of false or fraudulent data. These requirements provide program integrity safeguards for gainsharing under sharing arrangements.
With respect to alignment payments, we propose that alignment payments from a CJR-X collaborator to a CJR-X participant may be made at any interval that is agreed upon by both parties. Alignment payments must not be issued, distributed, or paid prior to the calculation by CMS of the repayment amount, and cannot be assessed in the absence of a repayment amount. The CJR-X participant must not receive any amounts under a sharing arrangement from a CJR-X collaborator that are not alignment payments.
We also propose certain limitations on alignment payments that are consistent with the CJR Model. For a performance year, the aggregate amount of all alignment payments received by the CJR-X participant from all of the CJR-X participant's CJR-X collaborators must not exceed 50 percent of the repayment amount. Given that the CJR-X participant would be responsible for developing and coordinating care redesign strategies in response to its CJR-X participation, we believe it is important that the CJR-X participant retain a significant portion of its responsibility for repayment amounts. In addition, the aggregate amount of all alignment payments from a CJR-X collaborator to the CJR-X participant for a CJR-X collaborator other than an ACO
We propose that all gainsharing payments and any alignment payments must be administered by the CJR-X participant in accordance with GAAP and Government Auditing Standards (The Yellow Book). Additionally, we propose that all gainsharing payments and alignment payments must be made by check, electronic funds transfer, or another traceable cash transaction. We make this proposal to mitigate the administrative burden that the electronic fund transfer (EFT) requirement would place on the financial arrangements between certain CJR-X participants and CJR-X collaborators, especially individual physicians and nonphysician practitioners and small PGPs, NPPGPs or TGPs which could discourage participation of those suppliers as CJR-X collaborators.
We seek comment on our proposals at § 512.670(c) on the conditions and restrictions on gainsharing payments, alignment payments, and internal cost savings under the model.
To ensure the integrity of the sharing arrangements, we propose that CJR-X participants must meet a variety of documentation requirements for these arrangements. Specifically, the CJR-X participant must—
• Document the sharing arrangement contemporaneously with the establishment of the arrangement;
• Maintain accurate current and historical lists of all CJR-X collaborators, including CJR-X collaborator names and addresses; update such lists on at least a quarterly basis; and publicly report the current and historical lists of CJR-X collaborators on the CJR-X participant's website; and
• Maintain and require each CJR-X collaborator to maintain contemporaneous documentation with respect to the payment or receipt of any gainsharing payment or alignment payment that includes at a minimum the—
++ Nature of the payment (gainsharing payment or alignment payment);
++ Identity of the parties making and receiving the payment;
++ Date of the payment;
++ Amount of the payment;
++ Date and amount of any recoupment of all or a portion of a CJR-X collaborator's gainsharing payment; and
++ Explanation for each recoupment, such as whether the CJR-X collaborator received a gainsharing payment that contained funds derived from a CMS overpayment of a reconciliation payment amount, or was based on the submission of false or fraudulent data.
In addition, we propose that the CJR-X participant must keep records for all of the following:
• A process for determining and verifying potential and current CJR-X collaborators' eligibility to participate in Medicare if the CJR-X collaborator is a Medicare-enrolled provider or supplier.
• A plan to track internal cost savings.
• Information on the accounting systems used to track internal cost savings.
• A description of current health information technology, including systems to track reconciliation payment amounts, repayment amounts, and internal cost savings.
• A plan to track gainsharing payments and alignment payments.
Finally, we propose that the CJR-X participant must retain and provide access to, and must require each CJR-X collaborator to retain and provide access to, the required documentation in accordance with § 512.135 and 42 CFR 1001.952(ii).
We seek comment on our proposals on the documentation requirements for sharing arrangements at § 512.670(d). We seek comment about all of the requirements set out in the preceding discussion, including whether additional or different safeguards would be needed to ensure program integrity, protect against abuse, and ensure that the goals of the model are met.
Similar to the CJR Model (80 FR 73541), we propose that certain financial arrangements between CJR-X collaborators and other individuals or entities called “collaboration agents” be termed “distribution arrangements.” In the January 2017 CJR final rule (82 FR 180), we finalized a full replacement of the prior CJR Model regulations to allow for—(1) participant hospitals to enter into sharing arrangements with additional categories of CJR collaborators, including certain ACOs, hospitals, CAHs, NPPGPs and therapy group practices (TGPs); (2) ACOs, PGPs, NPPCGs and TGPs that are CJR collaborators to enter into distribution arrangements with certain entities and individuals; and (3) PGPs, NPPGPs and TGPs that received distribution payments from ACOs to enter into downstream distribution arrangements to share distribution payments with certain of their members. Similarly in CJR-X, a “collaboration agent” would be defined as an individual or entity that is not a CJR-X collaborator and that is a PGP, NPPGP, or TGP member that has entered into a distribution arrangement with the same PGP, NPPGP, or TGP in which he or she is an owner or employee. For purposes of the Federal anti-kickback statute safe harbor for CMS-sponsored model arrangements (42 CFR 1001.952(ii)), we propose that a “distribution arrangement” would be defined as a financial arrangement between a CJR-X collaborator that is a PGP, NPPGP or TGP and a collaboration agent for the sole purpose of sharing a gainsharing payment received by the PGP, NPPGP or TGP. Where a payment from a CJR-X collaborator to a collaboration agent is made pursuant to a CJR-X distribution arrangement, we define that payment as a “distribution payment.” A collaboration agent may only make a distribution payment in accordance with a distribution arrangement which complies with the provisions of this proposed model and all other applicable laws and regulations, including the fraud and abuse laws.
Like our proposal for gainsharing payments, we propose that the amount of any distribution arrangements must be determined in accordance with a methodology that is solely based on quality of care and the provision of CJR-X activities. We considered whether this methodology could substantially, rather than solely, be based on quality of care and the provision of CJR-X activities, but ultimately determined that basing the methodology solely on these two elements creates a model safeguard where gainsharing aligns directly with the model goal of quality of care and with CJR-X activities.
We seek comment on our definitions for “collaboration agent,” “distribution arrangements,” and “distribution payment” at § 512.605. We also seek comment on our distribution arrangements proposals at § 512.675(a).
We propose several requirements to help ensure that the sole purpose of distribution arrangements is to create financial and CJR-X performance alignment between CJR-X collaborators and collaboration agents . These requirements largely parallel those
We propose that any distribution payments must be determined in accordance with a methodology that is solely based on quality of care and the provision of CJR-X activities. We propose that the opportunity to make or receive a distribution payment must not be conditioned directly or indirectly on the volume or value of referrals or business otherwise generated by, between or among the CJR-X participant, any CJR-X collaborator, any collaboration agent, or any individual or entity affiliated with a CJR-X participant, CJR-X collaborator, or collaboration agent. We propose more flexible standards for the determination of the amount of distribution payments from PGPs, NPPGPs and TGPs allowing CJR-X collaborators and collaboration agents to create tailored distribution payments that supports the individual structure of their arrangement.
We note that for distribution payments made by a PGP to PGP members, by NPPGPs to NPPGP members, or TGPs to TGP members, the requirement that the amount of any distribution payments must be determined in accordance with a methodology that is solely based on quality of care and the provision of CJR-X activities may be more limiting in how a PGP, NPPGP or TGP pays its members than is allowed under existing law. However, we believe quality of care is an important facet of episode-based payment models and making this a requirement for distribution payment supports greater emphasis on quality of care improvement in CJR-X. Further this is consistent with the BPCI Advanced model that required their NPRA Shared Payments and Partner Distribution Payments to achieve quality performance targets to receive these payments.
We seek comment on this proposal and specifically whether there are additional safeguards or a different standard is needed to allow for greater flexibility in calculating the amount of distribution payments that would avoid program integrity risks and whether additional or different safeguards are reasonable, necessary, or appropriate for the amount of distribution payments from a PGP to its members, a NPPGP to its members or a TGP to its members.
Similar to our proposed requirements for sharing arrangements for those CJR-X collaborators that furnish or bill for items and services, we propose that a collaboration agent is eligible to receive a distribution payment only if the collaboration agent furnished or billed for an item or service rendered to a beneficiary during an episode that occurred during the same performance year for which the CJR-X participant accrued the internal cost savings or earned a reconciliation payment amount that comprises the gainsharing payment being distributed. We note that all individuals and entities that fall within our proposed definition of collaboration agent may either directly furnish or bill for items and services rendered to beneficiaries. This proposal ensures that there is the same required relationship between direct care for CJR-X beneficiaries during a performance year and distribution payment eligibility that we require for gainsharing payment eligibility. We believe this requirement provides a safeguard against payments to collaboration agents that are unrelated to direct care for CJR-X beneficiaries during the performance year.
We further propose that with respect to the distribution of any gainsharing payment received by an ACO, PGP, NPPGP or TGP, the total amount of all distribution payments in a performance year must not exceed the amount of the gainsharing payment received by the CJR-X collaborator from the CJR-X participant for that performance year. Like gainsharing and alignment payments, we propose that all distribution payments must be made by check, electronic funds transfer, or another traceable cash transaction. The collaboration agent must retain the ability to make decisions in the best interests of the CJR-X beneficiary, including the selection of devices, supplies, and treatments. Finally, the distribution arrangement must not induce the collaboration agent to reduce or limit medically necessary items and services to any Medicare beneficiary or reward the provision of items and services that are medically unnecessary.
We propose that the CJR-X collaborator must maintain contemporaneous documentation regarding distribution arrangements in accordance with § 512.675(b), including—
• The relevant written agreements;
• The date and amount of any distribution payment(s);
• The identity of each collaboration agent that received a distribution payment; and
• A description of the methodology and accounting formula for determining the amount of any distribution payment.
We propose that the CJR-X collaborator may not enter into a distribution arrangement with any individual or entity that has a sharing arrangement with the same CJR-X participant, which is continuation of the CJR Model policy in the 2015 final rule (80 FR 73427). This proposal ensures that the proposed separate limitations on the total amount of gainsharing payment and distribution payment to PGPs, NPPGPs, TGPs, physicians, and nonphysician practitioners that are solely based on quality of care and the provision of CJR-X activities are not exceeded in absolute dollars by a PGP, NPPGP, TGP, physician, or nonphysician practitioner's participation in both a sharing arrangement and distribution arrangement for the care of the same CJR-X beneficiaries during the performance year. Allowing both types of arrangements for the same individual or entity for care of the same beneficiary during the performance year could also allow for duplicate counting of the individual or entity's same contribution toward model goals and provision of CJR-X activities in the methodologies for both gainsharing and distribution payments, leading to financial gain for the individual or entity that is disproportionate to the contribution toward model goals and provision of CJR-X activities by that individual or entity. However, we recognize there could be instances where an individual or entity could have distribution arrangements with multiple CJR-X collaborators. For example, a physician may practice with and have reassigned their Medicare billing rights to multiple PGPs, and those PGPs may each be CJR-X collaborators. We seek comment on allowing an individual or entity to have distribution arrangements with multiple CJR-X collaborators and whether there are additional program integrity safeguards that should be established in those scenarios. Finally, we propose that the CJR-X collaborator must retain and provide access to, and must require collaboration agents to retain and provide access to, the required documentation.
We seek comment on the requirements for distribution arrangements under CJR-X at § 512.675(b)
We propose that CJR-X allow for certain financial arrangements within an ACO between a PGP and its members. Specifically, we propose that certain financial arrangements between a collaboration agent that is both a PGP, NPPGP, or TGP and an ACO participant and another individual termed “downstream collaboration agent” be termed a “downstream distribution arrangement.” We propose to define a “downstream distribution arrangement” as a financial arrangement between a collaboration agent that is both a PGP, NPPGP, or TGP and an ACO participant and a downstream collaboration agent for the sole purpose of sharing a distribution payment received by the PGP, NPPGP, or TGP. We propose to define a “downstream collaboration agent” as an individual who is not a CJR-X collaborator or a collaboration agent and who is a PGP member, a NPPGP member, or a TGP member that has entered into a downstream distribution arrangement with the same PGP, NPPGP, or TGP in which he or she is an owner or employee, and where the PGP, NPPGP, or TGP is a collaboration agent. Where a payment from a collaboration agent to a downstream collaboration agent is made pursuant to a downstream distribution arrangement, we define that payment as a “downstream distribution payment.” A collaboration agent may only make a downstream distribution payment in accordance with a downstream distribution arrangement which complies with the requirements of this section and all other applicable laws and regulations, including the fraud and abuse laws.
We seek comment on the definitions at § 512.605 for “downstream collaboration agent,” “downstream distribution arrangement,” and “downstream distribution payment.”
To help ensure that the sole purpose of downstream distribution arrangements is to create financial alignment between collaboration agents that are PGPs, NPPGPs, or TGPs which are also ACO participants and downstream collaboration agents and to meet the quality and efficiency goals of CJR-X We propose that all downstream distribution arrangements must be in writing and signed by the parties, contain the effective date of the agreement, and entered into before care is furnished to CJR-X beneficiaries under the downstream distribution arrangement. Furthermore, we propose that participation must be voluntary and without penalty for nonparticipation, and the downstream distribution arrangement must require the downstream collaboration agent to comply with all applicable laws and regulations.
Like our proposals for gainsharing and distribution payments, we propose that the opportunity to make or receive a downstream distribution payment must not be conditioned directly or indirectly on the volume or value of referrals or business otherwise generated by, between or among the CJR-X participant, any CJR-X collaborator, any collaboration agent, any downstream collaboration agent, or any individual or entity affiliated with a CJR-X participant, CJR-X collaborator, collaboration agent, or downstream collaboration agent. We propose the amount of any downstream distribution payments from an NPPGP to an NPPGP member or from a TGP to a TGP member must be determined in accordance with a methodology that is solely based on quality of care and the provision of CJR-X activities and that may take into account the amount of such CJR-X activities provided by a downstream collaboration agent relative to other downstream collaboration agents. We believe that the amount of a downstream collaboration agent's provision of CJR-X activities (including direct care) to CJR-X beneficiaries during episodes may contribute to the CJR-X participant's internal cost savings and reconciliation payment amount that may be available for making a gainsharing payment to the CJR-X collaborator that is then shared through a distribution payment to the collaboration agent with which the downstream collaboration agent has a downstream distribution arrangement. Greater contributions of CJR-X activities by one downstream collaboration agent versus another downstream collaboration agent that result in different contributions to the distribution payment made to the collaboration agent with which the downstream collaboration agents both have a downstream distribution arrangement may be appropriately valued in the methodology used to make downstream distribution payments to those downstream collaboration agents.
Similar to our proposed requirements for distribution arrangements for those CJR-X collaborators that are PGPs, we propose that a downstream collaboration agent is eligible to receive a downstream distribution payment only if the PGP billed for an item or service furnished by the downstream collaboration agent to a CJR-X beneficiary during an episode that was attributed to the same performance year for which the CJR-X participant accrued the internal cost savings or earned the reconciliation payment amount that comprise the gainsharing payment from which the ACO made the distribution payment to the PGP that is an ACO participant. This proposal ensures that there is the same required relationship between direct care for CJR-X beneficiaries during episodes and downstream distribution payment eligibility that we require for gainsharing and distribution payment eligibility. We believe this requirement provides a safeguard against payments to downstream collaboration agents that are unrelated to direct care for CJR-X beneficiaries during episodes.
Further, we propose that the total amount of all downstream distribution payments made to downstream collaboration agents must not exceed the amount of the distribution payment received by the collaboration agent (that is, the PGP, NPPGP, or TGP that is an ACO participant) from the ACO that is a CJR-X collaborator. Like gainsharing, alignment, and distribution payments, we propose that all downstream distribution payments must be made by check, electronic funds transfer, or another traceable cash transaction. The downstream collaboration agent must retain the ability to make decisions in the best interests of the patient, including the selection of devices, supplies, and treatments. The distribution arrangement must not induce a downstream collaboration agent to reduce or limit medically necessary items and services to any Medicare beneficiary or reward the provision of items and services that are medically unnecessary.
We propose that the PGP, NPPGP, or TGP must maintain contemporaneous documentation regarding downstream distribution arrangements in accordance with § 512.680(b)(12), including all of the following:
• The relevant written agreements.
• The date and amount of any downstream distribution payment(s).
• The identity of each downstream collaboration agent that received a downstream distribution payment.
• A description of the methodology and accounting formula for determining the amount of any downstream distribution payment.
We propose that the PGP, NPPGP, or TGP may not enter into a downstream distribution arrangement with any PGP, NPPGP, or TGP member who has a sharing arrangement with a CJR-X participant or distribution arrangement
We seek comment on the requirements for downstream distribution arrangements at § 512.680.
We believe it is necessary and appropriate to provide additional flexibilities to CJR-X participants to increase access to tools that could improve CJR-X beneficiaries' quality of care and meet other goals of the model. CJR-X participants may choose to provide in-kind patient engagement incentives to CJR-X beneficiaries in an episode, which may include, but would not be limited to, items of technology, subject to the following conditions consistent with 42 CFR 510.515.
As discussed in section X.C.2.i.(9) of this proposed rule, if the proposed beneficiary incentives are finalized, we would expect to make a determination that the anti-kickback statute safe harbor for CMS-sponsored model patient incentives (42 CFR 1001.952(ii)) is available to protect the beneficiary incentives proposed in this section when the incentives are offered in compliance with the requirements established in the final rule and the conditions for use of the anti-kickback statute safe harbor set out at 42 CFR 1001.952(ii).
As stated previously, CJR-X participants may choose to provide in-kind engagement incentives, which may include but not be limited to items of technology, to CJR-X beneficiaries in an episode, subject to the following proposed conditions. We propose that the incentive must be provided directly by the CJR-X participant or by an agent of the CJR-X participant under their direction and control to the CJR-X beneficiary during an episode. Additionally, we propose that the item or service provided must be reasonably connected to the CJR-X beneficiary's medical care, and be a preventive care item or service or an item of service that advances a clinical goal, as described in section X.C.2.i.(7)(b) of this proposed rule, by engaging the CJR-X beneficiary in better managing their own health.
We seek comment on the proposed conditions for CJR-X beneficiary incentives, as outlined in § 512.685. Specifically, we seek comment on whether these proposed conditions are reasonable, and whether additional conditions are appropriate to further engage CJR-X beneficiaries in their own healthcare management while preventing fraud or abuse.
In some cases, items or services involving technology may be useful as beneficiary engagement incentives that can advance a clinical goal of CJR-X by engaging a CJR-X beneficiary in managing their health during the 90 days following discharge from the anchor hospitalization or anchor procedure. However, we believe specific enhanced safeguards are necessary for these items and services to prevent abuse, and our proposals are consistent with the CJR Model policies (80 FR 73437). Specifically, we propose that items or services involving technology provided to a beneficiary may not exceed $1,000 in retail value for any CJR-X beneficiary in any episode (per episode), and that items or services involving technology provided to a CJR-X beneficiary must be the minimum necessary to advance a clinical goal as discussed in this section for a CJR-X beneficiary in an episode. We propose additional enhanced requirements for items of technology exceeding $75 in retail value as an additional safeguard against misuse of these items as beneficiary engagement incentives. Specifically, we propose that these items of technology that exceed $75 in retail value remain the property of the CJR-X participant and be retrieved from the CJR-X beneficiary at the end of the episode. The CJR-X participant must document all retrieval attempts, including the ultimate date of retrieval. We understand that CJR-X participants may not always be able to retrieve these items after the episode ends, such as when a CJR-X beneficiary dies or moves to another geographic area. Therefore, in cases when the item of technology is not able to be retrieved, the CJR-X participant must determine why the item was not retrievable and if it was determined that the item was used inappropriately (if it were sold, for example) preventing future beneficiary incentives for that CJR-X beneficiary. Following this process, the documentation of diligent, good faith attempts to retrieve items of technology will be deemed to meet the retrieval requirement. We recognize this requirement may increase CJR-X participant burden to document attempts at retrieval and seek comment if the value threshold should be raised or if there are other ways to demonstrate attempts at retrieval that may be less burdensome for the CJR-X participant.
We seek comment on our proposed CJR-X requirements at § 512.685 for beneficiary engagement incentives that involve technology. We welcome comment on additional or alternative program integrity safeguards for this type of beneficiary engagement incentive, including whether the financial thresholds proposed in this section are reasonable, necessary, and appropriate.
As discussed in section X.C.2.d. of this proposed rule, the proposed “episodes” are broadly defined to include most Part A and Part B items and services furnished during episodes of care that extend 90 days following discharge from the anchor hospitalization or anchor procedure that begins the episode. Therefore, we believe that in-kind beneficiary engagement incentives may appropriately be provided for managing acute conditions arising from episodes, as well as chronic conditions if the condition is likely to have been affected by care during the episode or when substantial services are likely to be provided for the chronic condition during the episode. We are proposing to allow CJR-X participants to offer in-kind beneficiary engagement incentives, where such incentives must be closely related to the provision of high-quality care and advance a clinical goal for a CJR-X beneficiary and should not serve as inducements for CJR-X beneficiaries to seek care from the CJR-X participants or other specific suppliers and providers. This outline is similar to the beneficiary incentive guidelines outlined previously in the CJR Model (80 FR 73553). We propose that beneficiary incentives must advance one of the following clinical goals of CJR-X:
• Beneficiary adherence to drug regimens.
• Beneficiary adherence to a care plan.
• Reduction of readmissions and complications resulting from treatment during the episode.
• Management of chronic diseases and conditions that may be affected by treatment for the CJR-X clinical condition.
We seek comment on our proposals for beneficiary engagement incentives at § 512.685.
As a program safeguard against misuse of beneficiary engagement incentives under CJR-X, we propose that CJR-X participants must maintain documentation of items and services furnished as beneficiary engagement incentives that exceed $25 in retail value including items of technology. In addition, we propose to require that the documentation established contemporaneously with the provision of the items and services must include at least the following:
• The date the incentive is provided.
• The incentive and estimated value of the item or service.
• The identity of the beneficiary to whom the item or service was provided.
We further propose that the documentation regarding items of technology exceeding $75 in retail that are required to be retrieved from the beneficiary at the end of an episode must also include contemporaneous documentation of any attempt to retrieve technology. In instances where the item of technology is not able to be retrieved, the CJR-X participant must determine why it is not retrievable, and if the item were misappropriated (if it were sold, for example), then further steps must be taken to ensure that CJR-X beneficiary does not receive further beneficiary incentives. Following this process, documented, diligent, good faith attempts to retrieve items of technology will be deemed to meet the retrieval requirement. This outline is similar to the beneficiary incentive guidelines outlined previously in the CJR Model (80 FR 73553).
Finally, we propose that the CJR-X participant must retain and provide access to the required documentation in accordance with § 512.135.
We seek comment on our proposed documentation requirements for beneficiary engagement incentives under CJR-X at § 512.685(d).
OIG authority is not limited or restricted by the provisions of the model, including the authority to audit, evaluate, investigate, or inspect the CJR-X participant, CJR-X collaborators, collaboration agents, downstream collaboration agents, or any other person or entity or their records, data, or information, without limitations. Additionally, no model provisions limit or restrict the authority of any other Government Agency to do the same.
The propose that the enforcement authority for CJR-X would be in accordance with the standard provisions applicable to all Innovation Center models at § 512.160.
Under section 1115A(d)(1) of the Act, the Secretary may waive such requirements of Titles XI and XVIII and of sections 1902(a)(1), 1902(a)(13), 1903(m)(2)(A)(iii) of the Act, and certain provisions of section 1934 of the Act as may be necessary solely for purposes of carrying out section 1115A of the Act with respect to testing models described in section 1115A(b) of the Act.
In the CJR 2015 final rule (80 FR 73325) the model was delayed by 3 months to allow for adequate time to prepare for hospital participation. Under the authority in the previous paragraph, OIG and CMS jointly issued Notice of Waivers of Certain Fraud and Abuse Laws in Connection with the Comprehensive Care for Joint Replacement Model (hereinafter “CJR 2017 notice”) effective January 1, 2018.
For this model and consistent with the authority under section 1115A(d)(1) of the Act, the Secretary may consider issuing waivers of certain fraud and abuse provisions in sections 1128A, 1128B, and 1877 of the Act. No fraud or abuse waivers are being issued in this document; fraud and abuse waivers, if any, would be set forth in separately issued documentation. Any such waiver would apply solely to CJR-X, as done under the CJR Model, and could differ in scope or design from waivers granted for other programs or models. Thus, notwithstanding any provision of this proposed rule, CJR-X participants, CJR-X collaborators, collaboration agents, and downstream collaboration agents must comply with all applicable laws and regulations, except as explicitly provided in any such separately documented waiver issued pursuant to section 1115A(d)(1) of the Act specifically for CJR-X.
In addition to or in lieu of a waiver of certain fraud and abuse provisions in sections 1128A and 1128B of the Act, CMS expects to make a determination that the anti-kickback statute safe harbor for CMS-sponsored model arrangements and CMS-sponsored model patient incentives (42 CFR 1001.952(ii)(1) and 42 CFR 1001.952(ii)(2)) is available to protect remuneration exchanged pursuant to certain financial arrangements and patient incentives that may be permitted under the final rule, if issued. Specifically, if the proposed rule is finalized, we expect to determine that the CMS-sponsored models safe harbor will be available to protect the following financial arrangements and incentives: the CJR-X sharing arrangement's gainsharing payments and alignment payments, the distribution arrangement's distribution payments with CJR-X collaborators and collaboration agents, the downstream distribution arrangements and downstream distribution payments with collaboration agents and downstream collaboration agents, and CJR-X beneficiary incentives. At proposed § 512.690(a), we propose to make the Federal anti-kickback statute safe harbor for CMS-sponsored model arrangements available to protect remuneration furnished in the CJR-X in the form of the sharing arrangement's gainsharing payments and alignment payments that meet all safe harbor requirements set forth in 42 CFR 1001.952(ii) and proposed § 512.670, in the form of the distribution arrangement's distribution payments that meet all safe harbor requirements set forth in 42 CFR 1001.952(ii) and proposed § 512.675,
Additionally, at proposed § 512.690(b), we propose to make the Federal anti-kickback statute safe harbor for CMS-sponsored model patient incentives (42 CFR 1001.952(ii)(2)) available to protect CJR-X beneficiary incentives that meet all safe harbor requirements set forth in 42 CFR 1001.952(ii) and 512.685.
We seek comment on our proposals at § 512.690 that the anti-kickback safe harbor for CMS-sponsored model arrangements (42 CFR 1001.952(ii)(1)) and CMS-sponsored model patient incentives (42 CFR 1001.952(ii)(2)) be available to CJR-X participants and CJR-X collaborators, collaboration agents, and downstream collaboration agents.
We believe it may be necessary and appropriate to provide flexibilities to hospitals participating in CJR-X, as well as other providers and suppliers that furnish services to beneficiaries in episodes. The purpose of such flexibilities would be to increase episode quality, decrease episode spending or internal costs, or both of providers and suppliers, resulting in better, more coordinated care for beneficiaries and improved financial efficiencies for Medicare, providers, and beneficiaries. These waivers were conducted in the CJR Model, and the easing of rules around the 3-Day SNF Rule and Telehealth allowed for easier discharges to less intensive settings and to avoid any resulting drops in quality of care via unplanned readmissions. These possible additional flexibilities could include use of our waiver authority under section 1115A of the Act, which provides authority for the Secretary to waive such requirements of title XVIII of the Act as may be necessary solely for purposes of carrying out section 1115A of the Act with respect to testing models described in section 1115A(b) of the Act. This provision affords broad authority for the Secretary to waive statutory Medicare program requirements as necessary to carry out the provisions of section 1115A of the Act.
As we have stated elsewhere in section X.C.1.c. of this proposed rule, our previous and current efforts in testing episode-based-payment models have led us to believe that models where entities bear financial responsibility for total Medicare spending for episodes of care hold the potential to incentivize the most substantial improvements in episode quality and efficiency. We believe that where CJR-X participants bear financial accountability for excess episode spending beyond the reconciliation target price while high quality care is valued, they will have an increased incentive to coordinate care furnished by the hospital and other providers and suppliers throughout the episode to improve the quality and efficiency of care. With these incentives present, there may be a reduced likelihood of over-utilization of services that could otherwise result from waivers of Medicare program rules. Given these circumstances, waivers of certain program rules for providers and suppliers furnishing services to CJR-X beneficiaries may be appropriate to offer more flexibility than under existing Medicare rules for such providers and suppliers, so that they may provide appropriate, efficient care for beneficiaries. An example of such a program rule that could be waived to potentially allow more efficient inpatient episodes would be the 3-day inpatient hospital stay requirement prior to a covered skilled nursing facility (SNF) stay for beneficiaries who could appropriately be discharged to a SNF or swing bed after less than a 3-day inpatient hospital stay. This type of waiver was implemented in a range of previous and existing CMS initiatives, including various episode-based payment models and accountable care initiatives such as the CJR Model and its successor model, TEAM. Keeping these waivers in the expansion of CJR-X will build on past successes.
We welcome comments on possible waivers under section 1115A of the Act of certain Medicare program rules beyond those specifically discussed in this proposed rule that might be necessary to test this model. We will consider the comments that are received during the public comment period and may make future proposals regarding program rule waivers during the course of the model test. We are especially interested in comments explaining how such waivers could provide providers and suppliers with additional flexibilities that are not permitted under existing Medicare rules to increase quality of care and reduce unnecessary episode spending, but that could be appropriately used in the context of CJR-X where CJR-X participants bear full responsibility for total episode spending.
Specific program rules for which we propose waivers under CJR-X to support provider and supplier efforts to increase quality and decrease episode spending and for which we invite comments are included in the sections that follow. We propose that these waivers of program rules would apply to the care of CJR-X beneficiaries who are in episodes at the time when the waiver is used to bill for a service that is furnished to the beneficiary, even if the episode is later cancelled as described in section X.C.2.d.(3)(e) of this proposed rule. Finally, we propose that if a service is found to have been billed and paid by Medicare under circumstances only allowed by a CJR-X program rule waiver for a beneficiary not in CJR-X at the time the service was furnished, CMS would recover payment for that service from the provider or supplier who was paid, and require that provider and supplier to repay the beneficiary for any coinsurance previously collected.
The CJR Model permitted certain post-discharge home visits during the episode of care to encourage CJR participant hospitals to closely examine the most appropriate PAC settings for beneficiaries, taking into consideration beneficiary choice and location of beneficiary home or place of residence, so that the clinically appropriate setting of the lowest acuity was recommended following discharge from the anchor hospitalization or anchor procedure. Consistent with the CJR Model and CJR-X's goals of improving quality and reducing unnecessary Medicare expenditures, we believe continuing such regulatory flexibilities would support clinically appropriate home-based follow-up care may further advance effective episode management.
Early post-discharge periods represent a time of heightened clinical vulnerability for beneficiaries undergoing joint replacement. Complications such as infection, medication-related issues, and mobility limitations frequently arise within the first weeks following discharge and may result in avoidable emergency department visits, readmissions, or use of institutional post-acute care services. We believe that timely, in-person home visits furnished by qualified clinicians may help identify emerging complications, reinforce discharge instructions, support medication reconciliation, and facilitate adherence to rehabilitation plans in the beneficiary's home environment.
We also anticipate that permitting targeted post-discharge home visits would promote safe discharge to home when clinically appropriate, potentially reducing reliance on higher-cost institutional post-acute care settings. Post-acute care spending represents a significant portion of episode spending, therefore enabling home-based clinical monitoring and care coordination, may support CJR-X participants' efforts to redesign care pathways in ways that improve outcomes while lowering total episode expenditures.
In the BPCI Advanced and CJR Models (80 FR 73444), we provided a waiver of the “incident to” rule to allow a physician or nonphysician practitioner participating in care redesign under a participating provider to bill for services furnished to a beneficiary who does not qualify for Medicare coverage of home health services as set forth under § 409.42 where the services are furnished in the beneficiary's home during the episode after the beneficiary's discharge from an acute care hospital. The “incident to” rules are set forth in § 410.26(b)(5), which requires services and supplies furnished incident to the service of a physician or other practitioner must be provided under the “direct supervision” (as defined at § 410.32(b)(3)(ii)) of a physician or other practitioner.
In the BPCI Advanced and CJR Models, the waiver is available only for services that are furnished by licensed clinical staff under the “general supervision” (as defined at § 410.32(b)(3)(i)) of a physician (or other practitioner), or other qualified health care professional, and who are allowed by law, regulation, and facility policy to perform or assist in the performance of a specific professional service, but do not individually report that professional service. While the services may be furnished by licensed clinical staff, they must be billed by the physician (or other practitioner) or participant to which the supervising physician has reassigned their billing rights in accordance with CMS instructions using a Healthcare Common Procedures Coding System (HCPCS) G-code created by CMS specifically for the BPCI Advanced or CJR Models. In the case of the incident to waiver under BPCI Advanced, the waiver allows physician and nonphysician practitioners to furnish the services up to 13 home visits during each 90-day clinical episode. In the case of the incident to waiver under the original CJR Model, the waiver allows physician and nonphysician practitioners to furnish the services up to 9 home visits during each 90-day clinical episode. This waiver was later modified to apply to anchor procedures in the CJR Extension (86 FR 23552). All other Medicare coverage and payment criteria must be met for both BPCI Advanced and CJR Models.
We recognize TEAM did not waive the “incident to” rule set forth in § 410.26(b)(5) given the low waiver utilization in other CMS models and initiatives. However, we have determined to keep continuity between CJR-X and the CJR Extension to preserve the policies tested as it pertains to model waivers. However, we can monitor utilization and reassess the necessity of this waiver at a later date. We believe this will ensure the integrity of model policies between the CJR Model and CJR-X as it expands nationally. Therefore, we propose to waive the “incident to” rule set forth in § 410.26(b)(5), to allow a CJR-X beneficiary who does not qualify for home health services to receive post-discharge visits in his or her home or place of residence any time during the episode. The waiver would not apply to beneficiaries who would qualify for home health services under the Medicare program, as set forth under § 409.42. Therefore, these visits would not be billed for such beneficiaries. Under the proposed waiver, we would allow licensed clinical staff, such as nurses, either employed by a hospital or not, to furnish the service under the general supervision of a physician, who may be either an employee or a contractor of the hospital. We would allow services furnished under the waiver to be billed under the physician fees schedule by the physician or nonphysician practitioner or by the hospital to which the supervising physician has reassigned his or her benefits. In the latter scenario, we note that the post-discharge home visit services will not be “hospital services,” even when furnished by clinical staff of the hospital. We plan to monitor patterns of utilization of home health services using this waiver under CJR-X to monitor for overutilization or reductions in medically necessary care, and significant reductions. By using this waiver now and monitoring use, we can evaluate effectiveness and redetermine its necessity if deemed superfluous.
Under the CJR Model, we allowed up to 9 post-discharge home visits to be billed and paid during each 90-day post-anchor hospitalization or anchor procedure. This limit on the number of visits is based on the average post-acute care LOS of approximately 30 to 45 days for original CJR episodes and the incentives under original CJR to improve efficiency, which may shorten post-acute care stays. Thus, 9 visits represent a home visit on average of once per week for two-thirds of the 90-day episode duration, the period of time when the typical beneficiary may have concluded post-acute care in an efficient episode. We propose to adopt the same number of post-discharge home visits in CJR-X. Specifically, we propose to allow up to 9 post-discharge home visits to be billed and paid during each 90-day post-anchor hospitalization or anchor procedure. We also propose that the service be billed with a HCPCS code G-code. The G-code would be created before the start of CJR-X and would be specific to CJR-X to allow for a home visit for patient assessment performed by clinical staff for an individual not considered homebound, including, but not necessarily limited to patient assessment of clinical status, safety/fall prevention, functional status/ambulation, medication reconciliation/management, compliance with orders/plan of care, performance of activities of daily living, and ensuring CJR-X beneficiary connections to community and other services; for use only in CJR-X; may not be billed for a 30-day period covered by a transitional care management code. We propose the G-code would be paid at approximately $50 under the physician fee schedule. The standard physician fee schedule rate setting methodologies establish relative value units (RVUs) based on the resources required to furnish the typical service. In addition, we propose to update the values each year to correspond to final values established under the physician fee schedule.
The waiver would not apply with respect to a CJR-X beneficiary who has qualified, or would qualify, for home health services when the visit was furnished. We expect that the visits by licensed clinical staff could include patient assessment, monitoring, assessment of functional status and fall risk, review of medications, assessment of adherence with treatment recommendations, patient education, communication and coordination with other treating clinicians, care management to improve beneficiary connections to community and other services, etc. These post-discharge home visits would remove barriers to follow-up care outside of the home with providers and suppliers and allow the CJR-X beneficiary to be treated in his or her home environment or place of residence, where potential safety concerns, such as tripping hazards, could quickly be identified and remediated. Given these occasions for further patient assessment and intervention, we believe that where
We also propose to waive current Medicare billing rules in order to allow the separate reporting of these post-discharge home visits during surgical global periods. The physician fee schedule payment for the surgical procedure includes 90 days of post-operative care furnished by the surgeon. Post-operative follow-up care is not separately billable by the surgeon or, unless there is a transfer of care, by another practitioner. The current construction of the global packages included in physician fee schedule payments reflects a narrow view of surgical follow-up care that does not encompass broader, more comprehensive models of post-operative care, such as an episode payment model CJR-X. We do not believe that the CJR-X post-discharge home visits, which can include nursing assessments for chronic conditions for which care may be affected by the surgery, would replace or substantially duplicate the kind of post-operative visits involved in furnishing post-operative follow-up care for the global surgery procedure under the physician fee schedule. Instead, we anticipate that the work of these post-discharge visits will be similar to the work furnished by the physician coordinating the patient's overall episode care. Therefore, we propose to waive the global surgery billing rules to allow the surgeon or other practitioners to furnish and bill for the post-discharge home visits during surgical global periods.
We seek comments at § 512.695(c) on the proposed waiver of the “incident to” rule to pay for a maximum number of nine post-discharge home visits to beneficiaries who do not qualify for home health services by licensed clinical staff under the general supervision of a physician.
The CJR Model waived certain telehealth service requirements to allow providers and suppliers furnishing services to model beneficiaries to utilize telemedicine for beneficiaries that are not classified as rural and allowed the greatest degree of efficiency and communication between providers and suppliers and beneficiaries by allowing beneficiaries to receive telehealth services at their home or place of residence. We believe similar telehealth waivers would be essential to maximize the opportunity to improve the quality of care and efficiency for episodes of care in CJR-X.
Under section 1834(m) of the Act, Medicare pays for telehealth services furnished by a physician or practitioner under certain conditions even though the physician or practitioner is not in the same location as the beneficiary. The telehealth services must be furnished to a beneficiary located in one of the ten types of originating sites specified in section 1834(m)(4)(C)(ii) of the Act and the site must satisfy at least one of the requirements of section 1834(m)(4)(C)(i)(I) through (III) of the Act. Generally, for Medicare payment to be made for telehealth services under the Medicare Physician Fee Schedule several conditions must be met, as set forth under § 410.78(b). Specifically, the service must be on the Medicare list of telehealth services and meet all of the following other requirements for payment:
• The service must be furnished via an interactive telecommunications system.
• The service must be furnished to an eligible telehealth individual.
• The individual receiving the services must be in an eligible originating site.
When all of these conditions are met, Medicare pays a facility fee to the originating site and provides separate payment to the distant site practitioner for the service. Section 1834(m)(4)(F)(i) of the Act defines “Medicare telehealth services” to include professional consultations, office visits, office psychiatry services, and any additional service specified by the Secretary, when furnished via a telecommunications system. For the list of approved Medicare telehealth services, see the CMS website at
In the CJR Model (80 FR 73274) as well as the national COVID-19 public health emergency (PHE) telehealth waiver,
• CMS waived the geographic site requirements under 1834(m)(4)(C)(i)(I) through (III) of the Act which allowed telehealth services to be furnished to eligible telehealth individuals when they are located at one of the eight originating sites at the time the service is furnished via a telecommunications system but without regard to the site meeting one of the geographic site requirements.
• CMS waived the originating site requirements under section 1834(m)(4)(C)(ii)(I) through (X) of the Act which allowed the eligible telehealth individual to not be in an originating site when the otherwise eligible individual is receiving telehealth services in their home or place of residence.
Specifically, like the telehealth waivers in the CJR Model (80 FR 73448), we propose to waive the geographic site requirements of section 1834(m)(4)(C)(i)(I) through (III) of the Act that limit telehealth payment to services furnished within specific types of geographic areas or in an entity participating in a federal telemedicine demonstration project approved as of December 31, 2000. Waiver of this requirement would allow beneficiaries located in any region to receive services related to the episode to be furnished via telehealth, as long as all other Medicare requirements for telehealth services are met. Any service on the list of Medicare approved telehealth services and reported on a claim that is not excluded from the proposed episode definition (see section X.C.2.d.(3). of this proposed rule) could be furnished to a CJR-X beneficiary, regardless of the CJR-X beneficiary's geographic location. Under CJR-X, this waiver would support care coordination and increasing timely access to high quality care for all CJR-X beneficiaries, regardless of geography. Additionally, we propose for CJR-X waiving the originating site requirements of section1834(m)(4)(C)(ii)(I) through (X) of the Act that specify the particular sites at which the eligible telehealth individual must be located at the time the service is furnished via a telecommunications system. Specifically, we propose to waive the requirement only when telehealth services are being furnished in the CJR-X beneficiary's home or place of residence during the episode. Any service on the list of Medicare approved telehealth services that is not excluded from the proposed episode definition (see section X.C.2.d.(3)(b). of this proposed rule) could be furnished to a
The existing set of codes used to report evaluation and management (E/M) visits are extensively categorized and defined by the setting of the service, and the codes describe the services furnished when both the patient and the practitioner are located in that setting. Section 1834(m) of the Act provides for particular conditions under which Medicare can make payment for office visits when a patient is located in a health care setting (the originating sites authorized by statute) and the eligible practitioner is located elsewhere. However, we do not believe that the kinds of E/M services furnished to patients outside of health care settings via real-time, interactive communication technology are accurately described by any existing E/M codes. This would include circumstances when the patient is located in his or her home and the location of the practitioner is unspecified. In order to create a mechanism to report E/M services accurately, the BPCI Advanced and CJR Models (80 FR 73450) created specific sets of HCPCS G-codes to describe the E/M services furnished to the model beneficiaries in their homes via telehealth. Similarly for CJR-X, we propose to create a specific set of 4 HCPCS G-codes to describe the E/M services furnished to CJR-X beneficiaries in their homes via telehealth. If the proposed CJR-X is finalized, we would specify the precise G-code created for CJR-X and share them to CJR-X participants prior to the first performance year.
Among the existing E/M visit services, we envision these services would be most similar to those described by the office and other outpatient E/M codes. Therefore, we propose to structure the new codes similarly to the office/outpatient E/M codes but adjusted to reflect the location as the CJR-X beneficiary's residence and the virtual presence of the practitioner. Specifically, we propose to create a parallel structure and set of descriptors currently used to report office or other outpatient E/M services, see Table X.C-06, for CPT codes CPT codes 99212 through 99215 for established patient visits. For example, the proposed G- code for a level 3 E/M visit for an established patient would be a telehealth visit for the evaluation and management of an established patient in the patient's home, which requires at least 2 of the following 3 key components:
• An expanded problem focused history;
• An expanded problem focused examination;
• Medical decision making of low complexity.
Counseling and coordination of care with other physicians, other qualified health care professionals or agencies are provided consistent with the nature of the problem(s) and the patient's or family's needs or both. Usually, the presenting problem(s) are of low to moderate severity. Typically, 20 minutes are spent with the patient or family or both via real-time, audio and video intercommunications technology.
We note that we are not proposing a G-code to parallel the level 1 office/outpatient visit for an established patient, since that service does not require the presence of the physician or other qualified health professional.
We propose to develop payment rates for these new telehealth G-codes for E/M services in the patient's home that are similar to the payment rates for the office/outpatient E/M services, since the codes will describe the work involved in furnishing similar services. Therefore, we propose to include the resource costs typically incurred when services are furnished via telehealth. In terms of the relative resource costs involved in furnishing these services, we believe that the efficiencies of virtual presentation generally limit resource costs other than those related to the professional time, intensity, and malpractice risk to marginal levels. Therefore, we propose to adopt work and malpractice (MP) RVUs associated with the corresponding level of office/outpatient codes as the typical service because the practitioner's time and intensity and malpractice liabilities when conducting a visit via telehealth are comparable to the office visit. We would include final RVUs under the CY 2027 Medicare Physician Fee Schedule for PY 1. Additionally, we propose to update these values each performance year to correspond to final values established under the Medicare Physician Fee Schedule.
We considered whether each level of visit typically would warrant support by auxiliary licensed clinical staff within the context of CJR-X. The cost of such staff and any associated supplies, for example, would be incorporated in the practice expense (PE) RVUs under the PFS. For the lower level visits, levels 2 and 3 for established visits, we did not believe that the visit would necessarily require auxiliary medical staff to be available in the patient's home. We anticipate these lower level visits would be the most commonly furnished and would serve as a mechanism for the patient to consult quickly with a practitioner for concerns that can be easily described and explained by the patient. We do not propose to include PE RVUs for these services, since we do not believe that virtual visits envisioned for this model typically incur the kinds of costs included in the PE RVUs under the Medicare Physician Fee Schedule. For higher level visits, we typically would anticipate some amount of support from auxiliary clinical staff. For example, wound examination and
We have considered support by auxiliary clinical staff to be typical for level 4 or 5 E/M visits furnished to CJR-X beneficiaries in the home via telehealth, however, we do not propose to incorporate these costs through PE RVUs. Given the anticipated complexity of these visits, we would expect to observe level 4 and 5 E/M visits to be reported on the same claim with the same date of service as a home visit or during a period of authorized home health care. If neither of these occurs, we propose to require the physician to document in the medical record that auxiliary licensed clinical staff were available on site in the patient's home during the visit and if they were not, to document the reason that such a high- level visit would not require such personnel.
We note that because the services described by the proposed G-codes, by definition, are furnished remotely using telecommunications technology, they therefore are paid under the same conditions as in-person physicians' services and they do not require a waiver to the requirements of section 1834(m) of the Act. We also note that because these home telehealth services are E/M services, all other coverage and payment rules regarding E/M services would continue to apply.
Under CJR-X, this proposal to waive the originating site requirements and create new home visit telehealth HCPCS codes would support the greatest efficiency and timely communication between providers and beneficiaries by allowing beneficiaries to receive telehealth services at their places of residence.
With respect to home health services paid under the home health prospective payment system (HH PPS), we emphasize that telehealth visits under this model cannot substitute for in- person home health visits per section 1895(e)(1)(A) of the Act. Furthermore, telehealth services by social workers cannot be furnished for CJR-X beneficiaries who are in a home health episode because medical social services are included as home health services per section 1861(m) of the Act and paid for under the Medicare HH PPS. However, telehealth services permitted under section 1834 of the Act and furnished by physicians or other practitioners, specifically physician assistants, nurse practitioners, clinical nurse specialists, certified nurse midwives, nurse anesthetists, psychologists, and dieticians, can be furnished for CJR-X beneficiaries who are in a home health episode. Finally, sections 1835(a) and 1814(a) of the Act require that the patient has a face-to-face encounter with the certifying physician or an allowed nonphysician practitioner (NPP) working in collaboration with or under the supervision of the certifying physician before the certifying physician certifies that the patient is eligible for home health services. Under § 424.22(a)(1)(v), the face-to-face encounter can be performed up to 90 days prior to the start of home health care or within 30 days after the start of home health care. Section § 424.22(a)(1)(v)(A) also allows a physician, with privileges, who cared for the patient in an acute or PAC setting (from which the patient was directly admitted to home health) or an allowed NPP working in collaboration with or under the supervision of the acute or PAC physician to conduct the face-to-face encounter.
Although sections 1835(a) and 1814(a) of the Act allow the face-to-face encounter to be performed via telehealth, we are not proposing that the waiver of the telehealth geographic site requirement for telehealth services and the originating site requirement for telehealth services furnished in the CJR-X beneficiary's home or place of residence would apply to the face-to-face encounter required as part of the home health certification when that encounter is furnished via telehealth. In other words, when a face-to-face encounter furnished via telehealth is used to meet the requirement for home health certification, the usual Medicare telehealth rules apply with respect to geography and eligibility of the originating site. We expect that this policy would not limit CJR-X beneficiaries' access to medically necessary home health services because beneficiaries receiving home health services during an episode will have had a face-to- face encounter with either the physician or an allowed NPP during their anchor hospitalization or a physician or allowed NPP during a post-acute facility stay prior to discharge directly to home health services.
Under the proposed waiver of the geographic site requirement and originating site requirement, all telehealth services would be required to be furnished in accordance with all Medicare coverage and payment criteria, and no additional payment would be made to cover set-up costs, technology purchases, training and education, or other related costs. The facility fee paid by Medicare to an originating site for a telehealth service would be waived if there is no facility as an originating site (that is, the service was originated in the CJR-X beneficiary's home). Finally, providers and suppliers furnishing a telehealth service to a CJR-X beneficiary in his or her home or place of residence during the episode would not be permitted to bill for telehealth services that were not fully furnished when an inability to provide the intended telehealth service is due to technical issues with telecommunications equipment required for that service. CJR-X beneficiaries would be able to receive services furnished pursuant to the telehealth waivers only during the episode.
We plan to monitor patterns of utilization of telehealth services under CJR-X to monitor for overutilization or reductions in medically necessary care, and significant reductions in face-to- face visits with physicians and NPPs. Though this waiver existed in the CJR Model, the broader Medicare telehealth waivers also covered much of the CJR Model. By including a telehealth waiver specific to CJR-X now and monitoring use, we could gauge effectiveness and guarantee its access even if the broad Medicare telehealth waiver, that were recently extended under the Consolidated Appropriations Act, 2026, expires. We plan to specifically monitor the distribution of new telehealth home visits that we are proposing, as we anticipate greater use of lower level visits. Given our concern that auxiliary licensed clinical staff be present for level 4 and 5 visits, we will monitor our proposed requirement that these visits be billed on the same claim with the same date of service as a home nursing visit, during a period authorized home health care, or that the physician document the presence of auxiliary licensed clinical staff in the home or an explanation as to the specific circumstances precluding the need for auxiliary staff for the specific visit.
We seek comment on the proposed waivers with respect to telehealth services and the proposed creation of the home visit telehealth codes at § 512.695(a).
Pursuant to section 1861(i) of the Act, a beneficiary must have a prior inpatient hospital stays of no fewer than 3 consecutive days to be eligible for
Because of the potential benefits we see for CJR-X participants, their provider partners, and beneficiaries, we propose to waive the SNF 3-day rule for coverage of a SNF stay following the anchor hospitalization or anchor procedure under CJR-X. We propose to use our authority under section 1115A of the Act with respect to certain SNFs that furnish Medicare Part A post- hospital extended care services to beneficiaries included in an episode in CJR-X. We believe this waiver is necessary to the model test so that CJR-X participants can redesign care throughout the episode continuum of care extending to 90 days post-discharge from the anchor hospital stay or anchor procedure to maximize quality and hospital financial efficiency, as well as reduce episode spending under Medicare. All other Medicare rules for coverage and payment of Part A-covered SNF services would continue to apply to CJR-X beneficiaries in all performance years of the model. Further, to ensure protection to CJR-X beneficiary safety and optimize health outcomes, we propose to require that CJR-X participants may only discharge a CJR-X beneficiary under this proposed waiver of the SNF 3-day rule to a SNF rated an overall of three stars or better by CMS based on information publicly available at the time of hospital discharge from an anchor hospital stay or anchor procedure. However, providers furnishing SNF services under swing bed agreements will not be subject to the star ratings requirement as described later in this section. Problem areas due to early hospital discharge may not be discovered through model monitoring and evaluation activities until well after the episode has concluded, and the potential for later negative findings alone may not afford sufficient CJR-X beneficiary protections. CMS created a Five-Star Quality Rating System for SNFs to allow SNFs to be compared more easily and to help identify areas of concerning SNF performance. The Nursing Home Compare website gives each SNF an overall rating of between 1 and 5 stars.
Thus, the CJR-X participant must discharge the CJR-X beneficiary to a SNF that is qualified under the SNF 3-day rule waiver. We are proposing that to be qualified under the SNF 3-day rule waiver a SNF must be included in the most recent calendar year quarter Five- Star Quality Rating System listing for SNFs on the Nursing Home Compare website for the date of the CJR-X beneficiary's admission to the SNF. The qualified SNF must be rated an overall 3 stars or better for at least 7 of the 12 months based on a review of the most recent rolling 12 months of overall star ratings, unless providers furnishing SNF services are doing so under swing bed agreements We propose to post on the CMS website the list of qualified SNFs in advance of the calendar quarter.
We recognize that there may be instances where a CJR-X participant would like to use the 3-day SNF rule waiver, but the CJR-X beneficiary receives inpatient PAC through swing bed arrangements in a hospital or Critical Access Hospital (CAH), as designated in § 485.606 of this chapter, which is not subject to the Five-Star Quality Rating System. For example, a CJR-X beneficiary located in a rural area may wish to receive PAC care closer to their home but there are no qualified SNFs in their area. The CJR Model (80 FR 73459) did not allow for exceptions to the star-rating requirements in the 3-day SNF waiver out of a concern for balancing the needs of participant flexibilities and beneficiary protections. However, in TEAM we finalized a policy allowing hospitals with swing beds arrangements to make use of the 3-day SNF waiver (90 FR 37130). Similar to TEAM, we propose allowing CJR-X participants to use the 3-day SNF rule waiver for hospitals and CAHs operating under swing bed agreements to support CJR-X beneficiary freedom of choice and provide greater flexibility to CJR-X participants for their care coordination efforts. We also propose for purposes of determining SNF qualification for the SNF 3-day rule waiver, that SNFs include providers furnishing SNF services under swing bed arrangements. Lastly, we propose that the minimum 3-star rating requirement for at least 7 of the past 12 months applies only if the provider furnishing SNF services is eligible to be included in the CMS Five-Star Quality Rating System. This approach is also consistent with the Shared Savings Program, which offers a similar 3-day SNF rule waiver and allows their ACOs to partner with hospitals and CAHs to with swing bed arrangements to utilize the waiver.
We plan to monitor patterns of SNF utilization under the CJR-X, particularly with respect to hospital discharge in fewer than 3 days to a SNF, to ensure that CJR-X beneficiaries are not being discharged prematurely to SNFs and that they are able to exercise their freedom of choice without patient steering.
We seek comment on our proposal at § 512.695(b)(1) through (4) to waive the SNF 3-day stay rule following discharge from the anchor hospitalization or anchor procedures for episodes in CJR-X.
We believe that it will be necessary to propose beneficiary protections against financial liability in addition to the beneficiary protections discussed elsewhere in this proposed rule. Specifically, we believe it is important to discern whether a waiver applies to SNF services furnished to a particular beneficiary to ensure compliance with the conditions of the waiver and improve our ability to monitor waivers for misuse.
In considering additional beneficiary protections that may be necessary to ensure proper use of SNF 3-day rule waiver under the CJR-X, we note that there are existing, well-established payment and coverage policies for SNF services based on sections 1861(i), 1862(a)(1), and 1879 of the Act that include protections for beneficiaries from liability for certain non-covered SNF charges. These existing payment and coverage policies for SNF services continue to apply under the CJR-X, including SNF services furnished pursuant to the SNF 3-day waiver. (For example, see section 70 in the Medicare Claims Processing Manual, Chapter 30—Financial Liability Protections on the CMS website at
As we discussed in the 2015 CJR final rule (80 FR 73454 through 73460), commenters expressed concern regarding the lag between a CJR beneficiary's Medicare coverage or eligibility status change and a CJR-X participant's awareness of that change. There may be cases in which a SNF waiver is used by a CJR-X participant because the CJR-X participant believes that the beneficiary meets the inclusion criteria, based on the information available to the hospital and SNF at the time of the beneficiary's admission to the SNF, but in fact the beneficiary's Medicare coverage has changed and the hospital was unaware of it based on available information. We recognize that despite good faith efforts by CJR-X participants and SNFs to determine a beneficiary's Medicare status for the model, it may occur that a beneficiary is not eligible to be included in the CJR-X at the time the SNF waiver is used. In these cases, we will cover services furnished under the waiver when the information available to the provider at the time the services under the waiver were furnished indicated that the beneficiary was included in the model.
Based on our experience with SNF 3-day rule waiver, including in the CJR Model, we believe there are situations where it would be appropriate to require additional beneficiary financial protections under the SNF 3-day waiver for the CJR-X. Specifically, we are concerned about potential beneficiary financial liability for non-covered Part A SNF services that might be directly related to use of the SNF 3-day waiver under the CJR-X. We are concerned that there could be scenarios where a CJR-X beneficiary could be charged for non-covered SNF services that were a result of a CJR-X participant's inappropriate use of the SNF waiver. Specifically, we are concerned that a CJR-X beneficiary could be charged for non-covered SNF services if a CJR-X participant discharges a CJR-X beneficiary to a SNF that does not meet the quality requirement (3 stars or higher in 7 of the last 12 months), and payment for SNF services is denied for lack of a qualifying inpatient hospital stay. We recognize that requiring a discharge planning notice would help mitigate concerns about CJR-X beneficiaries' potential financial liability for non-covered services. Nevertheless, we are concerned that in this scenario, once the claim is rejected, the CJR-X beneficiary may not be protected from financial liability under existing Medicare rules because the waiver would not be available, and the CJR-X beneficiary would not have had a qualifying inpatient hospital stay. Thus, the CJR-X beneficiary could be charged by the SNF for non-covered SNF services that were a result of an inappropriate attempt to use the waiver. In this scenario, Medicare would deny payment of the SNF claim, and the CJR-X beneficiary could potentially be charged by the SNF for these non-covered SNF services, potentially subjecting such CJR-X beneficiaries to significant financial liability. In this circumstance, we assume the CJR-X participant's intent was to rely upon the SNF 3-day waiver, but the waiver requirements were not met. We believe that in this scenario, the rejection of the claim could easily have been avoided if the hospital had confirmed that the requirements for use of the SNF 3-day waiver were satisfied or if the CJR-X beneficiary had been provided the discharge planning notice and elected to go to a SNF that met the quality requirement.
The CJR Model modifications in the 2016 EPM rule (82 FR 180) addressed beneficiary liability financial concerns for non-covered SNF services related to the waiver by generally placing the risk on the participant hospital and we believe it is appropriate to propose a similar policy for CJR-X. Original CJR participant hospitals were generally held financially responsible for misusing the waiver in situations where waiver requirements are not met, because participant hospitals were required to be aware of the 3-day waiver requirements. Participant hospitals were the entities financially responsible for episode spending under the model and made the decision as to whether it is appropriate to discharge a beneficiary without a 3-day stay. In addition, the requirements for use of the SNF waiver were clearly laid out in the 2015 CJR Final Rule (80 FR 73460). CMS posted on the public website a list of qualifying SNFs (those with a 3-star or higher rating for 7 of the last 12 months). Original CJR participant hospitals were required to consult the published list of SNFs prior to utilizing the SNF 3-day rule waiver.
For participant hospitals that provide a beneficiary with the discharge planning notice, the hospital would not have financial liability for non-covered SNF services that result from inapplicability of the waiver. In other words, when the participant hospital has discharged a beneficiary to a SNF that does not qualify under the conditions of the waiver, and has not provided the required discharge planning notice so that the beneficiary is aware that he or she is accepting financial liability for non-covered SNF services as a result of not having a qualifying inpatient stay, the ultimate responsibility and financial liability for the non-covered SNF stay rests with the participant hospital. For this reason, we are proposing to align with the CJR Model policy and require CJR-X participants to keep a record of discharge planning notice distribution to CJR-X beneficiaries. We will monitor CJR-X participants' use of discharge planning notices to assess the potential for their misuse.
To protect CJR-X beneficiaries from being charged for non-covered SNF charges in instances when the waiver
In the event a CJR-X beneficiary is discharged to a SNF without a qualifying 3-day inpatient stay, but the SNF is not on the qualified list as of the date of admission to the SNF, and the CJR-X participant has failed to provide a discharge planning notice, we propose that CMS apply the following rules:
• CMS does not make payment to the SNF for such services.
• The SNF must not charge the CJR-X beneficiary for the expenses incurred for such services; and the SNF must return to the CJR-X beneficiary any monies collected for such services.
• The hospital must be responsible for the cost of the uncovered SNF stay.
We seek comment on these proposals at § 512.695(b)(5) to hold the CJR-X participant financially responsible when the waiver of the SNF 3-day rule is used inappropriately.
In this proposed rule, we aim to incentivize CJR-X participants to engage in care redesign efforts to improve quality of care and reduce Medicare FFS spending for beneficiaries included in the model during the anchor hospitalization or anchor procedure and the 90 days post-discharge from the hospital or hospital outpatient department. These care redesign efforts would require CJR-X participants to work with and coordinate care with other health care providers and suppliers to improve the quality and efficiency of care for Medicare beneficiaries.
We have experience with a range of efforts designed to improve care coordination for Medicare beneficiaries, including the BPCI Advanced and CJR Models (80 FR 73274), both of which make certain Medicare data available to participants to better enable them to achieve their goals. For example, both the BPCI Advanced and CJR Model (80 FR 73515) participants may request to receive beneficiary-identifiable claims data and financial performance data from the baseline period and throughout their tenure in the model to help them better understand the FFS beneficiaries that are receiving services from their providers and help them improve quality of care and conduct care coordination and other care redesign activities to improve patient outcomes or reduce health care for beneficiaries that could have initiated an episode in the model.
Based on our experience with these efforts, as set forth later in this section, we propose to make certain beneficiary-identifiable claims data and regional aggregate data available to participants in CJR-X regarding Medicare FFS beneficiaries who may initiate an episode and be attributed to them in the model. However, we also expect that CJR-X participants are able to, or will work toward, independently identifying and producing their own data, through electronic health records, health information exchanges, or other means that they believe are necessary to best evaluate the health needs of their patients, improve health outcomes, and produce efficiencies in the provision and use of services.
We believe that CJR-X participants may need access to certain Medicare beneficiary-identifiable data for the purposes of evaluating their performance, conducting quality assessment and improvement activities, conducting population-based activities relating to improving health or reducing health care costs, or conducting other health care operations listed in the first or second paragraph of the definition of “health care operations” under the HIPAA Privacy Rule, 45 CFR 164.501. We recognize that there are issues and sensitivities surrounding the disclosure of beneficiary-identifiable health information, and that several laws place constraints on sharing individually identifiable health information. For example, section 1106 of the Act generally bars the disclosure of information collected under the Act without consent unless a law (statute or regulation) permits the disclosure. Here, the HIPAA Privacy Rule would allow for the proposed disclosure of beneficiary-identifiable health information by CMS because it permits the use and disclosure of such data to carry out treatment, payment, and health care operations, as discussed under 45 CFR 164.506. In this proposed rule, we propose to make CJR-X participants accountable for quality and cost outcomes for CJR-X beneficiaries during an anchor hospitalization or anchor procedure and during the 30-day post-discharge period. We believe that it is necessary for the purposes of this model to offer CJR-X participants the ability to request and receive summary or raw beneficiary-identifiable claims data for a 3-year baseline period as well as on a monthly basis during the performance year to help CJR-X participants engage in care coordination and quality improvement activities for CJR-X beneficiaries in an episode. For the 3-year baseline period, CJR-X participants would only receive beneficiary-identifiable claims data for beneficiaries that initiated an episode in their hospital or hospital outpatient department in the 3-year baseline period, and the beneficiary-identifiable claims data shared with the CJR-X participant would be limited to the items and services included in the episode. In other words, the CJR-X participant would not receive beneficiary-identifiable claims data for beneficiaries that were admitted to their hospital or hospital outpatient department and did not initiate an episode in the baseline period. Nor would the CJR-X participant receive beneficiary-identifiable claims data, for beneficiaries who did initiate an episode in their hospital or hospital outpatient department during the baseline period, for items and services that are not included in an episode, such as a primary care visit five days before the episode or a hospital readmission one day after the episode ends. We propose applying a similar approach for the beneficiary-identifiable claims data sharing during the performance year. We believe that these data would constitute the minimum information necessary to enable the CJR-X participant to understand
Under the HIPAA Privacy Rule, covered entities (means a health plan, a health care clearinghouse, and a health care provider who transmits any health information in electronic form in connection with a transaction covered in 45 CFR Subtitle A, Subchapter C) are barred from using or disclosing individually identifiable health information that is “protected health information” or PHI in a manner that is not permitted or required under the HIPAA Privacy Rule, without the individual's authorization. The Medicare FFS program, a “health plan” function of the Department, is subject to the HIPAA Privacy Rule limitations on the disclosure of PHI. Hospitals, which would be CJR-X participants, are also covered entities, provided they are “health care providers” as defined by 45 CFR 160.103, such as for claims transactions. Since CJR-X participants are hospitals who are covered entities and are the only entity able to request the beneficiary-identifiable data and with whom CMS would share the beneficiary-identifiable data, we believe that the proposed disclosure of the beneficiary claims data for an anchor hospitalization or an anchor procedure plus 30-day post-discharge for episodes included under the CJR-X model would be permitted by the HIPAA Privacy Rule under the provisions that permit disclosures of PHI for “health care operations” purposes. Under those provisions, a covered entity is permitted to disclose PHI to another covered entity for the recipient's health care operations purposes if both covered entities have or had a relationship with the subject of the PHI to be disclosed, the PHI pertains to that relationship, and the recipient will use the PHI for a “health care operations” function that falls within the first two paragraphs of the definition of “health care operations” in the HIPAA Privacy Rule (45 CFR 164.506(c)(4)).
The first paragraph of the definition of health care operations includes “conducting quality assessment and improvement activities, including outcomes evaluation and development of clinical guidelines” and “population-based activities relating to improving health or reducing health costs, protocol development, case management and care coordination” (45 CFR 164.501).
Under our proposal, CJR-X participants would be using the data on their patients to evaluate the performance of the CJR-X participant and other providers and suppliers that furnished services to the patient, conduct quality assessment and improvement activities, and conduct population-based activities relating to improved health for their patients. When done by or on behalf of a covered entity, these are covered functions and activities that would qualify as “health care operations” under the first and second paragraphs of the definition of health care operations at 45 CFR 164.501. Hence, as previously discussed, we believe that this provision is extensive enough to cover the uses we would expect a CJR-X participant to make of the beneficiary-identifiable data and would be permissible under the HIPAA Privacy Rule. Moreover, our proposed disclosures would be made only to HIPAA covered entities, specifically hospitals that are CJR-X participants that have (or had) a relationship with the subject of the information, the information we would disclose would pertain to such relationship, and those disclosures would be for purposes listed in the first two paragraphs of the definition of “health care operations.”
When using or disclosing PHI, or when requesting this information from another covered entity, covered entities must make “reasonable efforts to limit” the information that is used, disclosed, or requested to a “minimum necessary” to accomplish the intended purpose of the use, disclosure, or request (45 CFR 164.502(b)). We believe that the provision of the proposed data elements, as described in section X.C.2.k.(2)(c). of this proposed rule, would constitute the minimum data necessary to accomplish the CJR-X's model goals of the CJR-X participant.
The Privacy Act of 1974 also places limits on agency data disclosures. The Privacy Act applies when the federal government maintains a system of records by which information about individuals is retrieved by use of the individual's personal identifiers (names, Social Security numbers, or any other codes or identifiers that are assigned to the individual). The Privacy Act prohibits disclosure of information from a system of records to any third party without the prior written consent of the individual to whom the records apply (5 U.S.C. 552a(b)).
“Routine uses” are an exception to this general principle. A routine use is a disclosure outside of the agency that is compatible with the purpose for which the data was collected. Routine uses are established by means of a publication in the
We note that, as was the case with the CJR Model, in this proposed rule, we propose to disclose beneficiary-identifiable data to only the hospitals that are bearing risk for episodes and not with their collaborators. As stated in the 2015 CJR final rule (80 FR 73515), we believed that the hospitals that are specifically held financially responsible for an episode should make the determination as to which data are needed to manage care and care processes with their collaborators as well as which data they might want to re-disclose, if any, to their collaborators provided they are in compliance with the HIPAA Privacy Rule.
We believe our data sharing proposals are permitted by and are consistent with the authorities and protections available under the aforementioned statutes and regulations. We seek comments on our proposals regarding the authority to share beneficiary-identifiable data with CJR-X participants.
Based on our experience with BPCI Advanced and CJR Model participants, we recognize that TEAM participants could vary with respect to the kinds of beneficiary-identifiable claims information that would best meet their needs. For example, while many CJR-X participants might have the ability to analyze raw claims data, other CJR-X participants could find it more useful to have a summary of these data. Given this, we propose to make beneficiary-identifiable claims data for episodes in CJR-X available through two formats, summary and raw, both for the baseline period and on an ongoing monthly basis during their participation in the model as we do for BPCI Advanced and the CJR Model (80 FR 73308). Summary beneficiary-identifiable claims data summarizes the claims data by combining and categorizing claims data to provide a broad view of the CJR-X participant's health care expenditures and utilization. For example, a CJR-X participant may use summary beneficiary-identifiable data to identify
First, for CJR-X participants who wish to receive summary Medicare Parts A and B claims data, we propose offering CJR-X participants that enter into a CJR-X data sharing agreement with CMS, as specified in section X.C.2.k.(6). of this proposed rule, the option to submit a formal data request for summary beneficiary-identifiable claims data that have been aggregated to provide summary-level spending and utilization data on CJR-X beneficiaries who would be in an episode during the baseline period and performance years in accordance with applicable privacy and security laws and established privacy and security protections. Such summary beneficiary-identifiable claims data would provide tools to monitor, understand, and manage utilization and expenditure patterns as well as to develop, target, and implement quality improvement programs and initiatives. For example, if the data provided by CMS to a particular CJR-X participant reflects that, relative to their peers, a certain provider is associated with significantly higher rates of inpatient readmissions than the rates experienced by other beneficiaries with similar care needs, that may be evidence that the CJR-X participant could consider, among other things, the appropriateness of that provider, whether other alternatives might be more appropriate, and whether there exist certain care interventions that could be incorporated post- discharge to lower readmission rates.
Secondly, for CJR-X participants who wish to receive raw Medicare Parts A and B claims data, we propose to offer CJR-X participants that enter into a CJR-X data sharing agreement with CMS the opportunity to submit a formal data request for raw beneficiary-identifiable claims data for CJR-X beneficiaries who would be in an episode during the baseline period and performance years in accordance with applicable privacy and security laws and established privacy and security protections. These raw beneficiary-identifiable claims data would be much more detailed compared to the summary beneficiary-identifiable claims data and include all beneficiary-identifiable claims for all episodes in CJR-X. In addition, they would include episode summaries, indicators for excluded episodes, diagnosis and procedure codes, and enrollment and dual eligibility information for beneficiaries that initiate episodes in CJR-X. Through analysis, these raw beneficiary-identifiable claims data would provide CJR-X participants with information to improve their ability to coordinate and target care strategies as well as to monitor, understand, and manage utilization and expenditure patterns. Such data would also aid them in developing, targeting, and implementing quality improvement programs and initiatives.
The summary and raw beneficiary-identifiable data would allow CJR-X participants to assess summary and raw data on their relevant CJR-X beneficiary population, giving them the flexibility to utilize the data based on their analytic capacity. Therefore, for both the baseline period and as frequently as a monthly basis during an CJR-X participant's performance year, we propose to provide CJR-X participants with an opportunity to request summary beneficiary-identifiable claims data and raw beneficiary-identifiable claims data that would meet minimum necessary requirements in 45 CFR 164.502(b) and 164.514(d) and include Medicare Parts A and B beneficiary-identifiable claims data for CJR-X beneficiaries in an episode during the 3-year baseline period and performance year. This means the summary and raw beneficiary-identifiable claims data would encompass the total expenditures and claims for the proposed episodes, including the anchor hospitalization or anchor procedure, and all non-excluded items and services in an episode covered under Medicare Parts A and B within the 30 days after discharge, including hospital care, post- acute care, and physician services for the CJR-X participant's beneficiaries.
We propose that if a CJR-X participant wishes to receive beneficiary-identifiable claims data, they must submit a formal request for data on an annual basis in a manner form and by a date specified by CMS, indicating if they want summary beneficiary-identifiable data, raw beneficiary-identifiable data, or both, and sign a CJR-X data sharing agreement. To comply with applicable laws and safeguards, we propose the CJR-X participant must attest that—
• The CJR-X participant is requesting claims data of CJR-X beneficiaries who would be in an episode during the baseline period or performance year as a HIPAA covered entity;
• The CJR-X participant's request reflects the minimum data necessary for the CJR-X participant to conduct health care operations work that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501; and
• The CJR-X participant's use of claims data will be limited to developing processes and engaging in appropriate activities related to coordinating care and improving the quality and efficiency of care and conducting population-based activities relating to improving health or reducing health care costs that are applied uniformly to all CJR-X beneficiaries, in an episode during the baseline period or performance year, and that these data will not be used to reduce, limit or restrict care for specific Medicare beneficiaries.
We propose that the summary and raw beneficiary-identifiable data would be packaged and sent to a data portal (to which the CJR-X participants must request and be granted access) in a “flat” or binary format for the CJR-X participant to retrieve. We also note that, for both the summary and raw beneficiary-identifiable claims data, we would exclude information that is subject to the regulations governing the confidentiality of substance use disorder patient records (42 CFR part 2) from the data shared with a CJR-X participant. We believe our proposal to make data available to CJR-X participants, through the most appropriate means, may be useful to CJR-X participants to determine appropriate ways to increase the coordination of care, improve quality, enhance efficiencies in the delivery system, and otherwise achieve the goals of the proposed model. CJR-X beneficiaries would be informed of CJR-X and the potential sharing of Medicare beneficiary-identifiable claims data through the beneficiary notification, as discussed in section X.C.2.c.(1). of this proposed rule. Further, CMS would make beneficiary-identifiable claims data available to a CJR-X participant for beneficiaries who may be included in episodes, in accordance with applicable privacy and security laws and only in response to the CJR-X participant's request for such data, through the use of an executed CJR-X data sharing agreement with CMS.
We request comments on this proposal to share beneficiary-identifiable claims data with CJR-X participants at § 512.665(b).
We propose CJR-X participants must limit their beneficiary-identifiable data requests, for CJR-X beneficiaries who are in an episode during the baseline period or performance year, to the minimum necessary to accomplish a permitted use of the data. We propose the minimum necessary Parts A and B data elements may include but are not limited to the following data elements:
• Medicare beneficiary identifier (ID).
• Procedure code.
• Sex.
• Diagnosis code.
• Claim ID.
• The from and through dates of service.
• The provider or supplier ID.
• The claim payment type.
• Date of birth and death, if applicable.
• Tax identification number.
• National provider identifier.
We seek comment on the minimum data necessary beneficiary-identifiable information for CJR-X participants to request beneficiary-identifiable information for purposes of conducting permissible health care operations purposes under this model at § 512.665(c).
As discussed in section X.C.2.f.(3). of this proposed rule, we propose to incorporate regional pricing data when establishing target prices for CJR-X participants, similar to the CJR Model's target prices that are constructed at the regional level. As indicated in the 2015 CJR Final Rule (80 FR 73510), we finalized our proposal to share regional pricing data with original CJR participants because it was a factor affecting target prices. Given some of the similar features between the CJR Model and CJR-X proposed in this proposed rule, particularly our proposal to incorporate regional pricing data when establishing target prices under the model, we propose to provide regional aggregate expenditure data available for all Parts A and B claims associated with episodes in CJR-X for the U.S. Census Division in which the CJR-X participant is located, as we similarly provide to hospitals participating in the CJR Model. Specifically, we propose to provide CJR-X participants with regional aggregate data on the total expenditures during an anchor hospitalization or anchor procedure and the 90-day post-discharge period for all Medicare FFS beneficiaries who would have initiated an episode under our proposed episode definitions in section X.C.2.d. of this proposed rule during the baseline period and performance years. This data would be provided at the regional level; that is, we propose to share regional aggregate data with a CJR-X participant for episodes initiated in the U.S. Census Division where the CJR-X participant is located. These regional aggregate data would be in a format similar to the proposed summary beneficiary-identifiable claims data and would provide summary information on the average episode spending for episodes in CJR-X in the U.S. Census Division in which the CJR-X participant is located. However, the regional aggregate data would not be beneficiary-identifiable and would be de-identified in accordance with HIPAA Privacy Rule, 45 CFR 164.514(b). Further, the regional aggregate data would also comply with CMS data sharing requirements, including the CMS cell suppression policy which stipulates that no cell (for example, admissions, discharges, patients, services, etc.) containing a value of 1 to 10 can be reported directly. Given the regional aggregate data is de-identified, we propose CJR-X participants would not have to submit a request to receive this data and the data would not be subject to the terms and conditions of the CJR-X data sharing agreement.
We seek comments on our proposal at § 512.665(d) to provide these data to CJR-X participants.
We recognize that providing the ability for CJR-X participants to request the summary and raw beneficiary-identifiable claims baseline data and receive regional aggregate baseline data would be important for CJR-X participants to be able to detect unnecessary episode spending, coordinate care, and identify areas for practice transformation, and that early provision of this data, specifically before the “model start date,” as defined in § 512.605, could facilitate their efforts to do so. Also, as discussed in section X.C.2.f.(3)(a). of this proposed rule, target prices would be calculated using a CJR-X participant's historical episode spending during their baseline period. Further, we believe that CJR-X participants would view the episode payment model effort as one involving continuous improvement. As a result, changes initially contemplated by a CJR-X participant could be subsequently revised based on updated information and experiences.
Therefore, as with the BPCI Advanced and CJR Models (80 FR 73511), we propose to make 3-years of baseline period data available to CJR-X participants, who enter into a CJR-X data sharing agreement with CMS, for beneficiaries who would have been included in an episode had the model been implemented during the baseline period, and intend to make these data available upon request prior to the start of each performance year and in accordance with applicable privacy and security laws and established privacy and security protections. We would provide the 3 years of baseline period data for the summary and raw beneficiary-identifiable data and for the regional aggregate data. We believe that 3 years of baseline period data is sufficient to support a CJR-X participant's ability to detect unnecessary episode spending, coordinate care, and identify areas for practice transformation. We believe that if a CJR-X participant has access to baseline period data for the 3-year period for each performance year used to set target prices, then it would be better able to assess its practice patterns, identify cost drivers, and ultimately redesign its care practices to improve efficiency and quality. We considered proposing to make available 4 years of baseline period data, or offering 1 year of baseline period data, but we believe offering 4 years of baseline period data would not be necessary since target prices in CJR-X are constructed from a 3-year baseline period and 1 year of data may not sufficiently help CJR-X participants identify areas to improve beneficiary health and care coordination or reducing health costs.
Therefore, we propose that the 3-year period utilized for the baseline period match the baseline data used to create CJR-X participants target prices every performance year, and roll forward one year every performance year, as discussed in section X.C.2.f.(3)(a) of this proposed rule. Specifically, we propose that the baseline period data for the summary and raw beneficiary-identifiable data reports and regional aggregate data report would be shared annually at least 1 month prior to the start of a performance year and available for episodes initiated in the baseline period, as discussed in section X.C.2.f.(3)(a). in this proposed rule.
We request comments on these proposals at proposed § 512.665(b)(6)(i) and (d)(1)(i) to share beneficiary-identifiable data and regional aggregate data for a 3-year baseline period at least 1 month prior to the start of a performance year.
The availability of periodically updated raw and summary beneficiary-
To accomplish this for the first performance year of CJR-X, we would propose to provide, upon request and execution of a CJR-X data sharing agreement with CMS, and in accordance with the HIPAA Privacy Rule, beneficiary-identifiable claims data and aggregate regional data from October 1, 2027 to September 30, 2028 on as frequently as a running monthly basis, as claims are available. We would continue sharing beneficiary-identifiable claims data and regional aggregate data for episodes in performance year 1 for an additional 6 months, so until March 31, 2029, to capture claims run out for items and services billed during this time period. These datasets would represent all potential episodes that were initiated in 2026 and capture sufficient amount of time, up to 6 months, for relevant claims to have been processed. We would limit the content of this data set to the minimum data necessary for the CJR-X participant to conduct quality assessment and improvement activities and effectively coordinate care of its patient population. This data sharing process would continue each performance year of CJR-X. We considered proposing extending this period to capture more than 30 days of data or updating on a quarterly frequency. However, we do not believe this would benefit the CJR-X participant since it may create challenges to timely identify potential CJR-X beneficiaries for care coordination efforts. We seek comment on whether we should consider extending the period to capture more than 30 days of data or updating the data on a frequency other than as frequently as monthly.
We seek comments on this proposal at § 512.665(b)(6)(ii) and (d)(1)(ii) to make beneficiary-identifiable data and regional aggregate data available as frequently as a monthly basis and for up to 6 months after a performance year.
We propose that if a CJR-X participant wishes to retrieve the beneficiary-identifiable data, the CJR-X participant would be required to first complete, sign, and submit—and thereby agree to the terms of—a data sharing agreement with CMS, which we would call the CJR-X data sharing agreement. We propose to define the “CJR-X data sharing agreement” as an agreement between the CJR-X participant and CMS that includes the terms and conditions for any beneficiary-identifiable data being shared with the CJR-X participant under § 512.665. Further, we propose to require CJR-X participants to comply with all applicable laws and the terms of the CJR-X data sharing agreement as a condition of retrieving the beneficiary-identifiable data. We also propose that the CJR-X data sharing agreement would include certain protections and limitations on the CJR-X participant's use and further disclosure of the beneficiary-identifiable data and would be provided in a form and manner specified by CMS. Additionally, we propose that a TEAM Participant that wishes to retrieve the beneficiary-identifiable data would be required to complete, sign, and submit a signed CJR-X data sharing agreement at least annually. We believe that it is important for the CJR-X Participant to complete and submit a signed CJR-X data sharing agreement at least annually so that CMS has up-to-date information that the CJR-X participant wishes to retrieve the beneficiary-identifiable data and information on the designated data custodian(s). As described in greater detail later in this section, we propose that a designated data custodian would be the individual(s) that a CJR-X participant would identify as responsible for ensuring compliance with all privacy and security requirements and for notifying CMS of any incidents relating to unauthorized disclosures of beneficiary-identifiable data.
We believe it is important for the CJR-X participant to first complete and submit a signed CJR-X data sharing agreement before it retrieves any beneficiary-identifiable data to help protect the privacy and security of any beneficiary-identifiable data shared by CMS with the CJR-X participant. There are important sensitivities surrounding the sharing of this type of individually identifiable health information, and CMS must ensure to the best of its ability that any beneficiary-identifiable data that it shares with CJR-X participants would be further protected in an appropriate fashion.
We considered an alternative proposal under which CJR-X participants would not need to complete and submit a signed CJR-X data sharing agreement, but we concluded that, if we proceeded with this option, we would not have adequate assurances that the CJR-X participants would appropriately protect the privacy and security of the beneficiary-identifiable data that we are proposing to share with them. We also considered an alternative proposal under which the CJR-X participant would need to complete and submit a signed TEAM data sharing agreement only once for the duration of the CJR-X. However, we concluded that this similarly would not give CMS adequate assurances that the CJR-X participant would protect the privacy and security of the beneficiary-identifiable data from CMS. We concluded that it is critical that we have up-to-date information and designated data custodians, and that requiring the CJR-X participant to submit an CJR-X data sharing agreement at least annually would represent the best means of achieving this goal.
We solicit public comment on our proposal to define “CJR-X data sharing agreement” at § 512.605. We also seek comment on our proposal to require, in
We are proposing that, under the CJR-X data sharing agreement, CJR-X participants would agree to certain terms, namely: (1) to comply with the requirements for use and disclosure of this beneficiary-identifiable data that are imposed on covered entities by the HIPAA Privacy Rule and the requirements of the proposed CJR-X; (2) to comply with additional privacy, security, and breach notification requirements to be specified by CMS in the CJR-X data sharing agreement; (3) to contractually bind each downstream recipient of the beneficiary-identifiable data that is a business associate of the CJR-X participant or performs a similar function for the CJR-X participant, to the same terms and conditions to which the CJR-X participant is itself bound in its data sharing agreement with CMS as a condition of the downstream recipient's receipt of the beneficiary-identifiable data retrieved by the CJR-X participant under the CJR-X; and (4) that if the CJR-X participant misuses or discloses the beneficiary-identifiable data in a manner that violates any applicable statutory or regulatory requirements or that is otherwise non-compliant with the provisions of the CJR-X data sharing agreement, the CJR-X participant would no longer be eligible to retrieve the beneficiary-identifiable data and may be subject to additional sanctions and penalties available under the law. We believe that these terms for sharing beneficiary-identifiable data with CJR-X participants are appropriate and important, as CMS must ensure to the best of its ability that any beneficiary- identifiable data that it shares with CJR-X participants would be further protected by the CJR-X participant, and any business associates of the CJR-X participant, in an appropriate fashion. We believe that these proposals would allow CMS to accomplish that.
We seek public comment on the additional privacy, security, breach notification, and other requirements that we would include in the CJR-X data sharing agreement. CMS has these types of agreements in place as part of the governing documents of other models tested under section 1115A of the Act and in the Medicare Shared Savings Program. In these agreements, CMS typically requires the identification of data custodian(s) and imposes certain requirements related to administrative, physical, and technical safeguards relating to data storage and transmission; limitations on further use and disclosure of the data; procedures for responding to data incidents and breaches; and data destruction and retention. These provisions would be imposed in addition to any restrictions required by law, such as those provided in the HIPAA Privacy, Security and Breach Notification Rules (45 CFR parts 160 and 164). These provisions would not prohibit the CJR-X participant from making any disclosure of the data otherwise required by law.
We also seek public comment on what disclosures of the beneficiary-identifiable data might be appropriate to permit or prohibit under the CJR-X data sharing agreement. For example, we are considering prohibiting, in the CJR-X data sharing agreement, any further disclosure, not otherwise required by law, of the beneficiary-identifiable data to anyone who is not a “HIPAA covered entity or business associate”, as defined in 45 CFR 160.103, or to an individual practitioner in a treatment relationship with the CJR-X beneficiary, or that practitioner's business associates. Such a prohibition would be similar to that imposed by CMS in other models tested under section 1115A of the Act in which CMS shares beneficiary-identifiable data with model participants.
We are considering these possibilities because there exist important legal and policy limitations on the sharing of the beneficiary- identifiable data and CMS must carefully consider the ways in which and reasons for which we would provide access to this data for purposes of the CJR-X. We believe that some CJR-X participants may require the assistance of business associates, such as contractors, to perform data analytics or other functions using this beneficiary-identifiable data to support the CJR-X participant's review of their care management and coordination, quality improvement activities, or clinical treatment of CJR-X beneficiaries. We also believe that this beneficiary-identifiable data may be helpful for any HIPAA covered entities who are in a treatment relationship with the CJR-X beneficiary.
We seek public comment on how a CJR-X participant might need to, and want to, disclose the beneficiary-identifiable data to other individuals and entities to accomplish the goals of the CJR-X, in accordance with applicable law.
Under our proposal, the CJR-X data sharing agreement would include other provisions, including requirements regarding data security, retention, destruction, and breach notification. For example, we are considering including, in the CJR-X data sharing agreement, a requirement that the CJR-X participant designate one or more data custodians who would be responsible for ensuring compliance with the privacy, security and breach notification requirements for the data set forth in the CJR-X data sharing agreement; various security requirements like those found in other models tested under section 1115A of the Act, but no less restrictive than those provided in the relevant Privacy Act system of records notices; how and when beneficiary-identifiable data could be retained by the CJR-X-participant or its downstream participants of the beneficiary identifiable data; procedures for notifying CMS of any breach or other incident relating to the unauthorized disclosure of beneficiary-identifiable data; and provisions relating to destruction of the data. These are only examples and are not the only terms CMS would potentially include in the CJR-X data sharing agreement.
We solicit public comment on this proposal that CMS, by adding § 512.665(e)(1)(ii), would impose certain requirements in the CJR-X data sharing agreement related to privacy, security, data retention, breach notification, and data destruction.
Finally, we proposes, at § 512.665(e)(1)(iv), that the CJR-X data sharing agreement would include a term providing that if the CJR-X participant misuses or discloses the beneficiary-identifiable data in a manner that violates any applicable statutory or regulatory requirements or that is otherwise non-compliant with the provisions of the CJR-X data sharing agreement, the CJR-X participant would no longer be eligible to retrieve beneficiary-identifiable data under proposed § 512.665(b) and may be subject to additional sanctions and penalties available under law. We also propose that if CMS determines that one or more grounds for remedial action specified in § 512.665(e)(iv) has taken place, CMS may discontinue the provision of data sharing and reports to the model participant. We propose that CMS may take remedial action if the model participant misuses or discloses the beneficiary-identifiable data in a manner that violates any applicable statutory or regulatory requirements or
We solicit public comment on this proposal, to prohibit the CJR-X participant from obtaining beneficiary-identifiable data pertaining to the CJR-X if the CJR-X participant fails to comply with applicable laws and regulations, the terms of the CJR-X, or the CJR-X data sharing agreement.
As specified in the Quality Payment Program regulations (42 CFR 414.1415), in order to be considered an Advanced APM, an Alternative Payment Model (APM) must—
• Require use of Certified Electronic Health Record Technology (CEHRT);
• Be subject to payment based on quality measures; and
• Require entities to bear financial risk.
We seek to align the design of CJR-X with the Advanced APM criteria in the Quality Payment Program and enable CMS to have the necessary information on eligible clinicians to make the requisite Qualifying APM Participant (QP) determinations. Eligible clinicians, as defined at 42 CFR 414.1305, that are captured on a CMS-maintained list constituting an affiliated practitioner list, as defined at 42 CFR 414.1305, may be eligible to receive benefits for participating in an Advanced APM, including burden reduction and financial incentives. We propose that the CJR-X participant would be considered the APM entity, as defined at 42 CFR 414.1305, and that the CJR-X participant's affiliated practitioners, as defined at 42 CFR 414.1305, may be assessed for QP determinations depending on whether the CEHRT criteria are met, as established at 42 CFR 414.1425(b)(2). Additionally, we seek to ensure the design of CJR-X meets the Merit-based Incentive Payment System (MIPS) APM criteria and that CMS has the necessary information on MIPS eligible clinicians, as defined in 42 CFR 414.1305, so that they may be eligible for certain scoring benefits under MIPS. We therefore propose to adopt two different APM options for CJR-X—an “AAPM option” would be defined as an option in which CJR-X participants would attest to meeting the CEHRT requirement and in which the CJR-X participant's eligible clinicians may be assessed for QP determinations (to the extent CJR-X is determined to be an Advanced APM), and a “non-AAPM option” would be defined as an option in which CJR-X participants would not meet CEHRT and in which the CJR-X participant's MIPS eligible clinicians may be assessed for reporting and scoring through the APM Performance Pathway (APP) (to the extent the CJR-X is determined to be a MIPS APM).
As previously stated, an Advanced APM must require participants to use CEHRT (42 CFR 414.1415(a)), make payment based on quality measures (42 CFR 414.1415(b)) and meet financial risk standards (42 CFR 414.1415(c)). We propose two APM options in CJR-X: a non-Advanced APM (non-AAPM) option and an Advanced APM (AAPM) option. The non-AAPM option would be for CJR-X participants that do not meet the CEHRT. However, these CJR-X participants may still be considered APM entities in a MIPS APM. The AAPM option would be for CJR-X participants that meet the CEHRT requirement. These CJR-X participants would be considered APM entities in an Advanced APM.
We propose to require CJR-X participants who wish to participate in the AAPM option to attest to meeting the CEHRT use requirement that meets the CEHRT definition in our regulations at 42 CFR 414.1305 on an annual basis prior to the start of each performance year in a form and manner and by a date specified by CMS. We propose that the CJR-X participant would be required to retain and provide CMS access to the attestation upon request. We further propose that meeting and attesting to the CEHRT use criteria would be voluntary, and that CMS would assign CJR-X participants who choose not to do so to the non-AAPM option. Lastly, we propose to require CJR-X participants who wish to participate in the AAPM option to provide their CMS Electronic Health Record (EHR) Certification IDs on an annual basis prior to the end of each performance year in a form and manner and by a date specified by CMS.
We believe that a CJR-X participant's decision to meet and attest to the CEHRT use criteria would not create significant additional administrative burden for the CJR-X participant. Moreover, the choice of whether to meet and attest to the CEHRT use criteria would not otherwise affect the CJR-X participant's requirements or opportunities under the model. However, a CJR-X participant's decision to attest to CEHRT use may affect the ability of its clinicians to qualify as a QP. In other words, if a CJR-X participant chose not to attest to CEHRT use, its clinicians would not be assessed for QPs status.
We seek comment on our proposals for the CJR-X Advanced APM options and the associated requirements at § 512.615. We also seek comment on our proposed definitions for the “AAPM option” and “non-AAPM option” at § 512.605.
We propose that each CJR-X participant would be required to submit information about the eligible clinicians or MIPS eligible clinicians who enter into financial arrangements with the CJR-X participant for purposes of supporting the CJRL-X participants' cost or quality goals as discussed in section X.C.2.i. of this proposed rule. This information would enable CMS to make determinations as to eligible clinicians who could be considered for QP determinations based on the services furnished under CJR-X (to the extent the model is determined to be an AAPM) and would be necessary for APP reporting and scoring for MIPS eligible clinicians (to the extent the model is determined to be a MIPS APM), We are proposing that for purposes of CJR-X, the eligible clinicians or MIPS eligible clinicians could be: (1) CJR-X collaborators, as described in section X.C.2.i.(3). of this proposed rule, engaged in sharing arrangements with a CJR-X participant; (2) PGP, NPPGP, or TGP members who are collaboration agents engaged in distribution arrangements with a PGP, NPPGP, or TGP that is a CJR-X collaborator, as described in section X.C.3.i.(5) of this proposed rule; or (3) PGP, NPPGP, or TGP members who are downstream collaboration agents engaged in downstream distribution arrangements with a PGP, NPPGP, or TGP that is also an ACO participant in an ACO that is a CJR-X collaborator, as described in section X.C.3.i.(6). of this proposed rule. The list of physicians and nonphysician practitioners in these three groups that we are proposing to require CJR-X participants to submit to CMS would satisfy the criteria to be considered an Affiliated Practitioner List, as defined in 42 CFR 414.1305. We propose to use the list submitted by CJR-X participants to make determinations regarding which physicians and nonphysician practitioners should receive QP determinations or be reported for the APP based on the services they furnish under CJR-X.
We propose for the reasons detailed previously that each CJR-X participant with eligible clinicians or MIPS eligible clinicians must submit to CMS a
• For each CJR-X collaborator who is a physician, nonphysician practitioner, or therapist during the performance year—
++ The name, tax identification number (TIN), and national provider identifier (NPI) of the CJR-X collaborator; and
++ The start date and, if applicable, end date, for the sharing arrangement between the CJR-X participant and the CJR-X collaborator.
• For each collaboration agent who is a physician, nonphysician practitioner, or therapist during the performance year—
++ The name, TIN, and NPI of the collaboration agent and the name and TIN of the CJR-X collaborator with which the collaboration agent has entered into a distribution arrangement; and
++ The start date and, if applicable, end date, for the distribution arrangement between the CJR-X collaborator and the collaboration agent.
• For each downstream collaboration agent who is a physician or nonphysician practitioner, or therapist during the performance year—
++ The name, TIN, and NPI of the downstream collaboration agent and the name and TIN of the collaboration agent; and
++ The start date and, if applicable, end date, for the downstream distribution arrangement between the collaboration agent and the downstream collaboration agent.
• If there are no individuals that meet the reporting criteria listed previously for CJR-X collaborators, collaboration agents, or downstream collaboration agents, then the CJR-X participant must attest on a quarterly basis in a form and manner and by a date specified by CMS that there are no individuals to report on the financial arrangements list. While the proposed submission of the financial arrangements list may create some additional administrative burdens for certain CJR-X participants, we expect that CJR-X Participants could modify their contractual relationships with their CJR-X collaborators and, correspondingly, require those CJR-X collaborators to include similar requirements in their contracts with collaboration agents and in the contracts of collaboration agents with downstream collaboration agents.
We also recognize there may be physicians and nonphysician practitioners who would not be listed on the financial arrangements list because they have not entered into a financial arrangement as a CJR-X collaborator, collaboration agent, or downstream collaboration agent, but who may nevertheless participate in CJR activities, as defined at proposed § 512.605, and may be eligible for QP determinations or eligible for APP reporting because they are affiliated with and support the APM Entity. We propose that, in order to capture these physicians and nonphysician practitioners who are not listed on the CJR-X participant's financial arrangements list for QP determinations or APP reporting, CJR-X participants must also submit to CMS a clinician engagement list in a form and manner and by a date specified by CMS on a quarterly basis every performance year. We propose to use the clinician engagement list for assessing QP determinations and for APP reporting. The submission of the clinician engagement lists may create some additional administrative burdens for CJR-X participants, but we expect the effort to be worthwhile since some of these QP determinations may result in eligible clinicians receiving burden reduction benefits and financial incentives, and some MIPS eligible clinicians may receive MIPS APM scoring benefits.
We propose to define the “clinician engagement list” at § 512.605 as the list of eligible clinicians or MIPS eligible clinicians that participate in CJR-X activities, have a contractual relationship with the CJR-X participant, and who are not listed on the financial arrangements list. We propose that the CJR-X participant must submit the list to CMS on a quarterly basis during each performance year in a form and manner and by a date specified by CMS or attest that there are no individuals to report on the clinician engagement list. We believe submission of the clinician engagement list on a quarterly basis would align with the Quality Payment Program's QP determination dates, as described in 42 CFR 414.1425. We propose the CJR-X participant would be required to retain and provide CMS access to the clinician engagement list upon request. We propose that the clinician engagement list must include the following information:
• For each physician, nonphysician practitioner, or therapist who is not listed on the CJR-X participant's financial arrangements list during the performance year, but who does have a contractual relationship with the CJR-X participant and participates in CJR-X activities during the performance year—
++ The name, TIN, and NPI of the physician, nonphysician practitioner, or therapist; and
++ The start date and, if applicable, end date, for the contractual relationship between the physician, nonphysician practitioner, or therapist and the CJR-X participant.
• We are proposing that if there are no individuals that meet the requirements to be reported on the clinician engagement list, then the CJR-X participant must attest on a quarterly basis in a form and manner and by a date specified by CMS that there are no individuals to report on the clinician engagement list.
We seek comments on the proposal to require CJR-X participants to submit a financial arrangements list and clinician engagement list on a quarterly basis or attest that there are no individuals to report. We are especially interested in comments about approaches to information submission, including the content of the lists, and periodicity and method of submission to CMS that would minimize the reporting burden on CJR-X participants while providing CMS with sufficient information about eligible clinicians to facilitate QP determinations and APP reporting to the extent that CJR-X is considered to be an Advanced APM and a MIPS APM.
CJR-X meets the criteria for application of the Standard Provisions for Mandatory Innovation Center Models (42 CFR part 512, subpart A). Unless otherwise specified, all CJR-X participants and CJR-X beneficiaries would be subject to the provisions at §§ 512.100 through 512.190, which address the following areas:
• Beneficiary Protections.
• Cooperation in Model Evaluation and Monitoring.
• Audits and Record Retention.
• Rights in Data and Intellectual Property.
• Monitoring and Compliance.
• Remedial Action.
• Innovation Center Model Termination by CMS.
• Limitations on Review.
• Miscellaneous Provisions on Bankruptcy and Other Notifications.
• Reconsideration Review Process.
We recognize the standard provisions were not intended to encompass all the terms and conditions that would apply to each Innovation Center model, because each model embodies unique design features and implementation plans that may require additional, more tailored provisions, including with respect to payment methodology, care delivery and quality measurement, that would continue to be included in each model's governing documentation. Thus, we seek public comment on whether CJR-X should set forth model-specific provisions related to any of the provisions identified previously.
The general provisions relating to termination of the model by CMS in § 512.165 would apply to CJR-X. Consistent with termination provisions of other Innovation Center models, in the event we terminate CJR-X, we would provide written notice to CJR-X participants specifying the grounds for termination and the effective date of such termination or ending. As provided by section 1115A(d)(2) of the Act, termination of the model under section 1115A(b)(3)(B) of the Act would not be subject to administrative or judicial review.
Organ procurement organizations (OPOs)
Histocompatibility laboratories (HCLs) are specialized clinical laboratories that perform tissue typing and compatibility testing on potential organ donors and recipients. These labs primarily conduct HLA (Human Leukocyte Antigen) typing—identifying tissue markers for organ and tissue transplantation. They perform crossmatching tests to determine compatibility between organ donors and recipients, antibody screening to detect antibodies that could cause transplant rejection, and disease association testing—HLA typing for certain autoimmune and genetic conditions. HCLs play a critical role in organ transplantation programs, ensuring that donated organs are matched appropriately with recipients to minimize rejection risk. HCLs may also be independent or hospital-based. Hospital-based HCLs are considered departments of their hospital and report costs for services on their TH's MCR. Independent HCLs, hereinafter referred to as HCLs, file a separate cost report (see 42 CFR 413.420(c)(i)).
Under section 1861(v)(1)(A), reasonable cost is the necessary cost actually incurred in the efficient delivery of needed health care services to Medicare beneficiaries. Section 413.1(a)(2)(v) identifies OPOs and HCLs as provider types to which part 413 of the regulations apply, making them expressly subject to Medicare's reasonable cost principles, including 42 CFR 413.9 regarding costs related to patient care. Currently, the Medicare program reimburses the reasonable costs related to patient care of allowable kidney acquisition services furnished by IOPOs and HCLs, provided that they have an agreement with the Secretary in accordance with 42 CFR 413.420. Kidney acquisition costs are not paid directly by Medicare to an IOPO or HCL. IOPOs and HCLs are reimbursed for their kidney acquisition services by the THs, subject to later adjustment by Medicare (see 42 CFR 413.420). Medicare currently authorizes reimbursement to designated IOPOs for kidney acquisition costs, under reasonable cost principles
In the FY 2022 IPPS/LTCH PPS final rule with comment period, published in the
Medicare's current organ acquisition policy is modeled after the kidney acquisition policy that was implemented for kidney transplants following the Social Security Amendments of 1972 (Public Law 92-603) that extended Medicare coverage to individuals with end stage renal disease (ESRD) who required dialysis or transplantation. In July 1973 and July 1974, CMS (then the Bureau of Health Insurance
The Medicare reimbursement policies for IOPO and HCL kidney acquisition costs were implemented in a final rule (43 FR 58370 through 58372), published December 14, 1978. In that final rule, we noted that HOPOs or hospital-based HCLs included their services in their hospital cost report, and they were reimbursed based upon reasonable cost principles. However, THs had no authority or basis for determining the reasonableness of charges from IOPOs and independent HCLs, and the charges billed by IOPOs and these HCLs were not reviewed by the Medicare contractor (hereafter, “the contractor”) to determine reasonableness. As such, the potential existed for Medicare to pay more than reasonable costs for organ acquisition services. In June 1978, Congress passed Public Law 95-292 (the End Stage Renal Disease (ESRD) Program Amendment), which amended section 1881(b)(2)(A) of the Act, and required that reimbursement made under title XVIII for the services of OPOs and HCLs in procuring and furnishing organs for transplantation must not exceed the cost actually incurred by that OPO or HCL, and must be determined in accordance with section 1861(v) of the Act. Section 1861(v) of the Act requires that payments be based upon reasonable costs.
We note that Public Law 95-292 refers to the costs of procuring
We implemented section 1881(b)(2)(A) of the Act and this legislative intent by requiring that the Medicare program reimburse only the reasonable cost of IOPO and HCL services for kidney acquisitions.
Over the years, through various rulings and national coverage determinations (NCDs), Medicare added coverage for transplantation of non-renal organs such as heart, liver, lungs, and pancreas. Non-renal organs were covered for transplantation through a CMS Ruling (for heart transplants) and through NCDs (for other non-renal organs),
Currently IOPOs determine their charges for non-renal organ acquisition costs and those amounts are billed to and paid by THs. THs subsequently include those charges in their organ acquisition costs without the ability for determining reasonableness. We are concerned about reports from our Medicare contractor and from the OIG
In accordance with our current requirements at § 413.404(c)(1), for each non-renal organ type, an IOPO is supposed to establish its organ-specific non-renal acquisition charges by estimating the reasonable and necessary organ acquisition costs it expects to incur, divided by the projected number of organs it expects to procure, in its cost reporting period. The existing cost report data enables the MAC to determine if those acquisition charges the IOPO establishes are higher than what the acquisition charges should have been based on costs actually incurred. When an IOPO establishes a non-renal acquisition charge that is higher than its reasonable costs actually incurred, and the IOPO bills that inflated charge to a TH (or other OPO), that inflated charge is reported by the TH (or other OPO) as an organ acquisition cost on its cost report, Medicare then shares in those inflated costs. To correct this situation and ensure IOPOs and HCLs are held to reasonable costs, similar to HOPOs and hospital-based HCLs, we are proposing to reconcile IOPO and HCL costs for non-renal organs similar to how we reconcile IOPO and HCL kidney costs. We are proposing to require that IOPO and HCL non-renal organ acquisition costs be reviewed and analyzed by the Medicare contractor to ensure those costs are reasonable, necessary, related to patient care, and reconciled to payments made by or payable by THs and other OPOs. Without reconciliation, reasonable costs cannot be determined for non-renal organs leading to inflated organ acquisition costs to the THs and inflated costs throughout the transplant ecosystem.
Section 413.420(a)(1) explains that covered services furnished by IOPOs and HCLs in connection with kidney acquisition and transplantation are reimbursed under the principles for determining reasonable cost. As noted previously, section 1881(b)(2)(A) of the Act was amended in 1978 to require that reimbursement for the services of OPOs and HCLs in procuring and furnishing organs for transplantation must not exceed the cost actually incurred by that OPO or HCL. We also noted that HOPOs and hospital-based HCLs are reimbursed under reasonable cost principles for their services through the hospital cost report. Lastly, we noted that over the years, through various rulings and NCDs, Medicare added coverage for transplantation of non-renal organs such as heart, liver, lungs, and pancreas and payment policies were subsequently implemented through notice-and-comment rulemaking. While we modeled our reimbursement for non-renal organ acquisition costs based on existing kidney acquisition policies, we did not address reasonable cost reimbursement and reconciliation of the non-renal organs for IOPOs and HCLs.
In this proposed rule, we are proposing to hold IOPOs and HCLs to reasonable cost reimbursement for organ acquisition and transplantation services in accordance with section 1861(v) of the Act. We are proposing to revise the title of § 413.420 to change “kidney” to “organ” and to define the acronym IOPOs after independent organ procurement organizations and the acronym HCLs after histocompatibility laboratories. Throughout § 413.420, we also propose to use the acronym HCL and its permutations in every title, paragraph, or subparagraph where a histocompatibility laboratory or laboratory, and their various permutations, are mentioned. This would revise the regulation text at § 413.420(a)(1), (a)(2), (c) paragraph heading, (c)(1), (c)(1)(ii), (c)(1)(iv), (c)(2), (d)(1) through (d)(4), (e)(1), (e)(1)(i), (e)(2), (e)(2)(ii), and (g).
In addition, we are proposing to revise 42 CFR 413.420(a)(1) and to add paragraphs (a)(1)(i) and (ii). Specifically, we are proposing to revise § 413.420(a)(1) to specify that covered services furnished by IOPOs and HCLs in connection with organ acquisition and transplantation are reimbursed under the principles for determining reasonable cost as specified in paragraphs (a)(1)(i) and (ii). We are also proposing to add § 413.420(a)(1)(i) to specify that kidney acquisition and transplantation services furnished by IOPOs and HCLs are reimbursed under the principles for determining reasonable cost. For non-renal organs, we are proposing to add § 413.420(a)(1)(ii) to specify that for non-renal organ acquisition and transplantation services furnished for cost reporting periods beginning on or after October 1, 2027,
We are proposing to revise § 413.420(a)(2) to include OPOs as payors of IOPOs and HCLs and to specify that services furnished by IOPOs and HCLs that have an agreement with the Secretary, in accordance with § 413.420(c), are paid directly by the TH or OPO using a kidney SAC (for an IOPO) or contractor-established rates (for an HCL). Under this proposal, we would also specify that the reasonable costs of services furnished by IOPOs or HCLs are reimbursed in accordance with the principles contained in §§ 413.60 and 413.64.
Section 413.420(c), (which concerns agreements with IOPOs and HCLs, currently specifies that any IOPO or HCL that wishes to have the cost of its pre-transplant services reimbursed under the Medicare program must file an agreement with CMS under which the IOPO or HCL agrees to the following:
• To file a cost report in accordance with § 413.24(f) within 5 months following the close of the period covered by the report.
• To permit CMS to designate a contractor to determine the interim reimbursement rate, payable by the THs for services provided by the IOPO or HCL, and to determine Medicare's reasonable cost based upon the cost report filed by the IOPO or HCL.
• To provide such budget or cost projection information as may be required to establish an initial interim reimbursement rate.
• To pay to CMS amounts that have been paid by CMS to THs and that are determined to be in excess of the reasonable cost of the services provided by the IOPO or HCL.
• Not to charge any individual for items or services for which that individual is entitled to have payment made under section 1881 of the Act.
Because of the proposed change to the title of § 413.420, paragraph (c) would apply to both kidney and non-renal organs. We propose to revise § 413.420(c)(1)(ii) to include OPOs as entities that pay IOPOs and HCLs. We also propose to revise § 413.420(c)(1)(iv) to specify that the IOPO or HCL agrees to pay to CMS amounts that have been received or are receivable by IOPOs or HCLs from THs and OPOs, and that are in excess of the reasonable costs of the services provided by the IOPO or HCL. This rephrasing to use “have been received or are receivable” reflects the
Section 413.420(d)(1) currently specifies that THs with approved kidney transplant programs pay the IOPO or HCL for their pre-transplantation services on the basis of interim rates established by the contractor for that IOPO or HCL. The authority to allow the contractor to establish the interim rate is described in § 413.420(c)(ii). The interim rate currently described in § 413.420(d)(2) is a kidney SAC or contractor established rates, based on costs associated with procuring a kidney for transplantation, incurred by an IOPO or HCL respectively, during its previous fiscal year. If there is not adequate cost data to determine the initial interim rate, the contractor determines it according to the IOPO's or HCL's estimate of its projected costs for the fiscal year. Section 413.420(d)(3) goes on to specify that payments made by THs on the basis of interim rates are reconciled directly with the IOPO or HCL after the close of its fiscal year, in accordance with § 413.420(e). Lastly, § 413.420(d)(4) currently specifies that information on the interim rate for all IOPOs and HCLs must be disseminated to all THs and contractors.
In accordance with § 413.420(c)(ii), and to ensure that non-renal SACs and non-renal testing rates are an accurate estimate of actual costs, and to increase transparency around non-renal SACs and non-renal testing rates, we further propose to require the contractor to establish (and adjust if necessary) non-renal SACs. This proposed change also requires conforming changes to § 413.420(d)(1). As noted previously, § 413.420(d)(1) specifies that THs with approved kidney transplant programs pay the IOPO or HCL for their pre-transplantation services on the basis of an interim rate established by the contractor for that IOPO or HCL. However, we propose to revise § 413.420(d)(1) to specify that THs with approved transplant programs and OPOs pay the IOPO or HCL for their pre-transplantation services based on interim rates established by the contractor for that IOPO or HCL as described under proposed paragraphs (d)(1)(i) and (d)(1)(ii). OPOs are also entities that pay IOPOs and HCLs for their pre-transplant services using the interim rates.
We propose to add § 413.420(d)(1)(i) to specify that THs with approved kidney transplant programs and OPOs pay the IOPO or HCL for their kidney pre-transplantation services, based on interim rates established by the contractor for that IOPO or HCL. In addition, we propose to add § 413.420(d)(1)(ii) to specify that THs with approved non-renal transplant programs and OPOs pay the IOPO or HCL for their non-renal organ pre-transplantation services furnished for cost reporting periods beginning on or after October 1, 2027, based on interim rates established by the contractor for that IOPO or HCL. The establishment of these interim rates is the first step in preparing for the reconciliation for non-renal organ acquisition costs.
Section 413.420(d)(2) currently provides that the interim rate established by the contractor for an IOPO is a kidney SAC, and the interim rates established for an HCL are contractor established rates, based on costs associated with procuring a kidney for transplantation, and incurred by an IOPO or HCL during its previous fiscal year. If there is not adequate cost data to determine the initial interim rate, the contractor determines it according to the IOPO's or HCL's estimate of its projected costs for the fiscal year. We propose that the contractor follow the same procedures for establishing, adjusting, and publishing non-renal SACs that are used for establishing, adjusting, and publishing kidney SACs. To implement this proposed change, we are proposing to revise § 413.420(d)(2) and to add paragraphs (d)(2)(i) and (ii).
We are proposing to revise § 413.420(d)(2) to specify that interim rates are contractor established rates, based on costs associated with procuring an organ for transplantation, incurred by an IOPO or HCL during its previous fiscal year as described under proposed § 413.420(d)(2)(i) and (ii). We are also proposing to move language specific to kidney from the existing § 413.420(d)(2) to proposed § 413.420(d)(2)(i) and to specify that the interim rates for kidneys are a contractor established kidney SAC or contractor established rates, associated with procuring kidneys for transplantation, incurred by an IOPO or HCL, respectively, during its previous fiscal year. Under our proposal, if there is not adequate cost data to determine the initial interim rate, the contractor would determine it according to the IOPO's or HCL's estimate of its projected costs for the fiscal year.
Rates for non-renal organs are currently established by the IOPOs and HCLs in accordance with § 413.404(c)(1) and billed to THs or other OPOs. THs and OPOs pay the rates established by these entities; however, there is no ability for the THs or other OPOs to determine the reasonableness of these rates. We propose that the contractor establish, adjust (if necessary), and publish the non-renal organ interim rates for IOPOs and HCLs. Our proposal would ensure compliance with reasonable cost principles, result in lower costs throughout the transplant ecosystem, enhance payment accuracy, provide financial protection to OPOs and HCLs for their reasonable costs, increase transparency surrounding costs, and provide robust oversight in response to Congressional and OIG concerns. Therefore, we are proposing to add § 413.420(d)(2)(ii) to specify that for services furnished for cost reporting periods beginning on or after October 1, 2027, the interim rates for non-renal organs are contractor established non-renal organ-specific SACs or contractor established rates, based on costs associated with procuring each specific type of non-renal organ for transplantation, incurred by an IOPO or HCL, respectively, during its previous fiscal year. Under our proposal, if there is not adequate cost data to determine the initial interim rates, the contractor would determine them according to the IOPO's or HCL's estimate of its projected costs for the fiscal year.
Section 413.420(d)(3) currently specifies that payments made by THs based on interim rates are reconciled directly with the IOPO or HCL after the close of its fiscal year, in accordance with § 413.420(e). We are proposing to revise § 413.420(d)(3) to specify that payments or amounts payable from THs and OPOs based on interim rates as proposed in § 413.420(d)(2)(i), are reconciled directly with the IOPO or HCL after the close of its fiscal year in accordance with § 413.420(e). Additionally under § 413.420(d)(3), we are proposing to specify that for cost reporting periods beginning on or after October 1, 2027, payments or amounts payable from THs and OPOs based on interim rates as proposed in § 413.420(d)(2)(ii), are reconciled directly with the IOPO or HCL after the close of its fiscal year in accordance with § 413.420(e).
We propose to revise § 413.420(d)(4) to change “interim rate” to “interim rates” and to specify that when a contractor establishes interim rates for IOPOs and HCLs, it must disseminate those interim rates to all THs, OPOs, and contractors. Our proposed language adds OPOs to the list of entities that would receive the interim rate information since OPOs also pay IOPOs for organs.
We did not propose changes to § 413.420(e)(1) except to use the acronym HCLs instead of “histocompatibility laboratories” because the existing language specifies
We did not propose to revise § 413.420(e)(2) except to use the acronym HCL instead of “histocompatibility laboratory” as this paragraph applies to the current policy. We propose to revise § 413.420(e)(2)(i) to add the word “kidney” before “interim rate” to be clearer that this regulation applies to the existing policy. We also propose to revise the sentence to reflect the accrual basis of accounting required at § 413.24(a) by specifying that a retroactive adjustment of the amounts received or receivable by the IOPO or HCL under the kidney interim rate is made in accordance with § 413.64(f).
We propose to revise § 413.420(e)(2)(ii) to add the word “kidney” before “interim reimbursement rate” to be clearer that this regulation applies to the existing policy. We also propose to revise the sentence to reflect the accrual basis of accounting required at § 413.24(a), and to include OPOs as entities that pay IOPOs and HCLs. Therefore, we propose to specify that if the determination of reasonable cost reveals an overpayment or underpayment resulting from the kidney interim reimbursement rates received or receivable by the IOPO or HCL from THs and OPOs, a lump sum adjustment is made directly between the contractor and the IOPO or HCL.
We propose to add § 413.420(e)(3) to specify that for cost reporting periods beginning on or after October 1, 2027, a cost report submitted by an IOPO or HCL is reviewed by the contractor and new interim reimbursement rates for non-renal organ acquisition costs for the subsequent fiscal year are established by the contractor based upon this review. This proposed language is similar to the existing language at § 413.420(e)(2) except it includes the effective date of the proposed new policy and refers to non-renal organ acquisition costs rather than kidney acquisition costs.
We propose to add § 413.420(e)(3)(i) to specify that a retroactive adjustment of the amounts received or receivable by the IOPO or HCL under the non-renal organ-specific interim rates is made in accordance with § 413.64(f). This proposed language is similar to the existing language at § 413.420(e)(2)(i) except it refers to the “non-renal organ-specific interim rates” rather than the “interim rate” to reflect our proposed policy and also refers to amounts “received or receivable” to reflect the accrual basis of accounting required at § 413.24(a).
We propose to add § 413.420(e)(3)(ii) to state that if the determination of reasonable cost reveals an overpayment or underpayment resulting from the non-renal organ-specific interim reimbursement rates received or receivable by the IOPO or HCL from THs and OPOs, a lump sum adjustment is made directly between the contractor and the IOPO or HCL. This proposed language refers to non-renal organ-specific interim reimbursement rates rather than kidney interim reimbursement rates to reflect the proposed policy. It also indicates that payments are received or receivable by IOPOs or HCLs from THs and OPOs to reflect our reconciliation process, which is in accordance with the accrual basis of accounting required at § 413.24(a), and it identifies both THs and OPOs as the entities paying IOPOs and HCLs.
We are also proposing changes to § 413.404 to conform to the changes proposed to § 413.420(d), which require the contractor to establish the non-renal organ-specific interim rates, which are the same as the non-renal organ-specific SACs, following the same procedures used for establishing kidney SACs. We also propose that only the contractor adjust the non-renal SACs if necessary, and that the contractor disseminate the interim rates to all THs, OPOs, and contractors.
As noted previously, we are proposing a 1-year delay in implementing our proposed changes. Therefore, we need to indicate when these regulations would be effective. As such, we are proposing to change the title of § 413.404(c) to specify that it is for cost reporting periods beginning before October 1, 2027. This proposed change would clarify for readers that all the existing regulatory text under § 413.404(c) is effective for cost reporting periods beginning before October 1, 2027. We also propose to add new § 413.404(d) with a title that specifies that it is for Independent OPO organ SACs, for cost reporting periods beginning on or after October 1, 2027, and which would incorporate our proposed changes. This new paragraph (d) is for all organs, renal and non-renal.
We propose to add new § 413.404(d)(1), to state that for each organ type, the contractor establishes the organ-specific SAC based on an estimate of, initial year projected or subsequent years' actual, reasonable and necessary costs that the IOPO expects to incur to procure deceased donor organs during the IOPO's cost reporting period, divided by the initial year projected or subsequent years' actual, number of usable deceased donor organs the IOPO expects to procure. This is modeled after the existing kidney SAC regulations at § 413.404(c)(2)(i), except we propose to add “For each organ type,” at the start of the paragraph, and we replaced kidney SAC with organ-specific SAC and replaced deceased donor kidneys with deceased donor organs.
We also propose to add § 413.404(d)(1)(i) to specify how the non-renal and kidney SACs would be calculated in their initial year, by modelling after the existing regulation text at § 413.404(c)(2)(ii). The proposed text added at new § 413.404(d)(1)(i) would specify that for each organ type, the contractor develops the IOPO's initial organ-specific SAC based on the IOPO's budget information.
We also propose to add § 413.404(d)(1)(ii) to specify how the non-renal and kidney SACs would be calculated in subsequent years, by modelling after the existing regulation text at § 413.404(c)(2)(iii). The proposed § 413.404(d)(1)(ii) would state that for each organ type, the contractor computes the organ-specific SAC for subsequent years using the IOPO's costs related to organ acquisition that were incurred in the prior cost reporting period and dividing those costs by the number of usable deceased donor organs procured during that cost reporting period.
We propose to add § 413.404(d)(1)(iii), to state that each organ-specific SAC amount is the organ-specific interim payment the TH or other OPO pays to the IOPO, as set forth in § 413.420(d)(2)(i) and (ii). This language would make clear that the organ-specific SAC is the same as the organ-specific interim payment.
We also propose to add § 413.404(d)(1)(iv) to provide a listing of allowable organ acquisition costs for the contractor to use when establishing IOPO organ-specific SACs. In the FY 2022 IPPS/LTCH PPS final rule with comment period, we wrote that an IOPO establishes its non-renal SACs based on its costs of procuring organs, similar to procedures followed by transplant hospitals (86 FR 73478). However, the listing of organ acquisition costs IOPOs should use when developing their deceased donor SACs was omitted when we codified the regulations related to IOPO SACs in the FY 2022 IPPS/LTCH PPS final rule with comment period (86 FR 73478 through 73480). Therefore, we are proposing to use the same listing given in § 413.404(b)(3)(ii)(C) for transplant hospital deceased donor SACs, except to exclude registry fees, which are costs incurred by THs not OPOs. We are proposing to add § 413.404(d)(1)(iv) to specify that costs
• Costs of organs acquired from other THs or OPOs.
• Costs of transportation as specified in § 413.402(b)(8).
• Surgeons' fees for excising deceased donor organs (limited to $1,250 for kidneys).
• Costs of tissue typing services, including those furnished by independent laboratories.
• Organ preservation and perfusion costs.
• General routine and special care service costs (for example, intensive care unit or critical care unit services related to the donor).
• Operating room and other inpatient ancillary service costs.
We propose to add § 413.404(d)(1)(v) to require that only the contractor may adjust the organ SACs. This is a proposed change from the existing policy, where the IOPO currently can adjust its non-renal SACs as needed and use that adjusted SAC without contractor approval; we also included the word “only” to make it clear that only the contractor may adjust organ SACs. We also propose to state that IOPOs may request that the contractor make an adjustment in accordance with § 413.64(e), or the contractor may initiate an adjustment, in accordance with § 413.64(d)(2) or § 413.64(e) as applicable.
While we modelled our proposed regulation text after the existing regulations for IOPO kidney SACs, we did not propose to add a subparagraph (vi), similar to the existing regulation at § 413.404(c)(2)(vi), which currently states that the IOPO cannot use or change its kidney SAC without the contractor's approval. That language is not necessary because proposed subparagraph (v) already makes it clear that only the contractor can adjust the organ SACs, and any SAC the contractor establishes would already be contractor approved.
Finally, we are proposing to add § 413.404(d)(2) to state that when an IOPO obtains an organ from another IOPO, the receiving IOPO is responsible for paying the procuring IOPO's SAC. The receiving IOPO uses its SAC for each organ type, and not the procuring IOPO's SAC, when billing the TH receiving the organ. This is the same as the existing requirement at § 413.404(c)(3), and we are continuing this policy without change.
To reconcile Medicare's share of non-renal organ acquisition costs, the contractor would review the MCR to determine if the costs are reasonable. This would entail the contractor's review of all IOPO and HCL organ acquisition costs that IOPOs and HCLs report annually on their MCRs and would ensure that IOPOs' and HCLs' organ acquisition costs are allowable and are reasonable and necessary, in accordance with section 1861(v) of the Act, the regulations, and Provider Reimbursement Manual (PRM), CMS Pub. 15-1 (herein referred to as PRM-1).
In determining Medicare's share of non-renal organ acquisition costs, we propose that IOPOs and HCLs would follow the same procedures used for kidney reconciliation, which assumes that all usable organs or tests for usable organs intended for transplant are for Medicare beneficiaries, except for usable organs, or tests for usable organs, sent to military hospitals, U.S. Department of Veterans Affairs hospitals, or foreign countries. We believe that even with this limitation, our proposal would rein in excess costs; provide more robust oversight of IOPO and HCL costs; increase payment accuracy, in accordance with reasonable cost principles; and be responsive to Congressional and OIG concerns. Should this proposal be finalized, we would also update the IOPO and HCL cost report form CMS-216-94 to enable reconciliation of costs and revenues for each organ type.
In the CY 2023 OPPS/ASC proposed rule (87 FR 44769 through 44773), we issued an RFI (hereafter referred to as the “July 2022 RFI”) and inquired about reconciling non-renal organ acquisition costs, mirroring our current approach for determining Medicare's reimbursement of IOPOs' kidney acquisition costs. We received several comments related to non-renal organ reconciliation and have carefully reviewed each one.
We received a few comments to the July 2022 RFI from a TH, a patient advocacy group, and a provider of high-cost perfusion services supporting Medicare's non-renal SAC reconciliation. A commenter fully supported Medicare's non-renal reconciliation and wrote that the data show that many OPOs are failing in their organ recovery efforts; this commenter wrote that the current reimbursement policies are insufficient to incentivize productive resource allocation. Several commenters supported additional oversight of IOPO non-renal organ acquisition costs, saying it would strengthen fiscal integrity. One commenter noted that the distinction between how we account for renal versus non-renal organ acquisition costs creates powerful incentives for cost shifting to kidney acquisition cost centers on the MCR. We agree with these commenters and thank them for their support.
Other comments we received in response to the July 2022 RFI were from OPOs, OPO industry groups, or OPO consultants that expressed opposition to Medicare's reconciling non-renal organ acquisition costs. These commenters believed that reconciling non-renal organ acquisition costs would undercut their ability to procure marginal organs, leading to fewer organs and therefore fewer transplants. Specifically, some OPO commenters wrote that the costs of procuring, or attempting to procure, marginal organs that are subsequently found not suitable for transplant would create losses, as there would be no revenue from those organs. As such, these commenters wrote that they may have to scale back efforts to procure marginal organs. However, these commenters seemed to misunderstand Medicare's organ acquisition payment policy, which allows reasonable costs of procuring or attempting to procure an organ intended for transplant, even if it is subsequently found not suitable for transplant (see our regulations at § 413.412(a)(2) and (d)(2)). Medicare's reconciliation of organ acquisition costs for renal and non-renal organs would make IOPOs whole when total organ acquisition costs exceed total revenue, but this currently only occurs for kidneys.
In contrast to these OPO commenters, multiple other OPO commenters who also opposed Medicare's reconciling non-renal organ acquisition costs (because they were concerned about potential financial swings and the need to have large cash reserves) wrote that their procurement of organs would not be affected by such a policy, as they try to procure every organ, every time. Furthermore, several commenters stated that OPOs are incentivized to procure as many organs as possible through their organ performance metrics, which affect their tier rating. A perfusion provider commented that reconciling non-renal organs would increase organ procurement by removing the financial
Several commenters were concerned about situations where OPOs expend resources procuring organs that undergo costly interventions (for example, perfusion) but are later declined by THs and determined to be unsuitable for transplantation. One commenter wrote that if Medicare reconciles non-renal organ acquisition costs for IOPOs, those costly interventions would be considered unallowable, and the OPO would bear the cost. We disagree as our regulations at § 413.402(b)(5) allow perfusion costs; as noted previously, costs incurred for organs intended for transplant are allowable even if the organ is subsequently not transplanted (see §§ 413.412(a)(2) and 413.412(d)(2)). Therefore, if an IOPO authorized the perfusion of a non-renal organ intended for transplant that was subsequently not transplanted, those costs would be allowable (if a transplant hospital authorized the perfusion, the perfusion costs would belong to that transplant hospital and should be directly billed to that hospital). If Medicare reconciled IOPOs' costs for procuring all organs, it could reimburse more since it would cover acquisition costs for all organ types, not just kidneys as under the current policy.
Several commenters wrote that they have “losses” when procuring kidneys, because in reconciling, the contractor finds some costs that OPOs report on their MCRs to be unallowable. While OPOs can recover their allowable and reasonable operational costs, we cannot reimburse costs that are statutorily or regulatorily prohibited, or specified in the PRM-1 as non-allowable or unreasonable. In sections X.D.2. and X.D.3. of the preamble of this proposed rule, we are clarifying existing policy and proposing to codify certain longstanding reasonable cost policies, as well as revising certain other Medicare reasonable cost reimbursement policies, to assist all providers, including OPOs, in understanding what is not allowable under Medicare's reasonable cost principles.
Some commenters wrote that they make up for these monetary “losses” they experience when procuring kidneys through the revenue they receive for procuring non-renal organs. A few OPOs and industry groups acknowledged that their non-renal organ SACs result in “excess” revenue which they are using to fund non-allowable or unreasonable costs. That excess revenue is a result of inflated non-renal SACs, which are billed to transplant hospitals or other OPOs, inflating costs throughout the transplant ecosystem. Medicare ends up reimbursing its share of those inflated costs when it reimburses the TH, which violates our reasonable cost principles. We are committed to carefully and responsibly stewarding the tax dollars in the Medicare Trust Fund, and we believe that Medicare's reconciliation of OPOs' non-renal organ acquisition costs would result in Medicare more accurately reimbursing organ acquisition costs.
IOPOs indicated in comments submitted in response to the July 2022 RFI that they had concerns about the burden for IOPOs if Medicare reconciled IOPOs' costs for non-renal organs. We do not believe Medicare's reconciliation of IOPOs' costs for non-renal organs would impose additional data collection burden to IOPOs, as they already collect the data needed for reconciliation. However, we recognize there may be additional reporting burden to enable the contractor to reconcile non-renal organ acquisition costs.
A few OPOs also commented that there would be additional burden on the contractor if reconciliation of non-renal organs were to become policy. We do not agree that there would be additional burden on the contractor. Burden implies a cost that is not reimbursed. Our contractor would have increased administrative costs if we were to finalize our proposals that the contractor establish, adjust if necessary, and publish non-renal SACs and HCL testing rates, and reconcile IOPO and HCL non-renal organ acquisition costs. However, those administrative costs would be included in their contract. These increased administrative costs would be offset by the estimated savings of $100 million beginning in FY 2028, the first year that the policies would be effective, if the proposal is finalized. See section I.G.13. of Appendix A of this proposed rule for a discussion of the impacts including burden effects of our proposals.
A few commenters to the July 2022 RFI wrote that if non-renal organ acquisition costs are reconciled, they would have to build large financial reserves in case they may have to repay Medicare a share of those excess funds. We believe that if IOPOs' SACs more accurately estimate actual, reasonable costs, then reconciliation would not result in large payments back to Medicare, therefore limiting the need for large financial reserves. We also note that SACs can be adjusted during the year if IOPOs believe they are too high or too low. This can help IOPOs avoid owing large sums to Medicare after the year-end reconciliation takes place in cases where the SAC is overestimating costs. If an IOPO's SACs were underestimated, and costs are exceeding revenue, the contractor can also provide a lump sum adjustment during the accounting period; currently this only occurs with the kidney SAC (see 42 CFR 413.420(e)(2)(ii)) but our proposal would also allow it for non-renal organ SACs. Any lump sum adjustment would be accounted for when making a retroactive adjustment at cost report settlement.
Other commenters wrote that Medicare's reconciliation of non-renal organs would have a detrimental effect on the financial viability of IOPOs and cited section 371(b) of the Public Health Service Act (PHSA), which requires OPOs to have accounting and other fiscal procedures (as specified by the Secretary) necessary to assure the fiscal stability of the organization. These IOPOs were concerned about losing “excess” revenue. However, we believe that reconciliation is an accounting procedure that helps to ensure the financial integrity and stability of the IOPO or HCL and would be in accord with the requirements of section 371(b) of the PHSA by providing fiscal stability to the OPO. The reconciliation process for all non-renal organs would also entail the contractor's disseminating the non-renal SACs for each IOPO to THs, OPOs, and other contractors, thereby increasing transparency of organ procurement costs within the transplant community.
Commenters cited high-cost perfusion and transportation expenses that can make accurately estimating a non-renal SAC more difficult, leaving them vulnerable to financial losses. We conducted an analysis of 2024 IOPO MCR data and found that 20 percent of IOPOs had non-renal organ acquisition costs that exceeded their non-renal revenue; these IOPOs would have been made whole by Medicare had
We appreciate the input we received from July 2022 RFI commenters. For the reasons given in this section, we do not find the interested parties' concerns against reconciling IOPOs' non-renal organ acquisition costs to be compelling. We believe that reconciling IOPOs' non-renal organ acquisition costs would ensure that Medicare is paying organ acquisition costs on a reasonable cost basis, without hindering organ procurement. We also believe there is a need for the contractor to provide more robust oversight of IOPOs' non-renal organ acquisition costs and non-renal SACs to ensure that reasonable cost principles are followed, to be responsive to OIG and Congressional concerns, to protect the transplant ecosystem, and to protect the Medicare Trust Fund.
Like IOPOs, HCLs are compensated on a reasonable cost basis, and currently Medicare only reconciles their pre-transplant kidney histocompatibility testing costs. Based on our review of HCL MCR data, we have concerns that some HCLs may be over-allocating overhead costs to kidney acquisition cost centers, which increases Medicare's reimbursement. Additionally, a 2018 OIG report identified questionable accounting procedures at a large HCL. This HCL made numerous errors in reporting cost report data, such as reporting some non-reimbursable costs as reimbursable and including costs that were incurred outside of the cost reporting timeframe.
In summary, in this proposed rule, we are proposing to reconcile IOPOs' and HCLs' organ acquisition costs for non-renal organs, following the same process we currently use to reconcile kidney acquisition costs, and to require the contractor to establish, adjust, if necessary, and disseminate the non-renal interim rates, using the same process followed for kidney interim rates. We are proposing a 1-year delay to provide time for us to update the IOPO and HCL cost report, and to provide time for IOPOs and HCLs to prepare for increased reporting of non-renal costs and revenue on their MCRs and greater contractor oversight of their non-renal SACs and HCL testing rates, with an effective date for cost reporting periods beginning on or after October 1, 2027. We believe these proposals, if finalized, will protect the Medicare Trust fund, reduce inappropriate spending, increase compliance with our reasonable cost principles, and protect IOPOs and HCLs from certain financial losses while continuing to support the transplant ecosystem.
Medicare is often required, under section 1814(b) of the Act (for services covered under Part A) and under section 1833(a)(2) of the Act (for services covered under Part B), to pay for services furnished by providers on the basis of reasonable costs as defined in section 1861(v) of the Act, or the provider's customary charges for those services, if lower. Medicare reasonable costs are determined based on the provisions of section 1861(v) of the Act, and existing regulations under 42 CFR part 413. Medicare payments to providers of services must be based on the reasonable cost of services covered under Medicare and related to the care of beneficiaries.
Under Medicare's reasonable cost reimbursement principles, Medicare reimburses providers for actual costs incurred for Medicare-related items and services, excluding unnecessary costs, in the efficient delivery of needed health services. The Medicare “reasonable cost” statute at section 1861(v) of the Act allows the Secretary to develop methods for measuring reimbursable costs such that the necessary costs of efficiently delivering covered services to Medicare beneficiaries will not be borne by non-Medicare beneficiaries, and the costs with respect to individuals who are not Medicare beneficiaries will not be borne by Medicare.
Some providers are reimbursed for all or some of their services on a reasonable cost basis such as critical access hospitals (CAHs) reimbursed at 101 percent of their reasonable costs; CAH swing-bed skilled nursing facilities (SNFs) reimbursed at 101 percent of their reasonable costs; rural health clinics (RHCs) reimbursed under the all-inclusive rate up to their payment limit; OPOs and HCLs reimbursed based on their reasonable cost for organ acquisition and tissue typing services; TEFRA hospitals (that is, children's hospitals, cancer hospitals, long term care hospitals classified as extended neoplastic disease care hospitals, and hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) reimbursed for their reasonable costs up to the TEFRA limit.
In general, Medicare makes interim payments to providers through claims processing and additionally, for any pass-through costs such as organ acquisition or nursing and allied health cost, based on estimated costs or predetermined rates. These payments are typically made on a biweekly basis throughout the year, ensuring a steady cash flow to providers until final cost determinations are made. After the cost reporting period ends, providers submit an MCR documenting their actual allowable costs. The contractor reviews the provider's cost report and calculates a settlement by comparing total interim payments made to the provider during the year with the provider's actual allowable reasonable costs as determined from the provider's cost report. It is this process by which Medicare determines a provider's reasonable costs. If interim payments exceed the provider's actual allowable reasonable costs, the provider must pay Medicare for the overpayment. If actual
Section 1102 of the Act authorizes the Secretary to publish rules and regulations necessary for the efficient administration of the functions with which the Secretary is charged under the Act. Section 1871(a) of the Act also authorizes the Secretary to prescribe such regulations as may be necessary to carry out the administration of the Medicare Program. Additionally, under section 1861(v)(1)(A) of the Act, the Secretary has authority to determine reasonable costs of providing patient care to Medicare beneficiaries. In this proposed rule, we clarify existing policy and propose to codify certain longstanding Medicare reasonable cost reimbursement policies as well as to change certain other Medicare reasonable cost reimbursement policies.
In addition to the Medicare “reasonable cost” statute at section 1861(v) of the Act, part 413 of the regulations establishes Medicare's principles of reasonable cost reimbursement. Under 42 CFR 413.1(a)(2), these regulations in part 413 govern Medicare payment for services provided to beneficiaries by the following provider types: hospitals, CAHs, rural emergency hospitals (REHs), skilled nursing facilities (SNFs), home health agencies (HHAs), ESRD facilities, OPOs, and HCLs.
Section 413.1(a)(2)(v) identifies OPOs as a provider type to which part 413 of the regulations apply, making them expressly subject to Medicare's reasonable cost principles, including 42 CFR 413.9 regarding costs related to patient care. We find it necessary to restate this because OPOs have asserted in certain administrative appeals that reasonable cost principles and rules do not apply to them because they do not provide direct patient care. OPOs provide services directly related to patient care by procuring, perfusing, and transporting organs for transplantation into all organ recipients, including Medicare beneficiaries. An OPO must enter into an agreement with CMS, if it seeks payment under Medicare for organ procurement costs. An OPO incurs organ procurement costs for providing THs with organs for transplantation and for which the TH pays the OPO. When a Medicare beneficiary receives an organ transplant, the TH bills Medicare for the transplant and organ acquisition costs. As such, an OPO's organ acquisition costs that are paid by the TH and passed on to Medicare clearly arise under the Medicare statute under section 1861(v) and are governed by the statutory requirements and implementing regulations. As previously stated in section X.D.2. of this proposed rule, Public Law 95-292 required that the amounts of payments to OPOs and HCLs made under title XVIII for procuring organs must not exceed the costs incurred by OPOs and HCLs and must be determined in accordance with section 1861(v) of the Act. Accordingly, OPOs are subject to Medicare's reasonable cost principles, the regulations in part 413, and the reasonable cost payment proposals in this proposed rule.
The Office of Inspector General (OIG) has conducted audits identifying instances in which providers including CAHs, transplant hospitals, and OPOs have claimed unallowable costs on their MCRs.
Medicare's longstanding prudent buyer principles are set forth in the PRM-1, chapter 21, section 2103, issued in 1975. Medicare's prudent buyer principles also coincide with the principles set forth in the regulations at 42 CFR 413.9, Cost related to patient care. Implicit in the policy that payment is determined based on costs that are reasonable is the expectation that the provider will seek to minimize its costs and that its actual costs will not exceed what a prudent and cost-conscious buyer would pay for a given item or service. The prudent and cost-conscious buyer not only refuses to pay more than the going price for an item or service but also seeks to economize by minimizing cost. This is especially so when the buyer is an institution or organization which makes bulk purchases and can, therefore, often gain discounts because of the size of its purchases. In addition, bulk purchase of items or services often gives the buyer leverage in bargaining with suppliers for other items or services. Another way to minimize cost is to obtain free replacements or reduced charges under warranties for medical devices. Any alert and cost-conscious buyer seeks such advantages, and it is expected that Medicare providers of services will also seek them. If costs are determined to exceed the level that prudent buyers incur, the excess costs are not allowable and not reimbursable under Medicare in the absence of clear evidence that the higher costs were unavoidable.
The PRM-1, chapter 21, section 2103 sets forth the following examples of the application of the prudent buyer principle where costs are not reimbursable because the prudent buyer principle has not been applied by the provider:
• Provider A consistently purchases supplies from supplier R and makes no effort to obtain the most advantageous price for its supplies. Supplier W sells identical or equivalent supplies at a lower cost and is also convenient to A. Unless the provider can clearly justify its practice of purchasing supplies from R rather than W, any excess of R's charges over W's charges is excluded from the provider's costs.
• Supplier L supplies drugs to skilled nursing facility B and rents space from B to store the drugs to be used there. The rental paid by L to B for the space would generally constitute an indirect discount on the cost of drugs and must be reflected as a reduction of the cost of drugs supplied.
• Dr. C, a hospital-based radiologist, purchases radiology equipment which he then leases to the provider where he is a staff member. Costs to the provider in this case are higher than if the equipment had been leased through competitive bidding from an outside source. The Medicare contractor reimburses the provider only for those costs which a prudent and cost-conscious buyer would pay. Therefore, those costs which the provider pays for
• Provider B purchases cardiac pacemakers or their components for use in replacing malfunctioning or obsolete equipment, without asking the supplier/manufacturer for full or partial credits or payments available under the terms of the warranty covering the replaced equipment. The credits or payments that could have been obtained must be reflected as a reduction of the cost of the equipment supplied.
Providers may incur costs that are not allowable under Medicare when they fail to apply the prudent buyer principle. Other examples where the prudent buyer principle has not been applied by the provider include, but are not limited to, fees paid to consultants, attorneys, or other professionals that are excessive compared to market rates or for services not directly related to patient care; equipment purchases that are more expensive or sophisticated than necessary for the provider's patient population; and costs for items that are not necessary for patient care or that represent luxury items may be disallowed.
The application of the prudent buyer principle is set forth in PRM 15-1, chapter 21, section 2103 and includes the following examples of methods that contractors
We believe the use of IRS Form 990 is appropriate to compare compensation because the information provided is widely recognized in the industry, standardized and publicly available. Additionally, we believe the use of Federal per diem rates are an appropriate method of comparison because they reflect industry norms and are established based on extensive data collection and analysis, account for geographic variations and are transparent. We also note these methods align with Medicare's reasonable cost regulation under 42 CFR 413.9(c) which provides that actual costs may vary among providers, however, costs must not be substantially out of line with similar institutions in the same area and of comparable size, scope, utilization and other relevant factors. Amounts not related to patient care, or flowing from the provision of luxury items or services are not reimbursable under the program and are not allowable costs.
The PRM-1, chapter 21, section 2103 also provides where a group of institutions has a joint purchasing arrangement which seems to result in participating members getting lower prices because of the advantages gained from bulk purchasing, any potentially eligible providers in the area which do not participate in the group may be called upon to justify any higher prices paid. Also, the manual provides that when most of the costs of a service are reimbursed by Medicare (for example, for a home health agency which treats only Medicare beneficiaries), examine the costs with particular care. In those cases where a contractor notes that a provider pays more than the going price for a supply or service or does not try to realize savings available under warranties for medical devices or other items, in the absence of clear justification for the premium, the contractor excludes excess costs in determining allowable costs under Medicare.
In this proposed rule, we are proposing to codify a definition of the prudent buyer in accordance with the principle set forth in PRM-1, section 2103 and that reflects similar terminology used across financial, legal, and insurance fields as well as propose to codify the application of the prudent buyer principle currently set forth in PRM-1, section 2103. Specifically, in this proposed rule, we are proposing to revise § 413.9(b) to add paragraph (b)(3) to specify that the prudent buyer is a person, provider type or entity that purchases items or property with caution, good judgment, and a sensible approach, aiming to make a sound, informed decision that minimizes risk and avoids unnecessary financial loss. This person, provider type or entity thoughtfully evaluates the condition, legal, and financial aspects of a purchase, much like a reasonably prudent person would in a similar situation.
In this proposed rule, we are also proposing to revise § 413.9(c) to add paragraph (c)(4) to codify the application of the prudent buyer principle to providers to specify that providers are expected to economize by not paying more than the going price for an item or service and seeking to minimize their costs, so that their actual costs will not exceed what a prudent and cost-conscious buyer would pay for a given item or service. If costs are determined to exceed the level that prudent buyers incur, the excess costs are not reimbursable in the absence of clear evidence that the higher costs were unavoidable.
Under section 1861(v)(8) of the Act, costs for entertainment, including tickets to sporting and other entertainment events, must not be included in a provider's costs for Medicare reimbursement purposes because they are not reasonable costs related to patient care. The PRM-1, chapter 21, section 2105.8 sets forth that “Costs incurred by providers for entertainment, including tickets to sporting or other events, alcoholic beverages, golf outings, ski trips, cruises, professional musicians or other entertainers, are not allowable.” Additionally, PRM-1, chapter 21, section 2102.3 provides that, “Costs not related to patient care are costs which are not appropriate or necessary and proper in developing and maintaining the operation of patient care facilities and activities. Costs which are not necessary include costs which usually are not common or accepted occurrences in the field of the provider's activity. Such costs are not allowable in computing reimbursable costs and include, for example: cost of meals sold to visitors; cost of drugs sold to other than patients; cost of operation of a gift shop; cost of alcoholic beverages furnished to employees or to others regardless of how or where furnished, such as cost of alcoholic beverages furnished at a provider picnic or furnished as a fringe benefit; cost of gifts or donations; cost of entertainment, including tickets to sporting and other entertainment events; cost of personal use of motor vehicles; cost of fines or penalties resulting from violations of Federal, State, or local laws; cost of educational expenses for spouses or other dependents of providers of services, their employees or contractors, if they are not active employees of the
Despite this instruction, some providers continue to include inappropriate expenses for entertainment and sporting activities on their MCRs and CMS's disallowance of these costs often results in appeals. For example, some OPOs are reporting costs on their OPO/HCL MCR, Form CMS-216-94, (OMB control number 0938-0102), (hereinafter referred to as OPO/HCL MCR), for items such as the sponsorship of professional sports teams, sponsorship of race car drivers at nationally viewed racing events, sponsorship of floats at nationally viewed parades, and costs for musical entertainment and performers at these events. Some of these sponsorships have included items such as, full season tickets to professional basketball games, autographed items, tickets to racing events, entrance to hospitality suites, sponsorship of Indy Car teams and dirt track race cars, rides in an Indy Car, pit lane and garage tours and driver appearances at off-track events. These types of costs are not reasonable costs related to patient care and therefore, are unallowable under Medicare's reasonable cost principles.
Under section 371(b)(3)(B) of the PHSA, OPOs are responsible to “conduct and participate in systematic efforts, including professional education, to acquire all useable organs from potential donors,” and “assist hospitals in establishing and implementing protocols for making routine inquiries about organ donations by potential donors.” We have recognized the importance of OPOs implementing public education activities to increase organ donation awareness and increase the donor registration. (In the context of OPOs' public education activities, we note that the terms public education, public outreach, or public awareness have the same meaning and may be used interchangeably.) We have historically afforded OPOs the flexibility to allocate educational resources based on their individual donation service area (DSA) needs.
Some OPOs have asserted that their engagement in entertainment and sporting events, such as sponsoring parade floats, purchasing tickets to sporting events, engaging or purchasing tickets for musical entertainers and performers, lodging, food and beverages, and sponsoring professional race car driving events, are types of public education costs that serve to reach large audiences to educate potential donors regarding the benefits of organ donation, and thus recruit candidates for organ donor registries. OPOs' sponsorship costs for these entertainment and sporting events, declared by OPOs to be public education events, vary depending upon the event type and additional items the OPO can select for the sponsorship level that may increase the cost to the OPO.
One report indicated that costs to build a float in the Rose Bowl Parade may be in the vicinity of $125,000 to $500,000 per parade event.
We are aware of several OPOs conducting successful, cost-effective public education events within their DSAs while observing Medicare's reasonable cost principles and fulfilling their objectives of increasing donor registrations. These public education events have successfully increased the number of registered donors and effectively reached underrepresented groups within their DSA. For example, some OPOs have engaged with local high schools and colleges, Health Occupational Student Associations, and participated in local multicultural outreach events and set up booths at minor league baseball games and events within their communities and demonstrated successful organ donor registration at these engagements.
We believe for OPOs' public education costs to be allowable under Medicare, the costs incurred must be for direct engagement in public outreach and education events for efforts that are more direct and systematic to target populations within their DSAs and where one-on-one activity and conversations can take place to educate and register individuals for organ
We believe that allowable costs under Medicare for OPO public education initiatives include costs that directly support organ donation and align with Medicare's reasonable cost principles. Examples would include OPOs' participation and engagement in settings that can facilitate direct conversations with individuals regarding organ donation such as, setting up booths at local farmer's markets, health fairs, high school or local college sporting events, partnering with community organizations, faith-based groups, schools and health care facilities, participating in local multicultural festivals, providing education at driver's education programs and at local Department of Motor Vehicles (DMV) and Department of Natural Resources so that individuals can register to become an organ donor while obtaining a driver's license or fishing license.
The 2025 National Survey of Organ Donation Attitudes and Practices: Report of Findings
We do not believe that OPOs should incur costs and seek reimbursement from Medicare for engaging in national organ donor awareness campaigns. Health Resources and Services Administration (HRSA) is authorized, on behalf of the Secretary of Health and Human Services, to develop a public awareness program that partners with existing national campaigns to inform the public about organ donation.
We are committed to carefully and responsibly stewarding the tax dollars in the Medicare Trust Fund, and do not believe that providers should be claiming unreasonable, non-allowable, or non-reimbursable costs for reimbursement under Medicare on the Medicare cost report. Therefore, in this proposed rule, we are proposing to codify existing policy set forth in PRM-1, chapter 21, sections 2102.3 and 2105.8, while also providing greater specificity regarding unallowable entertainment costs for providers, including to specify that such unallowable costs include sponsorship of sporting events, teams or athletes, including race car drivers or motorsports activities, retreats held at spas or luxury resorts, spa services or treatments, and recreational excursions. In this proposed rule, we are also proposing to codify the current policy set forth in the OPO/HCL MCR;
Specifically, we are proposing to add § 413.5(c)(10) to specify that costs incurred by providers for entertainment, including costs associated with entertainment activities, or that are entertainment in nature, are not allowable costs. We are proposing to add § 413.5(c)(10)(i) to specify that—(1) paragraph (c)(10) includes costs that OPOs incur to engage in public education to increase awareness of organ donation and increase donor registration; and (2) non-allowable entertainment costs include, but are not limited to the following:
• Tickets, admission fees, or entry to sporting or other events, including national or professional sporting events.
• Sponsorship of sporting events, teams or athletes, including race car drivers or motorsports activities.
• Sponsorship of floats in national parades.
• Concert, theater, or performing arts events, professional musicians or other entertainers.
• Wine tours or alcoholic beverages.
• Retreats held at spas or luxury resorts, spa services or treatments.
• Golf outings, ski trips, cruises and similar recreational excursions.
In this proposed rule, we are also proposing to add § 413.5(c)(11) to specify that costs incurred by OPOs to engage in public education within its donation service area to increase awareness of organ donation and increase donor registration are allowable if they are reasonable and do not violate § 413.5(c)(10). We are also proposing to amend § 413.402(a) and (d)(2)(v) to cross-reference the policy set forth in § 413.5(c)(11) regarding OPOs' public education costs. Additionally, in this proposed rule, we are proposing to
The PRM-1, chapter 21, section 2105.8 sets forth that “Costs incurred by providers for entertainment, including tickets to sporting or other events, alcoholic beverages, golf outings, ski trips, cruises, professional musicians or other entertainers, are not allowable.” We continue to believe that these costs are appropriately excluded from allowable costs. However, PRM-1, chapter 21, section 2105.8 also states that “Costs incurred by providers for purposes of employee morale, specifically, for an annual employee picnic, an annual Christmas or holiday party, an annual employee award ceremony or for sponsorship of employee athletic programs (for example, bowling, softball, basketball teams, etc.), are allowable to the extent that they are reasonable.” After further consideration, we believe that costs incurred by providers for events for their employees and non-employees such as employee picnics, parties, award ceremonies or for the sponsorship of employee athletic programs should not be allowable costs under Medicare, as they are not costs a provider incurs to provide patient care. While we understand the significance of employee events provided by providers for their employees' morale, we believe that costs associated with employee and non-employee entertainment do not coincide with Medicare's reasonable cost principles and are not costs related to patient care as required under 42 CFR 413.9.
There are many cost-effective methods for improving employee morale that do not require entertainment expenses. Flexible work schedules, wellness programs, recognition for achievements, and creating a positive workplace culture are just a few examples of ways to support employees without impacting healthcare resources. (These items are separate from a provider's cost of fringe benefits provided to employees under the PRM-1, chapter 21, section 2144.4 that may be recognized as a provider's costs for Medicare reimbursement purposes. Employee fringe benefits that are part of a formal written policy and considered reasonable compensation (for example, health insurance, retirement plans) are generally allowable costs under Medicare.)
Therefore, in this proposed rule we are proposing to change the current policy provided in PRM-1, chapter 21, section 2105.8 to disallow costs incurred by providers for employees or non-employees or anyone for entertainment expenses for employee entertainment activities and employee morale, including but not limited to those set forth in PRM-1, chapter 21, section 2105.8, because they are not related to providing patient care. Specifically, we are proposing to add 42 CFR 413.5(c)(12) to specify that costs incurred by providers for anyone for purposes of employee and non-employee entertainment activities and employee morale, which include, but are not limited to, picnics, parties, performers, entertainment, award ceremonies, or the sponsorship of scholarships or athletic programs are not allowable costs.
The PRM-1, chapter 21, section 2105.8 sets forth that costs incurred by providers for alcoholic beverages are not allowable. Additionally, PRM-1, chapter 21, section 2102.3 sets forth that a provider's “cost of alcoholic beverages furnished to employees or to others regardless of how or where furnished, such as cost of alcoholic beverages furnished at a provider picnic or furnished as a fringe benefit, are not allowable in computing reimbursable costs.” OIG audits have found, and we have seen instances where some providers have included costs for furnishing alcohol in their MCRs, despite these prohibitions outlined in the PRM-1.
Regarding allowable professional education costs for OPOs, under section 371(b)(3)(B) of the PHSA, OPOs are responsible to “conduct and participate in systematic efforts, including professional education, to acquire all useable organs from potential donors,” and “assist hospitals in establishing and implementing protocols for making routine inquiries about organ donations by potential donors.” Medicare has recognized the costs incurred by OPOs' for providing professional education for increasing organ donation awareness and acquiring organs for transplantation as allowable costs, if such costs are reasonable, necessary and related to patient care. OPOs include professional education costs as OPO overhead costs on the OPO/HCL MCR, and Medicare shares in these costs. The current guidance regarding allowable professional education costs is set forth in the OPO/HCL MCR and includes, “costs associated with the education of donor hospital personnel and physicians, including the expenses of meetings, seminars, slide shows, and presentations.”
In 2023, the OIG reviewed OPOs' expenses and found that Medicare paid for costs incurred for professional and public education activities that did not meet Medicare requirements.
In response to comment in the FY 2022 IPPS/LTCH PPS final rule with comment period, we stated that costs of
In this proposed rule, we are proposing to add new paragraph (c)(14)(i) to specify that the costs incurred by OPOs for professional education such as meetings, seminars, and presentations on organ donation to acquire all useable organs from potential donors, where continuing education credits are not given and where the attendee is clinical staff such as OPO staff, donor hospital staff, and physicians, are allowable costs.
Additionally, in response to a comment in the FY 2022 IPPS Final Rule with comment period, (86 FR 73476), we stated, the reasonable cost of an OPO-sponsored seminar that provides continuing education credits, may be an allowable administrative and general cost limited to the OPO staff (as described at § 486.326(b)) if the seminar is related to patient care and meets the requirements at § 413.9. In this proposed rule, we are proposing to codify the existing policy regarding allowable costs of OPO-sponsored seminars where continuing education credits are given to the OPO staff. Specifically, we are proposing to add new paragraph (c)(14)(ii) to specify, the costs for OPO-sponsored seminars where continuing education credits are given and where the attendee is on the OPO staff are allowable costs to the extent that they are patient care related, reasonable and necessary and we are also proposing to add new paragraph (c)(14)(iii) in accordance with existing requirements under § 413.402(d)(2)(v) that costs incurred by OPOs for OPO-sponsored seminars where continuing education credits are given and where the attendee is not on the OPO staff are not allowable costs. Lastly, we are proposing to amend sections 413.402(a) and (d)(2)(v) to cross-reference the policy set forth in § 413.5(c)(14)(iii) regarding OPOs professional education costs.
The PRM-1, chapter 21 sets forth that the costs of staff training and education are allowable, provided they are reasonable and related to patient care. Specifically, the PRM-1, chapter 21 section 2128 states that orientation and on-the-job training costs are recognized as normal operating expenses and are therefore allowable. Such training is typically conducted within the provider's own setting; however, if outside instruction is required, those costs are also considered allowable. Additionally, the PRM-1, chapter 21, section 2144.6 provides that the cost of items provided to the employee for the convenience of the provider, such as the cost of provider-paid educational courses, uniforms, and operating day care centers for the children of employees are not classified as fringe benefits and may be included in a provider's allowable cost to the extent they are reasonable and related to patient care. The PRM-1, chapter 21, section 2162.7 D. also specifies that providers are required to maintain continuous safety initiatives and professional and employee training programs aimed at reducing the severity of incidents related to malpractice, comprehensive general liability, and workers' compensation incidents.
Regarding travel costs, the PRM-1, chapter 21, section 2105.6 sets forth that costs incurred by providers in conjunction with employee travel are generally allowable to the extent that they are patient care related and reasonable. However, travel costs incurred in conjunction with non-patient care related employee travel are not allowable. Foreign travel costs are allowable only where the provider can clearly substantiate the reasonableness and patient care relatedness of the travel costs to the satisfaction of the Medicare contractor.
When providers incur costs for their employees or staff to travel to professional education activities, these costs must be for activities related to patient care, reasonable and necessary in accordance with Medicare's reasonable cost principles. In this proposed rule, we are clarifying that overnight travel costs incurred by a provider on behalf of its employees or staff for activities related to patient care to attend a professional education course, meeting, or similar event should be considered allowable when the event is located more than 50 miles away from the employee's workplace and requires more than 8 hours of attendance. We believe this clarification reflects standard business practices. An 8-hour workday is widely recognized across industries, and many federal agencies define local travel as occurring within a 50-mile radius of an employee's official worksite.
Additionally, section 1861(v)(8)(iii) of the Act and PRM-1, chapter 21, section 2105.9 also provides that the costs incurred by providers related to employee personal use of provider vehicles are not allowable costs. In one OIG audit, the OIG found that a provider reported costs for chartered buses, shuttles, and limousines for Rose Bowl float judging and parade day on its Medicare cost report that were unallowable because they were entertainment focused and not related to patient care.
Under section 1861(v)(8)(v) of the Act, education expenses for spouses or other dependents of providers of services, their employees or contractors are unrelated to patient care and not allowable. We note a 1998 PRRB decision permitted the provider's cost of an educational seminar that took place on a cruise ship as an allowable educational activity,
We agree that the costs of a cruise, regardless of whether continuing education credits are provided, are not common and accepted occurrences in the field of the provider's activity, are not reasonable and necessary and are not patient care related. We believe that entertainment, travel and vacation type of expenses, are not related to patient care and are not appropriate or allowable as professional educational expenses. Such expenses are not necessary or proper in developing and maintaining the operation of patient care facilities and activities.
In this proposed rule, we are proposing to codify the existing policy in PRM-1, chapter 21, sections 2105.6, 2105.9, 2128, 2144.6, and 2162.7 D. with certain modifications to provide greater specificity regarding education and travel costs. Specifically, in this proposed rule we are proposing to add new 42 CFR 413.5(c)(15) to specify that costs incurred by providers:
• For employee travel are generally allowable to the extent that they are patient care related, reasonable and necessary. Costs for travel not related to patient care are not allowable costs.
• To conduct, or send its employees or staff to, patient care related professional education refresher programs, seminars and workshops that increase the quality of patient care or operating efficiency of the provider, are generally allowable costs to the extent that they are patient care related, reasonable and necessary.
• For entertainment and vacation travel expenses such as travel on cruises or to resorts or spas, or transportation to entertainment or sporting events, are not allowable costs regardless of whether they are or are not incurred in connection with professional educational seminars or continuing education.
• Related to the personal use of provider vehicles are not allowable costs.
Medicare's longstanding manual provisions regarding the allowability of a provider's costs for meals for its employees/personnel and meals provided to those other than the personnel of the provider are provided in PRM-1, chapter 21, sections 2105.2, 2105.5, and 2145, and meals sold to visitors are provided in section 2102.3. These policies were established decades ago and we believe they require updating to ensure costs are reasonable and necessary and are incurred for patient care activities, in accordance with Medicare's reasonable cost principles.
Section 2105.2 of PRM-1, chapter 21 states that the cost of meals for other than provider personnel is unallowable because it is not related to patient care. We have seen some OPOs assert in reimbursement appeals that meals provided to hospital staff during organ donation and management meetings constituted professional education overhead costs related to patient care and were therefore allowable. In 2023, the OIG reviewed certain OPOs' overhead costs and found some costs for meals were attributable to non-OPO employees. In its review, the OIG sampled 20 professional and public education overhead costs (reported by eight OPOs), totaling $4,637, and found instances where meals were provided to non-OPO employees, with Medicare payments of $1,797.
Additionally, in response to comment in the FY 2022 IPPS/LTCH final rule with comment period (86 FR 73416), we said that meals (excluding alcohol) provided to attendees of OPO-sponsored seminars (without continuing education credits) could be allowable administrative and general costs, provided the seminar related to patient care and met requirements under § 413.9 (86 FR 73476). However, upon further review, we believe the cost of meals at OPO-sponsored seminars is a benefit to the seminar attendees, rather than a direct cost necessary for patient care. In this proposed rule, we are proposing to change our previous position to better align with Medicare's reasonable cost principles, 42 CFR 413.9 and section 2105.2 of PRM-1, which provides that the costs for meals provided to non-employees of the provider are unallowable costs.
In a PRRB decision, the Board allowed a portion of costs incurred by a provider for refreshments at a community health education event,
PRM-1, chapter 21, section 2105.5 provides that excess costs for executive or management employee meals—such as separate dining facilities, additional staff, or upgraded menus—are not allowable. However, PRM-1, chapter 21, section 2105.5 sets forth that unrecovered costs for executive or management meals served from common menus in shared employee dining facilities are allowable if otherwise reasonable. Under PRM-1, chapter 21, section 2145, providers may claim reasonable unrecovered costs for employee meals in two circumstances when meals: (1) qualify as a fringe benefit (see PRM-1, chapter 21, section 2144.4E) related to patient care; and (2) are provided solely for the provider's benefit and related to patient care, as outlined in PRM-1, chapter 21, section 2102.2. For example, this includes meals served to personnel who must
We believe the existing manual provisions under PRM-1, chapter 21, sections 2105.2, 2105.5 and 2145 should be revised to better align with Medicare's reasonable cost principles, including § 413.9. As noted, we believe that meals provided to employees or staff of the provider would generally be considered a personal benefit to staff rather than a direct cost necessary for patient care under Medicare and therefore should not be considered allowable costs. For the foregoing reasons, in this proposed rule, we are proposing to codify certain longstanding policy in PRM-1, chapter 21, section 2102.3 and revise the existing policy in sections PRM-1, chapter 21, sections 2105.2, 2105.5, and 2145.
Specifically, we are proposing to add § 413.5(c)(16) to specify that costs incurred by providers for meals sold to visitors and meals for their employees or staff (including executives and management) and non-personnel (including attending physicians) are not allowable costs. We are also proposing to specify that the costs of meals and refreshments provided to attendees at educational events, including attendees of OPO-sponsored seminars (with or without continuing education credits) are not allowable costs.
Medicare's reasonable cost reimbursement principles require correct allocation of such costs to arrive at equitable and proper payment for services to Medicare beneficiaries. Medicare regulations at 42 CFR 413.24 require that providers receiving payment on the basis of reimbursable cost provide adequate cost data based on their financial and statistical records which must be capable of verification by qualified auditors, and the cost data must be based on an approved method of cost finding.
Medicare's reasonable cost principles take into account both direct and indirect costs of providers of services. Direct costs are costs that are specifically identifiable and attributable to an individual patient, a particular cost center, or a department.
Departments within a provider are usually divided into two types: (1) those that produce patient care revenue (for example, routine services and radiology); and (2) those that do not directly generate patient care revenue but are utilized as a service by other departments (for example, administration, laundry and linen, housekeeping and dietary).
The Step-Down method of cost finding used by providers for cost reporting periods after December 31, 1971, recognizes that services rendered by certain nonrevenue-producing departments or centers are utilized by certain other nonrevenue-producing centers, as well as by the revenue-producing centers.
The Medicare cost report's (MCR's) recommended statistical bases include square footage for facility costs, gross salaries for employee benefits, accumulated costs for administrative and general (A&G) costs, meals served for dietary, and other bases that distribute costs in proportion to the relative benefits received, or resources consumed, by each cost center.
Including a statistical cost that does not have a beneficial relationship to A&G expenses being allocated causes an improper distribution of overhead. Section 413.24(b)(1) explains that cost finding is the process of recasting the data derived from the accounts ordinarily kept by a provider to ascertain costs of the various types of services furnished. It is the determination of these costs by the allocation of direct costs and proration of indirect costs. Section 413.24(c) sets forth that adequate cost information must be obtained from the provider's records to support payments made for services furnished to beneficiaries, and that the provider's cost information must be accurate and in sufficient detail to accomplish the purposes for which it is intended. Additionally, § 413.24(d)(6) provides specific requirements for certain purchased services and how including these costs in the accumulated cost statistic when the costs do not relate to services or resource provided by the A&G department may cause an improper distribution of overhead and could result in improper Medicare payment.
Upon review of cost report data of various provider types, we have found that providers are not utilizing the Medicare cost report instructions regarding cost allocation,
When a provider purchases services or supplies and the amount of direct costs reported and paid to external entities includes the entities' overhead and profit, including these costs in the accumulated cost statistic overinflates the allocation and results in improper Medicare payment to the provider. In accordance with the MCR instructions,
Similar issues with overhead allocations may exist for CAHs and some CAHs have requested that CMS clarify the cost allocation rules with more explicit cost reporting instructions. Because CAHs are reimbursed by Medicare at 101 percent of their reasonable costs, they may face undesirable financial consequences if their overhead A&G costs are improperly allocated on their cost reports. This can occur when CAHs improperly allocate their costs to all cost centers or departments of the CAH based on the accumulated cost statistic without any causal or beneficial relationship. A CAH's costs can be shifted if they improperly allocate their costs without a causal relationship, such as to areas that do not benefit or are not serviced by overhead cost centers. This can impact the CAH's reimbursement if an improper allocation of A&G costs reduces the calculation of the CAH's operational costs and overall reimbursement.
We believe that the proper allocation of indirect costs by all providers is important in facilitating appropriate Medicare payment. Inflated administrative and general costs may inaccurately increase provider payment rates resulting in increased Medicare spending.
As an example, for hospitals, there are longstanding MCR instructions in PRM-2, chapter 40, section 4020 when providers use accumulated costs as a statistic for allocation. These longstanding instructions provide two methods that a provider can use to allocate its costs when adjustments are necessary. In this regard, a provider can use either method or both methods.
The first method to adjust the allocation statistic uses a negative adjustment of either (a) a negative one (-1) in the accumulated cost column to identify the cost center which should be excluded from receiving any allocation of A&G costs; or (b) if some of the costs from that cost center are to receive A&G costs, by removing in the reconciliation column the amount of accumulated costs that are not to receive A&G costs to assure that only those costs to receive overhead receive the proper allocation. We refer to this method as the Negative Adjustment Method in this section. When direct costs are reported in a cost center or department that includes purchased services or supplies, costs other than the purchased service costs may receive an allocation of A&G costs, and the purchased service costs that are not to receive A&G must be identified and removed from the allocation statistic using the reconciliation column on Worksheet B-1. Including a statistical cost which does not relate to the allocation of A&G expenses causes an improper distribution of overhead.
If there are some costs in A&G that may have a causal relationship to the purchased service cost, a second method to correct improper allocation of overhead is set forth in the MCR instructions and PRM-1, chapter 23, section 2307.B., “
For providers that desire to change their cost finding methods, PRM-1, chapter 23, section 2312 instructs providers to request this change from their Medicare contractor. This request must be submitted in writing to their contractor 90 days prior to the end of the cost reporting period to which the request for change applies. Under section 2312, the contractor's determination of a provider's request to change methods will be furnished to the provider in writing and will be considered binding on the provider as of the date of the contractor's written notice. Additionally, under section 2312, where the contractor approves the provider's request to change methods, the provider must use this method for the cost reporting period to which the request applies and for all subsequent cost reporting periods, unless the contractor approves a subsequent request by the provider to change its cost finding methods.
In this proposed rule, we are proposing to codify these overhead cost allocation requirements that are set forth generally in existing cost reporting instructions, to ensure that providers' costs of providing services to Medicare beneficiaries are correctly calculated. We believe this will provide additional clarity to providers so that they will correctly allocate overhead costs by ensuring that cost statistics are not used to disproportionately allocate costs resulting in inappropriate maximizing or minimizing reimbursement to providers.
Specifically, in this proposed rule we are proposing to add 413.24(d)(8) to specify that providers must not include a statistical cost which does not relate to the allocation of A&G expenses when it causes an improper distribution of overhead. For example, when a hospital performs organ transplants, it may purchase organs (kidneys, hearts, livers) from outside sources such as OPOs. These purchased organs carry a very high dollar value but have no causal relationship to administrative overhead compared to other hospital services, and these purchased organs include all the OPOs overhead in their cost. During the step-down cost allocation process on the Medicare Cost Report, when purchased organ costs are included in the accumulated cost statistic used to allocate Administrative & General (A&G) costs the allocation disproportionately allocates cost as seen in this Table X.D.-01.
When the purchased organ costs are removed from the accumulated cost statistic (as CMS guidelines instruct), the remaining base is $8,000,000 and the accumulated cost statistic properly reflects the allocation of A&G costs as shown in this Table X.D.-02.
We are also proposing to add 413.24(d)(8)(i) to specify that providers must employ either a Negative Adjustment Method, or a Fragmenting (Componentizing) A&G Method, or both, to adjust the allocation statistic as it relates to accumulated costs to prevent an improper allocation of overhead on the MCR.
We are proposing to add 413.24(d)(8)(ii) to set forth the Negative Adjustment Method for accumulated costs to specify that when direct costs are reported in a cost center or department that includes purchased services or supplies, costs other than the purchased service costs may receive an allocation of A&G costs, and the purchased service costs that are not to receive A&G must be identified and removed. We are also proposing to add
We are also proposing to add 413.24(d)(8)(ii)(B) to instruct providers that cost centers that are not to receive an allocation must not have entries in both the reconciliation and accumulated cost columns when the accumulated cost statistic is offset to zero. We are also proposing to add 413.24(d)(8)(ii)(C) to instruct providers that, for those cost centers that are to receive partial allocation of costs for costs other than purchased services, the cost to be excluded from the statistic must be reported as a negative amount on the appropriate line in the reconciliation column. This will result in entries in both the reconciliation column and accumulated cost column simultaneously on the same line where a partial accumulated cost statistic is offset.
In this proposed rule, we are proposing to add 413.24(d)(8)(iii) to set forth the Fragmenting (Componentizing) A&G Method, to specify that when a provider chooses to fragment, or componentize A&G costs, the provider must fragment (that is, subscript), the A&G cost center into two or more cost centers using accurate statistics to allocate its costs and ensure that overhead costs are accurately assigned to departments benefiting from the services provided. When creating multiple A&G cost centers, a provider must track and allocate overhead expenses based on actual resource consumption.
In this proposed rule, we are also proposing to add 413.24(d)(8)(iv) to specify procedures for a provider to request to change its cost finding method. We are proposing to add 413.24(d)(8)(iv)(A) to specify that a provider that wishes to change its cost finding method must submit a request to its contractor, in writing, 90 days prior to the end of the cost reporting period to which the provider's request for change applies. We are also proposing to add 413.24(d)(8)(iv)(B) to specify that the contractor's determination of a provider's request to change methods will be furnished to the provider in writing and will be binding on the provider as of the date of the contractor's written notice. Finally, we are proposing to add 413.24(d)(8)(iv)(C) to specify that when the contractor approves the provider's request to change methods, the provider must use this method for the cost reporting period to which the request applies and for all subsequent cost reporting periods, unless the contractor approves a subsequent request by the provider to change its cost finding methods.
Upon receipt of a provider's cost report, the Medicare contractor reviews or audits the cost report, makes any necessary adjustments to the provider's Medicare reimbursement for the cost reporting period, and finally determines the total amount of reimbursement due the provider. This year-end reconciliation of Medicare payment for the provider's cost reporting period constitutes a contractor determination, as defined in 405.1801(a). Under 42 CFR 405.1801(a)(1) and (2), and 405.1803, the contractor must give the provider written notice of the contractor determination for the cost period in a notice of the total amount of program reimbursement (NPR). The NPR is an appealable determination, subject to the jurisdictional and other requirements of the statute and regulations.
Currently, the regulations at 413.420(g) provide that an Independent Organ Procurement Organization (IOPO) or a Histocompatibility Laboratory (HCL) that is dissatisfied with a Medicare contractor's cost report determination may request a hearing before a contractor hearing officer if the amount in controversy is $1,000 or more, in accordance with the procedures and requirements set forth in 42 CFR 405.1811 through 405.1833. Once the contractor hearing officer decision is issued, an IOPO, HCL is entitled to obtain review by a CMS reviewing official (
On May 2, 2023, the CMS Administrator issued Standing Order 2023-1, to allow IOPOs and HCLs to request that the Administrator review a CMS reviewing official decision and to confirm that the Administrator can review a CMS reviewing official decision on his or her own motion. We propose these regulatory changes to confirm, clarify, and explicitly provide that the Administrator has discretionary authority to review CMS reviewing official decisions and contractor hearing officer decisions for reimbursement appeals for IOPOs and HCLs. We are doing so for several reasons. Among other things, we are proposing these changes to provide consistency with other Agency administrative review processes, provide clearer notice of this aspect of the administrative review procedures applicable to IOPOs and HCLs, ensure that interested parties can comment, improve the quality of agency decision making, so that the agency may ultimately have clear and publicly available regulations regarding administrative review for IOPOs and HCLs on the books. These proposals are in many respects similar to the CMS proposal to codify the process by which the Administrator may exercise discretionary review when CMS de-certifies an OPO or otherwise takes action that would be subject to appeal under 42 CFR 486.314.
In this proposed rule, we are proposing to make changes to various regulatory provisions to confirm, clarify, and explicitly provide that a party to a CMS reviewing official decision may request that the Administrator review a CMS reviewing official decision, and that the Administrator may review a CMS reviewing official decision on his or her own motion, consistent with the
Specifically, in this proposed rule we are proposing to revise 405.1801(a) so that it states that Administrator review means review provided for in section 1878(f) of the Act (42 U.S.C. 1395oo(f)) and 42 CFR 405.1875 and 405.1834. This proposed change reflects the changes that would be made to 405.1834 if this proposed rule is finalized.
In this proposed rule, we are also proposing to revise 405.1803(d)(1)(ii) so that it reflects the fact that a final agency decision by the Administrator is not just “as described in § 405.1875(e)(4),” but also is as described in 405.1834. This proposed change reflects the changes that would be made to 405.1834 if this proposed rule is finalized.
With respect to the required amount in controversy for the right to a contractor hearing for IOPOs and HCLs, in this proposed rule, we are proposing to revise § 405.1811(a)(2) and § 405.1811(c)(3) to specify that IOPOs and HCLs are subject to an amount in controversy as set forth in 42 CFR 413.420(g), which is $1,000 or more.
In this proposed rule, we are also proposing to revise 42 CFR 405.1813(e)(1) and adding new (e)(1)(i), (e)(1)(ii), and (e)(1)(iii) to reflect that a contractor hearing decision denying an extension request under this section and dismissing the appeal is final and binding on the provider, unless the dismissal decision is reviewed by a CMS reviewing official in accordance with 405.1834(b)(2)(i), or the Administrator, or is reopened and revised by the contractor hearing officer(s) in accordance with 405.1885 through 405.1889. We are also proposing to revise 405.1813(e)(2) to specify that the contractor hearing officer(s) promptly sends the decision to the appropriate component of CMS (currently the Center for Medicare). We are also proposing to add new 405.1813(e)(3), (e)(3)(i), and (e)(3)(ii) to reflect that a contractor hearing officer's decision granting an extension request is not subject to immediate review by a CMS reviewing official (as described in 405.1834(b)(3)), and any decision granting an extension request may be examined during the course of a CMS reviewing official's review of a final jurisdictional dismissal decision or a final hearing decision by the contractor hearing officer(s) (as described in 405.1834(b)(2)(i) and (ii)) or during the Administrator's review of a CMS reviewing official decision.
In this proposed rule, we are also proposing to revise 405.1814(a)(5) to reflect that final jurisdictional findings and jurisdictional dismissal decisions by the contractor hearing officer(s) are subject to the CMS reviewing official procedure in accordance with 405.1814(d) and 405.1834(b)(2)(i), and (ii), as well as the possibility of review by the Administrator. We are also proposing to revise 405.1814(c)(3) by adding paragraphs (i), (ii) and (iii) to reflect that a jurisdictional dismissal decision by the contractor hearing officer under 405.1814(c)(2) is final and binding on the parties, unless the decision is reviewed by a CMS reviewing official in accordance with 405.1834, or is subsequently reviewed by the Administrator in accordance with 405.1834, or is reopened and revised by the contractor hearing officer in accordance with 405.1885 through 405.1889.
In this proposed rule we are also proposing to revise the title of 405.1814(d) so that it would refer to jurisdictional decisions and include the possibility of Administrator review. We are proposing to revise 405.1814(d) so that it states that any finding by the contractor hearing officer as to whether he or she has jurisdiction to grant a hearing on a specific matter at issue in an appeal is not subject to further administrative review, except as provided in 405.1814(d). The revised subsection will also explain that a contractor hearing officer's jurisdictional findings as to specific matters at issue in an appeal may be reviewed solely during the course of the CMS reviewing official review of one of the contractor hearing officer decisions specified in 405.1834(b)(2), or during the course of the Administrator's review of a CMS reviewing official decision.
Regarding the reviewability of a contractor hearing officer's discovery or disclosure rulings, in this proposed rule we are also proposing to revise 405.1821(d)(2) to specify that to the extent a ruling authorizes discovery or disclosure of a matter for which an objection based on privilege or other protection from disclosure such as case preparation, confidentiality, or undue burden, was made before the contractor hearing officer(s), that portion of the discovery or disclosure ruling may immediately be reviewed by a CMS reviewing official or the Administrator in accordance with 405.1834. We are also proposing to revise 405.1821(d)(2)(i) to remove the phrase “the Administrator through” so it reflects that upon notice to the contractor hearing officer that the provider intends to seek immediate review of a ruling, or that the contractor or other affected nonparty intends to suggest that the CMS reviewing official or the Administrator, take own motion review of the ruling, the contractor hearing officer stays all proceedings affected by the ruling. To conform with this proposal, we are also proposing to revise the introductory text of 405.1821(d)(2)(iii) to delete the words “Administrator through the,” so that the first line states “If the CMS reviewing official or the Administrator . . .”
Regarding the effect of a contractor hearing officer's decision, in this proposed rule we are also proposing to amend 405.1833 by adding paragraphs (a), (a)(1), (a)(2) so that they reflect that a contractor hearing officer's decision issued in accordance with 405.1831 is final and binding on all parties to the contractor hearing and on the contractor, unless the contractor hearing officer's decision is reviewed by a CMS reviewing official, or is reviewed by a CMS reviewing official and then is in turn reviewed by the Administrator in accordance with 405.1834, or is reopened and revised by the contractor hearing officer(s) in accordance with 405.1885 through 405.1889. We are also proposing to amend 405.1833 by adding paragraph (b) to specify that final contractor hearing decisions are subject to the provisions of 405.1803(d).
In this proposed rule, we are also proposing to revise the section heading of 405.1834 so that it references the possibilities of and procedures for review by the CMS reviewing official and Administrator review of a reviewing official decision. We are also proposing to revise 405.1834(a) so that it no longer states that a review of a contractor hearing officer is conducted “on behalf of the Administrator” by a designated CMS reviewing official, and no longer indicates that the CMS reviewing official issues a decision “on behalf of the Administrator.” We are proposing that 405.1834(a) states that CMS or a provider that is a party to, and
We are also proposing to revise the general rules in 405.1834(b)(1)(ii) to specify that the CMS reviewing official exercises this review authority in response to a request from a provider party to the appeal that meets the requirements of 405.1834(c), or in response to a request from CMS, or may exercise his or her discretion to take own motion review. Additionally, we are proposing to revise the general rules in 405.1834(b)(4) to require the contractor hearing officer(s) to promptly send copies of any decision specified in 405.1834(b)(2) or (3), or in 405.1821(d)(2) and the underlying contractor hearing officer's administrative record to the appropriate component of CMS (currently the Center for Medicare). We are also proposing to revise § 405.1834(b)(4)(ii) to specify that the appropriate CMS component examines each contractor hearing officer decision that is reviewable under 405.1834(b)(2) or (3), or 405.1821(d)(2), along with any review requests and any other submissions made by a party or CMS in accordance with 405.1834, in order to assist the CMS reviewing official's and the Administrator's exercise of this review authority.
To correct a typographical error in 405.1834(c) regarding the granting of a provider's request for review by a CMS reviewing official, we are proposing to revise 405.1834(c)(1)(i) to change the word from “or” to “and” at the end of 405.1834(c)(1)(i). This proposed revision would reflect that a provider's request for review by a CMS reviewing official is granted if 405.1834(c)(1)(i) and 405.1834(c)(1)(ii) are met by requiring that the date of receipt by the appropriate CMS component of the review request is no later than 60 days after the date of receipt by the provider of the contractor hearing officer decision; and the request seeks review of a decision listed in 405.1834(b)(2), and the provider complies with the requirements of 405.1834(c)(2).
Regarding a request for immediate review of a contractor hearing officer ruling authorizing discovery or disclosure, we are proposing to revise 405.1834(c)(3) and (c)(3)(i) to specify that a request from a party or CMS for immediate review of a contractor hearing officer ruling authorizing discovery or disclosure in accordance with 405.1834(b)(3) must be made as soon as practicable after the ruling is made, but in no event later than 5 business days after the date the requesting party or CMS received notice of the ruling.
To reorganize and house the provisions together in 405.1834(d) for the own motion review of a CMS reviewing official, in this proposed rule, we are proposing to revise the paragraph title of 405.1834(d) so that it states “Own motion review of a CMS reviewing official.” We are also proposing to revise 405.1834(d)(1) to reflect that the CMS reviewing official has discretion to take own motion review of a contractor hearing decision (regardless of whether the decision was favorable or unfavorable to the provider) or other reviewable action. We are also proposing to add new 405.1834(d)(4) to specify that if the CMS reviewing official does not notify the parties and the contractor that he or she intends to review the contractor hearing officer decision or other reviewable action within 90 days after the date of the contractor hearing officer's decision, then the Administrator may issue a notice instructing the CMS reviewing official to review the contractor hearing officer decision and issue a decision if the CMS reviewing official fails to do so. Additionally, we are proposing to add new 405.1834(d)(4)(i) to specify that the Administrator shall promptly provide copies of the notice instructing the CMS reviewing official to review the contractor hearing officer decision to the parties, the contractor, and to the appropriate component of CMS. We are proposing to add new 405.1834(d)(4)(ii) to specify that after the CMS reviewing official's receipt of the Administrator's notice (instructing the CMS reviewing official to review the contractor hearing officer decision and issue a decision), the CMS reviewing official must allow the parties a reasonable period to comment on the issues identified by the Administrator for review. Finally, we are proposing to add new 405.1834(d)(5) to specify that if no party requests review of the contractor hearing decision and the CMS reviewing official does not take review on its own motion or at the direction of the Administrator within the time periods specified in 405.1834(d), the contractor hearing officer decision is final in accordance with 405.1833.
Regarding the reviewing official's review procedures for contractor hearing officer's decisions, in this proposed rule, we are proposing to revise the introductory text in 405.1834(e)(1) to state “In reviewing a contractor hearing officer decision specified in paragraph (b)(2) or (b)(3) of this section, the CMS reviewing official must—.” We are also proposing to revise 405.1834(e)(3) to specify that upon completion of the review of a contractor hearing decision in 405.1834(b)(2) or 405.1834(b)(3), the CMS reviewing official issues a written decision that includes findings of fact and conclusions of law on jurisdictional issues and on the merits of each issue under review over which the CMS reviewing official has jurisdiction and affirms, reverses, or modifies the contractor hearing decision or remands the contractor hearing decision to the contractor hearing officer for further proceedings. A copy of the decision must be sent promptly to each party, to the contractor, and to the appropriate component of CMS (currently the Center for Medicare).
To reflect the possibility of Administrator review of a reviewing official's decision, in this proposed rule, we are proposing to revise 405.1834(f) from “Effect of a decision: Remand” to “Effect of a reviewing official's decision, remand, and the possibility of Administrator review.” We are also proposing to revise 405.1834(f)(1) to specify that a decision of affirmation, reversal, or modification by the CMS reviewing official is final and binding on each party and the contractor except as set forth in 405.1834(g). The CMS reviewing official's decision may be reopened and revised by the CMS reviewing official in accordance with 405.1885 through 405.1889. Decisions of a CMS reviewing official are subject to the provisions of 405.1803(d). A decision by a CMS reviewing official remanding an appeal to the contractor hearing officer(s) for further proceedings under 405.1834(f)(2) is not a final decision.
We are also proposing to revise the introductory text of 405.1834(f)(2) to state “A remand to the contractor hearing officer(s) by the CMS reviewing official must do all of the following:”
In this proposed rule, we are also proposing to add 405.1834(f)(3) to
In this proposed rule, we are also proposing to add new paragraph (g) entitled “Administrator review of a CMS reviewing official's decision” to 405.1834 to further specify and elaborate on the procedures for the Administrator's review of a CMS reviewing official's decision. Specifically, we are proposing to add 405.1834(g)(1) to specify that CMS or any party to a CMS reviewing official decision may request Administrator review of a CMS reviewing official decision in accordance with 405.1834. No other provider, individual, or entity may request review. The Administrator may grant or deny review of a CMS reviewing official decision at his or her discretion. The Administrator may also review any decision of the CMS reviewing official on his or her own motion (regardless of whether the decision was favorable or unfavorable to the provider). In this proposed rule, we are also proposing to add 405.1834(g)(2) to specify that a party, or CMS may request that the Administrator review a CMS reviewing official decision within 15 days of their receipt of a final CMS reviewing official decision.
In this proposed rule, we are also proposing to add 405.1834(g)(2)(ii) to specify that the Administrator must issue a Notice advising the parties of his or her intent to review or to decline to review within 30 days of the Administrator's receipt of a request for review from CMS or any party to the CMS reviewing official's decision. That Notice must be promptly sent to the parties, the contractor, and the appropriate component of CMS. A Notice advising the parties of the Administrator's intent to review must contain a brief statement of the issues under “review and solicit comments from the parties, the contractor, and CMS. A Notice that the Administrator is declining to review need not set forth the basis for the Administrator's decision to decline review the CMS reviewing official's decision. We are also proposing to add 405.1834(g)(2)(iii) to specify that if the Administrator declines to review the reviewing official decision or the Administrator does not issue a determination regarding review of the reviewing official decision within 30 days of the Administrator's receipt of a request to review, the decision of the CMS reviewing official is final. We are also proposing that 405.1834(g)(2)(iii) specify that upon issuance of a Notice, within 30 days of a request for Administrator review of a CMS reviewing official decision, that the Administrator is declining to review the reviewing official's decision, the CMS reviewing official's decision becomes final in accordance with 405.1834(f)(1).
In this proposed rule, we are also proposing to add 405.1834(g)(3) to specify that within 45 days of Administrator's receipt of a CMS reviewing official's decision, the Administrator may issue a Notice of Review on his or her own motion. The Notice of Review must be sent to the parties, the contractor, and the appropriate component of CMS. The Notice of Review must contain a brief statement of the issues under review and solicit comments from the parties, contractor, and CMS. If the Administrator does not issue a determination regarding his or her own motion review within 45 days of the Administrator's receipt of a CMS reviewing official's decision, the decision of the CMS reviewing official is final.
In this proposed rule, we are also proposing to add 405.1834(g)(4), (g)(4)(i) and (g)(4)(ii) to set forth that if the Administrator elects to review the CMS reviewing official's decision, the Administrator will set deadlines for the parties and affected nonparties to submit comments; and the Administrator's decision affirming, reversing, or modifying the CMS reviewing official's decision is final and binding on each party and the contractor. A decision remanding an appeal to the CMS reviewing official, contractor hearing officer(s) is not a final decision. Decisions of the Administrator are subject to the provisions of 405.1803(d).
In this proposed rule, we are also proposing to add 405.1834(g)(5) to specify that if the Administrator does not issue a written decision that affirms, reverses, modifies or remands the CMS reviewing official's decision within 60 days of the date of issuance of the Notice of Review, the CMS reviewing official's decision becomes final in accordance with 405.1834(f)(1). We are also proposing to add 405.1834(g)(6) to specify that the Administrator may remand the CMS reviewing official's decision to the CMS reviewing official, to the contractor hearing officer, or to the contractor. A remand by the Administrator must do all of the following: vacate the CMS reviewing official's and/or the contractor hearing officer decisions as to the specific issues remanded; be governed by the same criteria that apply to remands by the Administrator to the Board under 405.1875(f)(2), and require the entity to which the matter is remanded to take specific actions on remand; and result in the CMS reviewing official, contractor hearing officer(s), or contractor taking the actions required on remand and issuing a new decision.
Consistent with the proposals in section X.D.4.b.(1). of the preamble of this proposed rule, we are proposing conforming revisions to the current regulations at 413.420(g) for appeals pertaining to IOPOs and HCLs. Specifically, we are proposing to revise 413.420(g) to reflect that if the amount in controversy is $1,000 or more, any IOPO or histocompatibility laboratory that disagrees with a contractor's cost determination is entitled to a contractor hearing, review of the contractor hearing by a CMS reviewing official, and discretionary Administrator Review of a CMS reviewing official decision, in accordance with the procedures set forth in 405.1801(b)(2) and 405.1811 through 405.1834.
In this proposed rule, we are proposing that these proposed provisions will apply to administrative appeals that were timely filed with a contractor hearing officer on or after the effective date of this rule, under 405.1811 and 405.1834, and/or that are pending before a contractor hearing officer or a CMS reviewing official on the effective date of the rule. With
In this proposed rule, we are proposing to make several technical corrections or clarifications to the regulatory text, which are unrelated to any of the other proposals in section X.D. of the preamble of this proposed rule.
We propose to make a technical correction to 412.116(c), to change “kidney” to “organ.” This correction should have been made in our FY 2022 IPPS/LTCH PPS final rule, with comment period (86 FR 73468 through 73505), but was overlooked.
We propose to make a technical correction to 413.404(b)(3)(ii)(A) to clarify in the definition of a deceased donor SAC that the deceased donor SAC is an average organ acquisition cost that a TH incurs to procure an organ from a deceased donor. The existing regulation omits the phrase “organ acquisition.” This proposed language also mirrors the language that defines the living donor SAC.
We propose to make a technical correction to 413.404(b)(3)(ii)(C), which inadvertently omitted registry fees from the costs that transplant hospital may use to develop the deceased donor SAC. In the FY 2022 IPPS/LTCH PPS final rule (86 FR73477 and 73478), we included registry fees in the allowable organ acquisition costs used in developing transplant hospital living donor SACs, but inadvertently omitted registry fees from the allowable acquisition costs used to develop the transplant hospital deceased donor SACs. Registry fees would be incurred by transplant hospitals for every potential transplant recipient on their waitlist. Therefore, we propose to add 413.404(b)(3)(ii)(C)(
Under section 1886(e)(4)(B) of the Act, the Secretary must consider MedPAC's recommendations regarding hospital inpatient payments. Under section 1886(e)(5) of the Act, the Secretary must publish in the annual proposed and final IPPS rules the Secretary's recommendations regarding MedPAC's recommendations. We have reviewed MedPAC's March 2026 “Report to the Congress: Medicare Payment Policy” and have given the recommendations in the report consideration in conjunction with the policies set forth in this proposed rule. MedPAC recommendations for the IPPS for FY 2027 are addressed in Appendix B to this proposed rule.
For further information relating specifically to the MedPAC reports or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, or visit MedPAC's website at
IPPS-related data are available on the internet for public use. The data can be found on the CMS website at
Commenters interested in discussing any data files used in construction of this proposed rule should contact Michael Treitel at (410) 786-4552.
This file contains the hospital hours and salaries from Worksheet S-3, parts II and III from FY 2023 Medicare cost reports used to create the proposed FY 2027 IPPS wage index. Multiple versions of this file are created each year. For a discussion of the release of different versions of this file, we refer readers to section III.C.4. of the preamble of this proposed rule.
This file contains the CY 2022 occupational mix survey data to be used to compute the occupational mix adjusted wage indexes. Multiple versions of this file are created each year. For a discussion of the release of different versions of this file, we refer readers to section III.C.4 of the preamble of this proposed rule.
This file contains each hospital's occupational mix adjustment factors by occupational category. Two versions of these files are created each year to support the rulemaking.
CMS releases other wage index analysis files after each proposed and final rule.
This file contains a crosswalk of State and county codes used by the Federal Information Processing Standards (FIPS), county name, and a list of Core Based Statistical Areas (CBSAs).
The data included in this file contain cost reports with fiscal years ending on or after September 30, 1996. These data files contain the highest level of cost report status.
(We note that data are no longer offered on a CD. All of the data collected are now available free for download from the cited website.)
This file is a component of the PRICER program used in the MAC's system to compute DRG/MS-DRG payments for individual bills. The file contains records for all prospective payment system eligible hospitals, including hospitals in waiver States, and data elements used in the prospective payment system recalibration processes and related activities. Beginning with December 1988, the individual records were enlarged to include pass-through per diems and other elements.
This file contains the Medicare case- mix index by provider number based on the MS-DRGs assigned to the hospital's discharges using the GROUPER version in effect on the date of the discharge. The case-mix index is a measure of the costliness of cases treated by a hospital relative to the cost of the national average of all Medicare hospital cases, using DRG/MS-DRG weights as a measure of relative costliness of cases. Two versions of this file are created each year to support the rulemaking.
This file contains a listing of MS-DRGs, MS-DRG narrative descriptions, relative weights, and geometric and arithmetic mean lengths of stay for each fiscal year. Two versions of this file are created each year to support the rulemaking.
This file contains data used to estimate payments under Medicare's hospital inpatient prospective payment systems for operating and capital-related costs. The data are taken from various sources, including the Provider-Specific File, HCRIS Cost Report Data, MedPAR Limited Data Sets, and prior impact files. The data set is abstracted from an internal file used for the impact analysis of the changes to the prospective payment systems published in the
This file contains data used to develop the MS-DRG relative weights. It contains mean, maximum, minimum, standard deviation, and coefficient of variation statistics by MS-DRG for length of stay and standardized charges. The BOR file are “Before Outliers Removed” and the AOR file is “After Outliers Removed.” (Outliers refer to statistical outliers, not payment outliers.) Two versions of this file are created each year to support the rulemaking.
This file contains information that standardizes the charges used to calculate relative weights to determine payments under the hospital inpatient operating and capital prospective payment systems. Variables include wage index, cost-of-living adjustment (COLA), case-mix index, indirect medical education (IME) adjustment, disproportionate share, and the Core- Based Statistical Area (CBSA). The file supports the rulemaking.
This file provides the lines on the cost report and the corresponding revenue codes that we used to create the 19 national cost center cost-to-charge ratios (CCRs) that we used in the relative weight calculation.
The Hospital Readmissions Reduction Program Supplemental File is only available and updated for the final rule, when the most recent data is available. Therefore, we refer readers to the FY 2026 IPPS/LTCH PPS final rule supplemental file, which has the most recent finalized payment adjustment factor components and is the same data as would have been used to create the FY 2027 IPPS/LTCH PPS proposed rule supplemental file.
This file contains information on the calculation of the uncompensated care payments for DSH-eligible hospitals as well as the supplemental payments for eligible IHS and Tribal hospitals and hospitals located in Puerto Rico for FY 2027. Variables include the data used to determine a hospital's share of uncompensated care payments, total uncompensated care payments, estimated per-claim uncompensated care payment amounts, and if applicable, supplemental payment amounts. The file supports the rulemaking.
This file contains the cost thresholds by MS-DRG that are generally used to evaluate applications for new technology add-on payments for the fiscal year that follows the fiscal year that is otherwise the subject of the rulemaking. (As discussed in section II.G. of this proposed rule, we use the proposed threshold values associated with the proposed rule for that fiscal year to evaluate the cost criterion for applications for new technology add-on payments and previously approved technologies that may continue to receive new technology add-on payments, if those technologies would be assigned to a proposed new MS-DRG for that same fiscal year.) Two versions of this file are created each year to support rulemaking.
Under the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501-3520, we are required to provide notice in the
• The need for information collection and its usefulness in carrying out the proper functions of our agency.
• The accuracy of our estimate of the information collection burden.
• The quality, utility, and clarity of the information to be collected.
• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
In this proposed rule, we are soliciting public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs). The following ICRs are listed in the order of appearance within the preamble (see sections II. through XI. of the preamble of this proposed rule).
In section V.I. of the preamble of this proposed rule, we discuss our proposed updates to the Hospital Readmissions Reduction Program. Specifically, in this proposed rule, we propose to adopt the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure beginning with the FY 2029 program year. Because this measure is calculated using Medicare administrative data (Medicare Fee-for-Service Part A and Part B claims, hospital-submitted Medicare Advantage (MA) claims and MA encounter data) that are already reported to the Medicare program for payment purposes under OMB control number 0938-1197 (expiration date October 31, 2027), and MA Organization-submitted encounter data already collected by CMS under OMB control number 0938-1152 (expiration date July 31, 2027), adopting this measure would not result in any change in information collection burden.
In section V.J. of the preamble of this proposed rule, we discuss our proposed updates to the Hospital Value-Based Purchasing Program. Specifically, we propose to modify the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction Hospitalization, Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure Hospitalization, Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization, Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease Hospitalization, and Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Coronary Artery Bypass Graft Surgery measures beginning with the July 1, 2028-June 30, 2030 performance period, associated with the FY 2032 payment determination. The proposed modifications would include adding Medicare Advantage (MA) beneficiaries into the patient cohorts and modifying the applicable performance period from a 3-year period to a 2-year period.
The five measures we are proposing to modify currently use data that are collected using Medicare Fee-for-Service claims that hospitals are already submitting to the Medicare program for payment purposes under OMB control number 0938-1197 (expiration date October 31, 2027); therefore, there is no additional information collection burden regarding the modification of the applicable performance period. We also do not anticipate any change in burden associated with the proposed modification to add MA beneficiaries into the measure cohorts. As proposed, the measure would use MA encounter data already collected by CMS under OMB control number 0938-1152 (expiration date July 31, 2027) to determine cohort inclusion criteria, complications outcomes, and present on admission comorbidities. We discuss the burden associated with the proposals to adopt these measures under the Hospital Inpatient Quality Reporting Program in section XII.B.4.c. of the preamble of this proposed rule.
OMB has currently approved 28,840 hours of burden and approximately $1.5 million under OMB control number 0938-1352 (expiration date November 30, 2027), accounting for information collection burden experienced by 400 subsection (d) hospitals selected for validation each year in the Hospital-Acquired Condition Reduction Program. We are not making any proposals or updates for the Hospital-Acquired Condition Reduction Program in this proposed rule.
Data collection for the Hospital Inpatient Quality Reporting Program is associated with OMB control number 0938-1022 (expiration date December 31, 2028), under which OMB has currently approved 1,351,632 hours of burden at a cost of approximately $73.7 million, accounting for information collection burden experienced by approximately 3,050 IPPS hospitals and 1,500 non-IPPS hospitals for the FY 2028 payment determination. In this proposed rule, we describe the burden changes regarding collection of information, under OMB control number 0938-1022.
For more detailed information on our proposals for the Hospital Inpatient Quality Reporting Program, we refer readers to sections IX.B. and IX.C. of the preamble of this proposed rule. We are proposing to adopt three new measures: (1) the Advance Care Planning electronic clinical quality measures (eCQM) beginning with the CY 2028 reporting period/FY 2030 payment determination; (2) the Hospital Harm-Postoperative Venous Thromboembolism (VTE) eCQM beginning with the CY 2028 reporting period/FY 2030 payment determination; and (3) the Excess Days in Acute Care After Hospitalization for Diabetes measure beginning with the July 1, 2025 through June 30, 2027 performance period, associated with the FY 2029 payment determination. We are also proposing to adopt five mortality measures for the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination, through the July 1, 2027 through June 30, 2029 performance period, associated with the FY 2031 payment determination: (1) the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization measure; (2) the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure (HF) Hospitalization measure beginning; (3) the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization measure; (4) the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization measure; and (5) the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Coronary Artery Bypass Graft (CABG) Surgery measure. We are also proposing to modify three measures beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination: (1) the Excess Days in Acute Care after Hospitalization for AMI measure; (2) the Excess Days in Acute Care after Hospitalization for HF measure; and (3) the Excess Days in Acute Care after Hospitalization for Pneumonia measure. We are additionally proposing to remove three self-selected eCQMs beginning with the CY 2028 reporting period/FY 2030 payment determination: (1) the VTE Prophylaxis eCQM; (2) the Intensive Care Unit VTE Prophylaxis eCQM; and (3) Discharged on Antithrombotic Therapy eCQM. Lastly, we are proposing an update to the reporting and submission requirements for the Maternal Morbidity Structural measure beginning with the CY 2026 reporting period/FY 2028 payment determination. We do not anticipate any of these proposals will affect information collection burden.
We are proposing to modify the reporting and submission requirements for eCQMs to require mandatory reporting of the Malnutrition Care Score eCQM beginning with the CY 2028 reporting period/FY 2030 payment determination, and to require mandatory reporting of Hospital Harm eCQMs after two years of self-selected reporting beginning with the CY 2028 reporting period/FY 2030 payment determination. We discuss the impacts on information collection burden associated with these proposals later in this section.
Using the most recent data from the BLS for medical records specialists (SOC 29-2072), entitled, the May 2024 Occupational Employment and Wage Estimates, we propose to use the median hourly wage for medical records specialists for the industry, “general medical and surgical hospitals,” which is $27.53.
In the FY 2026 IPPS/LTCH PPS final rule (90 FR 37192), our burden estimates were based on an assumption of approximately 3,050 IPPS hospitals. For this proposed rule, based on data from the FY 2026 Hospital Inpatient Quality Reporting Program payment determination, we are maintaining that assumption and estimate that approximately 3,050 IPPS hospitals will report data to the Hospital Inpatient Quality Reporting Program for the CY 2027 reporting period.
In sections IX.B.1. and IX.C.3.b. of the preamble of this proposed rule, we discuss the proposals to adopt the Advance Care Planning eCQM and Hospital Harm-Postoperative VTE eCQM beginning with the CY 2028 reporting period/FY 2030 payment determination, respectively, to add to the set of eCQMs from which hospitals may self-select to meet their eCQM reporting requirements. The proposed adoption of these two eCQMs would not affect the information collection burden of submitting eCQMs under the Hospital Inpatient Quality Reporting Program as current policy under OMB control number 0938-1022 requires hospitals to submit data for three self-selected and eight mandatory eCQMs from the eCQM
In sections IX.B.2. and IX.C.3.a. of the preamble of this proposed rule, we discuss the proposed adoption of six claims-based measures. In section IX.C.3.a. of the preamble of this proposed rule, we discuss the proposed adoption of one new claims-based measure: (1) Excess Days in Acute Care After Hospitalization for Diabetes measure beginning with the July 1, 2025 through June 30, 2027 performance period, associated with the FY 2029 payment determination. In section IX.B.2. of the preamble of this proposed rule, we discuss the adoption of five mortality measures beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination, through the July 1, 2027 through June 30, 2029 performance period, associated with the FY 2031 payment determination: (1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following AMI Hospitalization measure; (2) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following HF Hospitalization measure; (3) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization measure; (4) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following COPD Hospitalization measure; and (5) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following CABG Surgery measure.
Because these measures are calculated using Medicare FFS claims that are already reported to the Medicare program for payment purposes under OMB control number 0938-1197 (expiration date October 31, 2027) and MA encounter data already collected by CMS under OMB control number 0938-1152 (expiration date July 31, 2027) to determine cohort inclusion criteria, complications outcomes, and present on admission comorbidities, adoption of these measures would not result in a change in burden associated with OMB control number 0938-1022.
In section IX.C.5. of the preamble of this proposed rule, we are proposing to modify three measures beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination: (1) the Excess Days in Acute Care after Hospitalization for AMI measure; (2) the Excess Days in Acute Care after Hospitalization for HF measure; and (3) the Excess Days in Acute Care after Hospitalization for Pneumonia measure.
This proposed modification would include adding MA beneficiaries to the current cohort of patients and shortening the performance period from 3 years to 2 years. Because these measures would be calculated using Medicare FFS claims that are already reported to the Medicare program for payment purposes under OMB control number 0938-1197 and MA encounter data already collected by CMS under OMB control number 0938-1152 to determine cohort inclusion criteria, complications outcomes, and present on admission comorbidities, modifying these measures would not result in a change in burden associated with OMB control number 0938-1022.
In section IX.C.4. of the preamble of this proposed rule, we are proposing the removal of three eCQMs beginning with the CY 2028 reporting period/FY 2030 payment determination: (1) the VTE Prophylaxis eCQM; (2) the Intensive Care Unit VTE eCQM; and (3) Discharged on Antithrombotic Therapy eCQM. Because reporting these eCQMs is not mandatory, but they are instead available in the Hospital Inpatient Quality Reporting Program eCQM measure set for hospitals to self-select to report, removing these eCQMs would not result in a change in burden associated with OMB control number 0938-1022.
In section IX.C.8.d.(1). of the preamble of this proposed rule, we discuss the proposal to modify the reporting and submission requirements for the Maternal Morbidity Structural measure beginning with the CY 2027 reporting period/FY 2029 payment determination. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45361 through 45365), we adopted the Maternal Morbidity Structural measure, requiring hospitals to attest “yes”, “no”, or “not applicable” to one two-part question. The currently approved information collection burden for the Maternal Morbidity Structural measure under OMB control number 0938-1022 is five minutes (0.083 hours) per IPPS hospital annually. We are proposing to add a sub-question to collect the name of the Statewide and/or National Perinatal Quality Improvement Collaborative Program in which the hospital participates. We believe that the currently approved burden of five minutes is adequate for hospitals to both attest to the current two-part question and answer the proposed sub-question and therefore are not proposing any changes to the currently approved burden estimate.
In section IX.C.8.c.(2). of the preamble of this proposed rule, we discuss the proposal to modify the reporting and submission requirements for the Malnutrition Care Score eCQM to require mandatory reporting beginning with the CY 2028 reporting period/FY 2030 payment determination. The Malnutrition Care Score eCQM (previously known as Global Malnutrition Composite Score eCQM) was initially adopted in the FY 2023 IPPS/LTCH PPS final rule into the Hospital Inpatient Quality Reporting Program measure set from which a hospital could self-select beginning with the CY 2024 reporting period/FY 2026 payment determination (87 FR 49239 through 49246).
In section IX.C.8.c.(3). of the preamble of this proposed rule, we discuss the proposal to modify the reporting and submission requirements for Hospital Harm eCQMs to require mandatory reporting after two years of self-selected reporting, beginning with the CY 2028 reporting period/FY 2030 payment
Current Hospital Inpatient Quality Reporting Program policy under OMB control number 0938-1022 requires hospitals to submit data for three self-selected and eight mandatory eCQMs, for a total of 11 eCQMs, for the CY 2028 reporting period/FY 2030 payment determination and subsequent years. The currently approved information collection burden per reported eCQM under OMB control number 0938-1022 is 10 minutes (0.167 hours) per hospital per quarter or 40 minutes (0.67 hours) per hospital annually. For the CY 2028 reporting period/FY 2030 payment determination and CY 2029 reporting period/FY 2031 payment determination, we estimate the proposed modifications to the Malnutrition Care Score and two Hospital Harm eCQMs would result in a total increase of 120 minutes (2 hours) per hospital annually (10 minutes/eCQM × 3 eCQMs × 4 quarters) or a total annual burden increase across all 3,050 IPPS hospitals of 6,100 hours (2 hours × 3,050 IPPS hospitals) at a cost of $335,866 (6,100 hours × $55.06). Beginning with the CY 2030 reporting period/FY 2032 payment determination, when the Hospital Harm-Postoperative VTE eCQM would become a mandatory eCQM to report if this policy is finalized, we estimate the proposed modifications would result in a total increase of 160 minutes (2.67 hours) per hospital annually (10 minutes/eCQM × 4 eCQMs × 4 quarters) or a total annual burden increase across all 3,050 IPPS hospitals of 8,133 hours (2.67 hours × 3,050 IPPS hospitals) at a cost of $447,803 (8,133 hours × $55.06).
In summary, under OMB control number 0938-1022 (expiration date December 31, 2028), we estimate that the policies promulgated in this proposed rule would result in an increase in information collection burden of 8,133 hours at a cost of $447,803. We will submit the revised information collection estimates to OMB for approval under OMB control number 0938-1022. With respect to any costs/burdens unrelated to data submission, we refer readers to the Regulatory Impact Analysis (section I.K. of Appendix A of this proposed rule).
OMB has currently approved a total of 2 hours of burden at a cost of $111 under OMB control number 0938-1175 (expiration date January 31, 2029), accounting for the annual information collection requirements for 11 PCHs for the PCH Quality Reporting Program. In this proposed rule, we describe the burden changes regarding collection of information under OMB control number 0938-1175 for PCHs.
For more detailed information on our proposals for the PCH Quality Reporting Program, we refer readers to sections IX.B. and IX.D. of the preamble of this proposed rule. We are proposing to adopt two measures beginning with the CY 2028 reporting period/FY 2030 program year: (1) the Advance Care Planning electronic clinical quality measure (eCQM); and (2) the Malnutrition Care Score eCQM. We are also proposing to remove the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure beginning with the CY 2026 reporting period/FY 2028 program year. We discuss the impacts on information collection burden associated with these proposals later in this section.
Using the most recent data from the BLS for medical records specialists (SOC 29-2072), entitled, the May 2024 Occupational Employment and Wage Estimates, we propose to use the median hourly wage for medical records specialists for the industry, “general medical and surgical hospitals,” which is $27.53.
In sections IX.B.1. and IX.D.2.a. of the preamble of this proposed rule, we discuss the proposals to adopt the Advance Care Planning and Malnutrition Care Score eCQMs, respectively, beginning with the CY 2028 reporting period/FY 2030 program year. Similar to the currently approved information collection burden estimates for submission of eCQMs for the Hospital Inpatient Quality Reporting Program under OMB control number 0938-1022, we assume a Medical Records Specialist would require 10 minutes (0.167 hours) per eCQM to submit the data required per quarter for each PCH, or 40 minutes (0.67 hours) annually. For both eCQMs, we estimate a total of 80 minutes (1.33 hours) annually per PCH, or 15 hours across all PCHs (1.33 hours × 11 PCHs) at a cost of $826 (15 hours × $55.06).
In section IX.D.3.a. of the preamble of this proposed rule, we propose to remove the COVID-19 Vaccination Coverage among HCP measure beginning with the CY 2026 reporting period/FY 2028 program year. This measure was previously finalized in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45428 through 45434), and the associated information collection is approved under OMB control number 0920-1317
PCHs have the option to manually enter data directly into the Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network web-based application or by uploading a CSV file. CDC estimates that each PCH requires between 40 minutes (0.67 hours) to upload a CSV file and 45 minutes (0.75 hours) monthly to enter the data manually. CDC assumes that manual data entry would be completed by a Microbiologist with a wage rate of $58.60/hour and uploading of a CSV file would be completed by an Information Technologist with a wage rate of $56.50/hour. Therefore, we estimate that this proposal would result in a decrease in burden of between 88 hours (0.67 hours × 12 months × 11 PCHs) at a cost of $4,972 (88 hours ×$56.50/hour) and 99 hours (0.75 hours × 12 months × 11 PCHs) at a cost of $5,801 (99 hours × $58.60/hour) annually across all 11 PCHs under OMB control number 0920-1317.
In summary, under OMB control number 0938-1175 (expiration November 30, 2027), we estimate that the policies promulgated in this proposed rule for the PCH Quality Reporting Program would result in an increase in information collection burden of 15 hours and $826. We also estimate that the policies promulgated in this proposed rule for the PCH Quality Reporting Program would result in a decrease in information collection burden between 88 hours at a savings of $4,972 and 99 hours at a savings of $5,801 under OMB control number 0920-1317. We will submit the revised information collection estimates to OMB for approval under OMB control number 0938-1175. With respect to any costs/burdens unrelated to data submission, we refer readers to the Regulatory Impact Analysis (section I.L. of Appendix A of this proposed rule).
As required by section 1886(m)(5)(A)(i) of the Act, an LTCH that does not meet the requirements of the LTCH QRP for a fiscal year will receive a 2-percentage point reduction to its otherwise applicable annual update for that fiscal year. We estimated that the burden associated with the LTCH QRP is the time and effort associated with complying with the requirements of the LTCH QRP.
In section IX.E.3. of the preamble of the proposed rule, we are proposing to remove the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) (HCP COVID-19 Vaccine) measure. We are also proposing, in section IX.E.4 of the preamble of the proposed rule, to remove the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date (Patient/Resident COVID-19 Vaccine) measure. If these proposals are finalized, both measure removals will be effective beginning with the FY 2028 LTCH QRP.
In section IX.E.3. of the preamble of this proposed rule, we are proposing to remove the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) Measure (HCP COVID-19 Vaccine measure), beginning with the FY 2028 LTCH QRP. We note that the CDC would account for the burden associated with the HCP COVID-19 Vaccine measure collection under OMB control
For the purposes of calculating the costs associated with the collection of information requirements, we obtained median hourly wages from the BLS May 2024 National Occupational Employment and Wage Estimates.
We estimate that the removal of the HCP COVID-19 measure from the LTCH QRP will result in a reduction of 12 hours per LTCH per year. Using FY 2025 data, we estimate a total of 318 LTCHS annually for a decrease of 3,816 hours (12 hours × 318 LTCHS) for all LTCHs. Given an estimated $43.82 hourly wage for administrative assistants, we estimate a decrease of $525.84 per LTCH (12 hours × $43.82), or a decrease of $167,217.12 for all LTCHs annually ($525.84 × 318 LTCH). The total revised annual cost increase beginning with the FY 2028 LTCH QRP related to this information collection is summarized in Table XII.B-06.
In section IX.E.4. of the preamble of this proposed rule, we are proposing to remove COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date Measure (Patient/Resident COVID-19 Vaccine measure), beginning with the FY 2028 LTCH QRP. We believe that data collection would be completed equally by a Registered Nurse (RN) and a Licensed Practical and Licensed Vocational Nurse (LPN/LVN). However, LTCHs determine the staffing resources necessary. In section IX.E.4 of the proposed rule we also propose to remove the item (O0350) from the LCDS, currently approved under OMB control number 0938-1163 (Expiration date: 10/31/2027). The following is a discussion of this information collection.
The net result of removing the related Patient/Resident COVID-19 Vaccine Status measure and the LCDS item used to collect the measure data (O0350. Patient COVID-19 vaccination is up to date) is a decrease of 0.3 minutes or 0.005 hour of clinical staff time. We estimate that the burden and cost for LTCHs for complying with requirements of the FY 2028 LTCH QRP would decrease under this proposal.
For the purposes of calculating the costs associated with the collection of information requirements, we obtained median hourly wages for these staff from the U.S. Bureau of Labor Statistics' (BLS) May 2024 National Occupational Employment and Wage Estimates.
Using FY 2025 data, we estimate an annual total of 102,590 discharges from 318 LTCHs for an annual decrease of 512.95 hours (102,590 × 0.005 hour) for all LTCHs. Given 0.005 hours at $78.16 per hour, we estimate the total cost will decrease annually by $40,092.17 for all LTCHs ($78.16 × 512.95 hours). For each LTCH, we estimate an annual burden decrease of 1.61 hours (512.95 hours/318 LTCHs) and an annual decreased cost of $126.08. The total estimated annual burden decrease associated with the removal of the Patient/Resident COVID-19 Vaccine Status item (O0350) on discharge beginning with the FY LTCH QRP is summarized in Table XII.B-08.
We invite public comments on the proposed modification to information collection requirements for LTCH QRP beginning with the FY 2028 LTCH QRP.
OMB has currently approved 30,151 hours of burden at a cost of $1,669,707 under OMB control number 0938-1278 (expiration date March 31, 2029), accounting for information collection burden experienced by approximately 3,150 eligible hospitals and 1,400 Critical Access Hospitals (CAHs) for the electronic health record (EHR) reporting period in CY 2026. The collection of information burden analysis in this proposed rule focuses on all eligible hospitals and CAHs that could participate in the Medicare Promoting Interoperability Program and report the objectives and measures, and report electronic clinical quality measures (eCQMs), under the Medicare Promoting Interoperability Program for the EHR reporting periods in CY 2026 and CY 2027.
For more detailed information on our proposals for the Medicare Promoting Interoperability Program, we refer readers to section IX.B. and IX.F. of the preamble of this proposed rule. For the Medicare Promoting Interoperability Program, we are proposing to adopt three new measures: (1) the Advance Care Planning eCQM beginning with the CY 2028 reporting period; (2) the Hospital Harm-Postoperative Venous Thromboembolism (VTE) eCQM beginning with the CY 2028 reporting period; and (3) the Unique Device Identifiers for Implantable Medical Devices measure beginning with the EHR reporting period in CY 2027. Additionally, we are proposing to remove two attestations and five measures: (1) the Office of the National Coordinator for Health Information Technology (ONC) Direct Review Attestation beginning with the EHR reporting period in CY 2026; (2) the optional ONC-Authorized Certification Body (ONC-ACB) Surveillance Attestation beginning with the EHR reporting period in CY 2026; (3) the Support Electronic Referral Loops by Sending Health Information measure beginning with the EHR reporting period in CY 2028; (4) the Support Electronic Referral Loops by Receiving and Reconciling Health Information measure beginning with the EHR reporting period in CY 2028; (5) the VTE Prophylaxis eCQM beginning with the CY 2028 reporting period; (6) the Intensive Care Unit VTE Prophylaxis eCQM beginning with the CY 2028 reporting period; and (7) the Discharged on Antithrombotic Therapy eCQM beginning with the CY 2028 reporting period. We are also proposing to update the Electronic Prior Authorization measure by modifying the measure text, modifying the ONC certification criteria eligible hospitals and CAHs must use to attest “Yes” beginning with the EHR reporting period in CY 2027, as well as proposing to make the measure optional for the EHR reporting period in CY 2027 and required beginning with the EHR reporting period in CY 2028.
We are proposing to modify the Malnutrition Care Score eCQM to require mandatory reporting beginning with the CY 2028 reporting period. For those Hospital Harm eCQMs that are not already required to be reported (including any we may propose to adopt in the future), we are also proposing to modify the eCQM reporting and submission requirements for Hospital Harm eCQMs to require mandatory reporting after 2 years of self-selected reporting beginning with the CY 2028 reporting period. We will discuss the impacts on information collection burden associated with these proposals later in this section.
We are also proposing to revise the definition of CEHRT at 42 CFR 495.4 for the Medicare Promoting Interoperability Program so the definition would be consistent with the proposed modification to health IT certification criteria in the HTI-5 proposed rule. There is no information collection burden associated with this proposal.
Using the most recent data from the BLS for medical records specialists (SOC 29-2072), entitled, the May 2024 Occupational Employment and Wage Estimates, we propose to use the median hourly wage for medical records specialists for the industry, “general medical and surgical hospitals,” which is $27.53.
In the FY 2026 IPPS/LTCH PPS final rule (90 FR 37199), our burden estimates were based on an assumption of 4,550 eligible hospitals and CAHs. For this FY 2027 proposed rule, based on data from the EHR reporting period in CY 2024, we continue to estimate approximately 3,150 eligible hospitals and 1,400 CAHs will be eligible to report data to the Medicare Promoting Interoperability Program for the EHR reporting period in CY 2027, for a total number of 4,550 respondents.
In sections IX.B.1. and IX.F.9.b. of the preamble of this proposed rule, we are proposing to adopt two new eCQMs beginning with the CY 2028 reporting period, respectively: (1) the Advance Care Planning eCQM and (2) the Hospital Harm-Postoperative VTE eCQM, to add to the set of eCQMs from which CAHs may self-select to meet their eCQM reporting requirements. The proposed adoption of these two eCQMs would not affect the information collection burden of submitting eCQMs under the Medicare Promoting Interoperability Program as currently estimated under OMB control number 0938-1022, which accounts for eligible hospitals and CAHs submitting data for three self-selected and eight mandatory eCQMs, for a total of 11 eCQMs, from the eCQM measure set for the CY 2028 reporting period and subsequent years. In other words, although these two eCQMs would be added to the eCQM measure set, eligible hospitals and CAHs are not currently required to report more than a total of 11 eCQMs for the CY 2028 reporting period and subsequent years. However, we note that if the proposals to modify eCQM reporting and submission requirements for the Malnutrition Care Score eCQM and all Hospital Harm eCQMs discussed in section IX.F.9.c. of this proposed rule are finalized, eligible hospitals and CAHs would be required to report a total of 14 eCQMs for the CY 2028 and CY 2029 reporting periods, and 15 eCQMs beginning with the CY 2030 reporting period. In section XII.B.7.h, we discuss the burden associated with the proposals to modify eCQM reporting and submission requirements to require mandatory reporting for the Malnutrition Care Score and all Hospital Harm eCQMs after two years of self-selected reporting beginning with the CY 2028 reporting period.
In section IX.F.6. of the preamble of this proposed rule, we discuss the proposal to adopt the Unique Device Identifiers for Implantable Medical Devices measure under the Public Health and Clinical Data Exchange objective beginning with the EHR reporting period in CY 2027. For this attestation-based measure, eligible hospitals and CAHs would be required to report a “Yes” response, a “No” response, or claim an applicable exclusion for which they are eligible. Like other attestations approved for the Public Health and Clinical Data Exchange objective under OMB control number 0938-1278, we assume eligible hospitals and CAHs require 30 seconds (0.5 minutes) to attest to this measure. Therefore, we estimate a total annual burden increase across all 4,550 eligible hospitals and CAHs of 38 hours (0.0083 hours × 4,550 eligible hospitals and CAHs) at a cost of $2,092 (38 hours × $55.06). As stated in section IX.F.6.b. of the preamble of this proposed rule, we note that the ONC certification criterion at 45 CFR 170.315(g)(10) can support fulfillment of the measure. Eligible hospitals and CAHs are also already required to record and maintain patient-linked implantable device information in their records under 21 CFR 821.30. Additionally, as approved by OMB under control number 0938-1022 for the Hospital Inpatient Quality Reporting Program, in which we account for the information collection burden associated with eCQM reporting and submission for eligible hospitals and CAHs, only the time associated with electronically submitting data to CMS is accounted for in our burden estimates because patient data are already entered into EHRs and health information technology systems as part of clinical practice. Therefore, we assume no additional information collection burden under OMB control number 0938-1270 associated with entry of Unique Device Identifier information into EHRs by eligible hospitals and CAHs.
In section IX.F.3. of the preamble of this proposed rule, we discuss the proposals to remove the ONC Direct Review and optional ONC-ACB Surveillance attestations beginning with the EHR reporting period in CY 2026. The information collection burden associated with the ONC Direct Review attestation is currently approved under OMB control number 0938-1278 and assumes each eligible hospital and CAH requires 1 minute (0.0167 hours) at a cost of $1 (0.0167 hours × $55.06) annually to attest “Yes” or “No.” We therefore estimate a total annual burden decrease across all 4,550 eligible hospitals and CAHs of 76 hours (0.0167 hours × 4,550 eligible hospitals and CAHs) at a savings of $4,185 (76 hours × $55.06). Similarly, we estimate each eligible hospital and CAH that currently elects to submit the optional ONC-ACB Surveillance attestation will experience a decrease in burden of 1 minute (0.0167 hours) at a savings of $1 (0.0167 hours × $55.06) annually. We therefore estimate a total annual burden decrease across all 4,550 eligible hospitals and CAHs of 76 hours (0.0167 hours × 4,550 eligible hospitals and CAHs) at a savings of $4,185 (76 hours × $55.06). We note that although the ONC-ACB Surveillance attestation was finalized in the CY 2017 Quality Payment Program final rule with comment period (81 FR 77019 through 77028), the associated information collection burden has not been accounted for under OMB control number 0938-1278. We will submit a revised Information Collection Request under this OMB control number reflecting the inclusion of this attestation as well as its proposed removal.
In section IX.F.4. of the preamble of this proposed rule, we discuss the proposals to remove the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures beginning with the EHR reporting period in CY 2028. Under OMB control number 0938-1278, eligible hospitals and CAHs are currently required to report one of three alternatives under the Health Information Exchange objective: (1) the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures; (2) the Health Information Exchange (HIE) Bi-Directional Exchange measure; or (3) the Enabling Exchange Under the Trusted Exchange Framework and Common Agreement (TEFCA) measure. Because eligible hospitals and CAHs would still be required to report either the HIE Bi-Directional Exchange or Enabling Exchange Under the TEFCA measure, we are not proposing any change to information collection burden associated with this proposal.
In section IX.F.9.b. of the preamble of this proposed rule, we are proposing the removal of three eCQMs beginning with the CY 2028 reporting period: (1) the VTE Prophylaxis eCQM; (2) the Intensive Care Unit VTE Prophylaxis eCQM; and (3) the Discharged on Antithrombotic Therapy eCQM.
The burden associated with eligible hospitals and CAHs submitting eCQMs is currently approved under OMB control number 0938-1022. Because reporting these eCQMs is not mandatory, but they are instead available in the Medicare Promoting Interoperability Program eCQM measure set for eligible hospitals and CAHs to self-select to report, removing these eCQMs would not result in a change in burden associated with OMB control number 0938-1022.
In section IX.F.5. of the preamble of this proposed rule, we discuss the proposed updates to the Electronic Prior Authorization measure beginning with the EHR reporting period in CY 2027. Specifically, we are proposing that eligible hospitals and CAHs must use technology certified to the criteria at 45 CFR 170.315(g)(31), (32), and (33) to report on the Electronic Prior Authorization measure beginning with the EHR reporting period in CY 2027. We are also proposing to modify the Electronic Prior Authorization measure description such that for at least one medical item or service (excluding drugs) ordered during a hospital encounter that occurs within the EHR reporting period, the prior authorization is requested electronically through a Prior Authorization API using CEHRT. Because the Electronic Prior Authorization measure is currently approved under OMB control number 0938-1278 and we are only proposing to update the criteria which eligible hospitals and CAHs would have to meet to attest “Yes”, we are not proposing any changes to information collection burden associated with this proposal.
In section IX.F.5.d. of the preamble of this proposed rule, we are proposing to make the Electronic Prior Authorization measure optional for the EHR reporting period in CY 2027 and eligible for 10 bonus points. We are also proposing to make the Electronic Prior Authorization measure required beginning with the EHR reporting period in CY 2028. Under OMB control number 0938-1278, the currently approved burden estimate for this measure is 0.5 minutes per eligible hospital and CAH. Because we are unable to estimate the number of eligible hospitals and CAHs which may elect not to attest to this measure for the EHR reporting period in CY 2027 as a result of this proposal, for burden purposes, we propose not to make any changes to the currently approved burden estimates.
In section IX.F.9.c. of the preamble of this proposed rule, we discuss the proposal to modify the reporting and submission requirements for the Malnutrition Care Score eCQM to require mandatory reporting beginning with the CY 2028 reporting period. The Malnutrition Care Score eCQM (previously known as Global Malnutrition Composite Score eCQM) was initially adopted in the FY 2023 IPPS/LTCH PPS final rule into the Medicare Promoting Interoperability Program measure set from which an eligible hospital or CAH could self-select to report beginning with the CY 2024 reporting period (87 FR 49361 through 49364).
In section IX.F.9.c. of the preamble of this proposed rule, we discuss the proposal to modify the eCQM reporting and submission requirements for all Hospital Harm eCQMs to begin mandatory reporting after two years of self-selected reporting beginning with the CY 2028 reporting period. This proposal would apply only to Hospital Harm eCQMs that are not already required to be reported, including any Hospital Harm eCQMs we may adopt in future rules. In the currently approved eCQM measure set, there are two Hospital Harm eCQMs in the Medicare Promoting Interoperability Program measure set from which an eligible hospital or CAH could self-select: Hospital Harm-Falls with Injury and Hospital Harm-Postoperative Respiratory Failure. Under this proposal, these two measures would begin mandatory reporting with the CY 2028 reporting period, given they were adopted in the FY 2025 IPPS/LTCH PPS final rule for self-selection eCQMs beginning with the CY 2026 reporting period (89 FR 69621 and 69622). Additionally, as discussed in section IX.F.9.b. of the preamble of this proposed rule, we are proposing to adopt the Hospital Harm-Postoperative VTE eCQM as a self-selected eCQM beginning with the CY 2028 reporting period. If finalized, this measure would begin mandatory reporting with the CY 2030 reporting period.
Currently for the Medicare Promoting Interoperability Program's eCQM reporting requirements, the information collection burden is estimated under OMB control number 0938-1022 and the policy requires eligible hospitals and CAHs to submit data for three self-selected and eight mandatory eCQMs, for a total of 11 eCQMs, for the CY 2028 reporting period and subsequent years. The currently approved information collection burden per reported eCQM under OMB control number 0938-1022 is 10 minutes (0.167 hours) per eligible hospital or CAH per quarter or 40 minutes (0.67 hours) annually. For the CY 2028 and CY 2029 reporting periods, we estimate the proposed modifications to the Malnutrition Care Score and two Hospital Harm eCQMs would result in a total increase of 120 minutes (2 hours) per CAH annually (10 minutes/eCQM ×
In summary, under OMB control number 0938-1278 (expiration date April 30, 2027), we estimate that the policies in this proposed rule would result in a decrease in information collection burden of 114 hours at a savings of $6,258. We also estimate that the policies promulgated in this proposed rule would result in an increase in information collection burden of 4,000 hours at a cost of $220,240 under OMB control number 0938-1022. We will submit the revised information collection estimates to OMB for approval under OMB control number 0938-1278. With respect to any costs/burdens unrelated to data submission, we refer readers to the Regulatory Impact Analysis (section I.N. of Appendix A of this proposed rule).
In section X.A. of the preamble of this final rule, we discuss testing the Transforming Episode Accountability Model (TEAM), proposed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986), and proposed updates to the model under the authority of the CMS Innovation Center. Section 1115A of the Act authorizes the CMS Innovation Center to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program beneficiaries. As stated in section 1115A(d)(3) of the Act, chapter 35 of title 44, United States Code, shall not apply to the testing and evaluation of models under section 1115A of the Act. As a result, the information collection requirements contained in this proposed rule for TEAM need not be reviewed by the Office of Management and Budget.
In section X.C. of the preamble of this proposed rule, we discuss testing the proposed Comprehensive Care for Joint Replacement Expanded (CJR-X) Model, under the authority of the CMS Innovation Center. Section 1115A of the Act authorizes the CMS Innovation Center to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program beneficiaries. As stated in section 1115A(d)(3) of the Act, chapter 35 of title 44, United States Code, shall not apply to the testing and evaluation of models under section 1115A of the Act. As a result, the information collection requirements contained in this proposed rule for CJR-X need not be reviewed by the Office of Management and Budget.
In section X.D.2. and in section X.D.3. of the preamble of this proposed rule, we propose to revise and codify Medicare's reasonable cost policies and cost allocation policies, and in section X.D.4. of the preamble of this proposed rule to codify the discretionary Administrator review of CMS reviewing official determinations for IOPOs and HCLs. In section X.D.5 of the preamble of this proposed rule, we propose clarifications and technical corrections to regulation text. In addition, we propose in section X.D.1. of the preamble of this proposed rule to reconcile non-renal organ acquisition costs for IOPOs and HCLs and to require the contractor to establish, adjust if necessary, and publish interim rates for IOPOs and HCLs, with a 1-year delay, effective for cost reporting periods beginning on or after October 1, 2027.
Our proposal in section X.D.1. of the preamble of this proposed rule to reconcile non-renal organ acquisition costs for IOPOs and HCLs has a 1-year delay to allow time to update the IOPO and HCL Medicare cost report should this proposal be finalized. There would be no additional data collection requirements for IOPOs and HCLs as a result of our proposals, because IOPOs and HCLs already collect the data needed for the contractor to establish, adjust (if necessary), and publish non-renal SACs or testing rates, and to reconcile non-renal organ acquisition costs for IOPOs and HCLs, in accordance with §§ 413.20 and 413.24. However, we recognize there may be additional reporting requirements if our proposals are finalized.
The methods of determining costs payable under Medicare involve making use of data available from the
CMS currently collects data on OMB control number 0938-0102, Form CMS-216-94, and if this proposal is finalized, revisions to OMB control number 0938-0102 would be included in a future PRA package notice as required under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501
Because of the large number of public comments we normally receive on
Mehmet Oz, Administrator of the Centers for Medicare & Medicaid Services, approved this document on April 1, 2026.
Administrative practice and procedure, Diseases, Health facilities, Health professions, Medical devices, Medicare Reporting and recordkeeping requirements, Rural areas, X-rays.
Administrative practice and procedure, Health facilities, Medicare, Puerto Rico, and Reporting and recordkeeping requirements.
Diseases, Health facilities, Medicare, Puerto Rico, and Reporting and recordkeeping requirements.
Health facilities, Health professions, Medicare, Reporting and recordkeeping requirements.
Hospitals, Medicare, and Reporting and recordkeeping requirements.
Administrative practice and procedure, Health facilities, Health maintenance organizations (HMO), Health professions, Health records, Medicaid, Medicare, Penalties, Privacy, and Reporting and recordkeeping requirements.
Administrative practice and procedure, Health care, Health facilities, Health insurance, Intergovernmental relations, Medicare, Penalties, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare and Medicaid Services is proposing to amend 42 CFR Chapter IV as set forth below:
42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).
(d) * * *
(1) * * *
(ii) A final decision by a CMS reviewing official (as described in § 405.1834(f)(1) of this subpart) or the Administrator (as described in §§ 405.1834 and 405.1875(e)(4) of this subpart) following review of a hearing decision by the contractor, the Board or the CMS reviewing official, as the case may be.
(a) * * *
(2) With the exception of an IOPO or histocompatibility laboratory, the amount in controversy (as determined in accordance with § 405.1839) must be at least $1,000 but less than $10,000. An IOPO or histocompatibility laboratory is subject to the amount in controversy requirement specified in § 413.420(g).
(c) * * *
(3) Unless the provider qualifies for a good cause extension under § 405.1813, the date of receipt by the contractor of the provider's hearing request must be no later than 180 days after the date of receipt by the provider of the final contractor or Secretary determination. An IOPO or histocompatibility laboratory is subject to the amount in controversy requirement specified in § 413.420(g).
(e) * * *
(1) A decision denying an extension request under this section and dismissing the appeal is final and
(i) Reviewed by a CMS reviewing official in accordance with § 405.1834(b)(2)(i) of this subpart;
(ii) Reviewed by the Administrator; or
(iii) Reopened and revised by the contractor hearing officer(s) in accordance with §§ 405.1885 through 405.1889 of this subpart.
(2) The contractor hearing officer(s) promptly sends the decision to the appropriate component of CMS (currently the Center for Medicare) (as specified in § 405.1834(b)(4) of this subpart).
(3) A decision granting an extension request under this section is not subject to immediate review by a CMS reviewing official (as described in § 405.1834(b)(3) of this subpart). Any decision may be examined during—
(i) The course of a CMS reviewing official's review of a final jurisdictional dismissal decision or a final hearing decision by the contractor hearing officer(s) (as described in § 405.1834(b)(2)(i) and (ii) of this subpart); or
(ii) The Administrator's review of a CMS reviewing official decision.
(a) * * *
(5) Final jurisdictional findings and jurisdictional dismissal decisions by the contractor hearing officer(s) are subject to the CMS reviewing official procedure in accordance with paragraph (d) of this section and § 405.1834(b)(2)(i) and (b)(2)(ii) of this subpart, as well as the possibility of review by the Administrator as described in § 405.1834(g).
(c) * * *
(3) A jurisdictional dismissal decision by the contractor hearing officer(s) under paragraph (c)(2) of this section is final and binding on the parties, unless the decision is—
(i) Reviewed by a CMS reviewing official in accordance with § 405.1834 of this subpart;
(ii) Is subsequently reviewed by the Administrator in accordance with § 405.1834 of this subpart; or
(iii) Reopened and revised by the contractor hearing officer(s) in accordance with §§ 405.1885 through 405.1889 of this subpart.
(d)
(d) * * *
(2)
(i) Upon notice to the contractor hearing officer that the provider intends to seek immediate review of a ruling, or that the contractor or other affected nonparty intends to suggest that the CMS reviewing official or the Administrator, take own motion review of the ruling, the contractor hearing officer stays all proceedings affected by the ruling.
(iii) If the CMS reviewing official or the Administrator—
(a) A contractor hearing decision issued in accordance with § 405.1831 of this subpart is final and binding on all parties to the contractor hearing and on the contractor, unless the contractor hearing decision is—
(1) Reviewed by a CMS reviewing official or by a CMS reviewing official and then is in turn reviewed by the Administrator in accordance with § 405.1834 of this subpart; or
(2) Reopened and revised by the contractor hearing officer(s) in accordance with §§ 405.1885 through 405.1889 of this subpart.
(b) Final contractor hearing decisions are subject to the provisions of § 405.1803(d) of this subpart.
The revisions and additions read as follows:
(a)
(b) * * *
(1) * * *
(ii) The CMS reviewing official exercises this review authority in response to a request from a provider party to the appeal that meets the requirements of paragraph (c) of this section, or in response to a request from CMS, or may exercise his or her discretion to take own motion review.
(4) The contractor hearing officer(s) must promptly send copies of any decision specified in paragraph (b)(2) or (b)(3) of this section or in § 405.1821(d)(2) of this subpart and the underlying contractor hearing officer's administrative record to the appropriate component of CMS (currently the Center for Medicare).
(i) * * *
(ii) The appropriate CMS component examines each contractor hearing officer decision that is reviewable under paragraph (b)(2) or (b)(3) of this section or § 405.1821(d)(2) of this subpart, along with any review requests and any other
(c)
(1) * * *
(i) The date of receipt by the appropriate CMS component of the review request is no later than 60 days after the date of receipt by the provider of the contractor hearing officer decision; and
(3) A request from a party or CMS for immediate review of a contractor hearing officer ruling authorizing discovery or disclosure in accordance with paragraph (b)(3) of this section must—
(i) Be made as soon as practicable after the ruling is made, but in no event later than 5 business days after the date the requesting party or CMS received notice of the ruling; and
(d)
(1) The CMS reviewing official has discretion to take own motion review of a contractor hearing officer decision (regardless in either case of whether the decision was favorable or unfavorable to the provider) or other reviewable action.
(4) If the CMS reviewing official does not notify the parties and the contractor that he or she intends to review the contractor hearing officer decision or other reviewable action within 90 days after the date of the contractor hearing officer's decision, then the Administrator may issue a notice instructing the CMS reviewing official to review the contractor hearing officer decision and issue a decision if the CMS reviewing official fails to do so.
(i) The Administrator promptly provides copies of the notice instructing the CMS reviewing official to review the contractor hearing officer decision to the parties, the contractor, and to the appropriate component of CMS.
(ii) After the CMS reviewing official's receipt of the Administrator's notice (instructing the CMS reviewing official to review the contractor hearing officer decision and issue a decision), the CMS reviewing official must allow the parties a reasonable period to comment on the issues identified by the Administrator for review.
(5) If no party requests review of the contractor hearing decision and the CMS reviewing official does not take review on his or her own motion or at the direction of the Administrator within the time periods specified in this paragraph, the contractor hearing officer decision is final in accordance with § 405.1833 of this subpart.
(e) * * *
(1) In reviewing a contractor hearing officer decision specified in paragraph (b)(2) or (b)(3) of this section, the CMS reviewing official must—
(3) Upon completion of the review of a contractor hearing decision specified in paragraph (b)(2) or (b)(3) of this section, the CMS reviewing official issues a written decision that includes findings of fact and conclusions of law on jurisdictional issues and on the merits of each issue under review over which the CMS reviewing official has jurisdiction and affirms, reverses, or modifies the contractor hearing decision or remands the contractor hearing decision to the contractor hearing officer for further proceedings. A copy of the decision must be sent promptly to each party, to the contractor, and to the appropriate component of CMS (currently the Center for Medicare).
(f)
(1) A decision of affirmation, reversal, or modification by the CMS reviewing official is final and binding on each party and the contractor, except as set forth in paragraph (g) of this section. The CMS reviewing official's decision may be reopened and revised by the CMS reviewing official in accordance with §§ 405.1885 through 405.1889 of this subpart. Decisions of a CMS reviewing official are subject to the provisions of § 405.1803(d) of this subpart. A decision by a CMS reviewing official remanding an appeal to the contractor hearing officer(s) for further proceedings under paragraph (f)(2) of this section is not a final decision.
(2) A remand to the contractor hearing officer(s) by the CMS reviewing official must do all of the following:
(3) The CMS reviewing official must promptly send copies of the CMS reviewing official decision, along with any other submissions made by a party or CMS in accordance with the provisions of this section, to the appropriate component of CMS (currently the Center for Medicare) and to the Administrator c/o the CMS Office of the Attorney Advisor.
(g)
(1) CMS or any party to a CMS reviewing official decision may request Administrator review of a CMS reviewing official decision in accordance with this section. No other provider, individual, or entity may request review. The Administrator may grant or deny review of a CMS reviewing official decision at his or her discretion. The Administrator may also review any decision of the CMS reviewing official on his or her own motion (regardless of whether the decision was favorable or unfavorable to the provider).
(2) A party or CMS may request that the Administrator review a CMS reviewing official decision within 15 days of their receipt of a final CMS reviewing official decision.
(i) All requests for Administrator review and any other submissions to the Administrator under this paragraph must be sent to the Office of the Attorney Advisor. The request for review must be in writing, attach a copy of the CMS reviewing official decision for which it seeks review, and include a brief description of all of the following:
(A) Those aspects of the CMS reviewing official decision with which the requestor is dissatisfied.
(B) The reasons for the requestor's dissatisfaction.
(C) Any argument or record evidence the requestor believes supports its position.
(D) Any additional, extra-record evidence relied on by the provider, along with a demonstration that such evidence was improperly excluded in proceedings below (as described in § 405.1823 of this subpart).
(ii) The Administrator must issue a Notice advising the parties of his or her intent to review or to decline to review within 30 days of the Administrator's receipt of a request for review from CMS or any party to the CMS reviewing official's decision. That Notice must be promptly sent to the parties, the contractor, and the appropriate component of CMS. A Notice advising the parties of the Administrator's intent to review must contain a brief statement of the issues under “review and solicit comments from the parties, the contractor, and CMS. A Notice that the Administrator is declining to review need not set forth the basis for the Administrator's decision to decline review the CMS reviewing official's decision.
(iii) If the Administrator declines to review the reviewing official decision or the Administrator does not issue a determination regarding review of the reviewing official decision within 30 days of the Administrator's receipt of a request to review, the decision of the CMS reviewing official is final. Upon
(3) Within 45 days of the Administrator's receipt of a CMS reviewing official's decision, the Administrator may issue a Notice of Review on his or her own motion. The Notice of Review must be sent to the parties, the contractor, and the appropriate component of CMS. The Notice of Review must contain a brief statement of the issues under review and solicit comments from the parties, contractor, and CMS. If the Administrator does not issue a determination regarding his or her own motion review within 45 days of the Administrator's receipt of a CMS reviewing official's decision, the decision of the CMS reviewing official is final.
(4) If the Administrator elects to review the CMS reviewing official's decision—
(i) The Administrator will set deadlines for the parties and affected nonparties to submit comments; and
(ii) The Administrator's decision affirming, reversing, or modifying the CMS reviewing official's decision is final and binding on each party and the contractor. A decision remanding an appeal to the CMS reviewing official, contractor hearing officer(s) is not a final decision. Decisions of the Administrator are subject to the provisions of § 405.1803(d) of this subpart.
(5) If the Administrator does not issue a written decision that affirms, reverses, modifies or remands the CMS reviewing official's decision within 60 days of the date of issuance of the Notice of Review, the CMS reviewing official's decision becomes final in accordance with paragraph (f)(1) of this section.
(6) The Administrator may remand the CMS reviewing official's decision to the CMS reviewing official, to the contractor hearing officer, or to the contractor. A remand by the Administrator must do all of the following:
(i) Vacate the CMS reviewing official's and/or the contractor hearing officer decisions as to the specific issues remanded.
(ii) Be governed by the same criteria that apply to remands by the Administrator to the Board under § 405.1875(f)(2) of this subpart, and require the entity to which the matter is remanded to take specific actions on remand.
(iii) Result in the CMS reviewing official, contractor hearing officer(s), or contractor taking the actions required on remand and issuing a new decision.
42 U.S.C. 1302 and 1395hh.
(g)
When reporting eCQMs under the PCHQR Program, PCHs must use all of the following:
(1) Health information technology (IT) certified to the ONC Health IT Certification Program certification criteria necessary for eCQM reporting, as adopted and updated at 45 CFR 170.315(c).
(2) Certified health IT described in paragraph (g)(1) to calculate, export, and submit results for the eCQMs available to report under the PCHQR Program.
(3) The eCQM electronic measure specifications for the applicable reporting period available on the Electronic Clinical Quality Improvement Resource Center website at
(c)
(d)
(1)(i) For applications submitted for new technology add-on payments for FYs 2021 through 2027, inclusive, a new medical product is designated by FDA as a Qualified Infectious Disease Product and has received marketing authorization for the indication covered by the Qualified Infectious Disease Product designation; or
(ii) For applications submitted for new technology add-on payments for FYs 2022 through 2027, inclusive, a new medical product is approved under FDA's Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD) and used for the indication approved under the LPAD pathway.
(f)
(1)(i) CMS considers whether a new medical service or technology meets the eligibility criteria specified in paragraph (b) of this section and announces the results in the
(ii) CMS only considers any particular new medical service or technology for add-on payments under paragraph (b) of this section.
(2) CMS only considers, for add-on payments for a particular fiscal year, an application for which the new medical service or technology has received FDA marketing authorization by May 1 prior to the particular fiscal year.
(f) * * *
(1) * * *
(i) The resident must be enrolled in an approved teaching program. An approved teaching program is one that meets one of the following requirements, subject to the requirements in § 413.84 of this chapter:
(A) Is approved by one of the national organizations listed in § 415.152 of this chapter.
(B) May count towards certification of the participant in a specialty or subspecialty listed in the current edition of either of the following publications:
(
(
(C) Is approved by the Accreditation Council for Graduate Medical Education (ACGME), or other organization designated by the Secretary, as a fellowship program in geriatric medicine.
The revision and addition read as follows:
(c) * * *
(1) To demonstrate proximity to the area, the hospital must submit evidence from a nationally recognized electronic mapping service of the shortest route from the front entrance of the hospital over improved roads or waterways traveled by ferry boats to the county line of the requested area and the distance of that route.
(d) * * *
(6)
42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww.
(c) * * *
(10) Costs incurred by providers for entertainment, including costs associated with entertainment activities, or that are entertainment in nature, are not allowable costs.
(i) This paragraph (c)(10) includes costs that OPOs incur to engage in public education to increase awareness of organ donation and increase donor registration.
(ii) Non-allowable entertainment costs include, but are not limited to the following:
(A) Tickets, admission fees, or entry to sporting or other events, including national or professional sporting events.
(B) Sponsorship of sporting events, teams or athletes, including race car drivers or motorsports activities.
(C) Sponsorship of floats in national parades.
(D) Concert, theater, or performing arts events, professional musicians or other entertainers.
(E) Wine tours or alcoholic beverages.
(F) Retreats held at spas or luxury resorts, spa services or treatments.
(G) Golf outings, ski trips, cruises, and similar recreational excursions.
(11) Costs incurred by OPOs to engage in public education within its donation service area to increase awareness of organ donation and increase donor registration are allowable if they are reasonable and do not violate paragraph (c)(10) of this section.
(12) Costs incurred by providers for anyone for purposes of employee and non-employee entertainment activities and employee morale which include, but are not limited to, picnics, parties, performers, entertainment, award ceremonies or the sponsorship of scholarships or athletic programs are not allowable costs.
(13) Costs incurred by providers to furnish alcoholic beverages to anyone are not allowable costs.
(14) Costs incurred by OPOs—
(14) Costs incurred by OPOs—
(i) For professional education such as meetings, seminars, and presentations on organ donation to acquire all useable organs from potential donors where continuing education credits are not given and where the attendee is clinical staff such as OPO staff, donor hospital staff, and physicians are allowable costs; and
(ii) For OPO-sponsored seminars where continuing education credits are given and where the attendee is on the OPO staff are allowable costs to the extent that they are patient care related, reasonable and necessary; and
(iii) For OPO-sponsored seminars where continuing education credits are given and where the attendee is not on the OPO staff, in accordance with § 413.402(d)(2)(v) are not allowable costs.
(15) Costs incurred by providers—
(i) For employee travel are generally allowable to the extent that they are patient care related, reasonable and necessary. Costs for travel not related to patient care are not allowable costs;
(ii) To conduct, or send its employees or staff to, patient care related professional education refresher programs, seminars and workshops that increase the quality of patient care or operating efficiency of the provider, are generally allowable costs to the extent that they are patient care related, reasonable and necessary;
(iii) For entertainment and vacation travel expenses such as travel on cruises or to resorts or spas, or transportation to entertainment or sporting events, are not allowable costs regardless of whether they are or are not incurred in connection with professional educational seminars or continuing education; and
(iv) Related to the personal use of provider vehicles are not allowable costs.
(16) Costs incurred by providers—
(i) For meals sold to visitors, meals for their employees and staff (including executives and management) and non-personnel (including attending physicians) are not allowable costs.
(ii) For meals and refreshments provided to attendees at educational events, including attendees of OPO-sponsored seminars (with or without continuing education credits) are not allowable costs.
(17) Costs incurred by providers for drugs sold to other than patients are not related to patient care and are not allowable costs.
(18) Costs incurred by providers for cost of fines or penalties resulting from Federal, State or local laws are not allowable costs.
(19) Costs incurred by providers for operation of a gift shop are not allowable costs.
(b) * * *
(3)
(c) * * *
(4) Providers are expected to economize by not paying more than the going price for an item or service and seeking to minimize their costs, so that their actual costs will not exceed what a prudent and cost-conscious buyer would pay for a given item or service. If costs are determined to exceed the level that prudent buyers incur, the excess costs are not reimbursable in the absence of clear evidence that the higher costs were unavoidable.
(d) * * *
(8)
(i) Providers must employ either or both methods described in paragraphs (d)(8)(ii) or (iii) of this section, if needed, to prevent the improper allocation of overhead on the Medicare cost report.
(ii)
(A) On the Medicare cost report, in any column using accumulated costs as the statistical basis for allocating costs, providers must identify any cost center that is not to receive an allocation by entering a negative 1 (-1) on the appropriate line in the accumulated cost column, or by entering the total accumulated cost as a negative amount on the appropriate line in the reconciliation column. For those cost centers using accumulated costs that are to receive partial allocation of costs, providers must enter a negative amount for the costs that are to be excluded from the statistic on the appropriate line in the reconciliation column.
(B) Cost centers that are not to receive an allocation must not have entries in both the reconciliation and accumulated cost columns when the accumulated cost statistic is offset to zero.
(C) For those cost centers that are to receive partial allocation of costs for costs other than purchased services, the cost to be excluded from the accumulated cost statistic must be reported as a negative amount on the effected cost center in the reconciliation column. This results in entries in both the reconciliation column and accumulated cost statistic column simultaneously for the same line (cost center).
(iii)
(iv)
(A) A provider that wishes to change its cost finding method must submit a request to its contractor, in writing, 90 days prior to the end of the cost reporting period to which the provider's request for change applies.
(B) The contractor's determination of a provider's request to change methods will be furnished to the provider in writing and will be binding on the provider as of the date of the contractor's written notice.
(C) When the contractor approves the provider's request to change methods, the provider must use this method for the cost reporting period to which the request applies and for all subsequent cost reporting periods, unless the contractor approves a subsequent request by the provider to change its cost finding methods.
(b)
(i) Is approved by one of the national organizations listed in § 415.152 of this chapter.
(ii) May count towards certification of the participant in a specialty or subspecialty listed in the current edition of either of the following publications:
(A) The Directory of Graduate Medical Education Programs published by the American Medical Association, and available from American Medical Association, Department of Directories and Publications, 515 North State Street, Chicago, Illinois 60610.
(B) The Annual Report and Reference Handbook published by the American Board of Medical Specialties, and available from American Board of Medical Specialties, One Rotary Center, Suite 805, Evanston, Illinois 60201.
(iii) Is approved by the Accreditation Council for Graduate Medical Education (ACGME), or other organization designated by the Secretary, as a fellowship program in geriatric medicine.
(l) For purposes of this section, a new medical residency training program means a program that receives initial accreditation by the appropriate accrediting body or begins training residents on or after January 1, 1995, and that meets the following conditions:
(1) Subject to the provisions of paragraphs (l)(2) and (l)(3) of this section, effective for programs started on or after October 1, 2026, at least 90 percent of the individual residents that participate in the program during the 5-year cap building period (that is, for new urban teaching hospitals, during the first 5 program years of the first new program's existence under paragraph (e)(1) of this section; and for rural hospitals, during the first 5 program years of each new program under paragraph (e)(3) of this section) must not have previous experience training in another program in the same specialty.
(2) For purposes of determining whether a program satisfies the requirement under paragraph (l)(1) of this section, the count of individual residents excludes an individual—
(i) With previous experience training in another program in the same specialty who enters the program as a first-year resident through the National Resident Matching Program or another binding third-party resident matching program; or
(ii) Who meets the definition of a “displaced resident” under paragraph (h)(1)(iii) of this section.
(3) The requirement under paragraph (l)(1) of this section does not apply to a program accredited for 16 or fewer resident positions.
(a) An approved medical residency training program, as defined in §§ 412.105(f)(1)(i), 413.75(b), and 415.152 of this chapter, or an approved nursing and allied health education program, as defined in § 413.85 of this chapter, must not discriminate, or promote or encourage discrimination, on the basis of race, color, national origin, sex, age, disability, or religion, including the use of those characteristics or intentional proxies for those characteristics as a selection criterion for employment, program participation, resource allocation, or similar activities, opportunities, or benefits.
(b) An accrediting organization of approved medical residency training programs under §§ 412.105(f)(1)(i), 413.75(b), and 415.152 of this chapter, or of approved nursing and allied health education programs under § 413.85 of this chapter, and any publications cited in the regulations that list specialties or subspecialties of such programs, must not use criteria that discriminate, or promote or encourage discrimination, on the basis of race, color, national origin, sex, age, disability, or religion, including the use of those characteristics or intentional proxies for those characteristics as a selection criterion for employment, program participation, resource allocation, or similar activities, opportunities, or benefits.
(c) Approved medical residency training programs and approved nursing and allied health education programs include programs that would be accredited except for the accrediting agency's reliance upon an accreditation standard that requires an entity to—
(1) Discriminate, or promote or encourage discrimination, on the basis of race, color, age, disability, or religion, including the use of those characteristics or intentional proxies for those characteristics as a selection criterion for employment, program participation, resource allocation, or similar activities, opportunities, or benefits; or
(2) Perform an induced abortion or require, provide, or refer for training in the performance of induced abortions, or make arrangements for such training, regardless of whether the standard provides exceptions or exemptions.
The revisions read as follows:
(c)
(d) * * *
(2) * * *
(i) Subject to the provisions of paragraphs (d)(2)(ii) and (iii) of this section, the net cost of approved educational activities is determined as follows:
(A) Determine allowable direct costs incurred by the provider for trainee stipends and compensation of faculty employed by the provider.
(B) Subtract from those direct costs the revenues the provider receives from students or on behalf of students enrolled in the program, such as, but not limited to, tuition, student fees, or textbooks purchased for resale.
(C) Allocate indirect costs of the activities as determined under the Medicare cost-finding principles in § 413.24, limited to those costs that the provider itself incurs as a consequence of operating the approved educational activities.
(ii) The direct and indirect allowable costs of educational activities do not include patient care costs, costs incurred by a related organization, or costs that constitute a redistribution of costs from an educational institution to a provider or costs that have been or are currently being provided through community support.
(e)
(a)
(d) * * *
(2) * * *
(v) Costs associated with and incurred for OPO-sponsored seminars where continuing education credits are given and where the attendee is not on the OPO's staff (as described at § 486.326(b)). Costs incurred by OPOs for public education within their donation service area in accordance with § 413.5(c)(11) and professional education in accordance with § 413.5(c)(14)(iii) are allowable overhead costs.
The additions and revision read as follows:
(b) * * *
(3) * * *
(ii)* * *
(C) * * *
(
(c)
(d)
(1)
(i)
(ii)
(iii)
(iv)
(A) Costs of organs acquired from other THs or OPOs.
(B) Costs of transportation as specified in § 413.402(b)(8).
(C) Surgeons' fees for excising deceased donor organs (limited to $1,250 for kidneys).
(D) Costs of tissue typing services, including those furnished by independent laboratories.
(E) Organ preservation and perfusion costs.
(F) General routine and special care service costs (for example, intensive care unit or critical care unit services related to the donor).
(G) Operating room and other inpatient ancillary service costs.
(v)
(2)
The revisions and additions read as follows:
(a) * * *
(1) Covered services furnished by IOPOs and HCLs in connection with organ acquisition and transplantation are reimbursed under the principles for determining reasonable cost contained in this part as follows:
(i) For kidney acquisition and transplantation services, IOPOs and HCLs are reimbursed under the principles for determining reasonable cost.
(ii) For non-renal organ acquisition and transplantation services furnished for cost reporting periods beginning on or after October 1, 2027, IOPOs and HCLs are reimbursed under the principles for determining reasonable cost.
(2) Services furnished by IOPOs and HCLs, that have an agreement with the Secretary in accordance with paragraph (c) of this section, are paid directly by
(c) Agreements with IOPOs and HCLs.
(1) Any IOPO or HCL that wishes to have the cost of its pre-transplant services reimbursed under the Medicare program must file an agreement with CMS under which the IOPO or HCL agrees to do all of the following:
(ii) To permit CMS to designate a contractor to determine the interim reimbursement rate, payable by the THs or OPOs for services provided by the IOPO or HCL, and to determine Medicare's reasonable cost based upon the cost report filed by the IOPO or HCL.
(iv) To pay to CMS amounts that have been received or are receivable by IOPOs or HCLs from THs and OPOs, and that are determined to be in excess of the reasonable cost of the services provided by the IOPO or HCL.
(d) * * *
(1) THs with approved transplant programs and OPOs pay the IOPO or HCL for their pre-transplantation services on the basis of interim rates established by the contractor for that IOPO or HCL, as follows:
(i) THs with approved kidney transplant programs and OPOs pay the IOPO or HCL for their kidney pre-transplantation services, based on interim rates established by the contractor for that IOPO or HCL.
(ii) THs with approved non-renal transplant programs and OPOs pay the IOPO or HCL for their non-renal organ pre-transplantation services furnished for cost reporting periods beginning on or after October 1, 2027, based on interim rates established by the contractor for that IOPO or HCL.
(2) The interim rates are contractor established rates, based on costs associated with procuring an organ for transplantation incurred by an IOPO or HCL, respectively, during its previous fiscal year, as follows:
(i) The interim rates for kidneys are a contractor established kidney SAC or contractor established rates, based on costs associated with procuring kidneys for transplantation, incurred by an IOPO or HCL, respectively, during its previous fiscal year. If there is not adequate cost data to determine the initial interim rate, the contractor determines it according to the IOPO's or HCL's estimate of its projected costs for the fiscal year.
(ii) For services furnished for cost reporting periods beginning on or after October 1, 2027, the interim rates for non-renal organs are contractor established non-renal organ-specific SACs or contractor established rates, based on costs associated with procuring each specific type of non-renal organ for transplantation incurred by an IOPO or HCL, respectively, during its previous fiscal year. If there is not adequate cost data to determine the initial interim rates, the contractor determines them according to the IOPO's or HCL's estimate of its projected costs for the fiscal year.
(3) Payments or amounts payable from THs and OPOs based on interim rates specified in paragraph (d)(2)(i) of this section are reconciled directly with the IOPO or HCL after the close of the IOPO's or HCL's fiscal year in accordance with § 413.420(e). For cost reporting periods beginning on or after October 1, 2027, payments or amounts payable from THs and OPOs based on interim rates specified in paragraph (d)(2)(ii) of this section are reconciled directly with the IOPO or HCL after the close of the IOPO's or HCL's fiscal year in accordance with § 413.420(e).
(4) When a contractor establishes interim rates for IOPOs and HCLs, it must disseminate those interim rates to all THs, OPOs, and contractors.
(e) * * *
(2) * * *
(i)
(ii)
(3)
(i)
(ii)
(g)
42 U.S.C. 1302 and 1395h(h).
(1) A residency program approved by the Accreditation Council for Graduate Medical Education, by the American Osteopathic Association, by the Commission on Dental Accreditation of the American Dental Association, or by the Council on Podiatric Medical Education of the American Podiatric Medical Association, or other organization determined by the Secretary.
42 U.S.C. 1302, 1395l(t), and 1395hh.
(c) * * *
(2) * * *
(ii) For devices for which pass-through payment status began on or after January 1, 2020, and on or before January 1, 2028 for applications received through September 30, 2026, as an alternative pathway to paragraph (c)(2)(i) of this section, a new device is part of the Food and Drug Administration's (FDA's) Breakthrough Devices Program and has received marketing authorization for the indication covered by the Breakthrough Device designation.
42 U.S.C. 1302 and 1395hh.
(2) * * *
(i) For 2019 through 2026, at 45 CFR 170.315(a)(12) (family health history) and 45 CFR 170.315(e)(3) (patient health information capture); and
(ii) * * *
(A) For 2019 through 2026, the applicable measure calculation certification criterion at 45 CFR 170.315(g)(1) or (2) for all certification criteria that support a meaningful use objective with a percentage-based measure.
42 U.S.C. 1302, 1315a, and 1395hh.
The additions and revision read as follows:
(1) The IPPS under—
(i) MS-DRG 402, 426, 427, 428, 429, 430, 447, 448, 450, 451, 471, 472, 473; and
(ii) On or after October 1, 2026 MS-DRG 523, 524, 525.
(2) The OPPS under HCPCS codes 22551, 22554, 22612, 22630, or 22633.
(d) * * *
(4) * * *
(i) IPPS discharge under—
(A) MS-DRG 402, 426, 427, 428, 429, 430, 447, 448, 450, 451, 471, 472, 473; and
(B) On or after October 1, 2026 MS-DRG 523, 524, 525; or
(b) * * *
(4) The beneficiary is in a CJR-X episode and has a procedure performed at a TEAM participant during the 90-day post-discharge period after a CJR-X anchor hospitalization or CJR-X anchor procedure.
The revisions read as follows:
(b) * * *
(6)
(i) CMS applies risk adjustment multipliers, as specified in § 512.545(a)(1) through (3), to the most recent baseline year episodes for performance year 1 and to the entire baseline period episodes starting in performance year 2, to calculate the estimated risk-adjusted target price for all performance year episodes.
(ii) CMS divides the mean of the benchmark price for each episode across all hospitals and regions by the mean of the estimated risk-adjusted benchmark price calculated in § 512.540(b)(6)(i) for the same episode types across all hospitals and regions.
(7) Prospective and updated trend factors.
(
(A) CMS calculates a multiplier for each MS-DRG/HCPCS episode type and region which is applied to the most recent calendar year of the applicable baseline period.
(B) The multiplier is calculated using linear regression on the logarithmically
(C) CMS exponentiates the coefficient from this regression to calculate the estimated annual change (where an exponentiated coefficient of 1 signifies no change) in average regional spending for each MS-DRG/HCPCS episode type from year to year.
(D) CMS squares the value in paragraph (C) to calculate the 2-year prospective trend factor.
(ii)
(A) The prospective trend factor specified in paragraph (b)(7)(i) of this section.
(B) The APC update factor as specified in this paragraph (B). CMS calculates an APC update factor, after the corresponding calendar year inputs are published in the CY OPPS/ASC final rule, as the ratio of benchmark prices calculated with APC weights corresponding to the calendar year of the performance year to benchmark prices calculated with APC weights corresponding to the calendar year prior to the performance year.
(C) The MS-DRG update factor as specified in this paragraph (C). CMS calculates an MS-DRG update factor, after the corresponding fiscal year inputs are published in the FY IPPS/LTCH PPS final rule, for episodes with anchor hospitalization or anchor procedure end dates in the fourth quarter of a performance year as the ratio of benchmark prices calculated with the second fiscal year inputs to benchmark prices calculated with the first fiscal year inputs.
(8)
The revisions and additions read as follows:
(d)(1) At the time of reconciliation, the preliminary target prices computed under § 512.540 are risk adjusted by applying the applicable beneficiary level and hospital-level risk adjustment factors specific to the beneficiary in the episode, as set forth in paragraphs (a)(1) through (6) of this section.
(2) CMS applies the coefficients estimated with the assigned first fiscal year MS-DRG/HCPCS inputs, as determined in § 512.550(c)(1), for episodes with anchor hospitalizations or anchor procedure end date in the fourth quarter of a performance year.
(e) * * *
(1) * * *
(ii) Episodes with anchor hospitalization or anchor procedure end dates in the fourth quarter of a performance year are calculated specific to the assigned first and second fiscal year MS-DRG/HCPCS episode type and region combination, as determined in § 512.550(c)(1). The benchmark prices and risk adjustment coefficients are calculated with the assigned first fiscal year MS-DRG/HCPCS inputs and applied to the realized case mix of the second fiscal year MS-DRG/HCPCS.
(iii) As applied, cannot exceed ±5 percent of the prospective normalization factor (as specified in § 512.540(b)(6)).
(2) * * *
(ii) For episodes with anchor hospitalization or anchor procedure end dates in the fourth quarter of a performance year, the final normalization factor is applied to each assigned first and second fiscal year MS-DRG/HCPCS episode type and region combination.
(f) CMS calculates a multiplier, referred to as the capped retrospective trend factor, for each MS-DRG/HCPCS episode type and region, which is applied during reconciliation to the most recent calendar year of the applicable baseline period.
(1)(i) The retrospective trend factor is calculated as the average regional capped performance year episode spending for each MS-DRG/HCPCS episode type divided by the average regional capped baseline period episode spending for each MS-DRG/HCPCS episode type.
(ii) For episodes with anchor hospitalization or anchor procedure end dates in the fourth quarter of a performance year, CMS calculates the retrospective trend factor as the average regional capped performance year episode spending specific to the second fiscal year MS-DRG/HCPCS episode type divided by the average regional capped baseline period episode spending calculated with the assigned first fiscal year MS-DRG/HCPCS inputs.
(2) The retrospective trend factor is capped so that the maximum difference cannot exceed ±3 percent of the updated prospective trend factor (as specified in § 512.540(b)(7)).
(3)(i) CMS applies the capped retrospective trend factor to the previously calculated normalized, risk adjusted target prices specific to each region and MS-DRG/HCPCS episode type, as specified in paragraph (e)(2) of this section, to calculate the reconciliation target prices, which are compared to performance year spending at reconciliation, as specified in § 512.550(c).
(ii) For episodes with anchor hospitalization or anchor procedure end dates in the fourth quarter of a performance year, the capped retrospective trend factor is applied specific to each assigned first and second fiscal year MS-DRG/HCPCS episode type and region combination.
The additions read as follows:
(a) * * *
(4) For performance year 4:
(i) For all episode categories: Hybrid Hospital-Wide All-Cause Readmission Measure with Claims and Electronic Health Record Data (CMIT ID #356) with a July 1, 2026 through June 30, 2027 CQS baseline period.
(ii) For all episode categories: Hospital Harm—Falls with Injury (CMIT ID #1518) with a CY 2028 CQS baseline period.
(iii) For all episode categories: Hospital Harm—Postoperative Respiratory Failure (CMIT ID #1788) with a CY 2028 CQS baseline period.
(iv) For all episode categories: Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with Complications (ISCMR) (CMIT ID #134) with a July 1, 2025 through June 30, 2027 CQS baseline period.
(v) For LEJR episodes: Hospital-Level Total Hip and/or Total Knee Arthroplasty (THA/TKA) Patient-Reported Outcome-Based Performance Measure (PRO-PM) (CMIT ID #1618) with a July 1, 2026 through July 30, 2027 CQS baseline period.
(vi) For LEJR and Spinal Fusion episodes: Information Transfer PRO-PM (CMIT ID #1797) with a CY 2028 CQS baseline period.
(5) For performance year 5:
(i) For all episode categories: Hybrid Hospital-Wide All-Cause Readmission Measure with Claims and Electronic Health Record Data (CMIT ID #356) with a July 1, 2027 through June 30, 2028 CQS baseline period.
(ii) For all episode categories: Hospital Harm—Falls with Injury (CMIT ID #1518) with a CY 2029 CQS baseline period.
(iii) For all episode categories: Hospital Harm—Postoperative Respiratory Failure (CMIT ID #1788) with a CY 2029 CQS baseline period.
(iv) For all episode categories: Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with Complications (ISCMR) (CMIT ID #134) with a July 1, 2026 through June 30, 2028 CQS baseline period.
(v) For LEJR episodes: Hospital-Level Total Hip and/or Total Knee Arthroplasty (THA/TKA) Patient-Reported Outcome-Based Performance Measure (PRO-PM) (CMIT ID #1618) with a July 1, 2027 through July 30, 2028 CQS baseline period.
(vi) For LEJR and Spinal Fusion episodes: Information Transfer PRO-PM (CMIT ID #1797) with a CY 2029 CQS baseline period.
(c) * * *
(1) CMS assigns a first fiscal year MS-DRG by identifying diagnosis or procedure codes that change between the first and second fiscal year of the performance year per the fiscal year final payment rule MS-DRG definitions, for each episode with an anchor hospitalization or anchor procedure end date in the fourth quarter of a performance year. The first fiscal year MS-DRG will match the second fiscal year MS-DRG if there are no mapping changes for an initiating MS-DRG.
(i) CMS does not assign mapping changs for episodes with anchor hospitalization or anchor procedure end dates in the first three quarters of a performance year.
(2) CMS cancels an episode with an anchor hospitalization or anchor procedure end date in the fourth quarter of a performance year, in accordance with § 512.537(b), if the assigned first fiscal year MS-DRG is not specified in § 512.525(d).
(3) CMS determines the performance year spending for each episode included in the performance year (other than episodes that have been canceled in accordance with § 512.537(b)) for each MS-DRG/HCPCS episode type using claims data that is available 6 months after the end of the performance year.
(4) CMS calculates and applies the high-cost outlier cap for performance year episode spending by applying the calculation described in § 512.540(b)(4) to performance year episode spending for each MS-DRG/HCPCS episode type.
(5)(i) CMS applies the adjustments specified in § 512.545 to the preliminary target prices computed in accordance with § 512.540 to calculate the reconciliation target prices for each MS-DRG/HCPCS episode type.
(ii) CMS calculates the reconciliation target prices for each assigned first and second fiscal year MS-DRG/HCPCS episode type for episodes with anchor hospitalization or anchor procedure end dates in the fourth quarter of a performance year.
(6)(i) CMS aggregates the reconciliation target prices computed in accordance with paragraph (c)(3) of this section for all episodes included in the performance year (other than episodes that have been canceled in accordance with § 512.537(b)) for each MS-DRG/HCPCS episode type.
(ii) CMS aggregates the reconciliation target prices for each assigned first and second fiscal year MS-DRG/HCPCS episode type for episodes with anchor hospitalization or anchor procedure end dates in the fourth quarter of a performance year.
(7)(i) CMS subtracts the performance year spending amount determined under paragraphs (c)(1) and (2) of this section from the reconciliation target price amount determined under paragraph (c)(4) of this section for each MS-DRG/HCPCS episode type.
(i) CMS first subtracts the performance year spending amount from the reconciliation target amount for each assigned first and second fiscal year MS-DRG/HCPCS episode type, then sums values for each MS-DRG/HCPCS episode type for episodes with anchor hospitalization or anchor procedure end dates in the fourth quarter of a performance year.
(8) CMS sums the values calculated under paragraph (c)(5) of this section across all MS-DRG/HCPCS episode types to determine the reconciliation amount.
(9)(i) CMS caps the performance year spending amount for each MS-DRG/HCPCS episode type determined under paragraphs (c)(3) and (4) of this section to equal the reconciliation target price computed in accordance with paragraph (c)(5) of this section for episode categories where the TEAM participant did not meet the low volume threshold of at least 31 episodes during the 3-year baseline period.
(ii) Low volume hospital episodes, including episode categories where CMS caps performance year spending, are included in the CQS, as calculated in § 512.547(b), and stop-loss/stop-gain thresholds, as applied at paragraph (e) of this section.
(a)
(b)
(i) Participation in CJR-X.
(ii) Scope of episodes.
(iii) Pricing methodology.
(iv) Quality measures and quality reporting requirements.
(v) Reconciliation and review processes.
(vi) Data Sharing and other requirements.
(vii) Financial arrangements and beneficiary incentives.
(viii) Medicare program waivers.
(c)
For the purposes of this subpart, the following definitions are applicable unless otherwise stated:
(1) Skilled Nursing Facility (SNF).
(2) Home Health Agency (HHA).
(3) Long-Term Care Hospital (LTCH).
(4) Inpatient Rehabilitation Facility (IRF).
(5) Physician.
(6) Nonphysician practitioner.
(7) Therapist in private practice.
(8) Comprehensive Outpatient Rehabilitation Facility (CORF).
(9) Provider of outpatient therapy services.
(10) Physician Group Practice (PGP).
(11) Hospital.
(12) Critical Access Hospital (CAH).
(13) Non-Physician Provider Group Practice (NPPGP).
(14) Therapy Group Practice (TGP).
(1) A member of a PGP, NPPGP, or TGP that has entered into a distribution arrangement with the same PGP, NPPGP, or TGP in which he or she is an owner or employee, and where the PGP, NPPGP, or TGP is a CJR-X collaborator.
(2) An ACO participant or ACO provider/supplier that has entered into a distribution arrangement with the same ACO in which it is participating, and where the ACO is a CJR-X collaborator.
(1) A physician assistant who satisfies the qualifications set forth at § 410.74(a)(2)(i) and (ii) of this chapter.
(2) A nurse practitioner who satisfies the qualifications set forth at § 410.75(b) of this chapter.
(3) A clinical nurse specialist who satisfies the qualifications set forth at § 410.76(b) of this chapter.
(4) A certified registered nurse anesthetist (as defined at § 410.69(b)).
(5) A clinical social worker (as defined at § 410.73(a)).
(6) A registered dietician or nutrition professional (as defined at § 410.134).
(1) Outpatient physical therapy services as defined in § 410.60 of this chapter.
(2) Outpatient occupational therapy services as defined in § 410.59 of this chapter.
(3) Outpatient speech-language pathology services as defined in § 410.62 of this chapter.
(1) Is located in a rural area as defined under § 412.64 of this chapter.
(2) Is located in a rural census tract defined under § 412.103(a)(1) of this chapter.
(1) Physical therapist.
(2) Occupational therapist.
(3) Speech-language pathologist.
(1) Complies with the special provisions for physical therapists in private practice in § 410.60(c) of this chapter;
(2) Complies with the special provisions for occupational therapists in private practice in § 410.59(c) of this chapter; or
(3) Complies with the special provisions for speech-language pathologists in private practice in § 410.62(c) of this chapter.
(a)
(1) CJR-X participants, as defined in § 512.605, must participate in CJR-X, except as specified in paragraph (b) of this section.
(2) CJR-X participants will remain CJR-X participants, unless they no longer meet the definition of CJR-X participant, CMS terminates CJR-X, or the CJR-X participant receives notice of termination from CJR-X in accordance with § 512.165.
(b)
(1) Is a TEAM participant as defined at § 512.505.
(2) Is located in the State of Maryland.
(a)
(1)
(i) A CJR-X participant that selects the AAPM option as provided for in paragraph (a)(1) must provide their CMS electronic health record certification ID in a form and manner and by a date specified by CMS on annual basis prior to the end of each performance year.
(ii) A CJR-X participant that selects the AAPM option as provided for in paragraph (a)(1) must retain documentation of their attestation to CEHRT use and provide access to the documentation in accordance with § 512.135.
(2)
(b)
(1)
(i) The name, TIN, and NPI of the CJR-X collaborator.
(ii) The start date and, if applicable, end date of the sharing arrangement between the CJR-X participant and the CJR-X collaborator.
(2)
(i) The name, TIN, and NPI of the collaboration agent and the name and TIN of the CJR-X collaborator with which the collaboration agent has entered into a distribution arrangement.
(ii) The start date and, if applicable, end date of the distribution arrangement between the CJR-X collaborator and the collaboration agent.
(3)
(i) The name, TIN, and NPI of the downstream collaboration agent and the name and TIN of the collaboration agent with which the downstream collaboration agent has entered into a downstream distribution arrangement.
(ii) The start date and, if applicable, end date of the downstream distribution arrangement between the collaboration agent and the downstream collaboration agent.
(c)
(1) For each physician, nonphysician practitioner, or therapist who is not on a CJR-X participant's financial arrangements list during the performance year but who does have a contractual relationship with the CJR-X participant and participates in CJR-X activities during the performance year:
(i) The name, TIN, and NPI of the physician, nonphysician practitioner, or therapist.
(ii) The start date and, if applicable, the end date of the contractual relationship between the physician, nonphysician practitioner, or therapist and the CJR-X participant.
(d)
(e)
(a) An individual is a CJR-X beneficiary if, upon admission for an anchor procedure or anchor hospitalization, the individual:
(1) Is enrolled in Medicare Parts A and B;
(2) Has Medicare as their primary payer;
(3) Is not eligible for Medicare on the basis of having end stage renal disease, as described at § 406.13 of this chapter;
(4) Is not enrolled in any managed care plan (for example, Medicare Advantage, health care prepayment plans, or cost-based health maintenance organizations);
(5) Is not covered under a United Mine Workers of America health care plan; and
(6) Is in an episode.
(b) The episode is canceled in accordance with § 512.630(e) if at any time during the episode a beneficiary no longer meets all of the criteria in paragraph (a) of this section.
(a)
(1)
(2)
(3)
(4
(i) A detailed explanation of CJR-X and how it might be expected to affect the CJR-X beneficiary's care.
(ii) That the CJR-X beneficiary retains freedom of choice to choose providers, suppliers, and services.
(iii) Explanation of how the CJR-X beneficiary can access care records and claims data through an available patient portal, if applicable, and how to share access to Blue Button® electronic health information with caregivers.
(iv) Explanation of the type of beneficiary-identifiable claims data the CJR-X participant may receive.
(v) A statement that all existing Medicare beneficiary protections continue to be available to the CJR-X beneficiary. These include the ability to report concerns of substandard care to Quality Improvement Organizations or the 1-800-MEDICARE helpline.
(vi) A list of the CJR-X collaborators with which the CJR-X participant has a sharing arrangement. This requirement may be fulfilled by the CJR-X participant including in the detailed notification a publicly available Web address where the CJR-X beneficiary may access the list.
(b)
(1) The notice must be provided no later than the time at which the CJR-X beneficiary first receives an item or service from the CJR-X collaborator during an episode. In circumstances where, due to the CJR-X beneficiary's condition, it is not feasible to provide notification at such time, the notification must be provided to the CJR-X beneficiary or his or her representative as soon as is reasonably practicable.
(2) The CJR-X collaborator must provide to CMS upon request, a list of all CJR-X beneficiaries who received such a notice, including the date on which the notice was provided to the CJR-X beneficiary.
(c)
(1) If the CJR-X participant knows or should have known that the CJR-X beneficiary is considering or has decided to receive a non-covered post-acute care service or other non-covered associated service or supply, the CJR-X participant must notify the CJR-X beneficiary in writing that the service would not be covered by Medicare.
(2) If the CJR-X participant is discharging a CJR-X beneficiary to a SNF after an inpatient hospital stay, and the CJR-X beneficiary is being transferred to or is considering a SNF that would not qualify under the SNF 3-day waiver in § 512.695(b), the CJR-X participant must notify the CJR-X beneficiary in accordance with paragraph (c)(1) of this section that the CJR-X beneficiary will be responsible for payment for the services furnished by the SNF during that stay, except those services that would be covered by Medicare Part B during a non-covered inpatient SNF stay.
(d)
(a)
(1) IPPS discharge under MS-DRG 469, 470, 521, or 522.
(2) OPPS claim for HCPCS codes 27130 or 27447.
(b)
(1) Physicians' services.
(2) Inpatient hospital services (including hospital readmissions).
(3) IPF services.
(4) LTCH services.
(5) IRF services.
(6) SNF services.
(7) HHA services.
(8) Hospital outpatient services.
(9) Outpatient therapy services.
(10) Clinical laboratory services.
(11) DME.
(12) Part B drugs and biologic, except for those excluded under paragraph (c) of this section.
(13) Hospice services.
(14) Part B professional claims dated in the 3 days prior to an anchor hospitalization if a claim for the surgical procedure for the same episode type is not detected as part of the hospitalization because the procedure was performed by the CJR-X participant on an outpatient basis, but the patient was subsequently admitted as an inpatient.
(c)
(1) Select items and services considered unrelated to the anchor hospitalization or the anchor procedure for episodes in the baseline period and performance year, including, but not limited to, the following:
(i) Inpatient hospital admissions for MS-DRGs that group to the following categories of diagnoses:
(A) Oncology.
(B) Trauma medical.
(C) Organ transplant.
(D) Ventricular shunt.
(ii) Inpatient hospital admissions that fall into the following Major Diagnostic Categories (MDCs):
(A) MDC 02 (Diseases and Disorders of the Eye).
(B) MDC 14 (Pregnancy, Childbirth, and Puerperium).
(C) MDC 15 (Newborns).
(D) MDC 25 (Human Immunodeficiency Virus).
(2) New technology add-on payments, as defined in part 412, subpart F of this chapter for episodes in the baseline period and performance year.
(3) Transitional pass-through payments for medical devices as defined in § 419.66 of this chapter for episodes initiated in the baseline period and performance year.
(4) Hemophilia clotting factors provided in accordance with § 412.115 of this chapter for episodes in the baseline period and performance year.
(5) Part B payments for low-volume drugs, high-cost drugs and biologics, and blood clotting factors for hemophilia for episodes in the baseline period and performance year, billed on outpatient, carrier, and DME claims, defined as—
(i) Drug/biologic HCPCS codes that are billed in fewer than 31 episodes in total across all episodes in CJR-X during the baseline period;
(ii) Drug/biologic HCPCS codes that are billed in at least 31 episodes in the baseline period and have a mean allowed cost of greater than $25,000 per episode in the baseline period; and
(iii) HCPCS codes corresponding to clotting factors for hemophilia patients, identified in the quarterly average sales price file for certain Medicare Part B drugs and biologics as HCPCS codes with clotting factor equal to 1, HCPCS codes for new hemophilia clotting factors not included in the baseline period, and other HCPCS codes identified as hemophilia.
(6) Part B payments for low-volume drugs, high-cost drugs and biologics, and blood clotting factors for hemophilia for episodes initiated in the performance year, billed on outpatient, carrier, and DME claims, defined as—
(i) Drug/biologic HCPCS codes that were not captured in the baseline period and appear in 10 or fewer episodes in the relevant performance year;
(ii) Drug/biologic HCPCS codes that were not included in the baseline period, appear in more than 10 episodes in the relevant performance year, and have a mean cost of greater than $25,000 per episode in the relevant performance year; and
(iii) Drug/biologic HCPCS codes that were not included in the baseline period, appear in more than 10 episodes in the relevant performance year, have a mean cost of $25,000 or less per episode in the relevant performance year, and correspond to a drug/biologic that appears in the baseline period but was assigned a new HCPCS code between the baseline period and the relevant performance year.
(iv) HCPCS codes for new hemophilia clotting factors not included in the baseline period.
(d)
(e)
(1) Changes to the MS-DRGs under the IPPS.
(2) Coding changes.
(3) Other issues brought to CMS' attention.
(a)
(b)
(c)
(1) A beneficiary's admission to a CJR-X participant for an anchor hospitalization that is paid under a MS-DRG specified in § 512.625(a); or
(2) A beneficiary's receipt of an anchor procedure billed under a HCPCS code specified in § 512.625(a). If an anchor hospitalization is initiated on the same day as or within 3 days of an outpatient procedure for the same episode type, the episode start date will be that of the outpatient procedure rather than the admission date, and an anchor procedure will not be initiated.
(d)
(1) An episode ends on the 90th day following the date of the anchor procedure or the date of discharge from the anchor hospitalization, as applicable, with the date of the anchor procedure or the date of discharge from the anchor hospitalization being counted as the first day in the 90-day post-discharge period.
(e)
(1) The beneficiary ceases to meet any criterion listed in § 512.620.
(2) The beneficiary dies at any point during the episode.
(3) The episode qualifies for cancellation due to extreme and uncontrollable circumstances. An extreme and uncontrollable circumstance occurs if both of the following criteria are met:
(i) The CJR-X participant has a CCN primary address that—
(A) Is located in an emergency area, as those terms are defined in section
(B) Is located in a county, parish, or tribal government designated in a major disaster declaration under the Stafford Act.
(ii) The date of admission to the anchor hospitalization or the date of the anchor procedure is during an emergency period (as defined in section 1135(g) of the Act) or in the 30 days before the date that the emergency period (as defined in section 1135(g) of the Act) begins.
(4) The beneficiary is in a TEAM episode and receives a LEJR procedure at a CJR-X participant during the 30-day post-discharge period after a TEAM anchor hospitalization or TEAM anchor procedure.
(a)
(1) For all inpatient episodes: Hospital-level Risk-Standardized Complication Rate following elective primary Total Hip Arthroplasty and/or Total Knee Arthroplasty (CMIT ID #350).
(2) For all outpatient episodes: Hospital Visits within 7 days of Hospital Outpatient Department Surgery (CMIT ID #344, OP-36).
(3) For all inpatient episodes: Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS) (CMIT ID #338).
(4) For all outpatient episodes: Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Survey (OAS CAHPS) (CMIT #162, OP-46).
(5) For all inpatient episodes: Hospital-Level Total Hip and/or Total Knee Arthroplasty Patient-Reported Outcome-Based Performance Measure ((PRO-PM) CMIT ID #1618).
(b)
(1) CMS calculates the inpatient measure composite quality score by summing the following:
(i) The CJR-X participant's quality performance points for the measure identified in paragraph (a)(1) of this section. This measure is weighted at 50 percent of the inpatient composite quality score.
(ii) The CJR-X participant's quality performance points for the measure identified in paragraph (a)(3) of this section. This measure is weighted at 40 percent of the inpatient composite quality score.
(iii) The CJR-X participant's quality performance points for the measure identified in paragraph (a)(5) of this section. This measure is weighted at 10 percent of the inpatient composite quality score.
(2) CMS calculates the outpatient measure composite quality score by summing the following:
(i) The CJR-X participant's quality performance points for the measure identified in paragraphs (a)(2) of this section. This measure is weighted at 50 percent of the outpatient composite quality score.
(ii) The CJR-X participant's quality performance points for the measure identified in paragraphs (a)(4) of this section. This measure is weighted at 40 percent of the outpatient composite quality score.
(iii) The CJR-X participant's quality performance points for the measure identified in paragraph (a)(5) of this section. This measure is weighted at 10 percent of the inpatient composite quality score.
(c)
(1) For the measures described in paragraphs (a)(1) and (a)(2) of this section, CMS assigns the CJR-X participant measure value to a performance percentile and then quality performance points are assigned based on the following performance percentile scale:
(i) 10.00 for ≥90th.
(ii) 9.25 for ≥80th and <90th.
(iii) 8.50 for ≥70th and <80th.
(iv) 7.75 for ≥60th and <70th.
(v) 7.00 for ≥50th and <60th.
(vi) 6.25 for ≥40th and <50th.
(vii) 5.50 for ≥30th and <40th.
(viii) 0.00 for <30th.
(2) For the measure described in paragraphs (a)(3) and (4) of this section, CMS assigns the CJR-X participant measure value to a performance percentile and then quality performance points are assigned based on the following performance percentile scale:
(i) 8.00 for ≥90th.
(ii) 7.40 for ≥80th and <90th.
(iii) 6.80 for ≥70th and <80th.
(iv) 6.20 for ≥60th and <70th.
(v) 5.60 for ≥50th and <60th.
(vi) 5.00 for ≥40th and <50th.
(vii) 5.40 for ≥30th and <40th.
(viii) 0.00 for <30th.
(3) For the measure described in paragraph (a)(5) of this section, CMS assigns the CJR-X participant's measure value to a performance percentile and then CMS assigns quality performance points based on the following performance percentile scale:
(i) 2.00 for ≥90th.
(ii) 1.85 for ≥80th and <90th.
(iii) 1.70 for ≥70th and <80th.
(iv) 1.55 for ≥60th and <70th.
(v) 1.40 for ≥50th and <60th.
(vi) 1.25 for ≥40th and <50th.
(vii) 1.10 for ≥30th and <40th.
(viii) 0.00 for <30th.
(d)
(1) If the CJR-X participant is without a measure value that would allow CMS to assign quality performance points for that quality measure, CMS assigns the 50th percentile quality performance points to the CJR-X participant for the individual measure.
(2) A CJR-X participant will not have a measure value for—
(i) The measure described in paragraph (a)(1) of this section, if the CJR-X participant does not meet the minimum 25 patient case count.
(ii) The measure described in paragraph (a)(2) of this section, if the CJR-X participant does not meet the minimum 25 patient case count.
(iii) The measure described in paragraph (a)(3) of this section, if the CJR-X participant does not meet the minimum 100 completed surveys.
(iv) The measure described in paragraph (a)(4) of this section, if the CJR-X participant does not meet the minimum 100 completed surveys.
(v) The measure described in paragraph (a)(5) of this section, if the CJR-X participant does not meet the minimum 25 patient case count.
(e)
(1) CMS displays quality measure results on the publicly available CMS website that is specific to CJR-X, in a form and manner consistent with other publicly reported measures.
(2) CMS shares quality measures with the CJR-X participant prior to display on the CMS website. Quality measure performance in performance year 1 will be reported in Calendar Year 2029. Subsequent years will be reported in the year following the performance period.
(a)
(1)
(i) CMS determines a separate preliminary target price for each of the MS-DRGs specified in § 512.625(a)(1).
(ii) Preliminary target prices for MS-DRG 470 include HCPCS 27130 and 27447.
(2)
(3)
(4)
(b)
(1) CMS calculates preliminary target prices based on average baseline episode spending for the region where the CJR-X participant is located. The region used for calculating the preliminary target price corresponds to the U.S. Census Division associated with the primary address of the CCN of the CJR-X participant, and the regional episode spending amount is based on all hospitals in the region, except for those excluded from CJR-X as specified in § 512.610(b).
(2) CMS uses the following baseline periods to determine baseline episode spending:
(i) Performance Year 1: Episodes with anchor hospitalization start dates or anchor procedure dates beginning on or after October 1, 2023 and anchor hospitalization discharge dates or anchor procedure dates between October 1, 2023 and September 30, 2026.
(ii) Performance Year 2 and future performance years: CMS uses the same cadence described in paragraph (i) of this section to roll the baseline period forward a year to construct the baseline period.
(3) CMS calculates the benchmark price as the weighted average of baseline episode spending, applying the following weights:
(i) Baseline episode spending from baseline year 1 is weighted at 17 percent.
(ii) Baseline episode spending from baseline year 2 is weighted at 33 percent.
(iii) Baseline episode spending from baseline year 3 is weighted at 50 percent.
(4)
(5)
(6)
(i) Applying risk adjustment multipliers, as specified in § 512.645(a)(1) through (3), to baseline period episodes to calculate the estimated risk-adjusted target price for all performance year episodes; and
(ii) Dividing the mean of the benchmark price for each episode across all hospitals and regions by the mean of the estimated risk-adjusted benchmark price calculated in § 512.640(b)(6)(i) for the same episode types across all hospitals and regions.
(7)
(i) CMS calculates a multiplier for each MS-DRG/HCPCS episode type and region and applies that multiplier to the most recent calendar year of the applicable baseline period. The multiplier is calculated using linear regression on the logarithmically transformed average regional spending for each MS-DRG/HCPCS episode type in the baseline years at both the regional and national level.
(ii) CMS exponentiates the coefficient from this regression to calculate the estimated annual change (where an exponentiated coefficient of 1 signifies no change) in average regional spending for each MS-DRG/HCPCS episode type from year to year.
(8)
(9)
CMS calculates the reconciliation target price as follows:
(a)
(1) The CJR-X HCC count risk adjustment factor uses five variables, representing beneficiaries with zero, one, two, three, or four or more CMS-HCC conditions based on a 180-day lookback period that begins 181 days prior to the anchor hospitalization or anchor procedure and ends on the day prior to the anchor hospitalization or anchor procedure.
(2) The age bracket risk adjustment factor uses four variables, representing beneficiaries in the following age groups as of the first day of the episode:
(i) Less than 65 years.
(ii) 65 to less than 75 years.
(iii) 75 years to less than 85 years.
(iv) 85 years or more.
(3) The beneficiary economic risk adjustment factor uses two variables, representing beneficiaries that, as of the first day of the episode:
(i) Meet one or more of the following economic measures:
(A) National CDI above the 80th percentile.
(B) Eligibility for the low-income subsidy.
(C) Eligibility for full Medicaid benefits.
(ii) Do not meet any of the three economic measures in paragraph (a)(3)(i) of this section.
(4) The hospital bed size risk adjustment factor uses four variables based on the CJR-X participant's characteristics:
(i) 250 beds or fewer.
(ii) 251-500 beds.
(iii) 501-850 beds.
(iv) 850 beds or more.
(5) The safety net hospital risk adjustment factor is based on the CJR-X participant meeting the safety net hospital definition in § 512.605.
(6) Additional beneficiary level risk adjustment factors represent the presence or absence in beneficiaries, based on a 180-day lookback period that ends on the day prior to the anchor hospitalization or anchor procedure, of each of the following conditions:
(i) Ankle procedure or reattachment, partial hip procedure, partial knee arthroplasty, total hip arthroplasty or hip resurfacing procedure, and total knee arthroplasty.
(ii) Disability as the original reason for Medicare enrollment.
(iii) Prior post-acute care use.
(iv) HCC 17: Cancer Metastatic to Lung, Liver, Brain, and Other Organs; Acute Myeloid Leukemia Except Promyelocytic.
(v) HCC 36: Diabetes with Severe Acute Complications.
(vi) HCC 37: Diabetes with Chronic Complications.
(vii) HCC 48: Morbid Obesity.
(viii) HCC 125: Dementia, Severe.
(ix) HCC 126: Dementia, Moderate.
(x) HCC 127: Dementia, Mild or Unspecified.
(xi) HCC 151: Schizophrenia.
(xii) HCC 155: Major Depression, Moderate or Severe, without Psychosis.
(xiii) HCC 199: Parkinson and Other Degenerative Disease of Basal Ganglia.
(xiv) HCC 224: Acute on Chronic Heart Failure.
(xv) HCC 225: Acute Heart Failure (Excludes Acute on Chronic).
(xvi) HCC 226: Heart Failure, Except End-Stage and Acute.
(xvii) HCC 238: Specified Heart Arrhythmias.
(xviii) HCC 253: Hemiplegia/Hemiparesis.
(xix) HCC 267: Deep Vein Thrombosis and Pulmonary Embolism.
(xx) HCC 280: Chronic Obstructive Pulmonary Disease, Interstitial Lung Disorders, and Other Chronic Lung Disorders.
(xxi) HCC 326: Chronic Kidney Disease, Stage 5.
(xxii) HCC 327: Chronic Kidney Disease, Severe (Stage 4).
(xxiii) HCC 383: Chronic Ulcer of Skin, Except Pressure, Not Specified as Through to Bone or Muscle.
(xxiv) HCC 402: Hip Fracture/Dislocation.
(b)
(c)
(d)
(e)
(1) The final normalization factor at reconciliation—
(i) Is the mean benchmark price for each MS-DRG/HCPCS episode type and region divided by the mean risk-adjusted benchmark price for the same MS-DRG/HCPCS episode type and region.
(ii) As applied, cannot exceed +/- 5 percent of the prospective normalization factor (as specified in § 512.640(b)(6)).
(2) CMS applies the final normalization factor to the previously calculated, beneficiary-level, risk-adjusted target prices specific to each region and MS-DRG/HCPCS episode type.
(f)
(1) The retrospective trend factor is capped so that the maximum difference cannot exceed ±3 percent of the prospective trend factor (as specified in § 512.640(b)(7)).
(2) CMS applies the capped retrospective trend factor to the previously calculated normalized, risk adjusted target prices specific to each region and MS-DRG/HCPCS episode type, as specified in paragraph (e)(2) of this section.
(g)
(h)
(1) A CJR-X participant with excellent composite quality scores, defined as composite quality scores greater than or equal to 17.1, receives a 0.0 discount factor.
(2) A CJR-X participant with good composite quality scores, defined as composite quality scores greater than or equal to 12.1 and less than or equal to 17.0, receives a 1.0 discount factor.
(3) A CJR-X participant with acceptable composite quality scores, defined as composite quality scores greater than or equal to 6.1 and less than or equal to 12.0, receives a 2.0 discount factor.
(4) A CJR-X participant with below acceptable composite quality scores, defined as composite quality scores less than or equal to 6.0, receives a 2.0 discount factor and are ineligible to receive a reconciliation payment, as specified in § 512.650(d).
(a)
(b)
(1) Six months after the end of each performance year, CMS performs a reconciliation calculation to establish a reconciliation payment or repayment amount for each CJR-X participant as described in paragraph (c) of this section.
(2) For CJR-X participants that experience a reorganization event in which one or more hospitals reorganize under the CCN of a CJR-X participant, CMS performs both of the following:
(i) Separate reconciliation calculations for each predecessor CJR-X participant for episodes where the anchor hospitalization admission or the anchor procedure occurred before the effective date of the reorganization event.
(ii) Reconciliation calculations for each new or surviving CJR-X participant for episodes where the anchor hospitalization admission or anchor procedure occurred on or after the effective date of the reorganization event.
(c)
(1) CMS determines the performance year spending for each episode included in the performance year (other than episodes that have been canceled in accordance with § 512.630(b)) for each MS-DRG/HCPCS episode type using claims data that is available 6 months after the end of the performance year.
(2) CMS calculates and applies the high-cost outlier cap for performance year episode spending by applying the calculation described in § 512.640(b)(4) to performance year episode spending for each MS-DRG/HCPCS episode type.
(3) CMS applies the adjustments specified in § 512.645 to the preliminary target prices computed in accordance with § 512.640 to calculate the reconciliation target prices for each MS-DRG/HCPCS episode type.
(4) CMS aggregates the reconciliation target prices computed in accordance with paragraph (c)(3) of this section for all episodes included in the performance year (other than episodes that have been canceled in accordance with § 512.630(b)).
(5) CMS aggregates the adjusted performance year spending amounts determined under paragraph (c)(1) through (2) of this section and subtracts the resulting amount from the aggregated reconciliation target price amount determined under paragraph (c)(3) through (4) of this section.
(6) CMS applies stop-loss and stop-gain limits to the amount computed in paragraph (c)(5) of this section as follows:
(i)
(ii)
(iii)
(A) Medicare-dependent, small rural hospital (MDH).
(B) Rural hospital.
(C) Safety net hospital.
(D) Sole community hospital (SCH).
(7) CMS calculates the post-episode spending amount. If the average post-episode spending amount for a CJR-X participant in the performance year being reconciled is greater than 3 standard deviations above the regional average post-episode spending amount for the performance year, then the post-episode spending amount that exceeds 3 standard deviations above the regional average post-episode spending amount for the performance year is subtracted from the NPRA for that performance year.
(d)
(1) Excluding CJR-X participants that receive a below acceptable composite quality score, as specified in § 512.645(h), if the amount calculated in paragraph (c) of this section is positive, the CJR-X participant is owed a reconciliation payment in that amount, to be paid by CMS in one lump sum payment.
(2) If the amount calculated in paragraph (c) of this section is negative, the CJR-X participant will owe that amount as a repayment to CMS.
(e)
(1) The total performance year spending for the CJR-X participant.
(2) The CJR-X participant's reconciliation target prices.
(3) The CJR-X participant's reconciliation amount.
(4) The CJR-X participant's composite quality score calculated in accordance with § 512.635(b).
(5) The CJR-X participant's quality-adjusted reconciliation amount.
(6) The stop-loss and stop-gain limits that apply to the CJR-X participant.
(7) The CJR-X participant's NPRA.
(8) The CJR-X participant's post-episode spending amount, if applicable.
(9) The amount of any reconciliation payment owed to the CJR-X participant or repayment owed by the CJR-X participant to CMS for the performance year, if applicable.
The CJR-X does not replace any existing Medicare incentive programs or add-on payments. The CJR-X payments are independent of, and do not affect, any incentive programs or add-on payments under existing Medicare payment systems.
(a)
(b)
(1)
(2)
(3)
(i) The first day of the IPPS stay is counted as 2 days.
(ii) If the actual length of stay that occurred during the episode is equal to or greater than the MS-DRG geometric mean, the full MS-DRG payment is allocated to the episode.
(iii) If the actual length of stay that occurred during the episode is less than the MS-DRG geometric mean length of stay, the MS-DRG payment amount is allocated to the episode based on the number of inpatient days that fall within the episode.
(4) If the full amount of the payment is not allocated to the episode, any remainder amount is allocated to the post-episode spending calculation (defined in § 512.650(c)(7)).
(a)
(b)
(1) If the CJR-X participant identifies a calculation error as described in paragraph (a) of this section, the CJR-X participant must submit written notice of the error, in a form and manner specified by CMS, within 30 days of the issuance of the reconciliation report.
(2) If the CJR-X participant does not provide timely written notice of calculation error, CMS deems the CJR-X reconciliation report to be final 30 days after it is issued and proceeds with the payment or repayment processes as applicable.
(3) Only CJR-X participants may use the calculation error process described in this part.
(c)
(1) If CMS determines the timely error notice meets the requirements of this section and contains sufficient information to substantiate the request, CMS issues an initial determination in writing within 30 days of receipt to either confirm that there was an error in the calculation or verify that the calculation is correct.
(2) CMS reserves the right to extend the time for providing its initial final determination upon written notice to the CJR-X participant.
(3) If the request is not compliant with the requirements of this section or requires additional information—
(i) CMS contacts the CJR-X participant to request additional information in a form and manner as specified by CMS;
(ii) The CJR-X participant must respond within 10 days of CMS' request for additional information in a form and manner as specified by CMS; and
(iii) If a CJR-X participant does not respond in accordance with paragraph (c)(3)(ii) of this section, then the reconciliation report is deemed final.
(d)
(a)
(b)
(1) CMS makes available certain beneficiary-identifiable claims data described in paragraph (5) of this section for CJR-X participants to request for purposes of conducting health care operations work that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501 regarding their CJR-X beneficiaries.
(2) A CJR-X participant that wishes to receive beneficiary-identifiable claims data for its CJR-X beneficiaries must:
(i) Submit a formal request for the data on an annual basis in a manner and form and by a date specified by CMS, indicating their selection of summary beneficiary-identifiable data, raw beneficiary-identifiable data, or both, and attest that—
(A) The CJR-X participant is requesting claims data of CJR-X beneficiaries who would be in an episode during the baseline period or performance year, as a HIPAA covered entity.
(B) The CJR-X participant's request reflects the minimum data necessary, as set forth in paragraph (c) of this section, for the CJR-X participant to conduct health care operations work that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501.
(C) The CJR-X participant's use of claims data will be limited to developing processes and engaging in appropriate activities related to coordinating care, improving the quality and efficiency of care, and conducting population-based activities relating to improving health or reducing health care costs that are applied uniformly to all CJR-X beneficiaries, in an episode during the baseline period or performance year, and that these data will not be used to reduce, limit or restrict care for specific Medicare beneficiaries.
(ii) Sign and submit a CJR-X data sharing agreement, as defined in § 512.605, with CMS as set forth in paragraph (e) of this section.
(3) CMS shares this beneficiary-identifiable claims data with a CJR-X participant in accordance with applicable privacy and security laws and established privacy and security protections.
(4) CMS omits from the beneficiary-identifiable claims data any information that is subject to the regulations in 42 CFR part 2 governing the confidentiality of substance use disorder patient records.
(5) The beneficiary-identifiable claims data will include, when available, the following:
(i) Unrefined (raw) Medicare Parts A and B beneficiary-identifiable claims data for CJR-X beneficiaries in an episode during the 3-year baseline period and performance year.
(ii) Summarized (summary) Medicare Parts A and B beneficiary-identifiable claims data for CJR-X beneficiaries in an episode during the 3-year baseline period and applicable performance year.
(6) CMS makes available the beneficiary-identifiable claims data for retrieval by CJR-X participants at the following frequency:
(i) Annually, at least one month prior to every performance year for baseline period data, based on the baseline periods described in § 512.640(b)(2).
(ii) As frequently as monthly during the performance year and for up to 6 months after the performance year for performance year data.
(c)
(1) Medicare beneficiary identifier (ID).
(2) Procedure code.
(3) Sex.
(4) Diagnosis code.
(5) Claim ID.
(6) The from and through dates of service.
(7) The provider or supplier ID.
(8) The claim payment type.
(9) Date of birth and death, if applicable.
(10) Tax identification number.
(11) National provider identifier.
(d)
(1) CMS shares regional aggregate data for the 3-year baseline period and relevant performance year with CJR-X participants as follows.
(i) CMS shares 3-year baseline period regional aggregate data annually at least 1 month before the relevant performance year, based on the baseline periods described in § 512.640(b)(2).
(ii) CMS shares performance year regional aggregate data as frequently as a monthly basis during the applicable performance year and for up to 6 months after the relevant performance year.
(2) Regional aggregate data will—
(i) Be aggregated based on all Parts A and B claims associated with episodes in CJR-X for the U.S. Census Division in which the CJR-X participant is located;
(ii) Summarize average episode spending for episodes in CJR-X in the U.S. Census Division in which the CJR-X participant is located; and
(iii) Be de-identified in accordance with 45 CFR 164.514(b).
(e)
(1) A CJR-X participant who wishes to retrieve the beneficiary-identifiable data specified in paragraph (b) of this section, must complete and submit, on at least an annual basis, a signed CJR-X data sharing agreement, as defined in § 512.605, to be provided in a form and manner and by a date specified by CMS, under which the CJR-X Participant agrees:
(i) To comply with the requirements for use and disclosure of this beneficiary-identifiable data that are imposed on covered entities by the HIPAA Privacy Rule (45 CFR part 160 and subparts A and E of part 164) and the requirements of the CJR-X set forth in this part.
(ii) To comply with additional privacy, security, breach notification, and data retention requirements specified by CMS in the CJR-X data sharing agreement.
(iii) To contractually bind each downstream recipient of the beneficiary-identifiable data that is a business associate of the CJR-X participant to the same terms and conditions to which the CJR-X participant is itself bound in its CJR-X data sharing agreement with CMS as a condition of the business associate's receipt of the beneficiary-identifiable data retrieved by the CJR-X participant under the CJR-X.
(iv) That if the CJR-X participant misuses or discloses the beneficiary-identifiable data in a manner that violates any applicable statutory or regulatory requirements or that is otherwise non-compliant with the provisions of the data sharing agreement, CMS may deem the CJR-X participant ineligible to retrieve beneficiary-identifiable data under paragraph (b) of this section for any amount of time, and the CJR-X participant may be subject to additional sanctions and penalties available under the law.
(2) A CJR-X participant must comply with all applicable laws and the terms of the CJR-X data sharing agreement in order to retrieve the beneficiary-identifiable data.
(a)
(1) A CJR-X participant may enter into a sharing arrangement with a CJR-X collaborator to make a gainsharing payment, or to receive an alignment payment, or both. A CJR-X participant must not make a gainsharing payment to a CJR-X collaborator or receive an alignment payment from a CJR-X collaborator except in accordance with a sharing arrangement.
(2) A sharing arrangement must comply with the provisions of this section and all other applicable laws and regulations, including the applicable fraud and abuse laws and all applicable payment and coverage requirements.
(3) CJR-X participants must develop, maintain, and use a set of written policies for selecting individuals and entities to be CJR-X collaborators.
(i) These policies must contain criteria related to, and inclusive of, the quality of care delivered by the potential CJR-X collaborator and the provision of CJR-X activities.
(ii) The selection criteria cannot be based directly or indirectly on the volume or value of past or anticipated referrals or business otherwise generated by, between or among the CJR-X participant, any CJR-X collaborator, any collaboration agent, any downstream collaboration agent, or any individual or entity affiliated with a CJR-X participant, CJR-X collaborator, collaboration agent, or downstream collaboration agent.
(iii) A selection criterion that considers whether a potential CJR-X collaborator has performed a reasonable minimum number of services that would qualify as CJR-X activities, as determined by the CJR-X participant, will be deemed not to violate the volume or value standard if the purpose of the criterion is to ensure the quality of care furnished to CJR-X beneficiaries.
(4) If a CJR-X participant enters into a sharing arrangement, its compliance program must include oversight of sharing arrangements and compliance with the applicable requirements of CJR-X.
(b)
(1) A sharing arrangement must be in writing and signed by the parties, and entered into before care is furnished to CJR-X beneficiaries under the sharing arrangement.
(2) Participation in a sharing arrangement must be voluntary and without penalty for nonparticipation.
(3) The sharing arrangement must require the CJR-X collaborator and its employees, contractors (including collaboration agents), and subcontractors (including downstream collaboration agents) to comply with all of the following:
(i) The applicable provisions of this part 512 (including requirements regarding beneficiary notifications in
(ii) All applicable Medicare provider enrollment requirements at § 424.500 of this chapter, including having a valid and active TIN or NPI, during the term of the sharing arrangement.
(iii) All other applicable laws and regulations.
(4) The sharing arrangement must require the CJR-X collaborator to have or be covered by a compliance program that includes oversight of the sharing arrangement and compliance with the requirements of CJR-X that apply to its role as a CJR-X collaborator, including any distribution arrangements.
(5) The sharing arrangement must not pose a risk to beneficiary access, beneficiary freedom of choice, or quality of care.
(6) The board or other governing body of the CJR-X participant must have responsibility for overseeing the CJR-X participant's participation in CJR-X, its arrangements with CJR-X collaborators, its payment of gainsharing payments, its receipt of alignment payments, and its use of beneficiary incentives in the CJR-X model.
(7) The specifics of the agreement must be documented in writing and must be made available to CMS upon request (as outlined in § 512.150).
(8) The sharing arrangement must specify the following:
(i) The purpose and scope of the sharing arrangement.
(ii) The obligations of the parties, including specified CJR-X activities and other services to be performed by the parties under the sharing arrangement.
(iii) The date range for which the sharing arrangement is effective.
(iv) The financial or economic terms for payment, including the following:
(A) Eligibility criteria for a gainsharing payment.
(B) Eligibility criteria for an alignment payment.
(C) Frequency of gainsharing or alignment payments.
(D) Methodology and accounting formula for determining the amount of a gainsharing payment or alignment payment.
(9) The sharing arrangement must not do either of the following:
(i) Induce the CJR-X participant, CJR-X collaborator, or any employees, contractors, or subcontractors of the CJR-X participant or CJR-X collaborator to reduce or limit medically necessary services to any Medicare beneficiary.
(ii) Restrict the ability of a CJR-X collaborator to make decisions in the best interests of its patients, including the selection of devices, supplies, and treatments.
(c)
(1) Gainsharing payments, if any, must—
(i) Be derived solely from reconciliation payment amounts, or internal cost savings, or both;
(ii) Be distributed on an annual basis (not more than once per calendar year);
(iii) Not be a loan, advance payment, or payment for referrals or other business; and
(iv) Be clearly identified as a gainsharing payment at the time it is paid.
(2) Gainsharing payment eligibility—
(i) To be eligible to receive a gainsharing payment, a CJR-X collaborator must meet quality of care criteria for the performance year for which the CJR-X participant accrued the internal cost savings or earned the reconciliation payment that comprises the gainsharing payment. The quality-of-care criteria must be established by the CJR-X participant and directly relate to the episode.
(ii) To be eligible to receive a gainsharing payment, or to be required to make an alignment payment, a CJR-X collaborator other than ACO, PGP, NPPGP, or TGP must have directly furnished a billable item or service to a CJR-X beneficiary during an episode that was attributed to the same performance year for which the CJR-X participant accrued the internal cost savings or earned the reconciliation payment amount or repayment amount that comprises the gainsharing payment or the alignment payment.
(iii) To be eligible to receive a gainsharing payment, or to be required to make an alignment payment, a CJR-X collaborator that is a PGP, NPPGP, or TGP must meet the following criteria:
(A) The PGP, NPPGP, or TGP must have billed for an item or service that was rendered by one or more PGP member, NPPGP member, or TGP member respectively to a CJR-X beneficiary during an episode that was attributed to the same performance year for which the CJR-X participant accrued the internal cost savings or earned the reconciliation payment amount or repayment amount that comprises the gainsharing payment or the alignment payment.
(B) The PGP, NPPGP, or TGP must have contributed to CJR-X activities and been clinically involved in the care of CJR-X beneficiaries during the same performance year for which the CJR-X participant accrued the internal cost savings or earned the reconciliation payment amount or repayment amount that comprises the gainsharing payment or the alignment payment. A non-exhaustive list of examples where, a PGP, NPPGP, or TGP might have been clinically involved in the care of CJR-X beneficiaries includes—
(
(
(
(iv) To be eligible to receive a gainsharing payment, or to be required to make an alignment payment, a CJR-X collaborator that is an ACO must meet the following criteria:
(A) The ACO must have had an ACO provider/supplier that directly furnished, or an ACO participant that billed for, an item or service that was rendered to a CJR-X beneficiary during an episode that was attributed to the same performance year for which the CJR-X participant accrued the internal cost savings or earned the reconciliation payment amount or repayment amount that comprises the gainsharing payment or the alignment payment; and
(B) The ACO must have contributed to CJR-X activities and been clinically involved in the care of CJR-X beneficiaries during the performance year for which the CJR-X participant accrued the internal cost savings or earned the reconciliation payment amount or repayment amount that comprises the gainsharing payment or the alignment payment. A non-exhaustive list of ways in which an ACO might have been clinically involved in the care of CJR-X beneficiaries could include—
(
(
(
(3) The methodology for accruing, calculating and verifying internal cost savings will be determined by the CJR-X participant. The methodology—
(i) Must be transparent, measurable, and verifiable in accordance with generally accepted accounting principles (GAAP) and Government Auditing Standards (The Yellow Book).
(ii) Used to calculate internal cost savings must reflect the actual, internal cost savings achieved by the CJR-X participant through the documented implementation of CJR-X activities identified by the CJR-X participant and must exclude—
(A) Any savings realized by any individual or entity that is not the CJR-X participant; and
(B) “Paper” savings from accounting conventions or past investment in fixed costs.
(4) The amount of any gainsharing payments must be determined in accordance with a methodology that is based solely on quality of care and the provision of CJR-X activities. The methodology may take into account the amount of CJR-X activities provided by a CJR-X collaborator relative to other CJR-X collaborators.
(5) For a performance year, the aggregate amount of all gainsharing payments that are derived from reconciliation payment amounts must not exceed the amount of that year's reconciliation payment amount.
(6) No entity or individual, whether a party to a sharing arrangement or not, may condition the opportunity to make or receive gainsharing payments or to make or receive alignment payments directly or indirectly on the volume or value of past or anticipated referrals or business otherwise generated by, between or among the CJR-X participant, any CJR-X collaborator, any collaboration agent, any downstream collaboration agent, or any individual or entity affiliated with a CJR-X participant, CJR-X collaborator, collaboration agent, or downstream collaboration agent.
(7) A CJR-X participant must not make a gainsharing payment to a CJR-X collaborator if CMS has notified the CJR-X participant that such CJR-X collaborator is subject to any action by CMS, HHS or any other governmental entity, or its designees, for noncompliance with this part or the fraud and abuse laws, for the provision of substandard care to CJR-X beneficiaries or other integrity problems, or for any other program integrity problems or noncompliance with any other laws or regulations.
(8) The sharing arrangement must require the CJR-X participant to recoup any gainsharing payment that contained funds derived from a CMS overpayment on a reconciliation payment amount or was based on the submission of false or fraudulent data.
(9) Alignment payments from a CJR-X collaborator to a CJR-X participant may be made at any interval that is agreed upon by both parties, and must not be—
(i) Issued, distributed, or paid prior to the calculation by CMS of a repayment amount;
(ii) Loans, advance payments, or payments for referrals or other business; or
(iii) Assessed by a CJR-X participant in the absence of a repayment amount.
(10) The CJR-X participant must not receive any amounts under a sharing arrangement from a CJR-X collaborator that are not alignment payments.
(11) For a performance year, the aggregate amount of all alignment payments received by the CJR-X participant must not exceed 50 percent of the CJR-X participant's repayment amount.
(12) The aggregate amount of all alignment payments from a CJR-X collaborator to the CJR-X participant may not be greater than with respect to a CJR-X collaborator—
(i) Other than an ACO, 25 percent of the CJR-X participant's repayment amount; or
(ii) That is an ACO, 50 percent of the CJR-X participant's repayment amount.
(13) The amount of any alignment payments must be determined in accordance with a methodology that does not directly account for the volume or value of past or anticipated referrals or business otherwise generated by, between or among the CJR-X participant, any CJR-X collaborator, any collaboration agent, any downstream collaboration agent, or any individual or entity affiliated with a CJR-X participant, CJR-X collaborator, collaboration agent, or downstream collaboration agent.
(14) All gainsharing payments and any alignment payments must be administered by the CJR-X participant in accordance with generally accepted accounting principles (GAAP) and Government Auditing Standards (The Yellow Book).
(15) All gainsharing payments and alignment payments must be made by check, electronic funds transfer, or another traceable cash transaction.
(d)
(1) CJR-X participants must—
(i) Document the sharing arrangement contemporaneously with the establishment of the arrangement;
(ii) Post (and update on at least a quarterly basis) on a publicly available web page on the CJR-X participant's website the following:
(A) Accurate lists of all current CJR-X collaborators, including the CJR-X collaborators' names and addresses as well as accurate historical lists of all CJR-X collaborators.
(B) Written policies for selecting individuals and entities to be CJR-X collaborators as required by § 512.670(a)(3).
(iii) Maintain, and require each CJR-X collaborator to maintain, contemporaneous documentation with respect to the payment or receipt of any gainsharing payment or alignment payment that includes all of the following, at a minimum:
(A) Nature of the payment (gainsharing payment or alignment payment).
(B) Identity of the parties making and receiving the payment.
(C) Date of the payment.
(D) Amount of the payment.
(E) Date and amount of any recoupment of all or a portion of a CJR-X collaborator's gainsharing payment.
(F) Explanation for each recoupment, such as whether the CJR-X collaborator received a gainsharing payment that contained funds derived from a CMS overpayment of a reconciliation payment or was based on the submission of false or fraudulent data.
(2) The CJR-X participant must keep records of all of the following:
(i) A process for determining and verifying its potential and current CJR-X collaborators' eligibility to participate in Medicare.
(ii) A plan to track internal cost savings.
(iii) Information on the accounting systems used to track internal cost savings.
(iv) A description of current health information technology, including systems to track reconciliation payment amounts, repayment amounts, and internal cost savings.
(v) A plan to track gainsharing payments and alignment payments.
(3) The CJR-X participant must retain and provide access to, and require each CJR-X collaborator to retain and provide access to, the required documentation in accordance with § 512.135.
(a)
(1) An ACO, PGP, NPPGP, or TGP that is a CJR-X collaborator and has entered
(2) All distribution arrangements must comply with the provisions of this section and all other applicable laws and regulations, including the fraud and abuse laws.
(b)
(1) All distribution arrangements must be in writing and signed by the parties, contain the effective date of the agreement, and be entered into before care is furnished to CJR-X beneficiaries under the distribution arrangement.
(2) Participation in a distribution arrangement must be voluntary and without penalty for nonparticipation.
(3) The distribution arrangement must require the collaboration agent to comply with all applicable laws and regulations.
(4) The opportunity to make or receive a distribution payment must not be conditioned directly or indirectly on the volume or value of past or anticipated referrals or business otherwise generated by, between or among the CJR-X participant, any CJR-X collaborator, any collaboration agent, any downstream collaboration agent, or any individual or entity affiliated with a CJR-X participant, CJR-X collaborator, collaboration agent, or downstream collaboration agent.
(5) The amount of any distribution payments from an ACO, from an NPPGP to an NPPGP member, or from a TGP to a TGP member, must be determined in accordance with a methodology that is solely based on quality of care and the provision of CJR-X activities and that may take into account the amount of such CJR-X activities provided by a collaboration agent relative to other collaboration agents.
(6) The amount of any distribution payments from a PGP must be determined in accordance with a methodology that is solely based on quality of care and the provision of CJR-X activities and that may take into account the amount of such CJR-X activities provided by a collaboration agent relative to other collaboration agents.
(7) A collaboration agent is eligible to receive a distribution payment only if the collaboration agent furnished or billed for an item or service rendered to a CJR-X beneficiary during an episode that was attributed to the same performance year for which the CJR-X participant accrued the internal cost savings or earned the reconciliation payment amount that comprises the gainsharing payment being distributed.
(8) With respect to the distribution of any gainsharing payment received by an ACO, PGP, NPPGP, or TGP, the total amount of all distribution payments for a performance year must not exceed the amount of the gainsharing payment received by the CJR-X collaborator from the CJR-X participant for the same performance year.
(9) All distribution payments must be made by check, electronic funds transfer, or another traceable cash transaction.
(10) The collaboration agent must retain the ability to make decisions in the best interests of the patient, including the selection of devices, supplies, and treatments.
(11) The distribution arrangement must not do either of the following:
(i) Induce the collaboration agent to reduce or limit medically necessary items and services to any Medicare beneficiary.
(ii) Reward the provision of items and services that are medically unnecessary.
(12) The CJR-X collaborator must maintain contemporaneous documentation regarding distribution arrangements in accordance with § 512.135, including all of the following:
(i) The relevant written agreements.
(ii) The date and amount of any distribution payment(s).
(iii) The identity of each collaboration agent that received a distribution payment.
(iv) A description of the methodology and accounting formula for determining the amount of any distribution payment.
(13) The CJR-X collaborator may not enter into a distribution arrangement with any individual or entity that has a sharing arrangement with the same CJR-X participant.
(14) The CJR-X collaborator must retain and provide access to, and must require collaboration agents to retain and provide access to, the required documentation in accordance with § 512.135.
(a)
(1) An ACO participant that is a PGP, NPPGP, or TGP and that has entered into a distribution arrangement with a CJR-X collaborator that is an ACO, may distribute all or a portion of any distribution payment it receives from the CJR-X collaborator only in accordance with a downstream distribution arrangement.
(2) All downstream distribution arrangements must comply with the provisions of this section and all applicable laws and regulations, including the fraud and abuse laws.
(b)
(1) All downstream distribution arrangements must be in writing and signed by the parties, contain the effective date of the agreement, and be entered into before care is furnished to CJR-X beneficiaries under the downstream distribution arrangement.
(2) Participation in a downstream distribution arrangement must be voluntary and without penalty for nonparticipation.
(3) The downstream distribution arrangement must require the downstream collaboration agent to comply with all applicable laws and regulations.
(4) The opportunity to make or receive a downstream distribution payment must not be conditioned directly or indirectly on the volume or value of past or anticipated referrals or business otherwise generated by, between or among the CJR-X participant, any CJR-X collaborator, any collaboration agent, any downstream collaboration agent, or any individual or entity affiliated with a CJR-X participant, CJR-X collaborator, collaboration agent, or downstream collaboration agent.
(5) The amount of any downstream distribution payments from an NPPGP to an NPPGP member or from a TGP to a TGP member must be determined in accordance with a methodology that is solely based on quality of care and the provision of CJR-X activities and that may take into account the amount of such CJR-X activities provided by a downstream collaboration agent relative to other downstream collaboration agents.
(6) The amount of any downstream distribution payments from a PGP must be determined in accordance with a methodology that is solely based on quality of care and the provision of CJR-X activities and that may take into account the amount of such CJR-X activities provided by a downstream collaboration agent relative to other downstream collaboration agents.
(7) A downstream collaboration agent is eligible to receive a downstream distribution payment only if the downstream collaboration agent furnished an item or service to a CJR-X beneficiary during an episode that is attributed to the same performance year for which the CJR-X participant accrued the internal cost savings or earned the reconciliation payment amount that comprises the gainsharing payment from which the ACO made the distribution payment to the PGP,
(8) The total amount of all downstream distribution payments made to downstream collaboration agents must not exceed the amount of the distribution payment received by the PGP, NPPGP, or TGP from the ACO.
(9) All downstream distribution payments must be made by check, electronic funds transfer, or another traceable cash transaction.
(10) The downstream collaboration agent must retain his or her ability to make decisions in the best interests of the beneficiary, including the selection of devices, supplies, and treatments.
(11) The downstream distribution arrangement must not do either of the following:
(i) Induce the downstream collaboration agent to reduce or limit medically necessary services to any Medicare beneficiary.
(ii) Reward the provision of items and services that are medically unnecessary.
(12) The PGP, NPPGP, or TGP must maintain contemporaneous documentation regarding downstream distribution arrangements in accordance with § 512.135, including the following:
(i) The relevant written agreements.
(ii) The date and amount of any downstream distribution payment.
(iii) The identity of each downstream collaboration agent that received a downstream distribution payment.
(iv) A description of the methodology and accounting formula for determining the amount of any downstream distribution payment.
(13) The PGP, NPPGP, or TGP may not enter into a downstream distribution arrangement with any PGP member, NPPGP member, or TGP member who has—
(i) A sharing arrangement with a CJR-X participant.
(ii) A distribution arrangement with the ACO that the PGP, NPPGP, or TGP is a participant in.
(14) The PGP, NPPGP, or TGP must retain and provide access to, and must require downstream collaboration agents to retain and provide access to, the required documentation in accordance with § 512.135.
(a)
(1) The incentive must be provided directly by the CJR-X participant or by an agent of the CJR-X participant under the CJR-X participant's direction and control to the CJR-X beneficiary during an episode.
(2) The item or service provided must be reasonably connected to medical care provided to a CJR-X beneficiary during an episode.
(3) The item or service must be a preventive care item or service or an item or service that advances a clinical goal, as listed in paragraph (c) of this section, for a CJR-X beneficiary in an episode by engaging the CJR-X beneficiary in better managing his or her own health.
(4) The item or service must not be tied to the receipt of items or services outside the episode.
(5) The item or service must not be tied to the receipt of items or services from a particular provider or supplier.
(6) The availability of the items or services must not be advertised or promoted, except that a CJR-X beneficiary may be made aware of the availability of the items or services at the time the CJR-X beneficiary could reasonably benefit from them.
(7) The cost of the items or services must not be shifted to any federal health care program, as defined at section 1128B(f) of the Act.
(b)
(1) Items or services involving technology provided to a CJR-X beneficiary may not exceed $1,000 in retail value for any one CJR-X beneficiary during any one episode.
(2) Items or services involving technology provided to a CJR-X beneficiary must be the minimum necessary to advance a clinical goal, as listed in paragraph (c) of this section, for a beneficiary in an episode.
(3) Items of technology exceeding $75 in retail value must—
(i) Remain the property of the CJR-X participant; and
(ii) Be retrieved from the CJR-X beneficiary at the end of the episode, with documentation of the ultimate date of retrieval. The CJR-X participant must document all retrieval attempts. In cases when the item of technology is not able to be retrieved, the CJR-X participant must determine why the item was not retrievable. If it was determined that the item was misappropriated (if it were sold, for example), the CJR-X participant must take steps to prevent future beneficiary incentives for that CJR-X beneficiary. Following this process, documented, diligent, good faith attempts to retrieve items of technology will be deemed to meet the retrieval requirement.
(c)
(1) Beneficiary adherence to drug regimens.
(2) Beneficiary adherence to a care plan.
(3) Reduction of readmissions and complications following an episode.
(4) Management of chronic diseases and conditions that may be affected by the CJR-X procedure.
(d)
(1) CJR-X participants must maintain documentation of items and services furnished as beneficiary incentives that exceed $25 in retail value.
(2) The documentation must be established contemporaneously with the provision of the items and services with a record established and maintained to include at least the following:
(i) The date the incentive is provided.
(ii) The identity of the CJR-X beneficiary to whom the item or service was provided.
(3) The documentation regarding items of technology exceeding $75 in retail value must also include contemporaneous documentation of any attempt to retrieve technology at the end of an episode, or why the items were not retrievable, as described in paragraph (b)(3) of this section.
(4) The CJR-X participant must retain and provide access to the required documentation in accordance with § 512.135.
(a)
(b)
(a)
(1)
(i) May be furnished via telehealth under existing Medicare program requirements; and
(ii) Are included in the episode in accordance with § 512.625(e).
(2)
(i) May be furnished via telehealth under existing Medicare program requirements; and
(ii) Are included in the episode in accordance with § 512.625(e).
(3)
(i) CMS waives the payment requirements under section 1834(m)(2)(B) of the Act so that the facility fee normally paid by Medicare to an originating site for a telehealth service is not paid if the service is originated in the beneficiary's home or place of residence.
(ii) CMS waives the payment requirements under section 1834(m)(2)(A) of the Act to allow the distant site payment for telehealth home visit HCPCS codes unique to CJR-X.
(4)
(b)
(1)
(2)
(3)
(i) Qualified SNFs are rated an overall of 3 stars or better for at least 7 of the 12 months.
(ii) Qualified SNFs include providers furnishing SNF services under swing bed agreements, which will not be subject to the star ratings requirement.
(4)
(5)
(i) CMS makes no payment to a SNF for SNF services if the SNF admits a CJR-X beneficiary who has not had a qualifying anchor hospitalization or anchor procedure.
(ii) In the event that CMS makes no payment for SNF services furnished by a SNF as a result of paragraph (b)(5)(i) of this section, the beneficiary protections specified in paragraph (b)(5)(iii) of this section apply, unless the CJR-X participant has provided the beneficiary with a discharge planning notice in accordance with § 512.622(c).
(iii) If the CJR-X participant does not provide the beneficiary with a discharge planning notice in accordance with § 512.622(c)—
(A) The SNF must not charge the beneficiary for the expenses incurred for such services;
(B) The SNF must return to the beneficiary any monies collected for such services; and
(C) The CJR-X participant is financially liable for the expenses incurred for such services.
(4) If the CJR-X participant provided a discharge planning notice to the beneficiary in accordance with § 512.622(c), then normal SNF coverage requirements apply and the beneficiary may be financially liable for non-covered SNF services.
(6)
(c)
(1)
(2)
(i) The home visit is furnished during the episode to a CJR-X beneficiary who has been discharged from an anchor hospitalization or anchor procedure.
(ii) The home visit is furnished at the CJR-X beneficiary's home or place of residence.
(iii) The CJR-X beneficiary does not qualify for home health services under sections 1835(a) and 1814(a) of the Act at the time of any such home visit.
(iv) The visit is furnished by clinical staff under the general supervision of a physician or non-physician practitioner. Clinical staff are individuals who work under the supervision of a physician or other qualified health care professional, and who are allowed by law, regulation, and facility policy to perform or assist in the performance of a specific professional service, but do not individually report that professional service.
(v) No more than 9 visits are furnished to the CJR-X beneficiary during the episode.
(3)
(4)
In this Addendum, we are setting forth a description of the methods and data we used to determine the prospective payment rates for Medicare hospital inpatient operating costs and Medicare hospital inpatient capital-related costs for FY 2027 for acute care hospitals. We also are setting forth the rate-of-increase percentage for updating the target amounts for certain hospitals excluded from the IPPS for FY 2027. We note that, because certain hospitals excluded from the IPPS are paid on a reasonable cost basis subject to a rate-of-increase ceiling (and not by the IPPS), these hospitals are not affected by the figures for the standardized amounts, offsets, and budget neutrality factors. Therefore, in this proposed rule, we are setting forth the rate-of-increase percentage for updating the target amounts for certain hospitals excluded from the IPPS that would be effective for cost reporting periods beginning on or after October 1, 2026. In addition, we are setting forth a description of the methods and data we used to determine the LTCH PPS standard Federal payment rate that would be applicable to Medicare LTCHs for FY 2027.
In general, except for SCHs and MDHs, for FY 2027, each hospital's payment per discharge under the IPPS is based on 100 percent of the Federal national rate, also known as the national adjusted standardized amount. This amount reflects the national average hospital cost per case from a base year, updated for inflation.
SCHs are paid based on whichever of the following rates yields the greatest aggregate payment:
• The Federal national rate (including, as discussed in section IV.E. of the preamble of this final rule, uncompensated care payments under section 1886(r)(2) of the Act).
• The updated hospital-specific rate based on FY 1982 costs per discharge.
• The updated hospital-specific rate based on FY 1987 costs per discharge.
• The updated hospital-specific rate based on FY 1996 costs per discharge.
• The updated hospital-specific rate based on FY 2006 costs per discharge.
Under section 1886(d)(5)(G) of the Act, MDHs historically were paid based on the Federal national rate or, if higher, the Federal national rate plus 50 percent of the difference between the Federal national rate and the updated hospital-specific rate based on FY 1982 or FY 1987 costs per discharge, whichever was higher. However, section 5003(a)(1) of Public Law 109-171 extended and modified the MDH special payment provision that was previously set to expire on October 1, 2006, to include discharges occurring on or after October 1, 2006, but before October 1, 2011. Under section 5003(b) of Public Law 109-171, if the change results in an increase to an MDH's target amount, we must rebase an MDH's hospital specific rates based on its FY 2002 cost report. Section 5003(c) of Public Law 109-171 further required that MDHs be paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the updated hospital specific rate. Further, based on the provisions of section 5003(d) of Public Law 109-171, MDHs are no longer subject to the 12-percent cap on their DSH payment adjustment factor. Section 2202 of the Full-Year Continuing Appropriations and Extensions Act, 2025 extended the MDH program through FY 2025. As discussed in section V.F. of the preamble of this proposed rule, section 6202 of the Consolidated Appropriations Act, 2026 (Pub. L. 119-75) extended the MDH program for FY 2027 discharges occurring before January 1, 2027. Therefore, under current law, the MDH program will expire for discharges on or after January 1, 2027. We refer readers to section V.F. of the preamble of this proposed rule for further discussion of the MDH program.
As discussed in section V.B.2. of the preamble of this proposed rule, section 1886(n)(6)(B) of the Act was amended to specify that the adjustments to the applicable percentage increase under section 1886(b)(3)(B)(ix) of the Act apply to subsection (d) Puerto Rico hospitals that are not meaningful EHR users, effective beginning FY 2022. In general, Puerto Rico hospitals are paid 100 percent of the national standardized amount and are subject to the same national standardized amount as subsection (d) hospitals that receive the full update. Accordingly, our discussion later in this section does not include references to the Puerto Rico standardized amount or the Puerto Rico-specific wage index.
As discussed in section II. of this Addendum, we are proposing to make changes in the determination of the prospective payment rates for Medicare inpatient operating costs for acute care hospitals for FY 2027. In section III. of this Addendum, we discuss our proposed policy changes for determining the prospective payment rates for Medicare inpatient capital-related costs for FY 2027. In section IV. of this Addendum, we are setting forth the rate-of-increase percentage for determining the rate-of-increase limits for certain hospitals excluded from the IPPS for FY 2027. In section V. of this Addendum, we discuss proposed policy changes for determining the LTCH PPS standard Federal rate for LTCHs paid under the LTCH PPS for FY 2027. The tables to which we refer in the preamble of this proposed rule are listed in section VI. of this Addendum and are available via the internet on the CMS website.
The basic methodology for determining prospective payment rates for hospital inpatient operating costs for acute care hospitals for FY 2005 and subsequent fiscal years is set forth under § 412.64. The basic methodology for determining the prospective payment rates for hospital inpatient operating costs for hospitals located in Puerto Rico for FY 2005 and subsequent fiscal years is set forth under §§ 412.211 and 412.212. In this section, we discuss the factors we are proposing to use for determining the prospective payment rates for FY 2027.
In summary, the proposed standardized amounts set forth in Tables 1A, 1B, and 1C that are listed and published in section VI. of this Addendum (and available via the internet on the CMS website) reflect—
• Equalization of the standardized amounts for urban and other areas at the level computed for large urban hospitals during FY 2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of the Act.
• The labor-related share that is applied to the standardized amounts to give the hospital the highest payment, as provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act. For FY 2027, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR
We refer readers to section VI.B. of the preamble of this proposed rule for a complete discussion on the FY 2027 inpatient hospital update. The table that follows shows these four scenarios:
We note that section 1886(b)(3)(B)(viii) of the Act, which specifies the adjustment to the applicable percentage increase for “subsection (d)” hospitals that do not submit quality data under the rules established by the Secretary, is not applicable to hospitals located in Puerto Rico. In addition, section 602 of Public Law 114-113 amended section 1886(n)(6)(B) of the Act to specify that Puerto Rico hospitals are eligible for incentive payments for the meaningful use of certified EHR technology, effective beginning FY 2016, and also to apply the adjustments to the applicable percentage increase under section 1886(b)(3)(B)(ix) of the Act to subsection (d) Puerto Rico hospitals that are not meaningful EHR users, effective beginning FY 2022. Accordingly, the applicable percentage increase for subsection (d) Puerto Rico hospitals that are not meaningful EHR users for FY 2027 and subsequent fiscal years is adjusted by the proposed adjustment for failure to be a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act. The regulations at 42 CFR 412.64(d)(3)(ii) reflect the current law for the update for subsection (d) Puerto Rico hospitals for FY 2022 and subsequent fiscal years.
• An adjustment to the standardized amount to ensure budget neutrality for DRG recalibration and reclassification, as provided for under section 1886(d)(4)(C)(iii) of the Act.
• An adjustment to the standardized amount to ensure budget neutrality for the permanent 10-percent cap on the reduction in a MS-DRG's relative weight in a given fiscal year, as discussed in section II.D.2.c. of the preamble of this proposed rule, consistent with our current methodology for implementing DRG recalibration and reclassification budget neutrality under section 1886(d)(4)(C)(iii) of the Act.
• An adjustment to ensure the wage index and labor-related share changes (depending on the fiscal year) are budget neutral, as provided for under section 1886(d)(3)(E)(i) of the Act (as discussed in the FY 2006 IPPS final rule (70 FR 47395) and the FY 2010 IPPS final rule (74 FR 44005)). We note that section 1886(d)(3)(E)(i) of the Act requires that when we compute such budget neutrality, we assume that the provisions of section 1886(d)(3)(E)(ii) of the Act (requiring a 62-percent labor-related share in certain circumstances) had not been enacted.
• An adjustment to ensure the effects of geographic reclassification are budget neutral, as provided for under section 1886(d)(8)(D) of the Act, by removing the FY 2026 budget neutrality factor and applying a revised factor.
• An adjustment to the standardized amount to implement in a budget neutral manner the wage index cap policy (as described in section III.G.5 of the preamble of this proposed rule).
• Using our authority under section 1886(d)(5)(I)(i) of the Act, an adjustment to the standardized amount to implement in a budget neutral manner the transition for the discontinuation of the low wage index hospital policy (as described in section III.F.6 of the preamble of this proposed rule).
• An adjustment to remove the FY 2026 outlier offset and apply an offset for FY 2027, as provided for in section 1886(d)(3)(B) of the Act.
We note, in section VI.N. of the preamble of this proposed rule, we discuss the Rural Community Hospital Demonstration (RCHD) program. In past years, we made an adjustment to ensure the effects of the RCHD program are budget neutral as required under section 410A(c)(2) of Public Law 108-173. As discussed in that section, as we are not yet able to finalize the FY 2027 estimated costs of the demonstration at this time, we are not proposing to apply a budget neutrality offset in this FY 2027 IPPS/LTCH PPS proposed rule. Rather, we are proposing to apply budget neutrality offsets for both FY 2027 and FY 2028 to the national IPPS rates in the FY 2028 IPPS/LTCH PPS rulemaking. We would also incorporate any statutory change that might affect the methodology for determining hospital costs either with or without the demonstration. We refer the reader to section VI.N. of the preamble of this proposed rule for complete details on this proposal.
For FY 2027, consistent with current law, we are proposing to apply the rural floor budget neutrality adjustment to hospital wage indexes. Also, consistent with section 3141 of the Affordable Care Act, instead of applying a State-level rural floor budget neutrality adjustment to the wage index, we are proposing to apply a uniform, national budget neutrality adjustment to the FY 2027 wage index for the rural floor.
For FY 2027, we are proposing to continue to not remove the Stem Cell Acquisition Budget Neutrality Factor from the prior year's standardized amount and to not apply a new factor. If we removed the prior year's adjustment, we would not satisfy budget neutrality. We believe this approach ensures the effects of the reasonable cost-based payment for allogeneic hematopoietic stem cell acquisition costs under section 108 of the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94) are budget neutral as required under section 108 of Public Law 116-94. For a discussion of Stem Cell Acquisition Budget Neutrality Factor, we refer the reader to the FY 2021 IPPS/LTCH PPS final rule (85 FR 59032 and 59033).
In general, the national standardized amount is based on per discharge averages of adjusted hospital costs from a base period (section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d) of the Act. The September 1, 1983, interim final rule (48 FR 39763) contained a detailed explanation of how base-year cost data (from cost reporting periods ending during FY 1981) were established for urban and rural hospitals in the initial development of standardized amounts for the IPPS.
Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to update base-year per discharge costs for FY 1984 and then standardize the cost data in order to remove the effects of certain sources of cost variations among hospitals. These effects include case-mix, differences in area wage levels, cost-of-living adjustments for Alaska and Hawaii, IME costs, and costs to hospitals serving a disproportionate share of low-income patients.
For FY 2027, we are proposing to continue to use the national labor-related and nonlabor-related shares (which are based on the 2023-based hospital IPPS market basket) that were used in FY 2026. Specifically, under section 1886(d)(3)(E) of the Act, the Secretary estimates, from time to time, the proportion of payments that are labor-related and adjusts the proportion (as estimated by the Secretary from time to time) of hospitals' costs which are attributable to wages and wage-related costs of the DRG prospective payment rates. We refer to the proportion of hospitals' costs that are attributable to wages and wage-related costs as the “labor-related share.” For FY 2027, as discussed in section III.H. of the preamble of this proposed rule, we are proposing to use a labor-related share of 66.0 percent for the national standardized amounts for all IPPS hospitals (including hospitals in Puerto Rico) that have a wage index value that is greater than 1.0000. Consistent with section 1886(d)(3)(E) of the Act, we are proposing to apply the wage index to a labor-related share of 62 percent of the national standardized amount for all IPPS hospitals (including hospitals in Puerto Rico) whose wage index values are less than or equal to 1.0000.
The proposed standardized amounts for operating costs appear in Tables 1A, 1B, and 1C that are listed and published in section VI. of the Addendum to this proposed rule and are available via the internet on the CMS website.
Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning with FY 2004 and thereafter, an equal standardized amount be computed for all hospitals at the level computed for large urban hospitals during FY 2003, updated by the applicable percentage increase. Accordingly, we are proposing to calculate the FY 2027 national average standardized amount irrespective of whether a hospital is located in an urban or rural location.
Section 1886(b)(3)(B) of the Act specifies the applicable percentage increase used to update the standardized amount for payment for inpatient hospital operating costs. We note that, in compliance with section 404 of the MMA, we are proposing to use the 2023-based IPPS operating and capital market baskets for FY 2027. As discussed in section VI.B. of the preamble of this proposed rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, we are proposing to reduce the FY 2027 applicable percentage increase (which for this proposed rule is based on IGI's fourth quarter 2025 forecast of the 2023-based IPPS market basket) by the productivity adjustment, as discussed elsewhere in this proposed rule.
Based on IGI's fourth quarter 2025 forecast of the IPPS hospital market basket percentage increase (as discussed in appendix B of this proposed rule), the forecast of the hospital market basket percentage increase for FY 2027 for this proposed rule is 3.2 percent and the forecast of the productivity adjustment for FY 2027 for this proposed rule is 0.8 percentage point. As discussed earlier, for FY 2027, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act, there are four possible applicable percentage increases that can be applied to the standardized amount. We refer readers to section VI.B. of the preamble of this proposed rule for a complete discussion on the proposed FY 2027 inpatient hospital update to the standardized amount. We also refer readers to the previous table for the four possible applicable percentage increases that would be applied to update the national standardized amounts. The proposed standardized amounts shown in Tables 1A through 1C that are published in section VI. of this Addendum and that are available via the internet on the CMS website reflect these differential amounts.
Although the update factors for FY 2027 are set by law, we are required by section 1886(e)(4) of the Act to recommend, taking into account MedPAC's recommendations, appropriate update factors for FY 2027 for both IPPS hospitals and hospitals and hospital units excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires that we publish our recommendations in the
The methodology we used to calculate the proposed FY 2027 standardized amount is as follows:
• To ensure we are only including hospitals paid under the IPPS in the calculation of the standardized amount, we applied the following inclusion and exclusion criteria: include hospitals whose last four digits fall between 0001 and 0879 (section 2779A1 of Chapter 2 of the State Operations Manual on the CMS website at:
• As in the past, we are proposing to adjust the FY 2027 standardized amount to remove the effects of the FY 2027 geographic reclassifications and outlier payments before applying the FY 2027 updates. We then applied budget neutrality offsets for outliers and geographic reclassifications to the standardized amount based on proposed FY 2027 payment policies.
• We do not remove the prior year's budget neutrality adjustments for reclassification and recalibration of the DRG relative weights and for updated wage data because, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate payments after updates in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year's adjustment, we would not satisfy these conditions.
Budget neutrality is determined by comparing aggregate IPPS payments before and after making changes that are required to be budget neutral (for example, changes to MS-DRG classifications, recalibration of the MS-DRG relative weights, updates to the wage index, and different geographic reclassifications). We include outlier payments in the simulations because they may be affected by changes in these parameters.
• Consistent with our methodology established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because IME Medicare Advantage payments are made to IPPS hospitals under section 1886(d) of the Act, we believe these payments must be part of these budget neutrality calculations. However, we note that it is not necessary to include Medicare Advantage IME payments in the outlier threshold calculation or the outlier offset to the standardized amount because the statute requires that outlier payments be not less than 5 percent nor more than 6 percent of total “operating DRG payments,” which does not include IME and DSH payments. We refer readers to the FY 2011 IPPS/LTCH PPS final rule for a complete discussion on our methodology of identifying and adding the total Medicare Advantage IME payment amount to the budget neutrality adjustments.
• Consistent with the methodology in the FY 2012 IPPS/LTCH PPS final rule, in order to ensure that we capture only fee-for-service claims, we are only including claims with a “Claim Type” of 60 (which is a field on the MedPAR file that indicates a claim is an FFS claim).
• Consistent with our methodology established in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57277), in order to further ensure that we capture only FFS claims, we are excluding claims with a “GHOPAID” indicator of 1 (which is a field on the MedPAR file that indicates a claim is not an FFS claim and is paid by a Group Health Organization).
• Consistent with our methodology established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we examine the MedPAR file and remove pharmacy charges for anti-hemophilic blood factor (which are paid separately under the IPPS) with an indicator of “3” for blood clotting with a revenue code of “0636” from the covered charge field for the budget neutrality adjustments. We are removing organ acquisition charges, except for cases that group to MS-DRG 018, from the covered charge field for the budget neutrality adjustments because organ acquisition is a pass-through payment not paid under the IPPS. Revenue centers 081X-089X are typically excluded from ratesetting, however, we are not removing revenue center 891 charges from MS-DRG 018 claims during ratesetting because those revenue 891 charges were included in the relative weight calculation for MS-DRG 018, which is consistent with the policy finalized in the FY 2021 final rule (85 FR 58600). We note that a new MedPAR variable for revenue code 891 charges was introduced in April 2020.
• For FY 2027, we are continuing to remove allogeneic hematopoietic stem cell acquisition charges from the covered charge field for budget neutrality adjustments. As discussed in the FY 2021 IPPS/LTCH PPS final rule, payment for allogeneic hematopoietic stem cell acquisition costs is made on a reasonable cost basis for cost reporting periods beginning on or after October 1, 2020 (85 FR 58835 through 58842).
• Consistent with our methodology established in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we believe that it is appropriate to include adjustments for the Hospital Readmissions Reduction Program and the Hospital VBP Program (established under the Affordable Care Act) within our budget neutrality calculations.
Both the hospital readmissions payment adjustment (reduction) and the hospital VBP payment adjustment (redistribution) are applied on a claim-by-claim basis by adjusting, as applicable, the base-operating DRG payment amount for individual subsection (d) hospitals, which affects the overall sum of aggregate payments on each side of the comparison within the budget neutrality calculations.
In order to properly determine aggregate payments on each side of the comparison, consistent with the approach we have taken in prior years, for FY 2027, we are proposing to continue to apply a proxy based on the prior fiscal year hospital readmissions payment adjustment and a proxy based on the prior fiscal year hospital VBP payment adjustment on each side of the comparison, consistent with the methodology that we adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688). Under this proposed policy for FY 2027, we used the final FY 2026 readmissions adjustment factors from Table 15 of the FY 2026 IPPS/LTCH PPS final rule and the final FY 2026 hospital VBP adjustment factors from Table 16B of the FY 2026 IPPS/LTCH PPS final rule. These proxy factors are applied on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum. We refer the reader to section V.K. of the preamble of this proposed rule for a complete discussion on the Hospital Readmissions Reduction Program and section V.L. of the preamble of this proposed rule for a complete discussion on the Hospital VBP Program.
• The Affordable Care Act also established section 1886(r) of the Act, which modifies the methodology for computing the Medicare DSH payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS hospitals receiving Medicare DSH payment adjustments receive an empirically justified Medicare DSH payment equal to 25 percent of the amount that would previously have been received under the statutory formula set forth under section 1886(d)(5)(F) of the Act governing the Medicare DSH payment adjustment. In accordance with section 1886(r)(2) of the Act, the remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals who are uninsured and any additional statutory adjustment, is available to make additional payments to Medicare DSH hospitals based on their share of the total amount of uncompensated care reported by Medicare DSH hospitals for a given time period. In order to properly determine aggregate payments on each side of the comparison for budget neutrality, prior to FY 2014, we included estimated Medicare DSH payments on both sides of our comparison of aggregate
Consistent with prior fiscal years, we are proposing to include the estimated empirically justified Medicare DSH payments that would be paid in accordance with section 1886(r)(1) of the Act and estimates of the additional uncompensated care payments made to hospitals receiving Medicare DSH payment adjustments as described by section 1886(r)(2) of the Act. That is, we are proposing to consider estimated empirically justified Medicare DSH payments at 25 percent of what would otherwise have been paid, and also the estimated additional uncompensated care payments for hospitals receiving Medicare DSH payment adjustments on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum.
We also are including the estimated supplemental payments for eligible IHS/Tribal hospitals and Puerto Rico hospitals on both sides of our comparison of aggregate payments when determining all budget neutrality factors described in section II.A.4. of this Addendum.
• When calculating total payments for budget neutrality, to determine total payments for SCHs, we model total hospital-specific rate payments and total Federal rate payments and then include whichever one of the total payments is greater. As discussed in section IV.G. of the preamble to this proposed rule and later in this section, we are proposing to continue to use the FY 2014 finalized methodology under which we take into consideration uncompensated care payments in the comparison of payments under the Federal rate and the hospital-specific rate for SCHs. Therefore, we are proposing to include estimated uncompensated care payments in this comparison.
As discussed elsewhere in this proposed rule, section 6202 of the Consolidated Appropriations Act, 2026 (Pub. L. 119-75) extended the MDH program for FY 2027 discharges occurring before January 1, 2027. Therefore, under current law, the MDH program will expire for discharges on or after January 1, 2027. For this proposed rule, approximately 80 hospitals would receive additional payments under the MDH program for the first quarter of FY 2027. Given the limited magnitude, we are proposing not to include this extension in the total payments for budget neutrality. Therefore, for purposes of this proposed rule's calculations, we computed payments under the Federal national rate (not including 75 percent of the difference between the payments under the Federal national rate and the payments under the updated hospital-specific rate as applicable) for the total payments for these hospitals in the budget neutrality calculations discussed in this section and we accounted for uncompensated care payments in the computation of total payments under the Federal rate.
• We are proposing to include an adjustment to the standardized amount for those hospitals that are not meaningful EHR users in our modeling of aggregate payments for budget neutrality for FY 2027. Similar to FY 2026, we are including this adjustment based on data on the prior year's performance. Payments for hospitals would be estimated based on the applicable standardized amount in Tables 1A and 1B for discharges occurring in FY 2027.
• In our determination of all budget neutrality factors described in section II.A.4. of this Addendum, we used transfer-adjusted discharges.
We note, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49414 through 49415), we finalized a change to the ordering of the budget neutrality factors in the calculation so that the RCH Demonstration budget neutrality factor (if applicable to the fiscal year) is applied after all wage index and other budget neutrality factors. We refer the reader to the FY 2023 IPPS/LTCH PPS final rule for further discussion.
Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in FY 1991, the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. As discussed in section II.D. of the preamble of this proposed rule, we normalized the recalibrated MS-DRG relative weights by an adjustment factor so that the average case relative weight after recalibration is equal to the average case relative weight prior to recalibration. However, equating the average case relative weight after recalibration to the average case relative weight before recalibration does not necessarily achieve budget neutrality with respect to aggregate payments to hospitals because payments to hospitals are affected by factors other than average case relative weight. Therefore, as we have done in past years, we are proposing to make a budget neutrality adjustment to ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act is met.
For this FY 2027 proposed rule, to comply with the requirement that MS-DRG reclassification and recalibration of the relative weights be budget neutral for the standardized amount and the hospital-specific rates, we used FY 2025 discharge data to simulate payments and compared the following:
• Aggregate payments using the FY 2026 labor-related share percentages, the FY 2026 relative weights, and the FY 2026 pre-reclassified wage data, and applied the proxy hospital readmissions payment adjustments and proxy hospital VBP payment adjustments (as described previously); and
• Aggregate payments using the FY 2026 labor-related share percentages, the proposed FY 2027 relative weights before applying the 10-percent cap, and the FY 2026 pre-reclassified wage data, and applied the same proxy hospital readmissions payment adjustments and proxy hospital VBP payment adjustments applied previously.
Because this payment simulation uses the proposed FY 2027 relative weights (before applying the 10-percent cap), consistent with our policy in section V.I. of the preamble to this proposed rule, we are applying the adjustor for certain cases that group to MS-DRG 018 in our simulation of these payments. We note that because the simulations of payments for all of the budget neutrality factors discussed in this section also use the FY 2027 relative weights, we are proposing to apply the adjustor for certain MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and other immunotherapies) cases in all simulations of payments for the budget neutrality factors discussed later in this section. We refer the reader to section V.I. of the preamble of this proposed rule for a complete discussion on the proposed adjustor for certain cases that group to MS-DRG 018 and to section II.D.2.b. of the preamble of this proposed rule, for a complete discussion of the proposed adjustment to the FY 2027 relative weights to account for certain cases that group to MS-DRG 018.
Based on this comparison, we computed a proposed budget neutrality adjustment factor and applied this factor to the standardized amount. As discussed in section IV. of this Addendum, we are proposing to apply the MS-DRG reclassification and recalibration budget neutrality factor to the hospital-specific rates that are effective for cost reporting periods beginning on or after October 1, 2026. Please see the table later in this section setting forth each of the proposed FY 2027 budget neutrality factors.
As discussed in section II.D.2.c. of the preamble of this proposed rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48897 through 48900), we finalized a permanent 10-percent cap on the reduction in an MS-DRG's relative weight in a given fiscal year, beginning in FY 2023. As also discussed in section II.D.2.c. of the preamble of this proposed rule, and consistent with our current methodology for implementing budget neutrality for MS-DRG reclassification and recalibration of the relative weights under section 1886(d)(4)(C)(iii) of the Act, we apply a budget neutrality adjustment to the standardized amount for all hospitals so that this 10-percent cap on relative weight reductions does not increase estimated aggregate Medicare payments beyond the payments that would be made had we never applied this cap. We refer the reader to the FY 2023 IPPS/LTCH PPS final rule for further discussion.
To calculate this proposed budget neutrality adjustment factor for FY 2027, we used FY 2025 discharge data to simulate payments and compared the following:
• Aggregate payments using the FY 2026 labor-related share percentages, the proposed FY 2027 relative weights before applying the 10-percent cap, and the FY 2026 pre-reclassified wage data, and applied the proxy hospital readmissions payment adjustments and the proxy hospital VBP payment adjustments (as described previously); and
• Aggregate payments using the FY 2026 labor-related share percentages, the proposed FY 2027 relative weights after applying the 10-percent cap, and the FY 2026 pre-reclassified wage data, and applied the same proxy FY 2027 hospital readmissions payment adjustments and proxy FY 2027 hospital VBP payment adjustments applied previously.
Because this payment simulation uses the proposed FY 2027 relative weights, consistent with our proposal in section V.I. of the preamble to this proposed rule and our historical policy, and as discussed in the preceding section, we applied the proposed adjustor for certain cases that group to MS-DRG 018 in our simulation of these payments.
In addition, we applied the proposed MS-DRG reclassification and recalibration budget neutrality adjustment factor before the cap (derived in the first step) to the payment rates that were used to simulate payments for this comparison of aggregate payments from FY 2026 to FY 2027. Based on this comparison, we computed a proposed budget neutrality adjustment factor and applied this factor to the standardized amount. As discussed in section IV. of this Addendum, as we are proposing to apply this budget neutrality factor to the hospital-specific rates that are effective for cost reporting periods beginning on or after October 1, 2026. Please see the table later in this section setting forth each of the proposed FY 2027 budget neutrality factors.
Section 1886(d)(3)(E)(i) of the Act requires us to update the hospital wage index on an annual basis beginning October 1, 1993. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index, or budget neutral.
Section 1886(d)(3)(E)(i) of the Act directs the Secretary to estimate from time to time the proportion of hospital costs that are labor-related and to adjust the proportion (as estimated by the Secretary from time to time) of hospitals' costs that are attributable to wages and wage-related costs of the diagnosis related group (DRG) prospective payment rates. We refer to the portion of hospital costs attributable to wages and wage-related costs as the labor-related share. In the FY 2026 IPPS/LTCH PPS final rule (90 FR 36869 through 36873), we finalized a labor-related share of 66.0 percent for discharges occurring on or after October 1, 2025. For FY 2027, we are proposing to continue to use a labor-related share of 66.0 percent for discharges occurring on or after October 1, 2026. Section 1886(d)(3)(E)(ii) of the Act provides that the Secretary must employ 62 percent as the labor-related share unless this would result in lower payments to a hospital than would otherwise be made. Thus, hospitals receive payment based on either a 62-percent labor-related share, or the labor-related share estimated from time to time by the Secretary, depending on which labor-related share results in a higher payment. (We refer the reader to section III.H of the preamble of this proposed rule for a complete discussion about the labor-related share).
As discussed in section III.H of the preamble of this proposed rule, for FY 2027, for all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are less than or equal to 1.0000, we are proposing to apply the wage index to a labor-related share of 62 percent of the national standardized amount. For all IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are greater than 1.000, for FY 2027, we are proposing to apply the wage index to a labor-related share of 66.0 percent of the national standardized amount.
Section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall calculate the budget neutrality adjustment for the adjustments or updates made under that provision as if section 1886(d)(3)(E)(ii) of the Act (among other provisions) had not been enacted. In other words, this section of the statute requires that we implement the updates to the wage index in a budget neutral manner, but that our budget neutrality adjustment should not take into account the requirement that we set the labor-related share for hospitals with wage indexes less than or equal to 1.0000 at the more advantageous level of 62 percent. Therefore, for purposes of this budget neutrality adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from taking into account the fact that hospitals with a wage index less than or equal to 1.0000 are paid using a labor-related share of 62 percent.
Section 1886(d)(3)(E)(i) of the Act provides for the collection of data at least every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, to construct an occupational mix adjustment to the wage index. Consistent with current policy, for FY 2027, we are proposing to adjust 100 percent of the wage index factor for occupational mix. We describe the occupational mix adjustment in section III.D of the preamble of this proposed rule.
To compute a proposed budget neutrality adjustment factor for wage index and labor-related share percentage changes, we used FY 2025 discharge data to simulate payments and compared the following:
• Aggregate payments using the proposed FY 2027 relative weights and the FY 2026 pre-reclassified wage indexes, applied the FY 2026 labor-related share of 66.0 percent to all hospitals (regardless of whether the hospital's wage index was above or below 1.0000), and applied the proxy hospital readmissions payment adjustment and the proxy hospital VBP payment adjustment (as described previously).
• Aggregate payments using the proposed FY 2027 relative weights and
In addition, we applied the proposed MS-DRG reclassification and recalibration budget neutrality adjustment factor before the proposed cap (derived in the first step) and the 10-percent cap on relative weight reductions adjustment factor (derived from the second step) to the payment rates that were used to simulate payments for this comparison of aggregate payments from FY 2026 to FY 2027. Based on this comparison, we computed a proposed budget neutrality adjustment factor and applied this factor to the standardized amount for changes to the wage index. Please see the table later in this section for a summary of the proposed FY 2027 budget neutrality factors.
Section 1886(d)(8)(B) of the Act provides that certain rural hospitals are deemed urban. In addition, section 1886(d)(10) of the Act provides for the reclassification of hospitals based on determinations by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be reclassified for purposes of the wage index.
Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amount to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. We note, in the FY 2024 IPPS/LTCH final rule (88 FR 58971 through 58977), we finalized a policy beginning with FY 2025 to include hospitals with § 412.103 reclassification along with geographically rural hospitals in all rural wage index calculations, and only exclude “dual reclass” hospitals (hospitals with simultaneous § 412.103 and MGCRB reclassifications) in accordance with the hold harmless provision at section 1886(d)(8)(C)(ii) of the Act. Consistent with the previous policy, beginning with FY 2024, we include the data of all § 412.103 hospitals (including those that have an MGCRB reclassification) in the calculation of “the wage index for rural areas in the State in which the county is located” as referred to in section 1886(d)(8)(C)(iii) of the Act.
We refer the reader to the FY 2015 IPPS final rule (79 FR 50371 and 50372) for a complete discussion regarding the requirement of section 1886(d)(8)(C)(iii) of the Act. We further note that the wage index adjustments provided for under section 1886(d)(13) of the Act are not budget neutral. Section 1886(d)(13)(H) of the Act provides that any increase in a wage index under section 1886(d)(13) of the Act shall not be taken into account in applying any budget neutrality adjustment with respect to such index under section 1886(d)(8)(D) of the Act. To calculate the proposed budget neutrality adjustment factor for FY 2027, we used FY 2025 discharge data to simulate payments and compared the following:
• Aggregate payments using the proposed FY 2027 labor-related share percentage, the proposed FY 2027 relative weights, and the proposed FY 2027 wage data prior to any reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act, and applied the proxy hospital readmissions payment adjustments and the proxy hospital VBP payment adjustments (as described previously).
• Aggregate payments using the proposed FY 2027 labor-related share percentage, the proposed FY 2027 relative weights, and the proposed FY 2027 wage data after such reclassifications, and applied the same proxy hospital readmissions payment adjustments and the proxy hospital VBP payment adjustments applied previously.
We note that the reclassifications applied under the second simulation and comparison are those listed in Table 2 associated with this proposed rule, which is available via the internet on the CMS website. This table reflects reclassification crosswalks for FY 2027 and applies the policies explained in section III of the preamble of this proposed rule. Based on this comparison, we computed a proposed budget neutrality adjustment factor and applied this proposed factor to the standardized amount to ensure that the effects of these provisions are budget neutral, consistent with the statute. Please see the table later in this section for a summary of the proposed FY 2027 budget neutrality factors.
The proposed FY 2027 budget neutrality adjustment factor was applied to the standardized amount after removing the effects of the FY 2026 budget neutrality adjustment factor. We note that the proposed FY 2027 budget neutrality adjustment reflects FY 2027 wage index reclassifications approved by the MGCRB or the Administrator at the time of development of this proposed rule.
Under § 412.64(e)(4), we make an adjustment to the wage index to ensure that aggregate payments after implementation of the rural floor under section 4410 of the BBA (Pub. L. 105-33) are equal to the aggregate prospective payments that would have been made in the absence of this provision. Consistent with section 3141 of the Affordable Care Act and as discussed in section III.G of the preamble of this proposed rule and codified at § 412.64(e)(4)(ii), the budget neutrality adjustment for the rural floor is a national adjustment to the wage index.
In fiscal years in which there are no hospitals in rural Puerto Rico with wage data, similar to our calculation in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50369 through 50370), we calculate a national rural Puerto Rico wage index. In such years, our calculation of the national rural Puerto Rico wage index is based on the policy adopted in the FY 2008 IPPS final rule with comment period (72 FR 47323). That is, we use the unweighted average of the wage indexes from all urban areas that are contiguous to (share a border with) the rural counties to compute the rural floor (72 FR 47323; 76 FR 51594). Based on the current labor market area delineations used for the wage index, all Puerto Rico urban areas are contiguous to a rural area. Therefore, the national rural Puerto Rico wage index is calculated based on the average of the proposed FY 2027 wage indexes for the following urban areas: Aguadilla, PR (CBSA 10380); Arecibo, PR (CBSA 11640), Guayama, PR (CBSA 25020); Mayaguez, PR (CBSA 32420); Ponce, PR (CBSA 38660); and San Juan-Bayamon-Caguas, PR (CBSA 41980).
We note, in the FY 2024 IPPS/LTCH final rule (88 FR 58971-77), we finalized a policy beginning with FY 2025 to include hospitals with § 412.103 reclassification along with geographically rural hospitals in all rural wage index calculations and to only exclude “dual reclass” hospitals (hospitals with simultaneous § 412.103 and MGCRB reclassifications) in accordance with the hold harmless provision at section 1886(d)(8)(C)(ii) of the Act. Consistent with the previous policy, beginning with FY 2024, we include the data of all § 412.103 hospitals (including those that have an MGCRB reclassification) in the calculation of the rural floor.
To calculate the proposed national rural floor budget neutrality adjustment factor, we used FY 2025 discharge data to simulate payments, and the post-reclassified national wage indexes and compared the following:
• National simulated payments without the rural floor.
• National simulated payments with the rural floor.
Based on this comparison, we determined a proposed national rural floor budget neutrality adjustment factor. The proposed national adjustment was applied to the national wage indexes to produce proposed rural floor budget neutral wage indexes. Please see the table later in this section for a summary of the proposed FY 2027 budget neutrality factors.
As further discussed in section III.G.2 of this proposed rule, section 9831 of the American Rescue Plan Act of 2021 (Pub. L. 117-2), enacted on March 11, 2021, amended section 1886(d)(3)(E)(i) of the Act (42 U.S.C. 1395ww(d)(3)(E)(i)) and added section 1886(d)(3)(E)(iv) of the Act to establish a minimum area wage index (or imputed floor) for hospitals in all-urban States for discharges occurring on or after October 1, 2021. Unlike the imputed floor that was in effect from FY 2005 through FY 2018, section 1886(d)(3)(E)(iv)(III) of the Act provides that the imputed floor wage index shall not be applied in a budget neutral manner. Specifically, section 9831(b) of Public Law 117-2 amends section 1886(d)(3)(E)(i) of the Act to exclude the imputed floor from the budget neutrality requirement under section 1886(d)(3)(E)(i) of the Act. In the past, we budget neutralized the estimated increase in payments each year resulting from the imputed floor that was in effect from FY 2005 through FY 2018. For FY 2022 and subsequent years, in applying the imputed floor required under section 1886(d)(3)(E)(iv) of the Act, we are applying the imputed floor after the application of the rural floor and would apply no reductions to the standardized amount or to the wage index to fund the increase in payments to hospitals in all-urban States resulting from the application of the imputed floor. We refer the reader to section III.G.2 of the preamble of this proposed rule for a complete discussion regarding the imputed floor.
As noted previously, in section III.G.6 of the preamble to this proposed rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021) we finalized a policy to apply a 5-percent cap on any decrease to a hospital's wage index from its wage index in the prior FY, regardless of the circumstances causing the decline. That is, a hospital's wage index would not be less than 95 percent of its final wage index for the prior FY. We also finalized the application of this permanent cap policy in a budget neutral manner through an adjustment to the standardized amount to ensure that estimated aggregate payments under our wage index cap policy for hospitals that will have a decrease in their wage indexes for the upcoming fiscal year of more than 5 percent will equal what estimated aggregate payments would have been without the permanent cap policy.
To calculate a wage index cap budget neutrality adjustment factor for FY 2027, we used FY 2025 discharge data to simulate payments and compared the following:
• Aggregate payments without the 5-percent cap using the proposed FY 2027 labor-related share percentages and the proposed FY 2027 relative weights, and applied the proxy hospital readmissions payment adjustments and the proxy hospital VBP payment adjustments (as described previously).
• Aggregate payments with the 5-percent cap using the proposed FY 2027 labor-related share percentages and the proposed FY 2027 relative weights, and applied the same proxy hospital readmissions payment adjustments and the proxy hospital VBP payment adjustments applied previously.
In the FY 2025 interim final action with comment period (IFC) (89 FR 80405 through 80421), we recalculated the FY 2025 IPPS hospital wage index to remove the low wage index hospital policy for FY 2025. We also removed the low wage index budget neutrality factor from the FY 2025 standardized amounts. For FY 2026 and subsequent fiscal years, consistent with the FY 2025 IFC, after considering the D.C. Circuit's decision in
For FY 2025 and FY 2026, consistent with our past practice to establish temporary transition policies to mitigate short-term instability and payment fluctuations, we established transition policies for hospitals significantly impacted by the discontinuation of the low wage index hospital policy using our authority under section 1886(d)(5)(I) of the Act. The transitional payment exception for FY 2025 for those hospitals was equal to the additional FY 2025 amount a hospital would have been paid under the IPPS if its FY 2025 wage index were equal to 95 percent of its FY 2024 wage index. The transitional payment exception for FY 2026 was equal to the additional FY 2026 amount the hospital would be paid under the IPPS if its FY 2026 wage index were equal to 90.25 percent of its FY 2024 wage index.
Some hospitals that previously benefitted from the low wage index hospital policy would continue to experience decreases of approximately 5 percent or more per year from their FY 2024 wage index (with the low wage index hospital policy applied). Therefore, we are proposing to extend the transitional exception to the calculation payments for FY 2027 a for these hospitals in the same manner as we did for the FY 2026 wage index. As noted previously, in section III.G.6 of the preamble to this proposed rule, for FY 2027 we are proposing to use our authority under section 1886(d)(5)(I)(i) of the Act twice. First, we are proposing to adopt a narrow transitional exception to the calculation of FY 2027 IPPS payments for low wage index hospitals significantly impacted by the discontinuation of the low wage index hospital policy. Second, we are proposing to exercise our authority again to do so in a budget neutral manner. To calculate the proposed transition wage index budget neutrality adjustment factor for FY 2027, we used FY 2025 discharge data to simulate payments and compared the following:
• Aggregate payments without the transition for the discontinuation of the low wage index hospital policy, the 5-percent cap using the proposed FY 2027
• Aggregate payments with the proposed transition for the discontinuation of the low wage index hospital policy, the 5-percent cap using the proposed FY 2027 labor-related share percentages the proposed FY 2027 relative weights, and applied the same proxy hospital readmissions payment adjustments and the proxy hospital VBP payment adjustments applied previously. This proposed FY 2027 budget neutrality adjustment factor was applied to the standardized amount.
We note, Table 2 associated with this proposed rule contains the wage index by provider before and after applying the 5 percent cap and the transition for the discontinuation of the low wage index hospital policy.
The following table is a summary of the proposed FY 2027 budget neutrality factors, as discussed in the previous sections.
Section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for “outlier” cases involving extraordinarily high costs. To qualify for outlier payments, a case must have costs greater than the sum of the prospective payment rate for the MS-DRG, any IME and DSH payments, uncompensated care payments, supplemental payment for eligible IHS/Tribal hospitals and Puerto Rico hospitals, any new technology add-on payments, and the “outlier threshold” or “fixed-loss” amount (a dollar amount by which the costs of a case must exceed payments in order to qualify for an outlier payment). We refer to the sum of the prospective payment rate for the MS-DRG, any IME and DSH payments, uncompensated care payments, supplemental payment for eligible IHS/Tribal hospitals and Puerto Rico hospitals, any new technology add-on payments, and the outlier threshold as the outlier “fixed-loss cost threshold.” To determine whether the costs of a case exceed the fixed-loss cost threshold, a hospital's CCR is applied to the total covered charges for the case to convert the charges to estimated costs. Payments for eligible cases are then made based on a marginal cost factor, which is a percentage of the estimated costs above the fixed-loss cost threshold. The marginal cost factor for FY 2027 is 80 percent, or 90 percent for burn MS-DRGs 927, 928, 929, 933, 934 and 935. We have used a marginal cost factor of 90 percent since FY 1989 (54 FR 36479 through 36480) for designated burn DRGs as well as a marginal cost factor of 80 percent for all other DRGs since FY 1995 (59 FR 45367).
In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year are projected to be not less than 5 percent nor more than 6 percent of total operating DRG payments (which does not include IME and DSH payments) plus outlier payments. When setting the outlier threshold, we compute the percent target by dividing the total projected operating outlier payments by the total projected operating DRG payments plus projected operating outlier payments. As discussed in the next section, for FY 2027, we are incorporating an estimate of the impact of outlier reconciliation when setting the outlier threshold. We do not include any other payments such as IME and DSH within the outlier target amount. Therefore, it is not necessary to include Medicare Advantage IME payments in the outlier threshold calculation. Section 1886(d)(3)(B) of the Act requires the Secretary to reduce the average standardized amount by a factor to account for the estimated total of outlier payments as a proportion of total DRG payments. More information on outlier payments may be found on the CMS website at:
The regulations in 42 CFR 412.84(i)(4) state that any outlier reconciliation at cost report settlement will be based on operating and capital cost-to-charge ratios (CCRs) calculated based on a ratio of costs to charges computed from the relevant cost report and charge data determined at the time the cost report coinciding with the discharge is settled. Instructions for outlier reconciliation are in section 20.1.2.5 of chapter 3 of the Claims Processing Manual (available at
On March 28, 2024, we issued Change Request (CR) 13566, which is available at
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42623 through 42635), we finalized a methodology to incorporate outlier reconciliation in the FY 2020 outlier fixed loss cost threshold. As discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19592), we stated that rather than trying to predict which claims and/or hospitals may be subject to outlier reconciliation, we believe a methodology that incorporates an estimate of outlier reconciliation dollars based on actual outlier reconciliation amounts reported in historical cost reports would be a more feasible approach and provide a better estimate and predictor of outlier reconciliation for the upcoming fiscal year. We also stated that we believe the methodology addresses stakeholder's concerns on the impact of outlier reconciliation on the modeling of the outlier threshold. (For a detailed discussion of additional background regarding outlier reconciliation, we refer the reader to the FY 2020 IPPS/LTCH PPS final rule.)
As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69949 through 69955), we finalized changes to our methodology to incorporate an estimate of outlier reconciliation in the FY 2025 outlier fixed loss cost threshold to reflect the estimated reconciled outlier payments under the new criteria (described previously). (We note, when we finalized these changes to the methodology beginning with FY 2025, CR 13566 was in place making the new criteria in effect for cost reports beginning on or after October 1, 2024.) In that final rule, we provided step by step details under our methodology to incorporate a projection of outlier payment reconciliations for the FY 2025 outlier threshold calculation. We refer the reader to the FY 2025 IPPS/LTCH final rule for complete details (89 FR 69950 through 69955).
Under our methodology for incorporating a projection of outlier reconciliation for the outlier threshold calculation, for each year, we typically advance the historical data used by 1 year, using cost report data that is on a 6-year lag, which is typically the most recent and complete available data to project the estimate of outlier reconciliation. Accordingly, for FY 2025 we used FY 2019 cost report data. Because at that time, the new criteria were not effective until FY 2025 cost reports, to estimate outlier reconciliation dollars under the new criteria, we applied the new criteria to FY 2019 cost reports as if they had been in place at the time of final cost report settlement. (As noted previously, when we finalized these changes to the methodology beginning with FY 2025, CR 13566 was in place making the new criteria in effect for cost reports beginning on or after October 1, 2024.) In FY 2026, we evaluated the FY 2020 cost report data under our methodology as established in FY 2020 and modified in the FY 2025 IPPS/LTCH PPS final rule. As discussed in the FY 2026 IPPS/LTCH PPS final rule, based on our evaluation of the data, for purposes of incorporating an estimate of outlier reconciliation in the outlier fixed-loss cost threshold calculation for FY 2026, we held the data constant and used the percentage of total operating outlier reconciliation dollars to total Federal operating payments from the FY 2025 IPPS/LTCH PPS final rule, which was based on FY 2019 cost reports and PSF data.
For FY 2027, we evaluated the use of the FY 2021 cost report data under our methodology as established in FY 2020 and modified in the FY 2025 IPPS/LTCH PPS final rule, to incorporate a projection of operating outlier reconciliations for the FY 2027 outlier threshold calculation (that is, the FY 2020 methodology as modified in FY 2025 to reflect additional cost reports that would be identified for outlier reconciliation approval under the new criteria in CR 14233). Specifically, for FY 2027 we evaluated using the same steps finalized in the FY 2025 IPPS/LTCH PPS final rule.
Specifically, we calculated a projection of outlier reconciliation using cost report data from FY 2021 hospital cost reports in the December 2025 HCRIS extract that were reconciled using the original criteria for referral for outlier reconciliation approval. In addition, in calculating this estimate, we used data from the Provider Specific File (PSF) and the cost report data to identify the FY 2021 cost reports that would have met the new criteria if those criteria had been in effect. This allows us to account for the additional hospital cost reports that would be referred for outlier reconciliation approval as a result of the new criteria under our methodology. For purposes of this estimate, we used the latest quarterly PSF update (December 2025 for the proposed rule).
As explained previously, our 5-step methodology to incorporate a projection of outlier payment reconciliations for the outlier threshold calculation is described in detail in the FY 2025 IPPS/LTCH final rule (see 89 FR 69950 through 69952). The 5 steps can be summarized as follows:
With regard to incorporating outlier reconciliation in the FY 2027 outlier fixed-loss cost threshold, we evaluated the use of the most recent available data (as described previously) using the 5-step methodology as set forth in the FY 2025 IPPS/LTCH PPS final rule. As we explain in greater detail in the discussion that follows, similar to FY 2026, we found that using the most recent available data under our 5-step methodology appears to produce anomalous results that may not provide an appropriate estimate and predictor of outlier reconciliation for the upcoming fiscal year. (We note, for the hospitals identified in Step 1b (hospitals that would be referred for outlier reconciliation under the new criteria), for this proposed rule we posted a public use file that includes the operating CCR calculated from the FY 2021 cost report in the most recent publicly available quarterly HCRIS extract (the December 2025 HCRIS for the proposed rule), the weighted operating CCR used for claim payment during the FY 2021 cost reporting period from the latest quarterly PSF update (December 2025 for the proposed rule), and the supplemental data from the MACs and operating outlier payment reported on the FY 2021 cost report.)
Step 4 of the methodology divides the aggregate amount from Step 2
Using the most recent available data for this proposed rule (as described previously), the ratio calculated under Step 4 of the methodology would be 0.000000 percent (($457,535/$77,326,439,126) × 100), which, when rounded to the second digit, is +0.0 percent. Under Step 5 of the methodology, this percentage amount would be used to adjust the outlier target for FY 2027. This would mean that for FY 2027, we would incorporate a projection of outlier reconciliation dollars by targeting an outlier threshold at 5.1 percent [5.1 percent—(0.0 percent)]. This 0.0 percentage is being driven by the numerator in Step 4 (that is, the total reconciled dollars or the aggregate operating outlier reconciliation dollars under both the original criteria and the new criteria).
Typically, the total reconciled dollars in Step 2 (the numerator of Step 4) is a negative amount reflecting that overall, providers would owe the Medicare program money at the time of outlier reconciliation, which then produces a negative percentage of operating outlier reconciliation dollars to total Federal operating payments in Step 4. Using the most recent available data (described previously), the total reconciled dollars in Step 2 (the numerator of Step 4) which is the aggregate operating outlier reconciliation dollars under both the original criteria and the new criteria, is resulting in a small amount owed by CMS to providers ($457,535). When Step 2 is divided by the aggregate amount of total Federal operating payments across all applicable hospitals using the cost report data in Step 3 ($77,326,439,126; the denominator in Step 4), this results in no adjustment to the threshold (0.0 percent).
As mentioned previously, since FY 2020 we have incorporated outlier reconciliation into the outlier fixed loss cost threshold calculation. For the outlier fixed loss cost threshold calculation for FYs 2020 through 2025, the percentage of operating outlier reconciliation dollars to total Federal operating payments from Step 4 has resulted in a negative value (having the effect of a decrease to the outlier threshold). Similar to the evaluation of FY 2020 cost report data for FY 2026, using the FY 2021 cost report data and PSF values described previously under our methodology would result in a percentage of operating outlier reconciliation dollars to total Federal operating payments that is inconsistent with the prior historical data. Similar to the evaluation of the FY 2020 cost report data for FY 2026, compared to the historical data used to calculate the estimate of outlier reconciliation for FYs 2020-2025, we believe 0.0 percent may be an anomaly and may not be an accurate predictor of outlier reconciliations for FY 2027 to use as an estimate of outlier reconciliation dollars for incorporating the effect of outlier reconciliation in the FY 2027 outlier fixed-loss cost threshold. Therefore, rather than use the percentage of total operating outlier reconciliation dollars to total Federal operating payments from Step 4 based on the latest available data (as described previously), for purposes of incorporating an estimate of outlier reconciliation into the outlier fixed-loss cost threshold calculation for FY 2027, we are proposing to hold the data constant and to use the percentage of total operating outlier reconciliation dollars to total Federal operating payments from Step 4 from the FY 2025 IPPS/LTCH PPS final rule which is based on FY 2019 cost reports and PSF data. As discussed in that final rule (89 FR 69952), the ratio was a negative 0.041994 percent ((−$36,439,127/$86,772,005,692) × 100), which, when rounded to the second digit, is −0.04 percent. Given the anomaly in the most recent available data described earlier, we believe that this is the best available data to estimate and predict outlier reconciliations for FY 2027 to use to incorporate the effect of outlier reconciliation in the FY 2027 outlier fixed-loss cost threshold. This percentage amount would then be used to adjust the proposed outlier target for FY 2027 as determined in Step 5. (For
Under Step 5 of our methodology, because the outlier reconciliation dollars are only available on the cost reports, and not in the Medicare claims data in the MedPAR file used to model the outlier threshold, we are proposing to target 5.1 percent minus the percentage determined under Step 4 in determining the outlier threshold. Consistent with the FY 2025 IPPS/LTCH PPS final rule, to incorporate a projection of outlier reconciliation dollars, we are proposing to target an outlier threshold at an amount higher than 5.1 percent for outlier payments for FY 2027. Therefore, for FY 2027, we are proposing to incorporate a projection of outlier reconciliation dollars by targeting an outlier threshold at 5.14 percent [5.1 percent - (−0.04 percent)]. As explained earlier, when the aggregate amount of outlier reconciliation as a percent of total operating payments rounds to a negative percent, the effect is a decrease to the outlier threshold compared to an outlier threshold that is calculated without including this estimate of operating outlier reconciliation dollars. In section II.A.4.i.(2). of this Addendum, we provide the FY 2027 proposed outlier threshold as calculated for this proposed rule both with and without including this percentage estimate of operating outlier reconciliation.
Consistent with the approach taken in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19593), we would continue to use a 5.1 percent target (or an outlier offset factor of 0.949) in calculating the outlier offset to the standardized amount. Therefore, the proposed operating outlier offset to the standardized amount is 0.949 (1 − 0.051).
We note, for the FY 2027 final rule, consistent with our historical practice, we plan to evaluate the updated data available at the time of the development of that final rule (such as the March 2026 HCRIS extract of the FY 2021 cost report). We would evaluate the use of that updated data in the methodology to assess whether that data still shows an anomaly such that it would not be appropriate to use in calculating the projection of outlier reconciliation dollars for FY 2027 and, depending on the results of this evaluation, may consider use of that data for purposes of projecting an estimate of outlier reconciliation dollars and incorporating that estimate into the modeling for the fixed loss cost outlier threshold for FY 2027. We are inviting public comment on our proposed methodology for projecting an estimate of outlier reconciliation and incorporating that estimate into the modeling for the fixed loss cost outlier threshold for FY 2027.
We establish an outlier threshold that is applicable to both hospital inpatient operating costs and hospital inpatient capital related costs (58 FR 46348). Similar to the calculation of the adjustment to the standardized amount to account for the projected proportion of operating payments paid as outlier payments, as discussed in greater detail in section III.A.2. of this Addendum, we are proposing to reduce the FY 2027 capital standard Federal rate by an adjustment factor to account for the projected proportion of capital IPPS payments paid as outliers. The regulations in 42 CFR 412.84(i)(4) state that any outlier reconciliation at cost report settlement would be based on operating and capital CCRs calculated based on a ratio of costs to charges computed from the relevant cost report and charge data determined at the time the cost report coinciding with the discharge is settled. As such, any reconciliation also applies to capital outlier payments.
Under our methodology for incorporating an adjustment to account for capital outlier reconciliation payments in the projected proportion of capital IPPS payments paid as outliers in determining the FY 2027 capital Federal rate, each year, we typically advance the historical data used by 1 year and use cost report data that is on a six year lag, which is typically the most recent and complete available data to project the estimate of outlier reconciliation. Accordingly, for FY 2025 we used FY 2019 cost report data. Because at that time, the new criteria were not effective until FY 2025 cost reports, to estimate outlier reconciliation dollars under the new criteria, we applied the new criteria to FY 2019 cost reports as if they had been in place at the time of final cost report settlement. (As noted previously, when we finalized these methodology changes beginning with FY 2025, CR 13566 was in place making the new criteria in effect for cost reports beginning on or after October 1, 2024.) In FY 2026, we evaluated the FY 2020 cost report data under our methodology as established in FY 2020 and modified in the FY 2025 IPPS/LTCH PPS final rule. As discussed in the FY 2026 IPPS/LTCH PPS final rule, based on our evaluation of the data, for purposes of incorporating an adjustment to account for capital outlier reconciliation payments in the projected proportion of capital IPPS payments paid as outliers in determining the FY 2026 capital Federal rate, we held the data constant and used the percentage of total capital outlier reconciliation dollars to total capital Federal payments from the FY 2025 IPPS/LTCH PPS final rule, which was based on FY 2019 cost reports and PSF data.
For FY 2027, we evaluated the use of the FY 2021 cost report data under the methodology we used for FY 2025 to incorporate an adjustment to the FY 2027 capital standard Federal rate to account for the projected proportion of capital IPPS payments paid as outliers (that is, the FY 2020 methodology as modified in FY 2025 to reflect additional cost reports that would be identified for reconciliation under the new criteria in CR 14233). Specifically, we calculated an estimate of outlier reconciliation using cost report data from FY 2021 hospital cost reports in the December 2025 HCRIS extract that were reconciled using the original criteria for referral for outlier reconciliation. Similarly, in calculating this estimate, we used data from the Provider Specific File (PSF) and the cost report data to identify the FY 2021 cost reports that would have met the new criteria if those criteria had been in effect. This allowed us to account for the additional hospital cost reports that would be referred for outlier reconciliation approval as a result of the new criteria under our methodology. For purposes of the estimate, we used the latest quarterly PSF update (December 2025) for the proposed rule.
As previously explained, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 699540 through 69955), we finalized changes to our methodology to incorporate an estimate of outlier reconciliation in the FY 2025 outlier fixed loss cost threshold to reflect the estimated reconciled outlier payments under the new criteria in CR 13566 (described previously). In that final rule, we provided step by step details under our methodology to incorporate a projection of outlier payment reconciliations for the FY 2025 outlier threshold calculation. (For complete details on our 5-step methodology to incorporate an adjustment to the capital outlier adjustment factor, we refer readers to the FY 2025 IPPS/LTCH final rule (89 FR 69953 through 69955).) The 5 steps can be summarized as follows:
Under this methodology, because the outlier reconciliation dollars are only available on the cost reports, and not in the specific Medicare claims data in the MedPAR file used to estimate outlier payments, in Step 5 the estimate of capital outlier payments are determined by adding the percentage determined in Step 4 to the estimated percentage of capital outlier payments otherwise determined using the shared outlier threshold that is applicable to both hospital inpatient operating costs and hospital inpatient capital-related costs. (We note that this percentage is added for capital outlier payments but subtracted in the analogous step for operating outlier payments. We have a unified outlier payment methodology that uses a shared threshold to identify outlier cases for both operating and capital payments. The difference stems from the fact that operating outlier payments are determined by first setting a “target” percentage of operating outlier payments relative to aggregate operating payments which produces the outlier threshold. Once the shared threshold is set, it is used to estimate the percentage of capital outlier payments to total capital payments based on that threshold. Because the threshold is already set based on the operating target, rather than adjusting the threshold (or operating target), we adjust the percentage of capital outlier to total capital payments to account for the estimated effect of capital outlier reconciliation payments. This percentage is adjusted by adding the capital outlier reconciliation percentage from Step 4 to the estimate of the percentage of capital outlier payments to total capital payments based on the shared threshold.)
As discussed in previous proposed and final rules, when the aggregate capital outlier reconciliation dollars in Step 2 is negative, the estimate of capital outlier payments under our methodology would be lower than the percentage of capital outlier payments otherwise determined using the shared outlier threshold. Under Step 5 this would be a relatively smaller outlier budget neutrality adjustment factor which would have the effect of an increase to the capital Federal rate. When the aggregate capital outlier reconciliation dollars from Step 2 are positive, the estimate of capital outlier payments under our methodology would be higher than the percentage of capital outlier payments otherwise determined using the shared outlier threshold. Under Step 5 this would be a relatively larger outlier budget neutrality adjustment factor which would have the effect of a decrease to the capital Federal rate.
With regard to incorporating an adjustment to account for capital outlier reconciliation payments in the projected proportion of capital IPPS payments paid as outliers, we evaluated the use of the most recent available data (as described previously) using the 5-step methodology as set forth in the FY 2025 IPPS/LTCH PPS final rule. (We note, for the hospitals identified in Step 1b (hospitals that would be referred for outlier reconciliation approval under the new criteria), for this proposed rule we posted a public use file that includes the capital CCR calculated from the FY 2021 cost report in the most recent publicly available quarterly HCRIS extract (the December 2025 HCRIS for the proposed rule), the weighted capital CCR used for claim payment during the FY 2021 cost reporting period from the latest quarterly PSF update (December 2025 for the proposed rule), and the supplemental data from the MACs and capital outlier payment reported on the FY 2021 cost report.)
Step 4 of the methodology divides the aggregate amount from Step 2
For this proposed rule, the estimated percentage of FY 2027 capital outlier payments otherwise determined using the shared outlier threshold is 3.60 percent (estimated capital outlier payments of $264,774,667 divided by (estimated capital outlier payments of $264,774,667 plus the estimated total capital Federal payment of $7,080,040,076)). Using the most recent available data (described previously), the total in Step 2 is $4,597,730, which is a negative amount. The percentage calculated in Step 4 was a negative 0.065876 percent (($4,597,730/$6,979,384,161) × 100), which, when rounded to the second digit, is −0.07 percent. Under Step 5 of the methodology, this percentage amount would be used to adjust the estimate of capital outlier payments for FY 2027. This would mean that for this FY 2027 proposed rule we would decrease the estimated percentage of FY 2027 aggregate capital outlier payments by 0.07 percent. This negative 0.07 percentage point is being driven by the numerator in Step 4 (that is, the total reconciled dollars or the aggregate capital outlier reconciliation dollars under both the original criteria and the new criteria).
The total reconciled dollars in Step 2 (the numerator of Step 4) is a negative amount reflecting that overall, providers would owe the Medicare program money at the time of outlier reconciliation, which then produces a negative percentage of capital outlier reconciliation dollars to total Federal capital payments in Step 4. This is consistent with the trends in the historical data.
However, as discussed earlier, using the FY 2021 cost report data and PSF values under our methodology for incorporating a projection of operating outlier reconciliations for the outlier threshold calculation would result in a percentage of operating outlier reconciliation dollars to total Federal operating payments that is inconsistent with the historical data. As previously discussed, compared to the historical data used to calculate the estimate of outlier reconciliation for FYs 2020-2025, we believe that 0.0 percent may be an anomaly and may not be an accurate predictor of outlier reconciliations for FY 2027 to use as an estimate of outlier reconciliation dollars for incorporating the effect of outlier reconciliation in the FY 2027 outlier fixed-loss cost
As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69955), based on FY 2019 cost reports and PSF data, the ratio was a negative 0.028042 percent ((-$2,181,440/$7,779,306,800) × 100), which, when rounded to the second digit, is -0.03 percent. Accordingly, for this proposed rule, taking into account projected capital outlier reconciliation under our methodology would decrease the estimated percentage of FY 2027 aggregate capital outlier payments by 0.03 percent. This percentage amount would be used to adjust the proposed estimated percentage of FY 2027 aggregate capital outlier payments under Step 5 of the methodology. (For complete details on the calculation, refer to the FY 2025 IPPS/LTCH final rule (89 FR 69953 through 69955).)
As discussed in section III.A.2. of this Addendum, we are incorporating the capital outlier reconciliation dollars from Step 5 when applying the outlier adjustment factor in determining the proposed capital Federal rate based on the estimated percentage of capital outlier payments to total capital Federal rate payments for FY 2027.
We note, for the FY 2027 final rule, consistent with our historical practice, we plan to evaluate the updated data available at the time of the development of that final rule (such as the March 2026 HCRIS extract of the FY 2021 cost report). We would evaluate the use of that updated data in the methodology to assess whether that data still shows an anomaly such that it would not be appropriate to use in calculating the projection of outlier reconciliation dollars for FY 2027 and, depending on the results of this evaluation, may consider use of that data for purposes of projecting an estimate of outlier reconciliation dollars and incorporating an adjustment to the FY 2027 capital standard Federal rate to account for the projected proportion of capital IPPS payments paid as outliers. We are inviting public comment on our proposed methodology for incorporating an adjustment to account for capital outlier reconciliation payments in the projected proportion of capital IPPS payments paid as outliers in determining the FY 2027 capital Federal rate.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through 50983), in response to public comments on the FY 2013 IPPS/LTCH PPS proposed rule, we made changes to our methodology for projecting the outlier fixed-loss cost threshold for FY 2014. We refer readers to the FY 2014 IPPS/LTCH PPS final rule for a detailed discussion of the changes.
As we have done in the past, to calculate the proposed FY 2027 outlier threshold, we simulated payments by applying proposed FY 2027 payment rates and policies using cases from the FY 2025 MedPAR file. As noted in section II.C. of this Addendum, we specify the formula used for actual claim payment which is also used by CMS to project the outlier threshold for the upcoming fiscal year. The difference is the source of some of the variables in the formula. For example, operating and capital CCRs for actual claim payment are from the Provider-Specific File (PSF) while CMS uses an adjusted CCR (as described later in this section) to project the threshold for the upcoming fiscal year. In addition, charges for a claim payment are from the bill while charges to project the threshold are from the MedPAR data with an inflation factor applied to the charges (as described earlier).
In order to determine the proposed FY 2027 outlier threshold, we inflated the charges on the MedPAR claims by 2 years, from FY 2025 to FY 2027. Consistent with the FY 2020 IPPS/LTCH PPS final rule (84 FR 42626 and 42627), we are using the following methodology to calculate the charge inflation factor for FY 2027:
• Include hospitals whose last four digits fall between 0001 and 0899 (section 2779A1 of Chapter 2 of the State Operations Manual on the CMS website at
• Include providers that are in both periods of charge data that are used to calculate the 1-year average annual rate of-change in charges per case. We note this is consistent with the methodology used since FY 2014.
• We excluded Medicare Advantage IME claims for the reasons described in section I.A.4. of this Addendum. We refer readers to the FY 2011 IPPS/LTCH PPS final rule for a complete discussion on our methodology of identifying and adding the total Medicare Advantage IME payment amount to the budget neutrality adjustments.
• In order to ensure that we capture only FFS claims, we included claims with a “Claim Type” of 60 (which is a field on the MedPAR file that indicates a claim is an FFS claim).
• In order to further ensure that we capture only FFS claims, we excluded claims with a “GHOPAID” indicator of 1 (which is a field on the MedPAR file that indicates a claim is not an FFS claim and is paid by a Group Health Organization).
• We examined the MedPAR file and removed pharmacy charges for anti-hemophilic blood factor (which are paid separately under the IPPS) with an indicator of “3” for blood clotting with a revenue code of “0636” from the covered charge field. We also removed organ acquisition charges from the covered charge field because organ acquisition is a pass-through payment not paid under the IPPS. As noted previously, we are proposing to remove allogeneic hematopoietic stem cell acquisition charges from the covered charge field for budget neutrality adjustments. As discussed in the FY 2021 IPPS/LTCH PPS final rule,
• Because this payment simulation uses the proposed FY 2027 relative weights, consistent with our proposal discussed in section IV.I. of the preamble to this proposed rule, we applied the proposed adjustor for certain cases that group to MS-DRG 018 in our simulation of these payments.
Our general methodology to inflate the charges computes the 1-year average annual rate-of-change in charges per case which is then applied twice to inflate the charges on the MedPAR claims by 2 years since we typically use claims data for the fiscal year that is 2 years prior to the upcoming fiscal year.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42627), we modified our charge inflation methodology. We stated that we believe balancing our preference to use the latest available data from the MedPAR files and stakeholders' concerns about being able to use publicly available MedPAR files to review the charge inflation factor can be achieved by modifying our methodology to use the publicly available Federal fiscal year period (that is, for FY 2020, we used the charge data from Federal fiscal years 2017 and 2018), rather than the most recent data available to CMS which, under our prior methodology, was based on calendar year data. We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for a complete discussion regarding this change.
For the same reasons discussed in that rulemaking, for FY 2027, we are proposing to use the same methodology as FY 2020 to determine the charge inflation factor. That is, for FY 2027, we are proposing to use the MedPAR files for the two most recent available Federal fiscal year time periods to calculate the charge inflation factor, as we did for FY 2020. Specifically, for this proposed rule we used the December 2024 MedPAR file of FY 2024 (October 1, 2023, to September 30, 2024) charge data (released for the FY 2026 IPPS/LTCH PPS proposed rule) and the December 2025 MedPAR file of FY 2025 (October 1, 2024, to September 30, 2025) charge data (released for this FY 2027 IPPS/LTCH PPS proposed rule) to compute the proposed charge inflation factor. We are proposing that for the FY 2027 final rule, we would use more recently updated data, that is the MedPAR files from March 2025 for the FY 2024 time period and March 2026 for the FY 2025 time period.
For FY 2027, under this proposed methodology, to compute the 1-year average annual rate-of-change in charges per case, we compared the average covered charge per case of $90,776.90 ($623,467,062,919/6,868,125) from October 1, 2023, through September 30, 2024, to the average covered charge per case of $97,412.36 ($677,169,023,175/6,951,572) from October 1, 2024, through September 30, 2025. This rate-of-change was 7.310 percent (1.07310) or 15.154 percent (1.15154) over 2 years. The billed charges are obtained from the claims from the MedPAR file and inflated by the inflation factor specified previously.
As we have done in the past, in this FY 2027 IPPS/LTCH PPS proposed rule, we are proposing to establish the FY 2027 outlier threshold using hospital CCRs from the December 2025 update to the Provider-Specific File (PSF), the most recent available data at the time of the development of the proposed rule. We are proposing to apply the following edits to providers' CCRs in the PSF. We believe these edits are appropriate to accurately model the outlier threshold. We first search for Indian Health Service providers and those providers assigned the statewide average CCR from the current fiscal year. We then replace these CCRs with the statewide average CCR for the upcoming fiscal year. We also assign the statewide average CCR (for the upcoming fiscal year) to those providers that have no value in the CCR field in the PSF or whose CCRs exceed the ceilings described later in this section (3.0 standard deviations from the mean of the log distribution of CCRs for all hospitals). We do not apply the adjustment factors described later in this section to hospitals assigned the statewide average CCR. For FY 2027, we are proposing to continue to apply an adjustment factor to the CCRs to account for cost and charge inflation (as explained later in this section). We are also proposing that, if more recent data become available, we would use that data to calculate the final FY 2027 outlier threshold.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we adopted a new methodology to adjust the CCRs. Specifically, we finalized a policy to compare the national average case-weighted operating and capital CCR from the most recent update of the PSF to the national average case-weighted operating and capital CCR from the same period of the prior year.
Therefore, as we have done in the past, we are proposing to adjust the CCRs from the December 2025 update of the PSF by comparing the percentage change in the national average case weighted operating CCR and capital CCR from the December 2024 update of the PSF to the national average case weighted operating CCR and capital CCR from the December 2025 update of the PSF. We note that we used total transfer-adjusted cases from FY 2025 to determine the national average case weighted CCRs for both sides of the comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we believe that it is appropriate to use the same case count on both sides of the comparison because this will produce the true percentage change in the average case-weighted operating and capital CCR from one year to the next without any effect from a change in case count on different sides of the comparison.
Using the proposed methodology, for this proposed rule, we calculated a December 2024 operating national average case-weighted CCR of 0.24059 and a December 2025 operating national average case-weighted CCR of 0.235176.We then calculated the percentage change between the two national operating case-weighted CCRs by subtracting the December 2024 operating national average case-weighted CCR from the December 2025 operating national average case-weighted CCR and then dividing the result by the December 2024 national operating average case-weighted CCR. This resulted in a proposed one-year national operating CCR adjustment factor of 0.977497.
We used this same proposed methodology to adjust the capital CCRs. Specifically, we calculated a December 2024 capital national average case-weighted CCR of 0.01644 and a December 2025 capital national average case-weighted CCR of 0.015639. We then calculated the percentage change between the two national capital case-weighted CCRs by subtracting the December 2024 capital national average case-weighted CCR from the December 2025 capital national average case-weighted CCR and then dividing the result by the December 2024 capital national average case-weighted CCR. This resulted in a proposed one-year national capital CCR adjustment factor of 0.951277.
For purposes of estimating the proposed outlier threshold for FY 2027, we used a wage index that reflects the policies discussed in the proposed rule. This includes the following:
• The proposed rural and imputed floor adjustments.
• The proposed State frontier floor adjustments in accordance with section 10324(a) of the Affordable Care Act, Public Law 111-148.
• The proposed out-migration adjustment as added by section 505 of Public Law 108-173.
• Our policy (described in section III.F.5 of the preamble of this proposed rule) to apply a 5-percent cap on any decrease to a hospital's wage index from its wage index in the prior FY, regardless of the circumstances causing the decline.
• The proposed continuation of the transition for the discontinuation of the low wage index hospital policy (as described in section III.F.6 of the preamble of this proposed rule).
If we did not take the aforementioned into account, our estimate of total FY 2027 payments would be too low, and, as a result, the proposed outlier threshold would be too high, such that estimated outlier payments would be less than our projected 5.1 percent of total payments (which includes outlier reconciliation).
As described in sections V.K. and V.L., respectively, of the preamble of this proposed rule, sections 1886(q) and 1886(o) of the Act establish the Hospital Readmissions Reduction Program and the Hospital VBP Program, respectively. We do not believe that it is appropriate to include the hospital VBP payment adjustments and the hospital readmissions payment adjustments in the proposed outlier threshold calculation or the proposed outlier offset to the standardized amount. Specifically, consistent with our definition of the base operating DRG payment amount for the Hospital Readmissions Reduction Program under § 412.152 and the Hospital VBP Program under § 412.160, outlier payments under section 1886(d)(5)(A) of the Act are not affected by these payment adjustments. Therefore, outlier payments would continue to be calculated based on the unadjusted base DRG payment amount (as opposed to using the base-operating DRG payment amount adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment). Consequently, we are proposing to exclude the estimated hospital VBP payment adjustments and the estimated hospital readmissions payment adjustments from the calculation of the proposed outlier fixed-loss cost threshold.
We note that, to the extent section 1886(r) of the Act modifies the DSH payment methodology under section 1886(d)(5)(F) of the Act, the uncompensated care payment under section 1886(r)(2) of the Act, like the empirically justified Medicare DSH payment under section 1886(r)(1) of the Act, may be considered an amount payable under section 1886(d)(5)(F) of the Act such that it would be reasonable to include the payment in the outlier determination under section 1886(d)(5)(A) of the Act. As we have done since the implementation of uncompensated care payments in FY 2014, for FY 2027, we are proposing to allocate an estimated per-discharge uncompensated care payment amount to all cases for the hospitals eligible to receive the uncompensated care payment amount in the calculation of the outlier fixed-loss cost threshold methodology. We continue to believe that allocating an eligible hospital's estimated uncompensated care payment to all cases equally in the calculation of the outlier fixed-loss cost threshold would best approximate the amount we would pay in uncompensated care payments during the year because, when we make claim payments to a hospital eligible for such payments, we would be making estimated per-discharge uncompensated care payments to all cases equally.
Furthermore, we continue to believe that using the estimated per-claim uncompensated care payment amount to determine outlier estimates provides predictability as to the amount of uncompensated care payments included in the calculation of outlier payments. Therefore, consistent with the methodology used since FY 2014 to calculate the outlier fixed-loss cost threshold, for FY 2027, we are proposing to include estimated FY 2027 uncompensated care payments in the computation of the proposed outlier fixed-loss cost threshold. Specifically, we are proposing to use the estimated per-discharge uncompensated care payments to hospitals eligible for the uncompensated care payment for all cases in the calculation of the proposed outlier fixed-loss cost threshold methodology.
In addition, consistent with the methodology finalized in the FY 2023 final rule, we are proposing to include the estimated supplemental payments for eligible IHS/Tribal hospitals and Puerto Rico hospitals in the computation of the FY 2027 proposed outlier fixed-loss cost threshold. Specifically, we are proposing to use the estimated per-discharge supplemental payments to hospitals eligible for the supplemental payment for all cases in the calculation of the proposed outlier fixed-loss cost threshold methodology.
Using this methodology, we used the formula described in section I.C.1. of this Addendum to simulate and calculate the Federal payment rate and outlier payments for all claims. In addition, as described in the earlier section to this Addendum, we are proposing to incorporate an estimate of FY 2027 outlier reconciliation in the methodology for determining the outlier threshold. As noted previously, for the FY 2027 proposed rule, we are proposing to hold the data constant and to use the FY 2025 final rule percentage of total operating outlier reconciliation dollars to total Federal operating payments from Step 4 from the FY 2025 IPPS/LTCH PPS final rule which is based on FY 2019 cost reports and PSF data. As discussed in the FY 2025 IPPS/LTCH PPS final rule, the ratio of outlier reconciliation dollars to total Federal Payments (Step 4) was a negative 0.041994 percent, which, when rounded to the second digit, is -0.04 percent. Therefore, for FY 2027, we are proposing to incorporate a projection of outlier reconciliation dollars by targeting an outlier threshold at 5.14 percent [5.1 percent-(-.04 percent)]. Under this proposed approach, we determined a proposed threshold of $51,704 and calculated total outlier payments of $4,642,138,720 total operating Federal payments of $90,312,360,835. We then divided total outlier payments by total operating Federal payments plus total outlier payments and determined that this threshold matched with the 5.14 percent target, which reflected our proposal to incorporate an estimate of outlier reconciliation in the determination of the outlier threshold (as discussed in more detail in the previous section of this Addendum). We note that, if calculated without applying our proposed methodology for incorporating an estimate of outlier reconciliation in the determination of the outlier threshold, the proposed threshold would be $52,096. We are proposing an outlier fixed-loss cost threshold for FY 2027 equal to the prospective payment rate for the MS-DRG, plus any IME, empirically justified Medicare DSH payments, estimated uncompensated care payment, estimated supplemental payment for eligible IHS/Tribal hospitals and Puerto Rico hospitals, and any add-on payments for new technology, plus $51,704.
As stated in the FY 1994 IPPS final rule (58 FR 46348), we establish an outlier threshold that is applicable to both hospital inpatient operating costs and hospital inpatient capital-related costs. When we modeled the combined operating and capital outlier payments, we found that using a common threshold resulted in a higher percentage of outlier payments for capital-related costs than for operating costs. We project that the threshold for
In accordance with section 1886(d)(3)(B) of the Act and as discussed previously, we are proposing to reduce the FY 2027 standardized amount by 5.1 percent to account for the projected proportion of payments paid as outliers.
The proposed outlier adjustment factors that would be applied to the operating standardized amount and capital Federal rate based on the FY 2027 outlier threshold are as follows:
We are proposing to apply the outlier adjustment factors to the FY 2027 payment rates after removing the effects of the FY 2026 outlier adjustment factors on the standardized amount.
To determine whether a case qualifies for outlier payments, we currently apply hospital-specific CCRs to the total covered charges for the case. Estimated operating and capital costs for the case are calculated separately by applying separate operating and capital CCRs. These costs are then combined and compared with the outlier fixed-loss cost threshold.
Under our current policy at § 412.84, we calculate operating and capital CCR ceilings and assign a statewide average CCR for hospitals whose CCRs exceed 3.0 standard deviations from the mean of the log distribution of CCRs for all hospitals. Based on this calculation, for hospitals for which the MAC computes operating CCRs greater than 1.278 or capital CCRs greater than 0.13 or hospitals for which the MAC is unable to calculate a CCR (as described under § 412.84(i)(3) of our regulations), statewide average CCRs are used to determine whether a hospital qualifies for outlier payments. Table 8A listed in section VI. of this Addendum (and available via the internet on the CMS website) contains the proposed statewide average operating CCRs for urban hospitals and for rural hospitals for which the MAC is unable to compute a hospital-specific CCR within the range previously specified. These statewide average ratios would be effective for discharges occurring on or after October 1, 2026, and would replace the statewide average ratios from the prior fiscal year. Table 8B listed in section VI. of this Addendum (and available via the internet on the CMS website) contains the proposed comparable statewide average capital CCRs. As previously stated, the proposed CCRs in Tables 8A and 8B would be used during FY 2027 when hospital-specific CCRs based on the latest settled cost report either are not available or are outside the range noted previously. Table 8C listed in section VI. of this Addendum (and available via the internet on the CMS website) contains the proposed statewide average total CCRs used under the LTCH PPS as discussed in section V. of this Addendum.
We finally note that section 20.1.2 of chapter three of the Medicare Claims Processing Manual (on the internet
Our current estimate, using available FY 2025 claims data, is that actual outlier payments for FY 2025 were approximately 4.86 percent of actual total MS-DRG payments. Therefore, the data indicate that, for FY 2025, the percentage of actual outlier payments relative to actual total payments is lower than we projected for FY 2025. Consistent with the policy and statutory interpretation we have maintained since the inception of the IPPS, we do not make retroactive adjustments to outlier payments to ensure that total outlier payments for FY 2025 are equal to 5.1 percent of total MS-DRG payments. As explained in the FY 2003 Outlier final rule (68 FR 34502), if we were to make retroactive adjustments to all outlier payments to ensure total payments are 5.1 percent of MS-DRG payments (by retroactively adjusting outlier payments), we would be removing the important aspect of the prospective nature of the IPPS. Because such an across-the-board adjustment would either lead to more or less outlier payments for all hospitals, hospitals would no longer be able to reliably approximate their payment for a patient while the patient is still hospitalized. We believe it would be neither necessary nor appropriate to make such an aggregate retroactive adjustment. Furthermore, we believe it is consistent with the statutory language at section 1886(d)(5)(A)(iv) of the Act not to make retroactive adjustments to outlier payments. This section states that outlier payments be equal to or greater than 5 percent and less than or equal to 6 percent of projected or estimated (not actual) MS-DRG payments. We believe that an important goal of a PPS is predictability. Therefore, we believe that the fixed-loss outlier threshold should be projected based on the best available historical data and should not be adjusted retroactively. A retroactive change to the fixed-loss outlier threshold would affect all hospitals subject to the IPPS, thereby undercutting the predictability of the system as a whole.
We note that, because the MedPAR claims data for the entire FY 2026 period would not be available until after September 30, 2026, we are unable to provide an estimate of actual outlier payments for FY 2026 based on FY 2026
The adjusted standardized amount is divided into labor-related and nonlabor-related portions. Tables 1A and 1B listed and published in section VI. of this Addendum (and available via the internet on the CMS website) contain the national standardized amounts that we are proposing to apply to all hospitals, except hospitals located in Puerto Rico, for FY 2027. The proposed standardized amount for hospitals in Puerto Rico is shown in Table 1C listed and published in section VI. of this Addendum (and available via the internet on the CMS website). The proposed amounts shown in Tables 1A and 1B differ only in that the labor-related share applied to the standardized amounts in Table 1A is 66.0 percent, and the labor-related share applied to the standardized amounts in Table 1B is 62 percent. In accordance with sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we are proposing to apply a labor-related share of 62 percent, unless application of that percentage would result in lower payments to a hospital than would otherwise be made. In effect, the statutory provision means that we would apply a labor-related share of 62 percent for all hospitals whose wage indexes are less than or equal to 1.0000. In addition, Tables 1A and 1B include the proposed standardized amounts reflecting the proposed applicable percentage increases for FY 2027.
The proposed labor-related and nonlabor-related portions of the national average standardized amounts for Puerto Rico hospitals for FY 2027 are set forth in Table 1C listed and published in section VI. of this Addendum (and available via the internet on the CMS website). Similarly, section 1886(d)(9)(C)(iv) of the Act, as amended by section 403(b) of Public Law 108-173, provides that the labor-related share for hospitals located in Puerto Rico be 62 percent, unless the application of that percentage would result in lower payments to the hospital.
The following table illustrates the changes from the FY 2026 national standardized amounts to the proposed FY 2027 national standardized amounts. The second through fifth columns display the changes from the FY 2026 standardized amounts for each proposed applicable FY 2027 standardized amount. The first row of the table shows the updated (through FY 2026) average standardized amount after restoring the FY 2026 offsets for outlier payments, geographic reclassification, rural demonstration, and wage index cap policy budget neutrality. The MS-DRG reclassification and recalibration wage index, and stem cell acquisition budget neutrality factors are cumulative (that is, we have not restored the offsets). Accordingly, those FY 2026 adjustment factors have not been removed from the base rate in the following table.
Tables 1A through 1C, as published in section VI. of this Addendum (and available via the internet on the CMS website), contain the labor-related and nonlabor-related shares that we are using to calculate the prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico for FY 2027. This section addresses two types of adjustments to the standardized amounts that are made in determining the prospective payment rates as described in this Addendum.
Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that we make an adjustment to the labor-related portion of the national prospective payment rate to account for area differences in hospital wage levels. This adjustment is made by multiplying the labor-related portion of the adjusted standardized amounts by the appropriate wage index for the area in which the hospital is located. For FY 2027, as discussed in section IV.B.3. of the preamble of this proposed rule, we are proposing to apply a labor-related share of 66.0 percent for the national
Section 1886(d)(5)(H) of the Act provides discretionary authority to the Secretary to make adjustments as the Secretary deems appropriate to take into account the unique circumstances of hospitals located in Alaska and Hawaii. Higher labor-related costs for these two States are taken into account in the adjustment for area wages described above. To account for higher nonlabor-related costs for these two States, we multiply the nonlabor-related portion of the standardized amount for hospitals in Alaska and Hawaii by an adjustment factor. For FY 2011 and in prior fiscal years, we used the most recent cost-of-living adjustment (COLA) factors obtained from the U.S. Office of Personnel Management (OPM) website at
In the FY 2013 IPPS/LTCH PPS final rule, we established a methodology to update the COLA factors for Alaska and Hawaii that were published by the OPM every 4 years (coinciding with the update to the labor-related share of the IPPS market basket), beginning in FY 2014. We refer readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for additional background and a detailed description of this methodology (77 FR 28145 through 28146 and 77 FR 53700 through 53701, respectively). In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45546 through 45547), we updated the COLA factors published by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule and Consumer Price Indices (CPIs) data through 2020. Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final rule, we utilized these COLA factors for FYs 2022 through 2025 to adjust the nonlabor-related portion of the standardized amount for hospitals located in Alaska and Hawaii.
In general, under our existing methodology, we update the 2009 OPM COLA factors by a comparison of the growth in the CPIs for the areas of Urban Alaska and Urban Hawaii, relative to the growth in the CPI for the average U.S. city as published by the Bureau of Labor Statistics (BLS). We use the comparison of the growth in the overall CPI relative to the growth in the CPI for those areas to update the COLA factors for all areas in Alaska and Hawaii, respectively, because BLS publishes CPI data for only Urban Alaska and Urban Hawaii. Using the respective CPI commodities index and CPI services index and using the approximate commodities/services shares obtained from the IPPS market basket, we create reweighted CPIs for each of the respective areas to reflect the underlying composition of the IPPS market basket nonlabor-related share. Lastly we exercised our discretionary authority to adjust payments to hospitals in Alaska and Hawaii by incorporating the statutorily mandated cap of 25 percent that was applied when determining OPM's COLA factors. (For additional information, refer to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45546 through 45547).)
We previously stated our intention to update the COLA factors at the same time as the update to the labor-related share of the IPPS market basket. In the FY 2026 IPPS/LTCH PPS proposed rule, we proposed to update the labor-related share of the IPPS market basket. We also stated that at that time, we believed it would be appropriate to maintain the current COLA factors for FY 2026 to allow us to consider whether it would be appropriate to incorporate additional data sources or other methodology changes in determining the COLA factors we apply to IPPS payments to account for the unique circumstances of hospitals located in Alaska and Hawaii (90 FR 18437 through `18438). Therefore, we proposed to continue to use the FY 2025 COLA factors to adjust the nonlabor-related portion of the standardized amount for hospitals located in Alaska and Hawaii for FY 2026. We solicited comments on any possible data sources that could be considered in the development of the COLA factors.
As summarized in the FY 2026 IPPS/LTCH PPS final rule (90 FR 37230), one commenter supported CMS' proposal to maintain the current COLA methodology temporarily while we evaluate alternative approaches. The commenter requested that CMS utilize a more sensitive adjustment to reflect cost variation across Alaska. The commenter stated that tying Alaska's COLA to a single urban index does not reflect higher costs in more remote areas. The commenter also requested that CMS reconsider the 25-percent cap on the COLAs and engage with providers during the development of the new methodology. After consideration of the public comment we received, we finalized our proposal to continue to use the FY 2025 COLA factors to adjust the nonlabor related portion of the standardized amount for hospitals located in Alaska and Hawaii for FY 2026.
After further consideration, effective for FY 2027, we are proposing to adjust non-labor related costs for hospitals located in Alaska and Hawaii, using the Overseas Cost-of-Living Allowance (OCOLA) data
We believe the DOD OCOLAs are an appropriate data source to capture the cost differences of hospital nonlabor-related inputs purchased in the areas of Hawaii and Alaska compared to the continental U.S. The DOD OCOLAs reflect the relative price differences in a basket of non-housing goods and services that would be consistent with many of the nonlabor-related goods and services that hospitals purchase (such as pharmaceuticals, food, and cleaning supplies). In addition, unlike the prior approach that relied on CPI data for urban areas, these relative price differences would account for the additional shipping costs to remote areas. Specifically, the DOD OCOLAs are reflective of the specific areas of
For the proposed COLA factors for IPPS hospitals located in Alaska and Hawaii for FY 2027, we are proposing to use the OCOLAs published by DOD effective for January 1, 2026. The DOD OCOLAs are available for 26 Alaska locality areas and 6 Hawaii locality areas. Similar to the COLAs used for Alaska and Hawaii for FY 2022 through FY 2026 that are based on the original OPM COLAs, we are proposing to continue to use the four Nonforeign COLA Areas designated by OPM for Alaska and the four Nonforeign COLA Areas designated by OPM for Hawaii as shown in Table II.B.2.
For each of the designated OPM areas for cities in Alaska (City of Anchorage, City of Fairbanks, and City of Juneau), if there is more than one DOD OCOLA within a 50-mile radius of the city, we are proposing to average the DOD OCOLAs within the designated OPM area to calculate the proposed COLA. Specifically, for the COLA factor for the City of Anchorage, we are proposing to average the DOD OCOLAs for the Anchorage and Wasilla locality areas. For the COLA factor for the City of Fairbanks, we are proposing to average the DOD OCOLAs for the College, Eielson Air Force Base, and Fairbanks locality areas. For the Rest of Alaska COLA, given that there are IPPS hospitals located in two locality areas (Bethel and Kenai), we are proposing to average the DOD OCOLAs for these two locality areas to calculate the proposed COLA.
For Hawaii, the OCOLAs published by DOD are generally consistent with the OPM designated areas. To obtain the COLA factor for the OPM designated area of County of Maui and County of Kalawao, we are proposing to average the DOD OCOLAs for the Maui and Molokai locality areas.
Starting with the FY 2027 payment year, we are proposing to no longer cap the COLA factors at 25 percent. We note that OPM's COLA factors were calculated with a statutorily mandated cap of 25 percent
Below is a table with the proposed COLA factors for FY 2027, as calculated using this proposed methodology, which indicates that changing the data source and eliminating the 25-percent cap has different impacts by area. We are soliciting comments on this proposed methodology and the use of the DOD OCOLAs, including any comments on how the use of survey data that are specific to Service members, including their access to discounted commissary prices that might be variable by geographic area, may result in differential impacts across the designated areas. We are also requesting comment on any potential modifications to this proposed methodology, including a potential phase-in of the use of these data or a transition period for implementation, which we may consider finalizing in the FY 2027 IPPS/LTCH PPS final rule, after consideration of the comments received.
In general, the operating prospective payment rate for all hospitals (including hospitals in Puerto Rico) paid under the IPPS, except SCHs and MDHs, for FY 2027 equals the Federal rate (which includes uncompensated care payments). As previously discussed, section 6202 of the Consolidated Appropriations Act, 2026 (Pub. L. 119-75) extended the MDH program for FY 2027 discharges occurring before January 1, 2027. Therefore, under current law, the MDH program will expire for discharges on or after January 1, 2027.
SCHs are paid based on whichever of the following rates yields the greatest aggregate payment:
• The Federal national rate (which, as discussed in section V.E. of the preamble of this proposed rule, includes uncompensated care payments).
• The updated hospital-specific rate based on FY 1982 costs per discharge.
• The updated hospital-specific rate based on FY 1987 costs per discharge.
• The updated hospital-specific rate based on FY 1996 costs per discharge.
• The updated hospital-specific rate based on FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment.
The prospective payment rate for SCHs for FY 2027 equals the higher of the applicable Federal rate, or the hospital-specific rate as described later in this section. The prospective payment rate for MDHs for discharges occurring before January 1, 2027, equals the higher of the Federal rate, or the Federal rate plus 75 percent of the difference between the Federal rate and the hospital-specific rate as described in this section. For MDHs, the updated hospital-specific rate is based on FY 1982, FY 1987, or FY 2002 costs per discharge, whichever yields the greatest aggregate payment.
Step 1—Determine the MS-DRG and MS-DRG relative weight (from Table 5) for each claim primarily based on the ICD-10-CM diagnosis and ICD-10-PCS procedure codes on the claim.
Step 2—Select the applicable average standardized amount depending on whether the hospital submitted qualifying quality data and is a meaningful EHR user, as described previously.
Step 3—Compute the operating and capital Federal payment rate:
Step 4—Determine operating and capital costs:
Step 5—Compute operating and capital outlier threshold (CMS applies a geographic adjustment to the operating and capital outlier threshold to account for local cost variation):
Step 6—Compute operating and capital outlier payments:
The payment rate may then be further adjusted for hospitals that qualify for a low-volume payment adjustment under section 1886(d)(12) of the Act and 42 CFR 412.101(b). The base-operating DRG payment amount may be further adjusted by the hospital readmissions payment adjustment and the hospital VBP payment adjustment as described under sections 1886(q) and 1886(o) of the Act, respectively. Payments also may be reduced by the 1-percent adjustment under the HAC Reduction Program as described in section 1886(p) of the Act. We also make new technology add-on payments in accordance with section 1886(d)(5)(K) and (L) of the Act. Finally, we add the uncompensated care payment and supplemental payment for eligible IHS/Tribal hospitals and Puerto Rico hospitals to the total claim payment amount. As noted in the previous formula, we take uncompensated care payments, supplemental payments for eligible IHS/Tribal hospitals and Puerto Rico hospitals, and new technology add-on payments into consideration when calculating outlier payments.
Section 1886(b)(3)(C) of the Act provides that SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal rate; the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospital-specific rate based on FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment. As discussed previously, currently MDHs are paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the greater of the updated hospital-specific rates based on either FY 1982, FY 1987, or FY 2002 costs per discharge. As noted, under current law, the MDH program is effective for FY 2027 discharges before January 1, 2027.
For a more detailed discussion of the calculation of the hospital-specific rates, we refer readers to the FY 1984 IPPS interim final rule (48 FR 39772); the April 20, 1990, final rule with comment period (55 FR 15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS final rule (65 FR 47082).
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase applicable to the hospital-specific rates for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Because the Act sets the update factor for SCHs and MDHs equal to the update factor for all other IPPS hospitals, the update to the hospital-specific rates for SCHs and MDHs is subject to the amendments to section 1886(b)(3)(B) of the Act made by sections 3401(a) and 10319(a) of the Affordable Care Act. As discussed in section V.F. of the preamble of this final rule, section 6202 of the Consolidated Appropriations Act, 2026 (Pub. L. 119-75) extended the MDH program for FY 2027 discharges occurring before January 1, 2027. Therefore, under current law, the MDH program will expire for discharges on or after January 1, 2027.
Accordingly, the proposed applicable percentage increases to the hospital-
For a complete discussion of the applicable percentage increase applied to the hospital-specific rates for SCHs and MDHs, we refer readers to section V.F. of the preamble of this proposed rule.
In addition, because SCHs and MDHs use the same MS-DRGs as other hospitals when they are paid based in whole or in part on the hospital-specific rate, the hospital-specific rate is adjusted by a budget neutrality factor to ensure that changes to the MS-DRG classifications and the recalibration of the MS-DRG relative weights are made in a manner so that aggregate IPPS payments are unaffected. Therefore, the hospital specific-rate for an SCH or MDH is adjusted by the MS-DRG reclassification and recalibration budget neutrality factor, as discussed in section III. of this Addendum and listed in the table in section II. of this Addendum. In addition, as discussed in section II.E.2.d. of the preamble this proposed rule and previously, we are applying a permanent 10-percent cap on the reduction in a MS-DRG's relative weight in a given fiscal year, as finalized in the FY 2023 IPPS/LTCH PPS final rule. Because SCHs and MDHs use the same MS-DRGs as other hospitals when they are paid based in whole or in part on the hospital-specific rate, consistent with the policy adopted in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48897 through 48900 and 49432 through 49433), the hospital specific-rate for an SCH or MDH would be adjusted by the proposed MS-DRG 10-percent cap budget neutrality factor. The resulting rate is used in determining the payment rate that an SCH or MDH would receive for its discharges beginning on or after October 1, 2026.
The PPS for acute care hospital inpatient capital related costs was implemented for cost reporting periods beginning on or after October 1, 1991. The basic methodology for determining Federal capital prospective rates is set forth in- the regulations at 42 CFR 412.308 through 412.352. In this section of this Addendum, we discuss the factors that we are proposing to use to determine the capital Federal rate for FY 2027, which would be effective for discharges occurring on or after October 1, 2026.
All hospitals (except “new” hospitals under § 412.304(c)(2)) are paid based on the capital Federal rate. We annually update the capital standard Federal rate, as provided in § 412.308(c)(1), to account for capital input price increases and other factors. The regulations at § 412.308(c)(2) also provide that the capital Federal rate be adjusted annually by a factor equal to the estimated proportion of outlier payments under the capital Federal rate to total capital payments under the capital Federal rate. In addition, § 412.308(c)(3) requires that the capital Federal rate be reduced by an adjustment factor equal to the estimated proportion of payments for exceptions under § 412.348. (We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53705), there is generally no longer a need for an exceptions payment adjustment factor.) However, in limited circumstances, an additional payment exception for extraordinary circumstances is provided for under § 412.348(f) for qualifying hospitals. Therefore, in accordance with § 412.308(c)(3), an exceptions payment adjustment factor may need to be applied if such payments are made. Section 412.308(c)(4)(ii) requires that the capital standard Federal rate be adjusted so that the effects of the annual DRG reclassification and the recalibration of DRG weights and changes in the geographic adjustment factor (GAF) are budget neutral.
Section 412.374 provides for payments to hospitals located in Puerto Rico under the IPPS for acute care hospital inpatient capital related costs, which currently specifies capital IPPS payments to hospitals located in Puerto Rico are based on 100 percent of the Federal rate.
In the discussion that follows, we explain the factors that we are proposing to use to determine the capital Federal rate for FY 2027. In particular, we explain why the proposed FY 2027 capital Federal rate would increase approximately 4.02 percent, compared to the FY 2026 capital Federal rate. As discussed in the impact analysis in Appendix A to this proposed rule, we estimate that capital payments per discharge would increase approximately 2.3 percent during that same period. Because capital payments constitute approximately 10 percent of hospital payments, a 1-percent change in the capital Federal rate yields only approximately a 0.1 percent change in actual payments to hospitals.
Under § 412.308(c)(1), the capital standard Federal rate is updated on the basis of an analytical framework that takes into account changes in a capital input price index (CIPI) and several other policy adjustment factors. Specifically, we adjust the projected CIPI rate of change, as appropriate, each year for case-mix index-related changes, for intensity, and for errors in previous
The case mix index is the measure of the average DRG weight for cases paid under the IPPS. Because the DRG weight determines the prospective payment for each case, any percentage increase in the case- mix- index corresponds to an equal percentage increase in hospital payments.
The case mix- index can change for any of several reasons—
• The average resource use of Medicare patient changes (“real” case mix- change);
• Changes in hospital documentation and coding of patient records result in higher weighted- DRG assignments (“coding effects”); or
• The annual DRG reclassification and recalibration changes may not be budget neutral (“reclassification effect”).
We define real case mix change as actual changes in the mix (and resource requirements) of Medicare patients, as opposed to changes in documentation and coding behavior that result in assignment of cases to higher-weighted DRGs, but do not reflect higher resource requirements. The capital update framework includes the same case-mix index adjustment used in the former operating IPPS update framework (as discussed in the May 18, 2004, IPPS proposed rule for FY 2005 (69 FR 28816)). (We no longer use an update framework to make a recommendation for updating the operating IPPS standardized amounts, as discussed in section II. of appendix B to the FY 2006 IPPS final rule (70 FR 47707).)
For FY 2027, we are projecting a 0.5 percent total increase in the case mix index. We estimated that the real case-mix increase would equal 0.5 percent for FY 2027. The net adjustment for change in case mix is the difference between the projected real increases in case mix and the projected total increase in case mix. Therefore, the proposed net adjustment for case-mix change in FY 2027 is 0.0 percentage point.
The capital update framework also contains an adjustment for the effects of DRG reclassification and recalibration. This adjustment is intended to remove the effect on total payments of prior year's changes to the DRG classifications and relative weights, to retain budget neutrality for all case-mix index-related changes other than those due to patient severity of illness. Due to the lag time in the availability of data, there is a 2-year lag in data used to determine the adjustment for the effects of DRG reclassification and recalibration. For example, for this proposed rule, we have the FY 2025 MedPAR claims data available to evaluate the effects of the FY 2025 DRG reclassification and recalibration as part of our update for FY 2027. We assume for purposes of this adjustment, that the estimate of FY 2025 DRG reclassification and recalibration would result in no change in the case-mix when compared with the case mix index that would have resulted if we had not made the reclassification and recalibration changes to the DRGs. Therefore, we are proposing to make a 0.0 percentage point adjustment for reclassification and recalibration in the update framework for FY 2027.
The capital update framework also contains an adjustment for forecast error. The input price index forecast is based on historical trends and relationships ascertainable at the time the update factor is established for the upcoming year. In any given year, there may be unanticipated price fluctuations that may result in differences between the actual increase in prices and the forecast used in calculating the update factors. In setting a prospective payment rate under the framework, we make an adjustment for forecast error only if the difference in the actual increase and projected increase of the capital input price index for any year is greater than 0.25 percentage point in absolute terms. There is a 2-year lag between the forecast and the availability of data to develop a measurement of the forecast error. Historically, when a forecast error of the CIPI is greater than 0.25 percentage points in absolute terms, it is reflected in the update recommended under this framework. The forecast error in any given year can be derived as the actual CIPI increase less the forecasted CIPI increase. A forecast error of 0.3 percentage point was calculated for the FY 2025 update, for which there are historical data. That is, current historical data indicate that actual realized price increases (2.9 percent) were 0.3 percentage point higher than the forecasted FY 2025 CIPI increase (2.6 percent) used in calculating the FY 2025 update factor. Since this exceeds the 0.25 percentage point threshold, we are proposing an adjustment for forecast error in the update for FY 2027.
Under the capital IPPS update framework, we also make an adjustment for changes in intensity. Historically, we calculate this adjustment using the same methodology and data that were used in the past under the framework for operating IPPS. The intensity factor for the operating update framework reflects how hospital services are utilized to produce the final product, that is, the discharge. This component accounts for changes in the use of quality-enhancing services, for changes within DRG severity, and for expected modification of practice patterns to remove non cost-effective services. Our intensity measure is based on a 5-year average.
We calculate case-mix constant intensity as the change in total cost per discharge, adjusted for price level changes (the Consumer Price Index for hospital and related services) and changes in real case-mix. Without reliable estimates of the proportions of the overall annual intensity changes that are due, respectively, to ineffective practice patterns and the combination of quality enhancing new technologies and complexity within the DRG system, we assume that one-half of the annual change is due to each of these factors. Thus, the capital update framework provides an add-on to the input price index rate of increase of one-half of the estimated annual increase in intensity, to allow for increases within DRG severity and the adoption of quality-enhancing technology.
In this proposed rule, we are proposing to continue to use a Medicare-specific intensity measure that is based on a 5-year adjusted average of cost per discharge for FY 2027 (we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 0436) for a full description of our Medicare-specific intensity measure). Specifically, for FY 2027, we are proposing to use an intensity measure that is based on an average of cost per-discharge data from the 5-year period beginning with FY 2020 and extending through FY 2024. Based on these data, we estimated that case-mix constant intensity declined during FYs 2020 through 2024. In the past, when we found intensity to be declining, we believed a zero (rather than a negative) intensity adjustment was appropriate. Consistent with this approach, because we estimated that
Earlier, we described the basis of the components we used to develop the proposed 3.1 percent capital update factor under the capital update framework for FY 2027, as shown in the following table.
Section 412.312(c) establishes a unified outlier payment methodology for inpatient operating and inpatient capital related costs. A shared threshold is used to identify outlier cases for both inpatient operating and inpatient capital-related payments. Section 412.308(c)(2) provides that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of capital-related outlier payments to total inpatient capital-related PPS payments. The outlier threshold is set so that operating outlier payments are projected to be 5.1 percent of total operating IPPS DRG payments. For FY 2027, we are proposing to continue to incorporate the impact of estimated operating outlier reconciliation payment amounts into the outlier threshold model. (For more details on our methodology to incorporate an estimate of the impact of operating outlier reconciliation payment amounts into the outlier threshold model, see section II.A.4.i. of this Addendum to this proposed rule.)
For FY 2026, we estimated that outlier payments for capital-related PPS payments would equal 3.84 percent of inpatient capital related-payments based on the capital Federal rate. Based on the threshold discussed in section II.A. of this Addendum, we estimate that prior to taking into account projected capital outlier reconciliation payments, outlier payments for capital-related costs would equal 3.61 percent of inpatient capital-related payments based on the capital Federal rate in FY 2027. Using the methodology outlined in section II.A.4.i. of this Addendum, we estimate that taking into account projected capital outlier reconciliation payments would decrease the estimated percentage of FY 2027 capital outlier payments by 0.03 percent. Therefore, accounting for estimated capital outlier reconciliation, the estimated outlier payments for capital-related PPS payments would equal 3.58 percent (3.61 percent—0.03 percent) of inpatient capital-related payments based on the capital Federal rate in FY 2027. Accordingly, we are proposing an outlier adjustment factor of 0.9642 in determining the capital Federal rate for FY 2027. Thus, we estimate that the percentage of capital outlier payments to total capital Federal rate payments for FY 2027 would be lower than the percentage we estimated for FY 2026.
The outlier reduction factors are not built permanently into the capital rates; that is, they are not applied cumulatively in determining the capital Federal rate. The proposed FY 2027 outlier adjustment of 0.9642 is a 0.27 percent change from the FY 2026 outlier adjustment of 0.9616. Therefore, the proposed net change in the outlier adjustment to the capital Federal rate for FY 2027 is 1.0027 (0.9642/0.9616) so that the proposed outlier adjustment would increase the FY 2027 capital Federal rate by approximately 0.27 percent compared to the FY 2026 outlier adjustment.
Section 412.308(c)(4)(ii) requires that the capital Federal rate be adjusted so that aggregate payments for the fiscal year based on the capital Federal rate, after any changes resulting from the annual DRG reclassification and recalibration and changes in the GAF, are projected to equal aggregate payments that would have been made on the basis of the capital Federal rate without such changes.
As discussed in section III.F.6. of the preamble of this proposed rule, in the FY 2025 interim final action with comment period (IFC) (89 FR 80405 through 80421), we recalculated the FY 2025 IPPS hospital wage index to remove the low wage index hospital policy for FY 2025. The recalculation of the FY 2025 hospital wage index impacted the FY 2025 GAFs. We also removed the budget neutrality adjustment for changes to the GAF for the lowest quartile adjustment from the FY 2025 capital Federal rate. For FY 2026 and subsequent fiscal years, after considering the D.C. Circuit's decision in
For FY 2026, we established a payment transition with a budget neutrality adjustment for hospitals significantly impacted by the discontinuation of the low wage index hospital policy. The transitional payment exception for FY 2026 was equal to the additional FY 2026 amount the hospital would be paid under the IPPS if its FY 2026 wage index were equal to 90.25 percent of its FY 2024 wage index. Under that transitional policy, we made a budget neutral equivalent exception under the capital IPPS for FY 2026. We refer readers to the FY 2026 IPPS/LTCH PPS final rule (90 FR 37234 through 37235) for a full discussion on the FY 2026 transitional payment exception under the capital IPPS.
As discussed in III.F.6 of this proposed rule, we recognize that some hospitals that previously benefitted from the low wage index hospital policy would experience decreases of 15 percent or more over the three years from their FY 2024 wage index (with the low wage index hospital policy applied) to their FY 2027 wage index. Therefore, in addition to our 5-percent wage index cap policy at 42 CFR 412.64(h)(7), we are proposing to extend the transitional exception to the calculation of payments for FY 2027 for hospitals significantly impacted by the discontinuation of the low wage index hospital policy in a budget neutral manner. The transitional payment exception will end when the impact of discontinuing the low wage index hospital policy is mitigated and the hospital's wage index decrease is less than 95 percent for each year since 2024 (also expressed as 0.95^n, with n being the number of years since FY 2024). Specifically, for FY 2027, for hospitals that benefitted from the low wage index hospital policy in FY 2024 and whose FY 2027 wage index is decreasing by more than 14.2625 percent from the hospital's FY 2024 wage index, we would continue a transitional payment exception for FY 2027 for that hospital that would be equal to the additional FY 2027 amount the hospital would be paid under the IPPS if its FY 2027 wage index were equal to 85.7375 percent of its FY 2024 wage index. Under this proposed policy, we are making a budget neutral equivalent exception under the capital IPPS. In this section, we refer to this proposed policy as the transition for the discontinuation of the low wage index hospital policy.
As referenced previously, beginning in FY 2023, we finalized at 42 CFR 412.64(h)(7) a 5-percent cap on any decrease to a hospital's wage index from its wage index in the prior FY regardless of the circumstances causing the decline. That is, under this policy, a hospital's wage index value would not be less than 95 percent of its prior year value (87 FR 49018 through 49021). In this section, we refer to our policy to place a 5-percent cap on any decrease in a hospital's wage index from the hospital's final wage index in the prior fiscal year as the 5-percent cap on wage index decreases policy. We note that the proposed transitional payment exception for FY 2027 discussed previously would be applied after the application of the 5-percent cap on wage index decreases policy.
For this proposed rule, we propose to use a 2-step methodology for computing the budget neutrality factor for changes in the GAFs in light of the effect of those proposed wage index changes on the GAFs. In the first step, we calculate a factor to ensure budget neutrality for changes to the GAFs due to the update to the wage data, wage index reclassifications and redesignations, and application of the rural floor policy, consistent with our historical GAF budget neutrality factor methodology. In the second step, we calculate a factor to ensure budget neutrality for changes to the GAFs due to the 5-percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy.
The budget neutrality factors applied for changes to the GAFs due to the update to the wage data, wage index reclassifications and redesignations, and application of the rural floor policy are built permanently into the capital Federal rate; that is, they are applied cumulatively in determining the capital Federal rate. However, the budget neutrality factor for the 5-percent cap on wage index decreases policy and the transition for the discontinuation of the low wage index hospital policy is not permanently built into the capital Federal rate. This is because the GAFs with 5-percent cap on wage index decreases policy and the transition for the discontinuation of the low wage index hospital policy applied from the previous year are not used in the budget neutrality factor calculations for the current year. Accordingly, and consistent with this approach, prior to calculating the proposed GAF budget neutrality factors for FY 2027, we removed from the capital Federal rate the budget neutrality factor applied in FY 2026 for the 5-percent cap on wage index decreases policy and the transition for the discontinuation of the low wage index hospital policy. Specifically, we divided the capital Federal rate by the FY 2026 budget neutrality factor of 0.9989 (90 FR 37235 through 37236). (We refer the reader to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45552) for additional discussion on our policy of removing from the capital Federal rate the prior year budget neutrality factor(s) that are not used in the budget neutrality factor calculations for the current year.)
We discuss our 2-step calculation of the proposed GAF budget neutrality factors for FY 2027 as follows. To determine the GAF budget neutrality factors for FY 2027, we first compared estimated aggregate capital Federal rate payments based on the FY 2026 MS
Next, we compared estimated aggregate capital Federal rate payments based on the proposed FY 2027 GAFs with and without the 5-percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy. For this calculation, estimated aggregate capital Federal rate payments were calculated using the proposed FY 2027 MS-DRG classifications and relative weights (after application of the 10-percent cap discussed later in this section) and the proposed FY 2027 GAFs (both with and without the 5-percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy). (We note, for this calculation the GAFs included the imputed floor, out-migration, and Frontier State adjustments.) To achieve budget neutrality for the effects of the 5-percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy on the FY 2027 GAFs, we calculated an incremental GAF budget neutrality adjustment factor of 0.9913.
The budget neutrality factor for the 5-percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy is not permanently built into the capital Federal rate. Consistent with this, we present the budget neutrality factor for the 5-percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy calculated under the second step of this 2-step methodology separately from the other budget neutrality factors in the discussion that follows, and this factor is not included in the calculation of the proposed combined GAF/DRG adjustment factor described later in this section.
In the FY 2023 IPPS/LTCH PPS final rule, we finalized a permanent 10-percent cap on the reduction in an MS-DRG's relative weight in a given fiscal year, beginning in FY 2023. Consistent with our historical methodology for adjusting the capital standard Federal
To determine the proposed DRG budget neutrality factors for FY 2027, we first compared estimated aggregate capital Federal rate payments based on the FY 2026 MS-DRG classifications and relative weights to estimated aggregate capital Federal rate payments based on the proposed FY 2027 MS-DRG classifications and relative weights prior to the application of the 10-percent cap. For these calculations, estimated aggregate capital Federal rate payments were calculated using the proposed FY 2027 GAFs without the 5-percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy. The proposed incremental adjustment factor for DRG classifications and changes in relative weights prior to the application of the 10-percent cap is 0.9986. Next, we compared estimated aggregate capital Federal rate payments based on the proposed FY 2027 MS-DRG classifications and relative weights prior to the application of the 10-percent cap to estimated aggregate capital Federal rate payments based on the proposed FY 2027 MS-DRG classifications and relative weights after the application of the 10-percent cap. For these calculations, estimated aggregate capital Federal rate payments were also calculated using the proposed FY 2027 GAFs without the 5 percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy. The proposed incremental adjustment factor for the application of the 10-percent cap on relative weight decreases is 0.9998. Therefore, to achieve budget neutrality for the proposed FY 2027 MS-DRG reclassification and recalibration (including the 10-percent cap), based on the calculations described previously, we applied a proposed incremental budget neutrality adjustment factor of 0.9983 (0.9986 x 0.9998) for FY 2027 to the capital Federal rate. We note that all the values are calculated with unrounded numbers.
The proposed incremental adjustment factor for the proposed FY 2027 MS-DRG reclassification and recalibration (0.9983) and for changes in the proposed FY 2027 GAFs due to the update to the wage data, wage index reclassifications and redesignations, and application of the rural floor policy (1.0156) is 1.0139 (0.9983 x 1.0156). This incremental adjustment factor is built permanently into the capital Federal rates.
To achieve budget neutrality for the effects of the 5-percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy on the FY 2027 GAFs, as described previously, we calculated a proposed budget neutrality adjustment factor of 0.9913 for FY 2027. We refer to this proposed budget neutrality factor for the remainder of this section as the cap/transition adjustment factor.
We applied the proposed budget neutrality adjustment factors described previously to the capital Federal rate. This follows the requirement under § 412.308(c)(4)(ii) that estimated aggregate payments each year be no more or less than they would have been in the absence of the annual DRG reclassification and recalibration and changes in the GAFs.
The methodology used to determine the recalibration and geographic adjustment factor (GAF/DRG) budget neutrality adjustment is similar to the methodology used in establishing budget neutrality adjustments under the IPPS for operating costs. One difference is that, under the operating IPPS, the budget neutrality adjustments for the effect of updates to the wage data, wage index reclassifications and redesignations, and application of the rural floor policy are determined separately. Under the capital IPPS, there is a single budget neutrality adjustment factor for changes in the GAF that result from updates to the wage data, wage index reclassifications and redesignations, and application of the rural floor policy. In addition, there is no adjustment for the effects that geographic reclassification, the 5-percent cap on wage index decreases policy, or the proposed transition for the discontinuation of the low wage index hospital policy described previously have on the other payment parameters, such as the payments for DSH or IME.
The proposed incremental GAF/DRG adjustment factor of 1.0139 accounts for the proposed MS-DRG reclassifications and recalibration (including application of the 10-percent cap on relative weight decreases) and for changes in the proposed GAFs that result from proposed updates to the wage data, the effects on the GAFs of FY 2027 geographic reclassification decisions made by the MGCRB compared to FY 2026 decisions, and the application of the rural floor policy. The proposed cap/transition adjustment factor of 0.9913 accounts for changes that result from the 5-percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy. However, these factors do not account for changes in payments due to changes in the DSH and IME adjustment factors.
For FY 2026, we established a capital Federal rate of $524.15 (90 FR 37236). We are proposing to establish an update of 3.1 percent in determining the FY 2027 capital Federal rate for all hospitals. As a result of this proposed update and the budget neutrality factors discussed earlier, we are proposing to establish a national capital Federal rate of $545.22 for FY 2027. The proposed national capital Federal rate for FY 2027 was calculated as follows:
• The proposed FY 2027 update factor is 1.031; that is, the proposed update is 3.1 percent.
• The proposed FY 2027 GAF/DRG budget neutrality adjustment factor that is applied to the capital Federal rate for changes in the MS-DRG classifications and relative weights (including application of the 10-percent cap on relative weight decreases) and changes in the GAFs that result from updates to the wage data, wage index reclassifications and redesignations, and application of the rural floor policy is 1.0139.
• The proposed FY 2027 cap/transition budget neutrality adjustment factor that is applied to the capital Federal rate for changes due to the 5-percent cap on wage index decreases policy and the proposed transition for the discontinuation of the low wage index hospital policy is 0.9913.
• The proposed FY 2027 outlier adjustment factor is 0.9642.
We are providing the following chart that shows how each of the proposed
For purposes of calculating payments for each discharge during FY 2027, the capital Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + DSH Adjustment Factor + IME Adjustment Factor, if applicable). The result is the adjusted capital Federal rate.
Hospitals also may receive outlier payments for those cases that qualify under the threshold established for each fiscal year. Section 412.312(c) provides for a shared threshold to identify outlier cases for both inpatient operating and inpatient capital-related payments. The proposed outlier threshold for FY 2027 is in section II.A. of this Addendum. For FY 2027, a case will qualify as a cost outlier if the cost for the case is greater than the prospective payment rates for the MS-DRG plus IME and DSH payments (including the empirically justified Medicare DSH payment and the estimated uncompensated care payment), estimated supplemental payment for eligible IHS/Tribal hospitals and Puerto Rico hospitals, and any add-on payments for new technology, plus the proposed fixed-loss amount of $51,679.
Currently, as provided under § 412.304(c)(2), we pay a new hospital 85 percent of its reasonable costs during the first 2 years of operation, unless it elects to receive payment based on 100 percent of the capital Federal rate. Effective with the third year of operation, we pay the hospital based on 100 percent of the capital Federal rate (that is, the same methodology used to pay all other hospitals subject to the capital PPS).
Like the operating input price index, the capital input price index (CIPI) is a fixed weight price index that measures the price changes associated with capital costs during a given year. The CIPI differs from the operating input price index in one important aspect, the CIPI reflects the vintage nature of capital, which is the acquisition and use of capital over time. Capital expenses in any given year are determined by the stock of capital in that year (that is, capital that remains on hand from all current and prior capital acquisitions). An index measuring capital price changes needs to reflect this vintage nature of capital. Therefore, the CIPI was developed to capture the vintage nature of capital by using a weighted average of past capital purchase prices up to and including the current year.
For this proposed rule, we are proposing to use the IPPS operating and capital market baskets that reflect a 2023 base year. For a complete discussion of the rebasing of the IPPS operating and capital market baskets, we refer readers to section IV. of the preamble of the FY 2026 IPPS/LTCH PPS final rule (90 FR 36859 through 36879).
Based on IHS Global Inc.'s fourth quarter 2025 forecast, for this proposed rule, we are forecasting the 2023-based CIPI to increase 2.8 percent in FY 2027. This reflects a projected 3.3 percent increase in vintage-weighted depreciation prices (building and fixed equipment, and movable equipment), a projected 0.5 percent increase in vintage-weighted interest expense prices and a projected 3.0 percent increase in other capital expense prices in FY 2027. The weighted average of these three factors produces the forecasted 2.8 percent increase for the 2023-based CIPI in FY 2027.
We are also proposing that if more recent data become available (for example, a more recent estimate of the percentage increase in the 2023-based CIPI), we would use such data, if appropriate, to determine the FY 2027 capital update factor for the final rule.
Payments for services furnished in children's hospitals, 11 cancer hospitals, and hospitals located outside the 50 States, the District of Columbia and Puerto Rico (that is, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) that are excluded from the IPPS are paid on the basis of reasonable costs based on the hospital's own historical cost experience, subject to a rate-of-increase ceiling. A per discharge limit (the target amount, as defined in § 413.40(a) of the regulations) is set for each hospital, based on the hospital's own cost experience in its base year, and updated annually by a rate-of-increase percentage specified in § 413.40(c)(3). In addition, as specified in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38536), effective for cost reporting periods beginning during FY 2018, the annual update to the target amount for extended neoplastic disease care hospitals (hospitals described in § 412.22(i) of the regulations) also is the rate-of-increase percentage specified in § 413.40(c)(3). (We note that, in accordance with § 403.752(a), religious nonmedical health care institutions (RNHCIs) are also subject to the rate-of-increase limits established under § 413.40 of the regulations.)
For this FY 2027 IPPS/LTCH PPS proposed rule, based on IGI's 2025 fourth quarter forecast, we estimate that the 2023-based IPPS operating market basket percentage increase for FY 2027 is 3.2 percent (that is, the estimate of the market basket rate-of-increase). Based on this estimate, the proposed FY 2027 rate-of-increase percentage that will be applied to the FY 2026 target amounts in order to calculate the proposed FY 2027 target amounts for children's hospitals, the 11 cancer hospitals, RNCHIs, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, and extended neoplastic disease care hospitals is 3.2 percent, in accordance with the applicable regulations at 42 CFR 413.40. We are also proposing that if more recent data become available (for example a more recent estimate of the market basket rate-of-increase), we would use such data, if appropriate, to calculate the final IPPS operating market basket update for FY 2027.
IRFs and rehabilitation distinct part units, IPFs and psychiatric units, and LTCHs are excluded from the IPPS and paid under their respective PPSs. The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We refer readers to section IX. of the preamble and section V. of the Addendum of this proposed rule for the changes to the Federal payment rates for LTCHs under the LTCH PPS for FY 2027. The annual updates for the IRF PPS and the IPF PPS are issued by the agency in separate
In section VIII. of the preamble of this proposed rule, we discuss our annual updates to the payment rates, factors, and specific policies under the LTCH PPS for FY 2027.
Under § 412.523(c)(3) of the regulations, for FY 2012 and subsequent years, we updated the standard Federal payment rate by the most recent estimate of the LTCH PPS market basket at that time, including additional statutory adjustments required by sections 1886(m)(3) (citing sections 1886(b)(3)(B)(xi)(II) and 1886(m)(4) of the Act as set forth in the regulations at § 412.523(c)(3)(viii) through (xvii)). (For a summary of the payment rate development prior to FY 2012, we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38310 through 38312) and references therein.)
Section 1886(m)(3)(A) of the Act specifies that, for rate year 2012 and each subsequent rate year, any annual update to the standard Federal payment rate shall be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act as discussed in section IX.C.2. of the preamble of this proposed rule. This section of the Act further provides that the application of section 1886(m)(3)(B) of the Act may result in the annual update being less than zero for a rate year, and may result in payment rates for a rate year being less than such payment rates for the preceding rate year. (As noted in section VIII.C.2. of the preamble of this proposed rule, the annual update to the LTCH PPS occurs on October 1 and we have adopted the term “fiscal year” (FY) rather than “rate year” (RY) under the LTCH PPS beginning October 1, 2010. Therefore, for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we use the term “fiscal year” rather than “rate year” for 2011 and subsequent years.)
For LTCHs that fail to submit the required quality reporting data in accordance with the LTCH QRP, the annual update is reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act.
Consistent with our historical practice and § 412.523(c)(3)(xvii), for FY 2027, we are proposing to apply the annual update to the LTCH PPS standard Federal payment rate from the previous year. Furthermore, in determining the proposed LTCH PPS standard Federal payment rate for FY 2027, we also are proposing to make certain regulatory adjustments, consistent with past practices. Specifically, in determining the proposed FY 2027 LTCH PPS standard Federal payment rate, we are proposing to apply a budget neutrality adjustment factor for the changes related to the area wage level adjustment (that is, changes to the wage data and labor-related share) as discussed in section V.B.6. of this Addendum.
In this proposed rule, we are proposing to establish an annual update to the LTCH PPS standard Federal payment rate of 2.4 percent (that is, the most recent estimate of the 2022-based LTCH market basket increase of 3.2 percent less the proposed productivity adjustment of 0.8 percentage point). Therefore, in accordance with § 412.523(c)(3)(xvii), we are proposing to apply an update factor of 1.024 to the FY 2026 LTCH PPS standard Federal payment rate of $50,824.51 to determine the proposed FY 2027 LTCH PPS standard Federal payment rate. Also, in accordance with § 412.523(c)(3)(xvii) and (c)(4), we are required to reduce the annual update to the LTCH PPS standard Federal payment rate by 2.0 percentage points for LTCHs that fail to submit the required quality reporting data for FY 2027 as required under the LTCH QRP. Therefore, for LTCHs that fail to submit quality reporting data under the LTCH QRP, we are proposing to establish an annual update to the LTCH PPS standard Federal payment rate of 0.4 percent (or an update factor of 1.004). This proposed update reflects the proposed annual market basket update of 3.2 percent reduced by the proposed 0.8 percentage point productivity adjustment, as required by section 1886(m)(3)(A)(i) of the Act, minus 2.0 percentage points for LTCHs failing to submit quality data under the LTCH QRP, as required by section 1886(m)(5) of the Act. Consistent with § 412.523(d)(4), we are proposing to apply an area wage level budget neutrality factor to the FY 2027 LTCH PPS standard Federal payment rate of
Under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we established an adjustment to the LTCH PPS standard Federal payment rate to account for differences in LTCH area wage levels under § 412.525(c). The labor-related share of the LTCH PPS standard Federal payment rate is adjusted to account for geographic differences in area wage levels by applying the applicable LTCH PPS wage index. The applicable LTCH PPS wage index is computed using wage data from inpatient acute care hospitals without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act.
The proposed FY 2027 LTCH PPS standard Federal payment rate wage index values that would be applicable for LTCH PPS standard Federal payment rate discharges occurring on or after October 1, 2026, through September 30, 2027, are presented in Table 12A (for urban areas) and Table 12B (for rural areas), which are listed in section VI. of this Addendum and available via the internet on the CMS website.
In adjusting for the differences in area wage levels under the LTCH PPS, the labor-related portion of an LTCH's Federal prospective payment is adjusted by using an appropriate area wage index based on the geographic classification (labor market area) in which the LTCH is located. Specifically, the application of the LTCH PPS area wage level adjustment under existing § 412.525(c) is made based on the location of the LTCH—either in an “urban area,” or a “rural area,” as defined in § 412.503. Under § 412.503, an “urban area” is defined as a Metropolitan Statistical Area (MSA) (which includes a Metropolitan division, where applicable), as defined by OMB, and a “rural area” is defined as any area outside of an urban area.
The geographic classifications (labor market area definitions) currently used under the LTCH PPS are based on the Core Based Statistical Areas (CBSAs) established by OMB. In the July 16, 2021,
In the FY 2025 IPPS/LTCH PPS final rule, we stated that we believe that adopting the CBSA-based labor market area delineations established in OMB Bulletin 23-01 will ensure that the LTCH PPS area wage level adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level based on the best available data that reflect the local economies and area wage levels of the hospitals that are currently located in these geographic areas (89 FR 69974). We also noted that our adoption of the revised delineations announced in OMB Bulletin No. 23-01 is consistent with the changes under the IPPS for FY 2025. Therefore, in that same final rule, we adopted the updates set forth in OMB Bulletin No. 23-01, under the authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, for the LTCH PPS effective for FY 2025. We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69973 through 69975), for a full discussion of our implementation of the OMB delineations based on OMB Bulletin No. 23-01 for the LTCH PPS. For additional information on the CBSA-based labor market area (geographic classification) delineations used under the LTCH PPS and the history of the labor market area definitions used under the LTCH PPS, we refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50180 through 50185).
We continue to believe that the CBSA-based labor market area delineations, as established in OMB Bulletin 23-01, would ensure that the LTCH PPS area wage level adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level based on the best available data that reflect the local economies and area wage levels of the hospitals that are currently located in these geographic areas (89 FR 69974). Therefore, for FY 2027, we are proposing to continue to use the CBSA-based labor market area delineations as established in OMB Bulletin 23-01 and adopted in the FY 2025 IPPS/LTCH final rule.
CBSAs are made up of one or more constituent counties. For FY 2027, we are proposing to continue using the Federal Information Processing Standard (FIPS) county codes, maintained by the U.S. Census Bureau, for purposes of crosswalking counties to CBSAs. The current county-to-CBSA crosswalk was adopted under the LTCH PPS in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69973 through 69975) and is located on the CMS website at
Under the payment adjustment for the differences in area wage levels under § 412.525(c), the labor-related share of an LTCH's standard Federal payment rate is adjusted by the applicable wage index for the labor market area in which the LTCH is located. The LTCH PPS labor-related share currently represents the sum of the labor-related portion of operating costs and a labor-related portion of capital costs using the applicable LTCH market basket. Additional background information on the historical development of the labor-related share under the LTCH PPS can be found in the RY 2007 LTCH PPS final rule (71 FR 27810 through 27817 and
Effective FY 2025, we rebased and revised the 2017-based LTCH market basket to reflect a 2022 base year and determined the labor-related share annually as the sum of the relative importance of each labor-related cost category in the 2022-based LTCH market basket using the most recent available data. (For more details, we refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR 69435 through 69455).)
In this proposed rule, consistent with our historical practice, we are proposing that the LTCH PPS labor-related share for FY 2027 would be the sum of the FY 2027 relative importance of each labor-related cost category in the LTCH market basket using the most recent available data. Specially, we are proposing that the labor-related share for FY 2027 is the sum of the labor-related portion of operating costs from the 2022-based LTCH market basket (that is, the sum of the FY 2027 relative importance shares of Wages and Salaries; Employee Benefits; Professional Fees: Labor-Related; Administrative and Facilities Support Services; Installation, Maintenance, and Repair Services; All Other: Labor-Related Services) and a portion of the relative importance of Capital-Related cost weight from the 2022-based LTCH market basket. The relative importance reflects the different rates of price change for these cost categories between the base year (2022) and FY 2027. Based on IHS Global Inc.'s fourth quarter 2025 forecast of the 2022-based LTCH market basket, the sum of the FY 2027 relative importance for Wages and Salaries; Employee Benefits; Professional Fees: Labor-Related; Administrative and Facilities Support Services; Installation, Maintenance, and Repair Services; and All Other: Labor-Related Services was 69.1 percent. The portion of capital-related costs that is influenced by the local labor market was estimated to be 46 percent (that was, the same percentage applied to the 2009-based, 2013-based, and 2017-based LTCH market basket capital-related costs relative importance). Since the FY 2027 relative importance for capital-related costs was 8.4 percent based on IHS Global Inc.'s fourth quarter 2025 forecast of the 2022-based LTCH market basket, we took 46 percent of 8.4 percent to determine the labor-related share of capital-related costs for FY 2027 of 3.9 percent. Therefore, we are proposing a total labor-related share for FY 2027 of 73.0 percent (the sum of 69.1 percent for the labor-related share of operating costs and 3.9 percent for the labor-related share of capital-related costs). Consistent with our historical practice, we are proposing that if more recent data become available after the publication of the proposed rule and before the publication of the final rule (for example, a more recent estimate of the relative importance of each labor-related cost category of the 2022-based LTCH market basket), we would use such data, if appropriate, to determine the FY 2027 LTCH PPS labor-related share.
Historically, we have established LTCH PPS area wage index values calculated from acute care IPPS hospital wage data without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act (67 FR 56019). The area wage level adjustment established under the LTCH PPS is based on an LTCH's actual location without regard to the “urban” or “rural” designation of any related or affiliated provider. As with the IPPS wage index, wage data for multicampus hospitals with campuses located in different labor market areas (CBSAs) are apportioned to each CBSA where the campus (or campuses) are located. We also employ a policy for determining area wage index values for areas where there are no IPPS wage data.
Consistent with our historical methodology, to determine the applicable area wage index values for the FY 2027 LTCH PPS standard Federal payment rate, under the broad authority of section 123 of the BBRA, as amended by section 307(b) of the BIPA, we are proposing to continue to employ our historical practice of using the same data we used to compute the proposed FY 2027 acute care hospital inpatient wage index, as discussed in section III. of the preamble of this proposed rule (that is, wage data collected from cost reports submitted by IPPS hospitals for cost reporting periods beginning during FY 2023) because these data are the most recent complete data available.
In addition, we are proposing to compute the FY 2027 LTCH PPS standard Federal payment rate area wage index values consistent with the “urban” and “rural” geographic classifications (that is, the proposed labor market area delineations as previously discussed in section V.B. of this Addendum) and our historical policy of not taking into account IPPS geographic reclassifications under sections 1886(d)(8) and 1886(d)(10) of the Act in determining payments under the LTCH PPS. We are also proposing to continue to apportion the wage data for multicampus hospitals with campuses located in different labor market areas to each CBSA where the campus or campuses are located, consistent with the IPPS policy. Lastly, consistent with our existing methodology for determining the LTCH PPS wage index values, for FY 2027, we are proposing to continue to use our existing policy for determining area wage index values for areas where there are no IPPS wage data. Under our existing methodology, the LTCH PPS wage index value for urban CBSAs with no IPPS wage data is determined by using an average of all of the urban areas within the State, and the LTCH PPS wage index value for rural areas with no IPPS wage data is determined by using the unweighted average of the wage indices from all of the CBSAs that are contiguous to the rural counties of the State.
Based on the FY 2023 IPPS wage data that we are proposing to use to determine the FY 2027 LTCH PPS area wage index values in this proposed rule, there are no IPPS wage data for the urban area of Hinesville, GA (CBSA 25980). Consistent with our existing methodology, we calculated the proposed FY 2027 wage index value for CBSA 25980 as the average of the wage index values for all of the other urban areas within the State of Georgia (that is, proposed CBSAs 10500, 12020, 12054, 12260, 15260, 16860, 17980, 19140, 23580, 31420, 31924, 40660, 42340, 46660, and 47580), as shown in Table 12A, which is listed in section VI. of this Addendum.
Based on the FY 2023 IPPS wage data that we are proposing to use to determine the FY 2027 LTCH PPS area wage index values in this proposed rule, there are no IPPS wage data for rural North Dakota (CBSA 35). Consistent with our existing methodology, we calculated the proposed FY 2027 wage index value for CBSA 35 as the average of the wage index values for all proposed CBSAs that are contiguous to the rural counties of the State (that is, proposed CBSAs 13900, 22020, 24220, and 33500), as shown in Table 12B, which is listed in section VI. of this Addendum. We note that, as IPPS wage data are dynamic, it is possible that the number of urban and rural areas without IPPS wage data will vary in the future.
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49440 through 49442), we finalized a policy that applies a permanent 5-percent cap on any
Under this policy, an LTCH's wage index will not be less than 95 percent of its wage index for the prior fiscal year. An LTCH's wage index cap adjustment is determined based on the wage index value applicable to the LTCH on the last day of the prior Federal fiscal year. However, for newly opened LTCHs that become operational on or after the first day of the fiscal year, these LTCHs will not be subject to the LTCH PPS wage index cap since they were not paid under the LTCH PPS in the prior year. For example, newly opened LTCHs that become operational during FY 2027 would not be eligible for the LTCH PPS wage index cap in FY 2027. These LTCHs would receive the calculated wage index for the area in which they are geographically located, even if other LTCHs in the same geographic area are receiving a wage index cap. The cap on wage index decreases policy is reflected at § 412.525(c)(1).
For each LTCH we identify in our rulemaking data, we are including in a supplemental data file the wage index values from both fiscal years used in determining its capped wage index. This includes the LTCH's final prior year wage index value, the LTCH's uncapped current year wage index value, and the LTCH's capped current year wage index value. Due to the lag in rulemaking data, a new LTCH may not be listed in this supplemental file for a few years. For this reason, a newly opened LTCH could contact their MAC to ensure that its wage index value is not less than 95 percent of the value paid to it for the prior Federal fiscal year. This supplemental data file for public use will be posted on the CMS website for this proposed rule at
Determining LTCH PPS payments for short-stay-outlier cases (reflected in § 412.529) and site neutral payment rate cases (reflected in § 412.522(c)) requires calculating an “IPPS comparable amount.” For information on this “IPPS comparable amount” calculation, we refer the reader to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49608 through 49610). Determining LTCH PPS payments for LTCHs that do not meet the applicable discharge payment percentage (reflected in § 412.522(d)) requires calculating an “IPPS equivalent amount.” For information on this “IPPS equivalent amount” calculation, we refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42439 through 42445).
Calculating both the “IPPS comparable amount” and the “IPPS equivalent amount” requires adjusting the IPPS operating and capital standardized amounts by the applicable IPPS wage index for nonreclassified IPPS hospitals. That is, the standardized amounts are adjusted by the IPPS wage index for nonreclassified IPPS hospitals located in the same geographic area as the LTCH. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49442 through 49443), we finalized a policy that applies a permanent 5-percent cap on decreases in an LTCH's applicable IPPS comparable wage index from its applicable IPPS comparable wage index in the prior year. Historically, we have not budget neutralized changes to LTCH PPS payments that result from the annual update of the IPPS wage index for nonreclassified IPPS hospitals. Consistent with this approach, the cap on decreases in an LTCH's applicable IPPS comparable wage index is not applied in a budget neutral manner.
Under this policy, an LTCH's applicable IPPS comparable wage index will not be less than 95 percent of its applicable IPPS comparable wage index for the prior fiscal year. An LTCH's applicable IPPS comparable wage index cap adjustment is determined based on the wage index value applicable to the LTCH on the last day of the prior Federal fiscal year. However, for newly opened LTCHs that become operational on or after the first day of the fiscal year, these LTCHs will not be subject to the applicable IPPS comparable wage index cap since they were not paid under the LTCH PPS in the prior year. For example, newly opened LTCHs that become operational during FY 2027 would not be eligible for the applicable IPPS comparable wage index cap in FY 2027. This means that these LTCHs would receive the calculated applicable IPPS comparable wage index for the area in which they are geographically located, even if other LTCHs in the same geographic area are receiving a wage cap. The cap on IPPS comparable wage index decreases policy is reflected at § 412.529(d)(4)(ii)(B) and (d)(4)(iii)(B).
Similar to the information we are making available for the cap on the LTCH PPS wage index values (described previously), for each LTCH we identify in our rulemaking data, we are including in a supplemental data file the wage index values from both fiscal years used in determining its capped applicable IPPS comparable wage index. Due to the lag in rulemaking data, a new LTCH may not be listed in this supplemental file for a few years. For this reason, a newly opened LTCH could contact its MAC to ensure that its applicable IPPS comparable wage index value is not less than 95 percent of the value paid to them for the prior Federal fiscal year. This supplemental data file for public use will be posted on the CMS website for this proposed rule at:
Historically, the LTCH PPS wage index and labor-related share are updated annually based on the latest available data. Under § 412.525(c)(2), any changes to the area wage index values or labor-related share are to be made in a budget neutral manner such that estimated aggregate LTCH PPS payments are unaffected; that is, will be neither greater than nor less than estimated aggregate LTCH PPS payments without such changes to the area wage level adjustment. Under this policy, we determine an area wage level adjustment budget neutrality factor that is applied to the standard Federal payment rate to ensure that any changes to the area wage level adjustments are budget neutral such that any changes to the area wage index values or labor-related share would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Accordingly, under § 412.523(d)(4), we have applied an area wage level adjustment budget neutrality factor in determining the standard Federal payment rate, and we also established a methodology for calculating an area wage level adjustment budget neutrality factor. (For additional information on the establishment of our budget neutrality policy for changes to the area wage level adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771 through 51773 and 51809).)
For FY 2027, in accordance with § 412.523(d)(4), we are proposing to apply an area wage level budget neutrality factor to adjust the LTCH PPS
We are proposing to use the most recent data available, including claims from the FY 2025 MedPAR file, in calculating the FY 2027 LTCH PPS standard Federal payment rate area wage level adjustment budget neutrality factor. We note that, because the area wage level adjustment under § 412.525(c) is an adjustment to the LTCH PPS standard Federal payment rate, consistent with historical practice, we only used data from claims that qualified for payment at the LTCH PPS standard Federal payment rate under the dual rate LTCH PPS to calculate the FY 2027 LTCH PPS standard Federal payment rate area wage level adjustment budget neutrality factor.
For this proposed rule, using the steps in the methodology previously described, we determined a proposed FY 2027 LTCH PPS standard Federal payment rate area wage level adjustment budget neutrality factor of 1.0025505. Accordingly, in section V.A. of this Addendum, we applied the proposed area wage level adjustment budget neutrality factor of 1.0025505 to determine the proposed FY 2027 LTCH PPS standard Federal payment rate, in accordance with § 412.523(d)(4).
Under § 412.525(b), a cost-of-living adjustment (COLA) is provided for LTCHs located in Alaska and Hawaii to account for the higher costs incurred in those States. Specifically, we apply a COLA to payments to LTCHs located in Alaska and Hawaii by multiplying the nonlabor-related portion of the standard Federal payment rate by the applicable COLA factors established annually by CMS. Higher labor-related costs for LTCHs located in Alaska and Hawaii are taken into account in the adjustment for area wage levels.
For FY 2011 and in prior fiscal years, we used the most recent cost-of-living adjustment (COLA) factors obtained from the U.S. Office of Personnel Management (OPM) website at
In the FY 2013 IPPS/LTCH PPS final rule, we established a methodology to update the COLA factors for Alaska and Hawaii that were published by OPM every 4 years (coinciding with the update to the labor-related share of the IPPS market basket), beginning in FY 2014. We refer readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for additional background and a detailed description of this methodology (77 FR 28019 through 28020 and 77 FR 53481 through 53482, respectively). In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45559 through 45560), we updated the COLA factors published by OPM for 2009 (as these are the last COLA factors OPM published prior to transitioning from COLAs to locality pay) using the methodology that we finalized in the FY 2013 IPPS/LTCH PPS final rule and Consumer Price Indices (CPIs) data through 2020. Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final rule, we utilized these COLA factors for FYs 2022 through 2025 to adjust the nonlabor-related portion of the standard Federal payment rate for LTCHs located in Alaska and Hawaii.
In general, under our existing methodology, we update the 2009 OPM COLA factors by a comparison of the growth in the CPIs for the areas of Urban Alaska and Urban Hawaii, relative to the growth in the CPI for the average U.S. city as published by the Bureau of Labor Statistics (BLS). We use the comparison of the growth in the overall CPI relative to the growth in the CPI for those areas to update the COLA factors for all areas in Alaska and Hawaii, respectively, because BLS publishes CPI data for only Urban Alaska and Urban Hawaii. Using the respective CPI commodities index and CPI services index and using the approximate commodities/services shares obtained from the IPPS market basket, we create reweighted CPIs for each of the respective areas to reflect the underlying composition of the IPPS market basket nonlabor-related share. Lastly, we exercised our discretionary authority to adjust payments to LTCHs in Alaska and Hawaii by incorporating the statutorily mandated cap of 25 percent that was applied when determining OPM's COLA factors. (For additional information, refer to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45559 through 45560).)
We previously stated our intention to update the COLA factors at the same time as the update to the labor-related share of the IPPS market basket. In the FY 2026 IPPS/LTCH PPS proposed rule, we proposed to update the labor-related share of the IPPS market basket. We also stated that at that time, we believed it would be appropriate to maintain the current COLA factors for FY 2026 to allow us to consider whether it would be appropriate to incorporate additional data sources or other methodology changes in determining the COLA factors we apply to LTCH PPS payments to account for the unique circumstances of LTCHs located in Alaska and Hawaii (90 FR 18448 through 18449). Therefore, we proposed to continue to use the FY 2025 COLA factors to adjust the nonlabor-related portion of the standard Federal payment rate for LTCHs located in Alaska and Hawaii for FY 2026. We solicited comments on any possible data
Although we received no comments on our FY 2026 LTCH PPS proposal, one commenter, as summarized in the FY 2026 IPPS/LTCH PPS final rule (90 FR 37230), supported CMS' proposal to maintain the current COLA methodology under the IPPS temporarily while we evaluate alternative approaches. The commenter requested that CMS utilize a more sensitive adjustment to reflect cost variation across Alaska. The commenter stated that tying Alaska's COLA to a single urban index does not reflect higher costs in more remote areas. The commenter also requested that CMS reconsider the 25-percent cap on the COLAs and engage with providers during the development of the new methodology. After consideration of the public comment we received, we finalized our proposal to continue to use the FY 2025 COLA factors to adjust the nonlabor-related portion of the standard Federal payment rate for LTCHs located in Alaska and Hawaii for FY 2026.
After further consideration and consistent with the approach proposed under the IPPS, effective for FY 2027, we are proposing to adjust non-labor related costs for LTCHs located in Alaska and Hawaii, using the Overseas Cost-of-Living Allowance (OCOLA) data
We believe the DOD OCOLAs are an appropriate data source to capture the cost differences of LTCH nonlabor-related inputs purchased in the areas of Hawaii and Alaska compared to the continental U.S. The DOD OCOLAs reflect the relative price differences in a basket of non-housing goods and services that would be consistent with many of the nonlabor-related goods and services that LTCHs purchase (such as pharmaceuticals, food, and cleaning supplies). In addition, unlike the prior approach that relied on CPI data for urban areas, these relative price differences would account for the additional shipping costs to remote areas. Specifically, the DOD OCOLAs are reflective of the specific areas of Alaska and Hawaii where LTCHs are located.
For the proposed COLA factors for LTCHs located in Alaska and Hawaii for FY 2027, we are proposing to use the OCOLAs published by DOD effective for January 1, 2026. The DOD OCOLAs are available for 26 Alaska locality areas and 6 Hawaii locality areas. Similar to the COLAs used for Alaska and Hawaii for FY 2022 through FY 2026 that are based on the original OPM COLAs, we are proposing to continue to use the four Nonforeign COLA Areas designated by OPM for Alaska and the four Nonforeign COLA Areas designated by OPM for Hawaii as shown in Table V.C.1.
For each of the designated OPM areas for cities in Alaska (City of Anchorage, City of Fairbanks, and City of Juneau), if there is more than one DOD OCOLA within a 50-mile radius of the city, we are proposing to average the DOD OCOLAs within the designated OPM area to calculate the proposed COLA. Specifically, for the COLA factor for the City of Anchorage, we are proposing to average the DOD OCOLAs for the Anchorage and Wasilla locality areas. For the COLA factor for the City of Fairbanks, we are proposing to average the DOD OCOLAs for the College, Eielson Air Force Base, and Fairbanks locality areas. For the Rest of Alaska COLA, given that there are IPPS hospitals located in two locality areas (Bethel and Kenai), we are proposing to average the DOD OCOLAs for these two locality areas to calculate the proposed COLA. We note there is currently only one LTCH in Alaska, located in Anchorage.
For Hawaii, the OCOLAs published by DOD are generally consistent with the OPM designated areas. To obtain the COLA factor for the OPM designated area of County of Maui and County of Kalawao, we are proposing to average the DOD OCOLAs for the Maui and Molokai locality areas. We note there are currently no LTCHs located in Hawaii.
Starting with the FY 2027 payment year, we are proposing to no longer cap the COLA factors at 25 percent. We note that OPM's COLA factors were calculated with a statutorily mandated cap of 25 percent
Below is a table with the proposed COLA factors for FY 2027, as calculated using this proposed methodology, which indicates that changing the data source and eliminating the 25-percent cap has different impacts by area. We are soliciting comments on this proposed methodology and the use of the DOD OCOLAs, including any comments on how the use of survey data that are specific to Service members, including their access to discounted commissary prices that might be variable by geographic area, may result in differential impacts across the designated areas. We are also requesting comment on any potential modifications to this proposed methodology, including a potential phase-in of the use of these data or a transition period for implementation, which we may consider finalizing in the FY 2027 IPPS/LTCH PPS final rule, after consideration of the comments received.
From the beginning of the LTCH PPS, we have included an adjustment to account for cases in which there are extraordinarily high costs relative to the costs of most discharges. Under this policy, additional payments are made based on the degree to which the estimated cost of a case (which is calculated by multiplying the Medicare allowable covered charge by the by the hospital's overall hospital CCR) exceeds a fixed-loss amount. This policy results in greater payment accuracy under the LTCH PPS and the Medicare program, and the LTCH sharing the financial risk for the treatment of extraordinarily high-cost cases.
We retained the basic tenets of our HCO policy in FY 2016 when we implemented the dual rate LTCH PPS payment structure under section 1206 of Public Law 113-67. LTCH discharges that meet the criteria for exclusion from the site neutral payment rate (that is, LTCH PPS standard Federal payment rate cases) are paid at the LTCH PPS standard Federal payment rate, which includes, as applicable, HCO payments under § 412.523(e). LTCH discharges that do not meet the criteria for exclusion are paid at the site neutral payment rate, which includes, as applicable, HCO payments under § 412.522(c)(2)(i). In the FY 2016 IPPS/LTCH PPS final rule, we established separate fixed-loss amounts and targets for the two different LTCH PPS payment rates. Under this bifurcated policy, the historic 8-percent HCO target was retained for LTCH PPS standard Federal payment rate cases, with the fixed-loss amount calculated using only data from LTCH cases that would have been paid at the LTCH PPS standard Federal payment rate if that rate had been in effect at the time of those discharges. For site neutral payment rate cases, we adopted the operating IPPS HCO target (currently 5.1 percent) and set the fixed-loss amount for site neutral payment rate cases at the value of the IPPS fixed-loss amount. Under the HCO policy for both payment rates, an LTCH receives 80 percent of the difference between the estimated cost of the case and the applicable HCO threshold, which is the sum of the LTCH PPS payment for the case and the applicable fixed-loss amount for such case.
To maintain budget neutrality, consistent with the budget neutrality requirement at § 412.523(d)(1) for HCO payments to LTCH PPS standard Federal rate payment cases, we also adopted a budget neutrality requirement for HCO payments to site neutral payment rate cases by applying a budget neutrality factor to the LTCH PPS payment for those site neutral payment rate cases. (We refer readers to § 412.522(c)(2)(i) of the regulations for further details.) For additional details on the HCO policy adopted for site neutral payment rate cases under the dual rate LTCH PPS payment structure, including the budget neutrality adjustment for HCO payments to site neutral payment rate cases, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49617 through 49623).
As noted previously, CCRs are used to determine payments for HCO adjustments for both payment rates under the LTCH PPS and are also used to determine payments for site neutral payment rate cases. As noted earlier, in determining HCO and the site neutral payment rate payments (regardless of whether the case is also an HCO), we generally calculate the estimated cost of the case by multiplying the LTCH's overall CCR by the Medicare allowable charges for the case. An overall CCR is used because the LTCH PPS uses a single prospective payment per discharge that covers both inpatient operating and capital-related costs. The LTCH's overall CCR is generally computed based on the sum of LTCH operating and capital costs (as described in section 150.24, Chapter 3, of the Medicare Claims Processing Manual (Pub. 100-4)) as compared to total Medicare charges (that is, the sum of its operating and capital inpatient routine and ancillary charges), with those values determined from either the most recently settled cost report or the most recent tentatively settled cost report, whichever is from the latest cost reporting period. However, in certain instances, we use an alternative CCR, such as the statewide average CCR, a CCR that is specified by CMS, or one that is requested by the hospital. (We refer readers to § 412.525(a)(4)(iv) of the regulations for further details regarding CCRs and HCO adjustments for either LTCH PPS payment rate and § 412.522(c)(1)(ii) for the site neutral payment rate.)
The LTCH's calculated CCR is then compared to the LTCH total CCR ceiling. Under our established policy, an LTCH with a calculated CCR in excess of the applicable maximum CCR threshold (that is, the LTCH total CCR ceiling, which is calculated as 3 standard deviations from the national geometric average CCR) is generally assigned the applicable statewide CCR. This policy is premised on a belief that calculated CCRs in excess of the LTCH total CCR ceiling are most likely due to faulty data reporting or entry, and CCRs based on erroneous data should not be used to identify and make payments for outlier cases.
Consistent with our historical practice, we are proposing to use the best available data to determine the LTCH total CCR ceiling for FY 2027 in this proposed rule. Specifically, in this
Our general methodology for determining the statewide average CCRs used under the LTCH PPS is similar to our established methodology for determining the LTCH total CCR ceiling because it is based on “total” IPPS CCR data. (For additional information on our methodology for determining statewide average CCRs under the LTCH PPS, we refer readers to the FY 2007 IPPS final rule (71 FR 48119 through 48120).) Under the LTCH PPS HCO policy at § 412.525(a)(4)(iv)(C), the SSO policy at § 412.529(f)(4)(iii), and the site neutral payment rate at § 412.522(c)(1)(ii), the MAC may use a statewide average CCR, which is established annually by CMS, if it is unable to determine an accurate CCR for an LTCH in one of the following circumstances: (1) New LTCHs that have not yet submitted their first Medicare cost report (a new LTCH is defined as an entity that has not accepted assignment of an existing hospital's provider agreement in accordance with § 489.18); (2) LTCHs whose calculated CCR is in excess of the LTCH total CCR ceiling; and (3) other LTCHs for whom data with which to calculate a CCR are not available (for example, missing or faulty data). (Other sources of data that the MAC may consider in determining an LTCH's CCR include data from a different cost reporting period for the LTCH, data from the cost reporting period preceding the period in which the hospital began to be paid as an LTCH (that is, the period of at least 6 months that it was paid as a short-term, acute care hospital), or data from other comparable LTCHs, such as LTCHs in the same chain or in the same region.)
Consistent with our historical practice of using the best available data, in this proposed rule, we are proposing to use our established methodology for determining the LTCH PPS statewide average CCRs, based on the most recent complete IPPS “total CCR” data from the December 2025 update of the PSF. We are proposing LTCH PPS statewide average total CCRs for urban and rural hospitals that will be effective for discharges occurring on or after October 1, 2026, through September 30, 2027, in Table 8C listed in section VI. of this Addendum (and available via the internet on the CMS website). Consistent with our historical practice, we also are proposing to use the best available data, if applicable, to determine the LTCH PPS statewide average total CCRs for FY 2027 in the final rule.
Under the current LTCH PPS labor market areas, all areas in the District of Columbia, New Jersey, and Rhode Island are classified as urban. Therefore, there are no rural statewide average total CCRs listed for those jurisdictions in Table 8C. This policy is consistent with the policy that we established when we revised our methodology for determining the applicable LTCH statewide average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through 48121) and is the same as the policy applied under the IPPS. In addition, consistent with our existing methodology, in determining the urban and rural statewide average total CCRs for Maryland LTCHs paid under the LTCH PPS, we are proposing to continue to use, as a proxy, the national average total CCR for urban IPPS hospitals and the national average total CCR for rural IPPS hospitals, respectively. We are proposing to use this proxy because we believe that the CCR data in the PSF for Maryland hospitals may not be entirely accurate (as discussed in greater detail in the FY 2007 IPPS final rule (71 FR 48120)).
Furthermore, although Connecticut, Idaho, Massachusetts, Nevada, and North Dakota have areas that are designated as rural under the current LTCH PPS labor market areas, in our calculation of the LTCH statewide average CCRs, there were no trimmed CCR data available from IPPS hospitals located in these rural areas as of December 2025. We refer the reader to section II.A.4.i.(2). of this Addendum for details on the trims applied to the IPPS CCR data from the December 2025 update of the PSF, which are the same data used to calculate the LTCH statewide average total CCRs. Therefore, consistent with our existing methodology, we are proposing to use the national average total CCR for rural IPPS hospitals for rural Connecticut, Idaho, Massachusetts, Nevada, and North Dakota in Table 8C. We note that there were no LTCHs located in these rural areas as of December 2025.
Under the HCO policy at § 412.525(a)(4)(iv)(D), the payments for HCO cases are subject to reconciliation (regardless of whether payment is based on the LTCH standard Federal payment rate or the site neutral payment rate). Specifically, any such payments are reconciled at settlement based on the CCR that was calculated based on the cost report coinciding with the discharge. For additional information on the reconciliation policy, we refer readers to sections 150.26 through 150.28 of the Medicare Claims Processing Manual (Pub. 100-4), as added by Change Request 7192 (Transmittal 2111; December 3, 2010) and the RY 2009 LTCH PPS final rule (73 FR 26820 through 26821), and most recently modified by Change Request 14233 (Transmittal 13428; September 22, 2025) with an update to the outlier reconciliation criteria.
Under the regulations at § 412.525(a)(2)(ii) and as required by section 1886(m)(7) of the Act, the fixed-loss amount for HCO payments is set each year so that the estimated aggregate HCO payments for LTCH PPS standard Federal payment rate cases are 99.6875 percent of 8 percent (that is, 7.975 percent) of estimated aggregate LTCH PPS payments for LTCH PPS standard Federal payment rate cases. (For more details on the requirements for high-cost outlier payments in FY 2018 and subsequent years under section 1886(m)(7) of the Act and additional information regarding high-cost outlier payments prior to FY 2018, we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38542 through 38544).)
When we implemented the LTCH PPS, we established a fixed-loss amount so that total estimated outlier payments are projected to equal 8 percent of total estimated payments (that is, the target percentage) under the LTCH PPS (67 FR 56022 through 56026). When we implemented the dual rate LTCH PPS payment structure beginning in FY 2016, we established that, in general,
For this proposed rule, for the reasons discussed below, we are proposing to depart from our historical methodology for determining the fixed
On September 22, 2025, we issued Change Request (CR) 14233, which is available at
We analyzed the FY 2023 cost reports to better understand the potential impact the expanded criteria would have on LTCH payments. We found that approximately 2 percent of LTCH cost reports met the original reconciliation criteria, while approximately 24 percent of LTCH cost reports would have met the expanded reconciliation criteria. For the vast majority of the cost reports that would have met the expanded criteria, the LTCHs increased their charges during their cost reporting period at rates that far exceed their costs. This practice of significant year-over-year charge increases has been documented in the charge inflation factors we have calculated in recent rules. (As an example, in the FY 2026 IPPS/LTCH PPS final rule (90 FR 37246), we determined that LTCHs, on average, increased their charges approximately 13 percent from FY 2023 to FY 2024.) Based on the most recent data available for this proposed rule, we determined that LTCHs, on average, increased their charges approximately 17 percent from FY 2024 to FY 2025.
As discussed in greater detail below, we do not believe our historical methodology, which relies on the most recently available data, would accurately estimate outlier payments for LTCHs in FY 2027. Ordinarily, the best available data to use for ratesetting is the most recently available data. However, in light of the issuance of CR 14233, we do not believe the most recently available data for estimating outlier payments is reflective of the expected LTCH experience in FY 2027. With an incentive to avoid outlier reconciliation, we believe LTCHs will not continue to increase their charges relative to costs at the rates reflected in the most recently available data. Specifically, we do not believe the recent annual increase in average charges of approximately 17 percent is a reliable indicator for forecasting future annual increases in charges that will occur for purposes of estimating outlier payments in FY 2027. Similarly, we do not believe the historical changes in LTCHs' CCRs observed from cost reporting periods subject to only the original criteria can be used to reliably predict future CCR levels for purposes of estimating outlier payments in FY 2027. However, we currently lack sufficient information to reasonably quantify the magnitude a behavioral change would have on charging practices and outlier payment trends in FY 2027. Using a variety of assumptions for charge inflation and degree of outlier reconciliation, we estimated that a fixed-loss amount that would meet the statutory budget neutral target of estimated LTCH PPS outlier payments in FY 2027 would fall in the range of approximately $67,000 (a decrease of approximately $12,000 compared to the current fixed-loss amount) to $109,000 (an increase of approximately $30,000 compared to the current fixed-loss amount). Given this wide range of uncertainty in attempting to adopt assumptions about charge inflation and degree of outlier reconciliation for purposes of estimating the fixed-loss amount for FY 2027 and the aforementioned issues with using the historic methodology for purposes of estimating the fixed-loss amount for FY 2027, we believe that maintaining the fixed-loss amount at its FY 2026 level is a reasonable estimate of a fixed-loss amount that will result in estimated LTCH PPS outlier payments being equal to 7.975 percent of total LTCH PPS payments for FY 2027. Therefore, under the broad authority of section 123(a)(1) of the BBRA and section 307(b)(1) of the BIPA, we are proposing a fixed-loss amount for LTCH PPS standard Federal payment rate cases for FY 2027 of $78,936 that would result in estimated outlier payments projected to be equal to 7.975 percent of estimated FY 2027 payments for such cases. As such, we will make an additional HCO payment for the cost of an LTCH PPS standard Federal payment rate case that exceeds the HCO threshold amount that is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the proposed adjusted LTCH PPS standard Federal payment rate payment and the proposed fixed-loss amount for LTCH PPS standard Federal payment rate cases of $78,936). We believe setting the FY 2027 fixed-loss amount at the FY 2026 level will provide stability and predictability while allowing CMS time to gain insight into LTCHs' response to the additional reconciliation criteria. We intend to reassess the appropriateness of returning to our historical calculation methodology for future years as more representative data becomes available.
When we implemented the application of the site neutral payment
For FYs 2016 through 2025, our actuaries projected that the proportion of cases that would qualify as LTCH PPS standard Federal payment rate cases versus site neutral payment rate cases under the statutory provisions would remain consistent with what is reflected in the historical LTCH PPS claims data. Although our actuaries did not project an immediate change in the proportions found in the historical data, they did project cost and resource changes to account for the lower payment rates. Our actuaries also projected that the costs and resource use for cases paid at the site neutral payment rate would likely be lower, on average, than the costs and resource use for cases paid at the LTCH PPS standard Federal payment rate and would likely mirror the costs and resource use for IPPS cases assigned to the same MS-DRG, regardless of whether the proportion of site neutral payment rate cases in the future remains similar to what is found based on the historical data. As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49619), this actuarial assumption is based on our expectation that site neutral payment rate cases would generally be paid based on an IPPS comparable per diem amount under the statutory LTCH PPS payment changes that began in FY 2016, which, in the majority of cases, is much lower than the payment that would have been paid if these statutory changes were not enacted. In light of these projections and expectations, we discussed that we believed that the use of a single fixed-loss amount and HCO target for all LTCH PPS cases would be problematic. In addition, we discussed that we did not believe that it would be appropriate for comparable LTCH PPS site neutral payment rate cases to receive dramatically different HCO payments from those cases that would be paid under the IPPS (80 FR 49617 through 49619 and 81 FR 57305 through 57307). For those reasons, we stated that we believed that the most appropriate fixed-loss amount for site neutral payment rate cases for FYs 2016 through 2025 would be equal to the IPPS fixed-loss amount for that particular fiscal year. Therefore, we established the fixed-loss amount for site neutral payment rate cases as the corresponding IPPS fixed-loss amounts for FYs 2016 through 2025.
In the FY 2026 IPPS/LTCH PPS final rule (90 FR 37247) we discussed that section 3711(b)(2) of the CARES Act provided a waiver of the application of the site neutral payment rate for LTCH cases. This waiver applied to patients admitted during the COVID-19 PHE period and expired on May 11, 2023. Although the vast majority of LTCH discharges in FY 2024 were not subject to the waiver of the application of the site neutral payment rate, we believed LTCHs' admission patterns may still have been adapting to the expiration of the waiver of the application of the site neutral payment rate. Therefore, we did not believe it was appropriate to use FY 2024 data to develop a fixed-loss amount for site neutral payment rate cases for FY 2026. Therefore, we established the fixed-loss amount for site neutral payment rate cases as the FY 2026 IPPS fixed-loss amount of $40,397 (90 FR 37247).
For FY 2027, we are proposing to set the fixed-loss amount for site neutral payment rate cases equal to the FY 2027 IPPS fixed-loss amount. As discussed above, the waiver of the application of the site neutral payment rate under section 3711(b)(2) of the CARES Act expired on May 11, 2023. While FY 2024 and FY 2025 claims data reflect discharges that were not subject to this waiver, we believe that only two years of data subject to the full application of the site neutral payment rate is not sufficient for establishing a separate methodology for determining the fixed-loss amount for site neutral payment rate cases. We remain concerned that LTCH admission patterns may still be evolving following the expiration of the PHE waiver, and that adjusting our current policy based on this limited period of data would not be appropriate. We will continue to monitor claims data in future years to assess whether adjustments to this policy may be warranted as we accumulate a more robust dataset reflecting the post-PHE environment.
Accordingly, for FY 2027, we are proposing that the applicable HCO threshold for site neutral payment rate cases is the sum of the site neutral payment rate for the case and the IPPS fixed-loss amount. That is, we are proposing a fixed-loss amount for site neutral payment rate cases of $51,679, which is the same FY 2027 IPPS fixed-loss amount discussed in section II.A.4.i.(2). of this Addendum. Accordingly, under this policy, for FY 2027, we would calculate an HCO payment for site neutral payment rate cases with costs that exceed the HCO threshold amount that is equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the site neutral payment rate payment and the proposed fixed-loss amount for site neutral payment rate cases of $51,679).
In establishing an HCO policy for site neutral payment rate cases, we established a budget neutrality adjustment under § 412.522(c)(2)(i). We established this requirement because we believed, and continue to believe, that the HCO policy for site neutral payment rate cases should be budget neutral, just as the HCO policy for LTCH PPS standard Federal payment rate cases is budget neutral, meaning that estimated site neutral payment rate HCO payments should not result in any change in estimated aggregate LTCH PPS payments.
To ensure that estimated HCO payments payable to site neutral payment rate cases in FY 2027 would not result in any increase in estimated aggregate FY 2026 LTCH PPS payments, under the budget neutrality requirement at § 412.522(c)(2)(i), it is necessary to reduce site neutral payment rate payments by 5.1 percent to account for the estimated additional HCO payments payable to those cases in FY 2027. Consistent with our historical practice, we are proposing to continue this policy.
As discussed earlier, consistent with the IPPS HCO payment threshold, we estimate the proposed fixed-loss threshold would result in FY 2027 HCO payments for site neutral payment rate cases to equal 5.1 percent of the site neutral payment rate payments that are based on the IPPS comparable per diem amount. As such, to ensure estimated HCO payments payable for site neutral payment rate cases in FY 2027 would not result in any increase in estimated aggregate FY 2027 LTCH PPS payments, under the budget neutrality requirement
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50766), we established a policy to reflect the changes to the Medicare IPPS DSH payment adjustment methodology made by section 3133 of the Affordable Care Act in the calculation of the “IPPS comparable amount” under the SSO policy at § 412.529 and the “IPPS equivalent amount” under the site neutral payment rate at § 412.522. Historically, the determination of both the “IPPS comparable amount” and the “IPPS equivalent amount” includes an amount for inpatient operating costs “for the costs of serving a disproportionate share of low-income patients.” Under the statutory changes to the Medicare DSH payment adjustment methodology that began in FY 2014, in general, eligible IPPS hospitals receive an empirically justified Medicare DSH payment equal to 25 percent of the amount they otherwise would have received under the statutory formula for Medicare DSH payments prior to the amendments made by the Affordable Care Act. The remaining amount, equal to an estimate of 75 percent of the amount that otherwise would have been paid as Medicare DSH payments, reduced to reflect changes in the percentage of individuals under the age of 65 who are uninsured, is made available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has uncompensated care. The additional uncompensated care payments are based on the hospital's amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all hospitals that receive Medicare DSH payments.
To reflect the Medicare DSH payment adjustment methodology statutory changes in section 3133 of the Affordable Care Act in the calculation of the “IPPS comparable amount” and the “IPPS equivalent amount” under the LTCH PPS, we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50766) that we will include a reduced Medicare DSH payment amount that reflects the projected percentage of the payment amount calculated based on the statutory Medicare DSH payment formula prior to the amendments made by the Affordable Care Act that will be paid to eligible IPPS hospitals as empirically justified Medicare DSH payments and uncompensated care payments in that year (that is, a percentage of the operating Medicare DSH payment amount that has historically been reflected in the LTCH PPS payments that are based on IPPS rates). We also stated, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50766), that the projected percentage will be updated annually, consistent with the annual determination of the amount of uncompensated care payments that will be made to eligible IPPS hospitals. We believe that this approach results in appropriate payments under the LTCH PPS and is consistent with our intention that the “IPPS comparable amount” and the “IPPS equivalent amount” under the LTCH PPS closely resemble what an IPPS payment would have been for the same episode of care, while recognizing that some features of the IPPS cannot be translated directly into the LTCH PPS (79 FR 50766 through 50767).
For FY 2027, as discussed in greater detail in section IV.E.2.b. of the preamble of this proposed rule, based on the most recent data available, our estimate of 75 percent of the amount that would otherwise have been paid as Medicare DSH payments (under the methodology outlined in section 1886(r)(2) of the Act) is adjusted to 65.00 percent of that amount to reflect the change in the percentage of individuals who are uninsured. The resulting amount is then used to determine the amount available to make uncompensated care payments to eligible IPPS hospitals in FY 2027. In other words, the amount of the Medicare DSH payments that would have been made prior to the amendments made by the Affordable Care Act is adjusted to 48.75 percent (the product of 75 percent and 65.00 percent) and the resulting amount is used to calculate the uncompensated care payments to eligible hospitals. As a result, for FY 2027, we project that the reduction in the amount of Medicare DSH payments pursuant to section 1886(r)(1) of the Act, along with the payments for uncompensated care under section 1886(r)(2) of the Act, will result in overall Medicare DSH payments of 73.75 percent of the amount of Medicare DSH payments that would otherwise have been made in the absence of the amendments made by the Affordable Care Act (that is, 25 percent + 48.75 percent = 73.75 percent).Therefore, for FY 2027, we are proposing to establish that the calculation of the “IPPS comparable amount” under § 412.529 would include an applicable operating Medicare DSH payment amount that is equal to 73.75 percent of the operating Medicare DSH payment amount that would have been paid based on the statutory Medicare DSH payment formula absent the amendments made by the Affordable Care Act. Furthermore, consistent with our historical practice, we are proposing that, if more recent data became available, we would use that data to determine the applicable operating Medicare DSH payment amount used to calculate the “IPPS comparable amount” in the final rule.
Under the dual rate LTCH PPS payment structure, only LTCH PPS cases that meet the statutory criteria to be excluded from the site neutral payment rate are paid based on the LTCH PPS standard Federal payment rate. Under § 412.525(c), the LTCH PPS standard Federal payment rate is adjusted to account for differences in area wages; we make this adjustment by multiplying the labor-related share of the LTCH PPS standard Federal payment rate for a case by the applicable LTCH PPS wage index (the proposed FY 2027 values are shown in Tables 12A through 12B listed in section VI. of this Addendum and are available via the internet on the CMS website). The LTCH PPS standard Federal payment rate is also adjusted to account for the higher costs of LTCHs located in Alaska and Hawaii by the applicable COLA factors (the proposed FY 2027 factors are shown in the chart in section V.C. of this Addendum) in accordance with § 412.525(b). In this proposed rule, we are proposing to establish an LTCH PPS standard Federal payment rate for FY 2027 of $52,177.04, as discussed in section V.A. of this Addendum. We illustrate the methodology to adjust the proposed LTCH PPS standard Federal payment
During FY 2027, a Medicare discharge that meets the criteria to be excluded from the site neutral payment rate, that is, an LTCH PPS standard Federal payment rate case, is from an LTCH that is located in CBSA 16984, which has a proposed FY 2027 LTCH PPS wage index value of 1.0107 (as shown in Table 12A listed in section VI. of this Addendum). The Medicare patient case is classified into proposed MS-LTC-DRG 189 (Pulmonary Edema & Respiratory Failure), which has a proposed relative weight for FY 2027 of 0.9688 (as shown in Table 11 listed in section VI. of this Addendum). The LTCH submitted quality reporting data for FY 2027 in accordance with the LTCH QRP under section 1886(m)(5) of the Act.
To calculate the LTCH's total adjusted proposed Federal prospective payment for this Medicare patient case in FY 2027, we computed the wage-adjusted Federal prospective payment amount by multiplying the unadjusted proposed FY 2027 LTCH PPS standard Federal payment rate ($52,177.04) by the proposed labor-related share (73.0 percent) and the proposed wage index value (1.0107). This wage-adjusted amount was then added to the proposed nonlabor-related portion of the unadjusted proposed LTCH PPS standard Federal payment rate (27.0 percent; adjusted for cost of living, if applicable) to determine the adjusted proposed LTCH PPS standard Federal payment rate, which is then multiplied by the proposed MS-LTC-DRG relative weight (0.9688) to calculate the total adjusted proposed LTCH PPS standard Federal payment for FY 2027 ($50,943.95). The table illustrates the components of the calculations in this example.
This section lists the tables referred to throughout the preamble of this proposed rule and in the Addendum. In the past, a majority of these tables were published in the
Tables 7A and 7B historically contained the Medicare prospective payment system selected percentile lengths of stay for the MS-DRGs for the prior year and upcoming fiscal year. We note, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49452), we finalized beginning with FY 2023, to provide the percentile length of stay information previously included in Tables 7A and 7B in the supplemental AOR/BOR data file. The AOR/BOR files can be found on the FY 2027 IPPS proposed rule home page on the CMS website at
As discussed in section II.E.6. of the preamble to this proposed rule, for certain FY 2027 new technology add-on payment applications, we are making available separate tables listing the ICD-10-PCS codes or ICD-10-CM codes that would be used to identify cases relevant to the Breakthrough Device-designated indications, or would be appropriate to exclude for cases related to a different technology, for purposes of the new technology add-on payment, if approved, in Table 10 associated with this proposed rule.
After hospitals have been given an opportunity to review and correct their calculations for FY 2027, we will post Table 15 (which will be available via the CMS website) to display the final FY 2027 readmissions payment adjustment factors that will be applicable to discharges occurring on or after October 1, 2026. We expect Table 15 will be posted on the CMS website in the Fall 2026.
Readers who experience any problems accessing any of the tables that are posted on the CMS websites identified in this proposed rule should contact Michael Treitel at (410) 786-4552.
The following IPPS tables for this proposed rule are generally available on the CMS website at
This proposed rule is necessary to make payment and policy changes under the IPPS for Medicare acute care hospital inpatient services for operating and capital-related costs as well as for certain hospitals and hospital units excluded from the IPPS. This proposed rule also is necessary to make payment and policy changes for Medicare hospitals under the LTCH PPS. Also, as we note later in this Appendix, the primary objective of the IPPS and the LTCH PPS is to create incentives for hospitals to operate efficiently and minimize unnecessary costs, while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs in delivering necessary care to Medicare beneficiaries. In addition, we share national goals of preserving the Medicare Hospital Insurance Trust Fund.
We believe that the proposed changes in this proposed rule, such as the proposed updates to the IPPS and LTCH PPS rates, and the proposals and discussions relating to applications for new technology add-on payments, are needed to further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries.
We expect that these proposed changes would ensure that the outcomes of the prospective payment systems are reasonable and provide equitable payments, while avoiding or minimizing unintended adverse consequences.
In accordance with section 1886(b)(3)(B) of the Act and as described in section VI.B. of the preamble of this proposed rule, we are proposing to update the national standardized amount for inpatient hospital operating costs by the applicable percentage increase of 2.4 percent (that is, a proposed 3.2 percent market basket percentage increase with a proposed reduction of 0.8 percentage point for the productivity adjustment). We are also proposing to update the hospital-specific rates by the applicable percentage increase (including the market basket percentage increase and the productivity adjustment).
Subsection (d) hospitals that do not submit quality information under rules established by the Secretary and that are meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act would receive a proposed applicable percentage increase of 1.6 percent, which reflects a one-quarter percent reduction of the market basket update for failure to submit quality data. Hospitals that are not meaningful EHR users and do submit quality information under section 1886(b)(3)(B)(viii) of the Act would receive a proposed applicable percentage increase of zero percent, which reflects a three-quarter percent reduction of the market basket update for not meeting the requirements to be a meaningful EHR user.
Hospitals that are not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act and also do not submit quality data under section 1886(b)(3)(B)(viii) of the Act would receive a proposed applicable percentage increase of -0.8 percent, which reflects a one-quarter
Consistent with sections 1886(d)(5)(K) and (L) of the Act, we review applications for new technology add-on payments based on the eligibility criteria at 42 CFR 412.87. As set forth in 42 CFR 412.87(f)(1), we consider whether a technology meets the criteria for the new technology add-on payment and announce the results as part of the annual updates and changes to the IPPS. New technology add-on payments are not budget neutral.
As discussed in section II.E.7. of the preamble of this proposed rule, we are proposing that for all applications received for new technology add-on payments for FY 2028 and subsequent fiscal years, including applications for FDA-designated Breakthrough Devices and QIDPs, or drugs approved under FDA's LPAD pathway, we would evaluate whether the technology is new and not substantially similar to an existing technology, and the technology must demonstrate that it meets the requirements under § 412.87(b) that it represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries. We note that this proposal, if finalized, would be effective beginning with new technology add-on payments for FY 2028, and there would be no impact of this proposal in FY 2027. In addition, we are proposing that all applications received for OPPS device pass-through payment status on or after October 1, 2026, including all applications received through the remainder of the CY 2028 OPPS application cycle ending on March 1, 2027, and subsequent calendar years would have to demonstrate that the technology meets the requirements currently reflected at § 419.66(c)(2)(i).
If all of the future Breakthrough Devices, QIDPs, and LPADs that would have applied for new technology add-on payments would have been approved under the criteria at § 412.87(b), this proposal has no impact relative to current policy. To the extent that there are future Breakthrough Devices, QIDPs, and LPADs that are the subject of applications for new technology add-on payments, and those applications would have been approved under the current new technology add-on payment alternative pathway criteria, but would not meet the requirement to be new and not substantially similar to existing technologies and the requirements under § 412.87(b), this proposal would result in additional savings, but the savings are not estimable.
For future Breakthrough Devices that would have applied for OPPS device pass-through payment and would have met the criteria currently at § 419.66(c)(2)(i), this proposal has no impact relative to current policy. To the extent that there are future Breakthrough Devices that are the subject of applications for OPPS device pass-through payment, and those applications would have been approved under the current OPPS device pass-through payment alternative pathway criteria, but would not meet the requirements currently under § 419.66(c)(2)(i), this proposal would result in additional savings, but the savings are not estimable.
In the FY 2025 interim final action with comment period (IFC) (89 FR 80405 through 80421), we recalculated the FY 2025 IPPS hospital wage index to remove the low wage index hospital policy for FY 2025. We also removed the low wage index budget neutrality factor from the FY 2025 standardized amounts. For FY 2026 and subsequent fiscal years, consistent with the FY 2025 IFC, after considering the D.C. Circuit's decision in
For FY 2025 and FY 2026, consistent with our past practice to establish temporary transition policies to mitigate short-term instability and payment fluctuations, we established transition policies for hospitals significantly impacted by the discontinuation of the low wage index hospital policy using our authority under section 1886(d)(5)(I) of the Act. The transitional payment exception for FY 2025 for those hospitals was equal to the additional FY 2025 amount a hospital would have been paid under the IPPS if its FY 2025 wage index were equal to 95 percent of its FY 2024 wage index. The transitional payment exception for FY 2026 was equal to the additional FY 2026 amount the hospital would be paid under the IPPS if its FY 2026 wage index were equal to 90.25 percent of its FY 2024 wage index.
Some hospitals that previously benefitted from the low wage index hospital policy would continue to experience decreases of approximately 5 percent or more per year from their FY 2024 wage index (with the low wage index hospital policy applied). Therefore, we are proposing to extend the transitional exception to the calculation payments for FY 2027 and subsequent years for these hospitals in the same manner as we did for the FY 2026 wage index. In section III.F.6. of the preamble to this proposed rule, for FY 2027 we are proposing to use our authority under section 1886(d)(5)(I)(i) of the Act twice. First, we are proposing to adopt a narrow transitional exception to the calculation of FY 2027 IPPS payments for low wage index hospitals significantly impacted by the discontinuation of the low wage index hospital policy. Second, we are proposing to exercise our authority again to do so in a budget neutral manner.
In this proposed rule, as required by section 1886(r)(2) of the Act, we are updating our estimates of the 3 factors used to determine uncompensated care payments for FY 2027. Beginning with FY 2023 (87 FR 49036 through 49038), we adopted a multiyear averaging methodology to determine Factor 3 of the uncompensated care payment methodology, which helps mitigate any large fluctuations in uncompensated care payments from year to year. Under this methodology, for FY 2025 and subsequent fiscal years, we determine Factor 3 for all eligible hospitals using a 3-year average of the data on
Beginning with FY 2023 (87 FR 49047 through 49051), we also established a supplemental payment for IHS and Tribal hospitals and hospitals located in Puerto Rico. In section IV.D. of the preamble of this proposed rule, we summarize the ongoing methodology for supplemental payments.
We note, in section V.N. of the preamble of this proposed rule, we discuss the Rural Community Hospital (RCH) demonstration program. In past years, we made an adjustment to ensure the effects of the RCH demonstration program are budget neutral as required under section 410A(c)(2) of Public Law 108-173. As discussed in that section, as we are not yet able to finalize the FY 2027 estimated costs of the demonstration at this time, we are not proposing to apply a budget neutrality offset in this FY 2027 IPPS/LTCH PPS proposed rule. Rather, we are proposing to apply budget neutrality offsets for both FY 2027 and FY 2028 to the national IPPS rates in the FY 2028 IPPS/LTCH PPS rulemaking. We would also incorporate any statutory change that might affect the methodology for determining hospital costs either with or without the demonstration. We refer the reader to section VI.N. of the preamble of this proposed rule for complete details on this proposal.
The Frontier Community Health Integration Project (FCHIP) demonstration was authorized under section 123 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275), as amended by section 3126 of the Affordable Care Act of 2010 (Pub. L. 114-158), and most recently re-authorized and extended by the Consolidated Appropriations Act of 2021 (Pub. L. 116-260). The legislation authorized a demonstration project to allow eligible entities to develop and test new models for the delivery of health care in order to improve access to and better integrate the delivery of acute care, extended care and other health care services to Medicare beneficiaries in certain rural areas. The FCHIP demonstration initial period was conducted in 10 critical access hospitals (CAHs) from August 1, 2016, to July 31, 2019, and the demonstration “extension period” began on January 1, 2022, to run through June 30, 2027.
The authorizing legislation requires the FCHIP demonstration to be budget neutral. In this proposed rule, we proposed to continue with the budget neutrality approach used in the demonstration initial period for the demonstration extension period—to offset payments across CAHs nationally—should the demonstration incur costs to Medicare.
The proposed update to the LTCH PPS standard Federal payment rate for FY 2027 is discussed in section IX.C. of the preamble of this proposed rule. For FY 2027, we are proposing to establish an annual market basket update to the LTCH PPS standard Federal payment rate of 2.4 percent (that is, the 3.2 percent proposed market basket increase with a proposed reduction of 0.8 percentage point for the productivity adjustment, as required by section 1886(m)(3)(A)(i) of the Act). LTCHs that failed to submit quality data, as required by 1886(m)(5)(A)(i) of the Act would receive a proposed update of 0.4 percent for FY 2027, which reflects a 2.0 percentage point reduction for failure to submit quality data.
Section 1886(b)(3)(B)(viii) of the Act requires subsection (d) hospitals to report data in accordance with the requirements of the Hospital Inpatient Quality Reporting Program for purposes of measuring and making publicly available information on health care quality and links the quality data submission to the annual applicable percentage increase. Sections 1886(b)(3)(B)(ix), 1886(n), and 1814(l) of the Act require eligible hospitals and CAHs to demonstrate they are meaningful users of certified EHR technology for purposes of electronic exchange of health information to improve the quality of health care and link the submission of information demonstrating meaningful use to the annual applicable percentage increase for eligible hospitals and the applicable percent for CAHs. Section 1886(m)(5) of the Act requires each LTCH to submit quality measure data in accordance with the requirements of the Long Term Care Hospital Quality Reporting Program for purposes of measuring and making publicly available information on health care quality, and to avoid a 2-percentage point reduction. Section 1886(o) of the Act requires the Secretary to establish a value-based purchasing program under which value-based incentive payments are made in a fiscal year to hospitals that meet the performance standards established on an announced set of quality and efficiency measures for the fiscal year. The purposes of the Hospital Value-based Purchasing Program include measuring the quality of hospital inpatient care, linking hospital measure performance to payment, and making publicly available information on hospital quality of care. Section 1886(p) of the Act requires a reduction in payment for subsection (d) hospitals that rank in the worst-performing 25 percent with respect to measures of hospital-acquired conditions under the Hospital Acquired Condition Reduction Program for the purpose of measuring HACs, linking measure performance to payment, and making publicly available information on health care quality. Section 1886(q) of the Act requires a reduction in payment for subsection (d) hospitals for excess readmissions based on measures for applicable conditions under the Hospital Readmissions Reduction Program for the purpose of measuring readmissions, linking measure performance to payment, and making publicly available information on health care quality. Section 1866(k) of the Act applies to hospitals described in section 1886(d)(1)(B)(v) of the Act (referred to as “PPS-exempt cancer hospitals” or “PCHs”) and requires PCHs to report data in accordance with the requirements of the PCH Quality Reporting Program for purposes of measuring and making publicly available information on the quality of care furnished by PCHs. However, there is no reduction in payment to a PCH that does not report data.
In section X.A. of the preamble of this proposed rule, we discuss the alternative payment model called the Transforming Episode Accountability Model (TEAM), which will be tested under the authority at section 1115A of the Act. Section 1115A of the Act authorizes the testing of innovative payment and service delivery models that preserve or enhance the quality of care furnished to Medicare, Medicaid, and CHIP beneficiaries while reducing program expenditures. The underlying issue addressed by TEAM is that under the traditional fee-for-service (FFS)
TEAM was finalized in the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986) and subsequent updates were made in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36536)). The proposals within this proposed rule address policy gaps and make technical or conforming updates to ensure TEAM has sound and well developed technical, administrative, and operational policies. We are also soliciting public comment on two RFIs that may inform future TEAM policy. Any future TEAM policy would go through notice and comment rulemaking.
In section X.C of the preamble of this proposed rule, we are proposing the expansion of the Comprehensive Care for Joint Replacement (CJR) model, with the expanded model referred to as CJR-X. Section 1115A of the Act authorizes the testing of innovative payment and service delivery models that preserve or enhance the quality of care furnished to Medicare, Medicaid, and CHIP beneficiaries while reducing program expenditures. CJR-X participants would be accountable for the cost and quality of care for beneficiaries who receive a LEJR episode of care at their hospital. By holding CJR-X participants accountable, we anticipate this proposed model would reduce costs while maintaining or improving quality of care, as well as by providing incentives to promote high quality and efficient care.
Based on our analysis, the CJR-X model will build upon the successful test of the CJR model and incorporate features from other CMS Innovation Center episode-based payment models such as the BPCI Advanced Model and TEAM. Given the strength of evidence from the CJR Model test, we believe its expansion across all eligible acute care hospitals is the logical follow on to continue driving value-based care for Medicare beneficiaries. Further, we believe CJR-X establishes a solid framework for managing clinical episodes as a standard practice in Original Medicare and could be used to inform episodes of care for Medicare Advantage or other payers.
Under the proposed CJR-X model, acute care hospitals paid under the IPPS and OPPS, with limited exclusions, would be accountable form LEJR episodes of care. We believe the model may benefit Medicare beneficiaries through improving the coordination of items and services paid for through Medicare FFS payments, encouraging provider investment in health care infrastructure and redesigned care processes, and incentivizing higher value care across the inpatient and post-acute care settings for the episode. The model would also provide financial incentives for providers to coordinate their efforts to meet patient needs and prevent future costs. CJR-X may benefit beneficiaries by holding hospitals accountable for the quality and cost of care for during the anchor hospitalization or anchor procedure and for 90 days after a beneficiary is discharged from the anchor hospitalization or anchor procedure, which could promote high quality and efficient service delivery that focuses on patient-centered care.
In section X.D. of the preamble of this proposed rule, we are proposing to make payment and policy changes to ensure that Medicare reimburses non-renal organ acquisition costs to IOPOs and HCLs on a reasonable cost basis, in accordance with sections 1881(b)(2)(A) and 1861(v) of the Act. This proposed rule is also necessary to clarify, revise, and/or codify for all providers Medicare's reasonable cost payment policies related to allowable costs, and clarify and codify for all providers Medicare's policies related to overhead allocation. These three proposals are needed to increase compliance with reasonable cost principles, increase payment accuracy, and increase provider understanding of reasonable cost principles. Additionally, this proposed rule is necessary to make a technical change to IOPO and HCL appeals policy, by codifying requirements that provide more consistency in the appeals process. Finally, this proposed rule is necessary to make technical corrections to clarify or correct regulation text.
The proposed changes in this proposed rule reflect our commitment to increasing payment accuracy for providers paid under reasonable cost principles, assisting providers in understanding reasonable cost principles, assisting IOPOs and HCLs in understanding their appeal rights, and responsibly stewarding the Medicare Trust Fund.
We have examined the impacts of this proposed rule as required by Executive Order 12866, “Regulatory Planning and Review”; Executive Order 13132, “Federalism”; Executive Order 13563, “Improving Regulation and Regulatory Review”; Executive Order 14192, “Unleashing Prosperity Through Deregulation”; the Regulatory Flexibility Act (RFA) (Pub. L. 96-354); section 1102(b) of the Social Security Act; section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select those regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as any regulatory action that is likely to result in a rule that may: (1) have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, or the President's priorities.
A regulatory impact analysis (RIA) must be prepared for a regulatory action that is significant under section 3(f)(1) of E.O. 12866. Based on our estimates, OMB's Office of Information and Regulatory Affairs has determined this rulemaking is significant per section 3(f)(1). We have prepared a regulatory impact analysis that to the best of our ability presents the costs and benefits of the rulemaking. OMB has reviewed these regulations, and the Departments have provided the following assessment of their impact.
We estimate that the proposed changes for FY 2027 acute care hospital operating and capital payments will redistribute amounts in excess of $100 million to acute care hospitals. The proposed applicable percentage increase to the IPPS rates required by the statute, in conjunction with other proposed payment changes in this proposed rule, would result in an estimated $1.9 billion increase in payments in FY 2027, primarily driven by the net effect of changes in FY 2027 operating payments, including uncompensated care payments, FY 2027 capital payments, the expiration of the temporary changes in the low-volume hospital program, the expiration of the MDH program, and new technology add-on payment changes. These changes are relative to payments made in FY 2026. The impact analysis of the capital payments can be found in section I.I. of this Appendix. In addition, as described in section I.J. of this Appendix, LTCHs are expected to experience an increase in payments of approximately $55 million in FY 2027 relative to FY 2026.
Our operating payment impact estimate includes the 2.4 percent applicable percentage increase to the standardized amount (reflecting the proposed 3.2 percent market basket rate-of-increase reduced by the proposed 0.8 percentage point productivity adjustment). The estimates of IPPS operating payments to acute care hospitals generally do not reflect any changes in hospital admissions or real case-mix intensity, which would also affect overall payment changes.
The analysis in this Appendix, in conjunction with the remainder of this document, demonstrates that this proposed rule is consistent with the regulatory philosophy and principles identified in Executive Orders 12866 and 13563, the RFA, and section 1102(b) of the Act. This proposed rule will affect payments to a substantial number of small rural hospitals, as well as other classes of hospitals, and the effects on some hospitals may be significant. Finally, in accordance with the provisions of Executive Order 12866, the Office of Management and Budget has reviewed this proposed rule.
The primary objective of the IPPS and the LTCH PPS is to create incentives for hospitals to operate efficiently and minimize unnecessary costs, while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their costs in delivering necessary care to Medicare beneficiaries. In addition, we share national goals of preserving the Medicare Hospital Insurance Trust Fund.
We believe that the changes in this proposed rule will further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries. We expect that these proposed changes would ensure that the outcomes of the prospective payment systems are reasonable and equitable, while avoiding or minimizing unintended adverse consequences.
Because this proposed rule contains a range of policies, we refer readers to the section of the proposed rule where each policy is discussed. These sections include the rationale for our decisions, including the need for the proposed policy.
The following quantitative analysis presents the projected effects of our proposed policy changes, as well as statutory changes effective for FY 2027, on various hospital groups. We estimate the effects of individual proposed policy changes by estimating payments per case, while holding all other payment policies constant. We use the best data available, but, generally, unless specifically indicated, we do not attempt to make adjustments for future changes in such variables as admissions, lengths of stay, case mix, changes to the Medicare population, or incentives. In addition, we discuss limitations of our analysis for specific proposed policies in the discussion of those policies as needed.
The prospective payment systems for hospital inpatient operating and capital related-costs of acute care hospitals encompass most general short-term, acute care hospitals that participate in the Medicare program. There were 26 Indian Health Service hospitals in our database, which we excluded from the analysis due to the special characteristics of the prospective payment methodology for these hospitals. Among other short term, acute care hospitals, hospitals in Maryland are paid in accordance with the AHEAD Model, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, 6 short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) receive payment for inpatient hospital services they furnish on the basis of reasonable costs, subject to a rate-of-increase ceiling.
As of March 2026, there were 3,013 IPPS acute care hospitals included in our analysis. This represents approximately 51 percent of all Medicare-participating hospitals. The majority of this impact analysis focuses on this set of hospitals. There also are approximately 1,385 CAHs. These small, limited-service hospitals are paid on the basis of reasonable costs, rather than under the IPPS. IPPS-excluded hospitals and units, which are paid under separate payment systems, include IPFs, IRFs, LTCHs, RNHCIs, children's hospitals, cancer hospitals, extended neoplastic disease care hospital, and short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. Changes in the prospective payment systems for IPFs and IRFs are made through separate rulemaking. Payment impacts of changes to the prospective payment systems for these IPPS-excluded hospitals and units are not included in this proposed rule. The impact of the proposed update and policy changes to the LTCH PPS for FY 2027 is discussed in section I.J. of this Appendix.
In this proposed rule, we are announcing proposed policy changes and payment rate updates for the IPPS for FY 2027 for operating costs of acute care hospitals and for uncompensated care payments. The proposed FY 2027 updates to the capital payments to acute care hospitals are discussed in section I.I. of this Appendix. A more detailed analysis of the proposed update to uncompensated care payments is discussed in section I.G.2 of this Appendix.
Based on the overall percentage change in payments per case estimated using our payment simulation model, we estimate that total FY 2027 operating
We have prepared separate impact analyses of the proposed changes on the operating and capital prospective payment systems. This section primarily deals with the proposed changes to the operating inpatient prospective payment system for acute care hospitals. Our payment simulation model relies on the best available claims data to enable us to estimate the impacts on payments per case of certain proposed changes in this proposed rule. However, there are other proposed changes for which we do not have data available that would allow us to estimate the payment impacts using this model. For those changes, we have attempted to predict the payment impacts based upon our experience and other more limited data.
The data used in developing the quantitative analyses of proposed changes in operating payments per case presented in this section are taken from the FY 2025 MedPAR file and the most current Provider-Specific File (PSF) that is used for payment purposes. Although the analyses of the proposed changes to the operating PPS do not incorporate cost data, data from the best available hospital cost reports were used to categorize hospitals. Our analysis has several qualifications. First, in this analysis, we do not generally adjust for future changes in such variables as admissions, lengths of stay, or underlying growth in real case-mix. Second, due to the interdependent nature of the IPPS payment components, it is very difficult to precisely quantify the impact associated with each change. Third, we use various data sources to categorize hospitals in the tables. In some cases, particularly the number of beds, there is a fair degree of variation in the data from the different sources. We have attempted to construct these variables with the best available source overall. However, for individual hospitals, some miscategorizations are possible.
Using cases from the FY 2025 MedPAR file, we simulate payments under the operating IPPS given various combinations of payment parameters. As described previously, Indian Health Service hospitals and hospitals in Maryland were excluded from the simulations. The impact of proposed payments under the capital IPPS, and the impact of proposed payments other than inpatient operating payments including uncompensated care payments are not analyzed in this section. Estimated payment impacts of the capital IPPS for FY 2027 are discussed in section I.I. of this Appendix.
We discuss the following proposed changes:
• The estimated effects of outlier payments returning to their targeted levels in FY 2027 as compared to the estimated outlier payments for FY 2026 produced from our payment simulation model.
• The effects of the application of the proposed applicable percentage increase of 2.4 percent (that is, a proposed 3.2 percent market basket rate-of-increase with a reduction of 0.8 percentage point for the proposed productivity adjustment), and the proposed applicable percentage increase (including the proposed market basket rate-of-increase and the proposed productivity adjustment) to the hospital-specific rates.
• The effects of the proposed changes to estimated uncompensated care payments in FY 2027 as compared to FY 2026.
• The effects of the expiration of the special payment status for MDHs beginning January 1, 2027 under current law.
• The effects of the proposed changes to the relative weights and MS-DRG GROUPER.
• The effects of the proposed changes in hospitals' wage index values due to the effects of the proposed incorporation of updated wage data from hospitals' cost reporting periods and the proposed changes in wage index reclassifications.
• The total estimated change in payments based on the proposed FY 2027 policies relative to payments based on FY 2026 policies.
To illustrate the impact of the proposed FY 2027 changes, our analysis begins with a FY 2026 baseline simulation model using: the FY 2026 national adjusted operating standardized amount; the FY 2026 MS-DRG GROUPER (Version 43); the FY 2026 CBSA designations for hospitals based on the OMB definitions from the 2020 Census; the FY 2026 wage index, including the FY 2026 labor and nonlabor share percentages; FY 2026 uncompensated care payments; and FY 2026 outlier payments which reflects our estimate of 6.0 percent of total operating MS-DRG and outlier payments as produced by our payment simulation model based on FY 2025 MedPAR data.
Our comparison illustrates the proposed percent change in payments per case from FY 2026 to FY 2027. The update to the standardized amount is a significant factor in the percent change in payments per case. In accordance with section 1886(b)(3)(B)(i) of the Act, each year we update the national standardized amount for inpatient hospital operating costs by a factor called the “applicable percentage increase.” For FY 2027, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), there are four proposed possible applicable percentage increases that can be applied to the national standardized amount. We refer readers to section VI.B. of the preamble of this proposed rule for a complete discussion of the FY 2027 inpatient hospital update, including the four proposed possible applicable percentage increases. For purposes of the simulations shown later in this section, we modeled the proposed payment changes for FY 2027 using a reduced update for hospitals that (1) failed to submit quality data but are meaningful EHR users; (2) are identified as not meaningful EHR users that do submit quality data; and (3) are identified as not meaningful EHR users that do not submit quality data. The reduced updates used for these hospitals are discussed previously and in section VI.B. of the preamble of this proposed rule and these hospitals are identified in the impact file posted in conjunction with this proposed rule.
We note, section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase applicable to the hospital-specific rates for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Because the Act sets the update factor for SCHs and MDHs equal to the update factor for all other IPPS hospitals, the update to the hospital-specific rates for SCHs and MDHs is subject to the amendments to section 1886(b)(3)(B) of the Act for hospitals that fail to submit quality data or are not a meaningful EHR users. Accordingly, the proposed applicable percentage increases to the hospital-specific rates applicable to SCHs and MDHs for FY 2027 are the same as the four proposed applicable percentage increases discussed in section VI.B. of the preamble of this proposed rule.
Table I displays the results of our analysis of the proposed changes for FY 2027 on payments for IPPS operating costs and uncompensated care payments. The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals. The top row of the table shows the overall impact on the acute care hospitals included in the analysis.
The next two rows of Table I contain hospitals categorized according to their geographic location: urban and rural. The next two groupings are by bed-size categories, shown separately for urban and rural hospitals. The last groupings by geographic location are by census divisions, also shown separately for urban and rural hospitals.
The second part of Table I shows hospital groups based on hospitals' FY 2027 payment classifications, including any reclassifications under sections 1886(d)(8) and 1886(d)(10) of the Act. For example, the rows labeled urban and rural show that the numbers of hospitals paid based on these categorizations after consideration of geographic reclassifications (including reclassifications under section 1886(d)(8)(B) of the Act, also known as Lugar hospitals, and section 1886(d)(8)(E) of the Act as implemented at 42 CFR 412.103).
The next three groupings examine the impacts of the changes on hospitals grouped by whether or not they have GME residency programs (teaching hospitals that receive an IME adjustment) or receive Medicare DSH payments, or some combination of these two adjustments.
In the DSH categories, hospitals are grouped according to their DSH payment status, and whether they are considered urban or rural for DSH payment purposes. The next category groups together hospitals considered urban or rural, in terms of whether they receive the IME adjustment, the DSH adjustment, both, or neither.
The next six rows examine the impacts of the changes on rural hospitals by special payment groups (SCHs and MDHs) and reclassification status from urban to rural in accordance with section 1886(d)(8)(E) of the Act.
The next series of groupings are based on the type of ownership and the hospital's Medicare and Medicaid utilization expressed as a percent of total inpatient days. These data were taken from the most recent available Medicare cost reports.
The next grouping concerns the geographic reclassification status of hospitals. The first subgrouping is based on whether a hospital is reclassified or not. The second and third subgroupings are based on whether urban and rural hospitals were reclassified by the MGCRB for FY 2027 or not, respectively. The fourth subgrouping displays hospitals that reclassified from urban to rural in accordance with section 1886(d)(8)(E) of the Act as implemented at 42 CFR 412.103. The fifth subgrouping displays hospitals deemed urban in accordance with section 1886(d)(8)(B) of the Act, also known as Lugar hospitals.
This column reflects the effect of estimated outlier payments returning to their targeted levels in FY 2027 as compared to the estimated outlier payments for FY 2026 produced from our payment simulation model. As discussed in section II.A.4.i. of the Addendum to this proposed rule, the statute requires that outlier payments for any year are projected to be not less than 5 percent nor more than 6 percent of total operating DRG payments plus outlier payments, and also requires that the average standardized amount be reduced by a factor to account for the estimated proportion of total DRG payments made to outlier cases. We continue to use a 5.1 percent target (or an outlier offset factor of 0.949) in calculating the outlier offset to the standardized amount, just as we did for FY 2026. Therefore, our proposed estimate of payments per discharge for FY 2027 from our payment simulation model reflects this 5.1 percent outlier payment target. Our payment simulation model shows that estimated outlier payments for FY 2026 were greater than that target by approximately 0.9 percentage points.
Overall, hospitals will experience a 0.7 percent decrease in payments primarily due to the estimated -0.9 percent change in outlier payments produced by our payment simulation model when returning to the 5.1 percent outlier target for FY 2027 in combination with interactive effects among the various add-on payment factors.
As discussed in section VI.B. of the preamble of this proposed rule, this column includes the proposed hospital update, including the proposed 3.2 percent IPPS market basket rate-of-increase reduced by 0.8 percentage point for the proposed productivity adjustment. As a result, we are proposing to make a 2.4 percent update to the national standardized amount. This column also includes the proposed update to the hospital-specific rates which includes the proposed 3.2 percent market basket rate-of-increase reduced by 0.8 percentage point for the proposed productivity adjustment. As a result, we are proposing to make a 2.4 percent update to the hospital-specific rates. This column also includes any applicable adjustments for hospitals that fail to comply with the quality data submission requirements and/or are not meaningful EHR users.
Overall, hospitals are expected to experience a 2.2 percent increase in payments primarily due to the combined effects of the proposed hospital update to the national standardized amount and the proposed hospital update to the hospital-specific rates.
Column 3 shows our estimate of the changes in payments due to the expiration of MDH status, a nonbudget neutral payment provision. Section 6202 of the Consolidated Appropriations Act, 2026 further extended the MDH program through December 31, 2026. Therefore, under current law, the MDH program will expire for discharges on or after January 1, 2027. Hospitals that qualify to be MDHs receive the higher of payments made based on the Federal rate or the payments made based on the Federal rate amount plus 75 percent of the difference between payments based on the Federal rate and payments based on the hospital-specific rate (a hospital-specific cost-based rate). Because this provision is not budget neutral, the expiration of this payment provision is estimated to result in a 0.1 percent decrease in IPPS payments overall. There are currently 160 MDHs, of which we estimate 80 would be paid under the blended payment of the Federal rate and hospital-specific rate if the MDH program were not set to expire. Because those 80 MDHs will no longer receive the blended payment and will be paid only under the Federal rate beginning January 1, 2027, it is estimated that those hospitals would experience an overall decrease in payments of approximately $110 million (relative to the MDH program payments they received for FY 2026 discharges).
Column 4 shows the effects of the proposed changes in uncompensated care payments for eligible hospitals in FY 2027. As discussed in section IV.E. of the preamble of this proposed rule, the total proposed uncompensated care payments and proposed supplemental payments equal approximately $8.5 billion. Overall, hospitals would experience a 0.2 percent decrease in total operating IPPS payments relative to FY 2026 payments due to the proposed change in uncompensated care payments. For a more detailed impact analysis of the proposed changes to uncompensated care payments, we refer readers to section I.G.2 of appendix A to this proposed rule.
Column 5 shows the effects of the proposed changes to the MS-DRGs and relative weights with the application of the proposed recalibration budget neutrality factor to the standardized amounts. Section 1886(d)(4)(C)(i) of the Act requires us annually to make appropriate classification changes to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. Consistent with section 1886(d)(4)(C)(iii) of the Act, we calculated a proposed recalibration budget neutrality factor to account for the changes in MS-DRGs and relative weights to ensure that the overall payment impact is budget neutral. We also applied the permanent 10-percent cap on the reduction in a MS-DRG's relative weight in a given year and an associated recalibration cap budget neutrality factor to account for the 10-percent cap on relative weight reductions to ensure that the overall payment impact is budget neutral.
As discussed in section II.D. of the preamble of this proposed rule, for FY 2027, we calculated the proposed MS-DRG relative weights using the FY 2025 MedPAR data grouped to the proposed Version 44 (FY 2027) MS-DRGs. The proposed reclassification changes to the GROUPER are described in more detail in section II.C. of the preamble of this proposed rule.
The “All Hospitals” line in Column 5 indicates that changes due to the MS-DRGs and relative weights are expected to result in a 0.0 percent change in payments with the application of the recalibration budget neutrality factor (discussed in section II.A.4.a. of the Addendum to this proposed rule) and the recalibration cap budget neutrality factor to the standardized amount (discussed in section II.A.4.b. of the Addendum to this proposed rule).
Column 6 shows the impact of the proposed changes to hospitals' FY 2027 wage index as compared to hospitals' FY 2026 wage index. Overall, the FY 2027 wage index changes are expected to lead to a 0.1 percent decrease for all hospitals, as shown in Column 6. This change is a result of the proposed updates to the wage data reported by hospitals, changes in the geographic
Specifically, this column in Table I shows the combined effects of the application of the following proposed FY 2027 wage index changes relative to FY 2026:
Column 6 reflects the effects of the proposed updated wage data and the proposed labor and non-labor shares, with the application of the proposed wage index budget neutrality factor for FY 2027 relative to FY 2026.
Section 1886(d)(3)(E) of the Act requires that we annually update the wage data used to calculate the wage index. In accordance with this requirement, the proposed wage index for acute care hospitals for FY 2027 is based on data submitted for hospital cost reporting periods, beginning on or after October 1, 2022, and before October 1, 2023. Column 6 reflects the proposed percentage change in payments when going from a model using the FY 2026 wage index based on FY 2026 reclassifications and the FY 2026 labor-related share of 66.0 percent, to a model using the proposed FY 2027 wage index based on FY 2027 reclassifications (as described in further detail in the next section) and the proposed labor-related share of 66.0 percent, while holding other payment parameters, such as use of the proposed Version 44 MS-DRG GROUPER, constant.
In addition, the column incorporates the application of the proposed wage index budget neutrality to the national standardized amount. As discussed in section II.A.4.c. of the Addendum to this proposed rule, for FY 2027 we calculated the proposed wage index budget neutrality factor to ensure that payments under the proposed wage index calculated from the proposed updated wage data and the proposed labor-related share of 66.0 percent are budget neutral, without regard to the lower share of 62 percent applied to hospitals with a wage index less than or equal to 1.0. This proposed budget neutrality factor can be found in the summary table of the proposed FY 2027 budget neutrality factors in section II.A.4. of the Addendum to this proposed rule.
Column 6 reflects the impact of MGCRB reclassification decisions under section 1886(d)(10) of the Act, urban to rural reclassifications under section 1886(d)(8)(E) of the Act, and Lugar status redesignations under section 1886(d)(8)(B) of the Act on the proposed wage index for FY 2027 relative to FY 2026. The overall effect of geographic reclassification is required by section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, as discussed in section II.A.4.d. of the Addendum to this proposed rule, we apply a proposed reclassification budget neutrality adjustment to ensure that the effects of the reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are budget neutral. This proposed budget neutrality factor can be found in the summary table of the proposed FY 2027 budget neutrality factors in section II.A.4. of the Addendum to this proposed rule.
Table 2 listed in section VI. of the Addendum to this proposed rule and available on the CMS website reflects the reclassifications for FY 2027 at the time of development of this proposed rule. For further information on MGCRB reclassifications, urban to rural reclassifications and Lugar status redesignations, we refer readers to section III.E of the preamble of this proposed rule.
Column 6 reflects the effects of the application of the proposed rural floor and the application of the proposed rural floor budget neutrality on the proposed wage index for FY 2027 relative to FY 2026. As discussed in section III.F.1. of the preamble of this proposed rule, section 4410 of Public Law 105-33 established the rural floor by requiring that the wage index for a hospital in any urban area cannot be less than the wage index applicable to hospitals located in rural areas in the same state. We apply a uniform budget neutrality adjustment to the wage index as discussed in section II.A.4.e. of the Addendum to this proposed rule. All IPPS hospitals in our model have their wage indexes reduced by the proposed rural floor budget neutrality adjustment. This proposed budget neutrality factor can be found in the summary table of the FY 2027 budget neutrality factors in section II.A.4. of the Addendum to this proposed rule.
Lastly, this column also reflects the combined effects of the application of the following non-budget neutral provisions for FY 2027 relative to FY 2026: (a) the imputed floor under section 1886(d)(3)(E)(iv)(I) and (II) of the Act for certain all-urban States (as discussed in section III.F.2. of the preamble of this proposed rule); (b) the minimum post-reclassified wage index of 1.00 for all hospitals located in “frontier States” as required by section 1886(d)(3)(E)(iii) Act (as discussed in section III.F.3. of the preamble of this proposed rule); and (c) the effects of the proposed out-migration adjustment under section 1886(d)(13) of the Act (as discussed in section III.F.4. of the preamble of this proposed rule).
Column 7 shows our estimate of the proposed changes in payments per discharge from FY 2026 and FY 2027, resulting from all proposed changes for FY 2027 included in Table I. It includes the combined effects of the year-over-year change of the factors described in the previous columns in the table.
The proposed average increase in payments under the IPPS for all hospitals is approximately 1.2 percent for FY 2027 relative to FY 2026, which is primarily driven by the proposed changes reflected in Column 1 (proposed outlier payments), Column 2 (proposed hospital update) and Column 4 (proposed uncompensated care payments). As described in Column 2, the proposed annual hospital update for hospitals paid under the national standardized amount, combined with the proposed annual hospital update for hospitals paid under the hospital-specific rates are expected to result in a 2.2 percent increase in payments in FY 2027 relative to FY 2026 for all hospitals. As described in Column 4, proposed uncompensated care payments would result in a 0.2 percent decrease in payments in FY 2027 relative to FY 2026 for all hospitals.
Overall payments to hospitals paid under the IPPS are estimated to increase by 1.2 percent for FY 2027 (as compared to FY 2026) due to the proposed outlier
Table II displays the results of our analysis of the proposed changes for FY 2027 on estimated average payments per discharge for IPPS operating costs and uncompensated care payments. It presents the impact for the categories of hospitals shown in Table I. It compares the estimated average payments per discharge for FY 2026 with the estimated average payments per discharge for FY 2027, as calculated under our models. It reflects the combined effects of the proposed changes presented in Table I, and therefore the estimated percentage changes shown in the last column of Table II equal the estimated percentage changes in average payments per discharge from Column 7 of Table I.
In addition to those proposed policy changes discussed previously that we are able to model using our IPPS payment simulation model, we are proposing to make various other changes in this proposed rule. As noted in section I.D. of this Appendix, our payment simulation model uses the most recent available claims data to estimate the impacts on payments per case of certain proposed changes in this proposed rule. Generally, we have limited or no specific data available with which to estimate the impacts of these proposed changes using that payment simulation model. For these proposed changes, we have attempted to predict the payment impacts based upon our experience and other more limited data. Our estimates of the likely impacts associated with these other proposed changes are discussed in this section.
In section II.E.4. of the preamble of this proposed rule, we are proposing to continue to make new technology add-on payments for the technologies listed in the following table in FY 2027 because these technologies would still be considered new for purposes of new technology add-on payments. Under § 412.88(a)(2), the new technology add-on payment for each case would be limited to the lesser of: (1) 65 percent of the costs of the new technology (or 75 percent of the costs for technologies designated as Qualified Infectious Disease Products (QIDPs) or approved under the Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD) pathway, or for the gene therapies, Casgevy
In the following table are estimates for the 41 new technology add-on payments which we are proposing to continue in FY 2027:
In sections II.E.5. and 6. of the preamble to this proposed rule are 30 discussions of technologies with respect to add-on payments for new medical services and technologies for FY 2027. We note that of the 47 applications (32 alternative and 15 traditional) we received, 17 applicants (10 alternative and 7 traditional) either withdrew their applications or were not eligible for consideration for new technology add-on payment for FY 2027. As explained in the preamble to this proposed rule, add-on payments for new medical services and technologies under section 1886(d)(5)(K) of the Act are not required to be budget neutral.
As discussed in section II.E.6. of the preamble of this proposed rule, under the alternative pathway for new technology add-on payments, new technologies that are medical products with a QIDP designation, approved through the FDA LPAD pathway, or are designated under the Breakthrough Device program will be considered not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS, and will not need to demonstrate that the technology represents a substantial clinical improvement. These technologies must still be within the 2- to 3-year newness period, as discussed in section II.E.1.a.(1). of the preamble this proposed rule, and must also still meet the cost criterion.
As fully discussed in section II.E.6. of the preamble of this proposed rule, we are proposing to approve 22 new technology add-on payments for the alternative pathway applications submitted for FY 2027 new technology add-on payments.
Based on preliminary information from the applicants at the time of this proposed rule, we estimate that total payments for the technologies that applied under the alternative pathway, if approved, would be approximately $589 million for FY 2027. Because cost or volume information has not yet been provided for 1 of the 22 technologies under the alternative pathway, we have not included that technology in the estimate. We note that the estimated payments may be updated in the final rule based on revised or additional information CMS receives prior to the final rule.
We have not yet determined whether any of the technologies discussed in section II.E.5. of the preamble of this proposed rule will meet the criteria for new technology add-on payments for FY 2027 under the traditional pathway. Consequently, it is premature to estimate the potential payment impact of these technologies for any potential new technology add-on payments for FY 2027. We note that, as in past years, if any of the technologies that applied under the traditional pathway are found to be eligible for new technology add-on payments for FY 2027, we would discuss the estimated payment impact for FY 2027 in the FY 2027 IPPS/LTCH PPS final rule.
As discussed in section V.E. of the preamble of this proposed rule, under section 3133 of the Affordable Care Act, hospitals that are eligible to receive Medicare DSH payments will receive 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments under section 1886(d)(5)(F) of the Act. The remainder, equal to an estimate of 75 percent of what formerly would have been paid as Medicare DSH payments (Factor 1), reduced to reflect changes in the percentage of uninsured individuals (Factor 2), is available to make additional payments to each hospital that qualifies for Medicare DSH payments and that has reported uncompensated care. Each hospital that is eligible for Medicare DSH payments will receive an additional payment based on its estimated share of the total amount of uncompensated care for all hospitals eligible for Medicare DSH payments. The uncompensated care payment methodology has redistributive effects based on the proportion of a hospital's amount of uncompensated care relative to the aggregate amount of uncompensated care of all hospitals eligible for Medicare DSH payments (Factor 3). The change to Medicare DSH payments under section 3133 of the Affordable Care Act is not budget neutral.
In this proposed rule, we are proposing to establish the amount to be distributed as uncompensated care payments (UCP) to DSH-eligible hospitals for FY 2027, which is $7,460,212,500. This figure represents 75 percent of the amount that otherwise would have been paid for Medicare DSH payment adjustments adjusted by a Factor 2 of 65.00 percent. For FY 2026, the amount available to be distributed for uncompensated care was $7,713,127,500, or 75 percent of the amount that otherwise would have been paid for Medicare DSH payment adjustments adjusted by a Factor 2 of 62.14 percent. In addition, eligible IHS/Tribal hospitals and hospitals located in Puerto Rico are estimated to receive approximately $102,768,418.04 in supplemental payments in FY 2027, based on the difference between each hospital's base year amount (that is, each hospital's FY 2022 UCP adjusted by 1 plus the percent change in the aggregate amount of uncompensated care payments between FYs 2022 and 2027) and its FY 2027 UCP.
To estimate the impact of the combined effect of the proposed changes in Factors 1 and 2, as well as the changes to the data used in determining Factor 3, on the calculation of Medicare UCP along with changes to supplemental payments for IHS/Tribal hospitals and hospitals located in Puerto Rico, we compared total UCP and supplemental payments estimated in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36536) to the combined total of the proposed UCP and the proposed supplemental payments estimated in this FY 2027 IPPS/LTCH PPS proposed rule. For FY 2026, we calculated 75 percent of the estimated amount that would be paid as Medicare DSH payments absent section 3133 of the Affordable Care Act, adjusted by a Factor 2 of 62.14 percent and multiplied by a Factor 3 calculated using the methodology described in the FY 2026 IPPS/LTCH PPS final rule. For FY 2027, we calculated 75 percent of the estimated amount that would be paid as Medicare DSH payments during FY 2026 absent section 3133 of the Affordable Care Act, adjusted by a proposed Factor 2 of 65.00 percent and multiplied by a Factor 3 calculated using the methodology described
Our analysis included 2,318 hospitals that are projected to be DSH-eligible in FY 2027. Our analysis did not include hospitals that had terminated their participation in the Medicare program as of February 3, 2026, Maryland hospitals, new hospitals, and SCHs that are expected to be paid based on their hospital-specific rates. The 22 hospitals that are anticipated to be participating in the Rural Community Hospital Demonstration Program were also excluded from this analysis, as participating hospitals are not eligible to receive empirically justified Medicare DSH payments and UCP. In addition, the data from merged or acquired hospitals were combined under the surviving hospital's CMS certification number (CCN), and the non-surviving CCN was excluded from the analysis. The estimated impact of the proposed changes in Factors 1, 2, and 3 on UCP and supplemental payments for eligible IHS/Tribal hospitals and Puerto Rico hospitals across all hospitals projected to be DSH-eligible in FY 2027, by hospital characteristic, is presented in the following table:
The changes in projected FY 2027 UCP and supplemental payments compared to the total of UCP and supplemental payments in FY 2026 are driven by a decrease in Factor 1 and a slight increase in Factor 2. Proposed Factor 1 has decreased slightly from the FY 2026 final rule's Factor 1 of $12.412 billion to this proposed rule's Factor 1 of $11.477 billion. Proposed Factor 2 has increased from the FY 2026 final rule's Factor 2 of 62.14 percent to this proposed rule's Factor 2 of 65.00 percent. In addition, we note that there is a slight decrease in the number of projected DSH-eligible hospitals to 2,318 at the time of the development of this proposed rule compared to the 2,364 DSHs at the time of development of the FY 2026 IPPS/LTCH PPS final rule (90 FR 36536). Based on the changes, the impact analysis found that, across all projected DSH-eligible hospitals, proposed FY 2027 UCP and proposed supplemental payments are estimated at approximately $7.563 billion, or a decrease of approximately 3.3 percent from FY 2026 UCP and supplemental payments (approximately $7.821 billion). While the changes would result in a net decrease in the proposed total amount available to be distributed in UCP and supplemental payments, the projected payment changes vary by hospital type. This redistribution of payments is caused by changes in Factor 3 and the amount of the supplemental payment for DSH-eligible IHS/Tribal hospitals and Puerto Rico hospitals. As seen in the previous table, a percent change greater than -3.3 percent indicates that hospitals within the specified category are projected to experience a smaller decrease in payments, on average, compared to the universe of projected FY 2026 DSH-eligible hospitals. Conversely, a percentage change less than -3.3 percent indicates that a hospital type is projected to have a larger decrease compared to the overall average. The variation in the distribution of overall payments by hospital characteristic is largely dependent on a given hospital's uncompensated care costs as reported on the Worksheet S-10 and used in the Factor 3 computation and whether the hospital is eligible to receive the supplemental payment.
Rural hospitals, in general, are projected to experience a larger change in UCP compared to the decrease their urban counterparts are projected to experience. Overall, rural hospitals are projected to receive a -8.5 percent change in payments, while urban hospitals are projected to receive a -3.0 percent change in payments, which is slightly above the overall hospital average.
By bed size, rural hospitals with 0 to 99 beds, 100 to 249 beds, and 250+ beds are projected to have percent change of approximately -8.5 percent, -7.9 percent, and -10.8 percent, respectively. Among urban hospitals, the largest urban hospitals, those with 250+ beds, are projected to receive a decrease in payments (-2.5 percent). In contrast, smaller urban hospitals with 0-99 beds and 100-249 beds are projected to receive percent change in payments of -7.7 and -3.9 percent, respectively.
By region, rural hospitals are projected to receive a varied range of payment changes. Rural hospitals in New England are projected to receive an increase in payments and those in the Middle Atlantic region are projected to receive smaller than average decreases in payments. However, rural hospitals in all other regions including the Pacific, South Atlantic, East North Central, East South Central, West North Central, West South Central, and Mountain regions are projected to receive larger than average decreases in payments. Similarly, urban hospitals are projected to receive a varied range of payment changes. Urban hospitals in the Middle Atlantic and Mountain regions are projected to receive an increase in payments, and those in the New England, West North Central, and West South Central regions are projected to receive smaller than average decreases in payments. However, urban hospitals in South Atlantic, East North Central, East South Central, Pacific regions, and Puerto Rico are projected to receive larger than average decreases in payments.
By payment classification, hospitals in urban payment areas overall are expected to receive a smaller than average change in UCP and supplemental payments of -2.6 percent. Hospitals in large urban payment areas are projected to receive a smaller than average change in payments (-1.8 percent), while other urban payment areas are projected to receive a larger than average change in payments of -3.8 percent. Hospitals in rural payment areas are projected to receive a larger than average change in payments of -3.8 percent.
Nonteaching hospitals and teaching hospitals with fewer than 100 residents are projected to receive average payment changes of -4.8 percent and -4.4 percent, respectively. Teaching hospitals with 100+ residents are projected to receive an average payment change of -1.6 percent. Voluntary hospitals and proprietary hospitals are projected to receive average changes of -3.7 percent and -5.6 percent, respectively, while government-owned hospitals are expected to receive a smaller than average payment change of -1.4 percent. Hospitals with less than 25 percent Medicare utilization are projected to receive an average change of -2.5 percent, while hospitals with Medicare utilization between 25-50 percent and 50-65 percent are projected to receive average payment changes of -6.8 percent and -7.8 percent, respectively. (Medicare utilization refers to a hospital's Medicare days divided by a hospital's total inpatient days.) We note that there is one hospital with greater than 65 percent Medicare utilization that did not have UCP in FY 2026 and is projected to have no UCP in FY 2027. Thus, there is a zero percent change in payments for this hospital. Hospitals with 25-50 percent Medicaid utilization, those with 50-65 percent Medicaid utilization, and those with greater than 65 percent Medicaid utilization are projected to receive smaller than average changes in payments of -2.5 percent, -0.5 percent and 0.8 percent, respectively. Hospitals with less than 25 percent Medicaid utilization are projected to receive an average change of -4.7 percent. (Medicaid utilization refers to a hospital's Medicaid days divided by a hospital's total inpatient days.)
The impact table reflects the proposed FY 2027 UCP and proposed supplemental payments for IHS/Tribal and Puerto Rico hospitals. We note that the proposed supplemental payments to IHS/Tribal hospitals and Puerto Rico hospitals are estimated to be approximately $102.8 million in FY 2027.
In section V.D. of the preamble of this proposed rule, we discuss the extension of the temporary changes to the low-volume hospital payment policy originally provided for by the Affordable Care Act and extended by subsequent legislation. Specifically, section 6201 of the Consolidated Appropriations Act, 2026 further extended the modified definition of low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals under section 1886(d)(12) through December 31, 2026.
Beginning January 1, 2027, the low-volume hospital qualifying criteria and payment adjustment will revert to the statutory requirements that were in effect prior to FY 2011, and the preexisting low-volume hospital payment adjustment methodology and qualifying criteria, as implemented in FY 2005, will resume. Therefore, absent further Congressional action, effective for the portion of FY 2027 occurring on or after January 1, 2027, FY 2028 and subsequent years, in order to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 discharges total, including both Medicare and non-Medicare discharges) during the fiscal year.
Using the same methodology used in developing the quantitative analyses of changes in payments per case discussed previously in section I.G. of Appendix A of this proposed rule, based upon the best available data at this time, we estimate the expiration of the temporary changes to the low-volume hospital payment policy effective for discharges occurring on or after January 1, 2027, and subsequent years would decrease aggregate low-volume hospital payments by $258 million in FY 2027 as compared to FY 2026. This payment estimate was determined based on the estimated payments for the approximately 589 providers that are expected to no longer qualify under the criteria that are effective beginning on January 1, 2027.
Of those 589 hospitals, currently approximately 90 hospitals have a low-volume hospital payment adjustment based on 500 or fewer total discharges, while the remaining approximately 499 hospitals have an adjustment based on having between 500 and 3,800 total discharges. Approximately 55 of the 589 hospitals that currently qualify for a low-volume hospital payment adjustment in FY 2026 have 200 or fewer total discharges. However, the distance information needed to project whether those hospitals are more than 25 road miles from another subsection (d) hospital (instead of 15 road miles), and therefore would continue to qualify for a low-volume hospital payment adjustment for FY 2027, is evaluated by each hospitals' MAC. Therefore, we are unable to estimate how many of these 55 hospitals would continue to qualify for the low-volume hospital payment adjustment for FY 2027.
In section V.F.2. of the preamble of this proposed rule, we discuss our proposal to require that, in addition to meeting other applicable requirements, an approved medical residency training program must not discriminate, or promote or encourage discrimination, on the basis of race, color, national origin, sex, age, disability, or religion, including the use of those characteristics or intentional proxies for those characteristics as a selection criterion for employment, program participation, resource allocation, or similar activities, opportunities, or benefits. In section V.G.3. of the preamble of this proposed rule, we discuss similar proposals with respect to approved nursing and allied health education programs and accreditors. The effective date of these policies
In section V.G.4. of this proposed rule, we discuss our proposal to revise the regulations at 42 CFR 413.85(d)(2) to state that tuition and other revenue must be subtracted from the allowable direct costs of a hospital's NAH education programs prior to the allocation of indirect costs. This proposal stems from an adverse ruling by the U.S. District Court for the District of Columbia in
In section V.I. of the preamble of this proposed rule, we are proposing to add sepsis as an applicable condition beginning with the FY 2029 program year; the remaining policies finalized in FY 2026 IPPS/LTCH PPS final rule (90 FR 36923) continue to apply. As finalized in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36923 through 36929), we will integrate Medicare Advantage beneficiaries into the cohorts of the Hospital Readmissions Reduction Program measure set and reduce the applicable period from 3 years to 2 years beginning with the FY 2027 program year.
In section V.I.2.b. of the preamble of this proposed rule, we discuss our proposal to adopt the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure beginning with the FY 2029 program year. While we state in section XII.B.1. of the preamble of this proposed rule that adopting this measure would not result in any change in information collection burden, we acknowledge that hospitals not currently providing the types of discharge planning and care coordination services that would be expected to minimize readmissions may incur other financial impacts such as updating policies and procedures, increased governance and oversight, and staff training in order to do so. We also recognize that most hospitals have already established standard evidence-based sepsis protocols as part of their existing quality improvement and patient safety frameworks. As such, hospitals are generally well-positioned with respect to the acute clinical management of sepsis, and the additional burden associated with this proposal is more likely to center on post-discharge care coordination and transition planning rather than inpatient sepsis treatment protocols. However, because each hospital is unique and we lack insight into what services each may already offer or would elect to offer if this proposal is finalized, we are unable to estimate the costs associated with these impacts. We request public comment on financial impacts related to post-discharge coordination, transition planning, or other areas associated with the acute clinical management of sepsis that hospitals may incur if this proposal is finalized.
The Hospital Readmissions Reduction Program requires a reduction to a hospital's base operating diagnosis-related group (DRG) payments to account for excess readmissions of selected applicable conditions and procedures. The table and analysis in this section illustrate the estimated financial impact of the Hospital Readmissions Reduction Program payment adjustment methodology by hospital characteristic. Hospitals are sorted into quintiles based on the proportion of dual-eligible stays among Medicare Fee-For-Service and managed care (that is, Medicare Advantage) stays between July 1, 2021, and June 30, 2023. Hospitals' excess readmission ratios (ERRs)—based on the data used to calculate preliminary Medicare Advantage and Medicare Fee-for-Service readmission measure results from January 1, 2022, through December 31, 2023—are assessed relative to their peer group median. A neutrality modifier is applied in the payment adjustment factor calculation to maintain budget neutrality. In the FY 2027 IPPS/LTCH PPS final rule, we will provide an updated estimate of the financial impact using the proportion of dually-eligible beneficiaries, ERRs, and aggregate payments for each condition/procedure and all discharges for applicable hospitals from the FY 2027 Hospital Readmissions Reduction Program applicable period (that is, July 1, 2023, through June 30, 2025).
The results in Table I.G.6.-01 include 2,832 non-Maryland hospitals estimated as eligible to receive a penalty during the performance period. Hospitals are eligible to receive a penalty if they have 25 or more eligible discharges for at least one measure between January 1, 2022, and December 31, 2023. The third column in Table I.G.6.-01 indicates the total number of non-Maryland hospitals with available data for each characteristic that have an estimated payment adjustment factor less than 1 (that is, penalized hospitals).
The fourth column in Table I.G.6.-01 indicates the estimated percentage of penalized hospitals among those eligible to receive a penalty by hospital characteristic. For example, 78.64 percent of eligible hospitals characterized as non-teaching hospitals are expected to be penalized. Among teaching hospitals, 87.93 percent of eligible hospitals with fewer than 100 residents and 93.90 percent of eligible hospitals with 100 or more residents are expected to be penalized. The fifth column in Table I.G.6.-01 estimates the financial impact on hospitals by hospital characteristic. Table I.G.6.-01 also shows the share of penalties as a percentage of all base operating DRG payments for hospitals with each characteristic. This is calculated as the sum of penalties for all hospitals with that characteristic over the sum of all base operating DRG payments for those hospitals between October 1, 2022, through September 30, 2023 (FY 2023). For example, the penalty as a share of payments for non-teaching hospitals is 0.51 percent. This means that total penalties for all non-teaching hospitals are 0.51 percent of total payments for non-teaching hospitals. Measuring the financial impact on hospitals as a percentage of total base operating DRG payments accounts for differences in the amount of base operating DRG payments for hospitals with the characteristic when comparing the financial impact of the program on different groups of hospitals.
The Secretary makes value-based incentive payments to hospitals under the Hospital Value-Based Purchasing Program based on their performance on measures during the performance period with respect to a fiscal year. These incentive payments will be funded for FY 2027 through a reduction to the FY 2027 base operating DRG payment amount for hospital discharges for such fiscal year, as required by section 1886(o)(7)(B) of the Act. The applicable percentage for FY 2027 and subsequent years is 2 percent. The total amount available for value-based incentive payments must be equal to the total amount of reduced payments for all hospitals for the fiscal year, as estimated by the Secretary. In section V.J.1.b. of the preamble of this proposed rule, we estimate the available pool of funds for value-based incentive payments in the FY 2027 program year, which, in accordance with section 1886(o)(7)(C)(v) of the Act, will be 2.00 percent of base operating DRG payments, or a total of approximately $1.9 billion. This estimated available pool for FY 2027 is based on the historical pool of hospitals that were eligible to participate in the FY 2026 program year and the payment information from the December 2025 update to the FY 2025 MedPAR file.
The proposed estimated impacts of the FY 2027 program year by hospital characteristic, found in Table I.G.8.-01, are based on historical TPSs. We used the FY 2026 program year's TPSs to calculate the proxy adjustment factors used for this impact analysis. These are the most recently available scores that hospitals were given an opportunity to review and correct. The proxy adjustment factors use estimated annual base operating DRG payment amounts derived from the December 2025 update to the FY 2025 MedPAR file. The proxy adjustment factors can be found in Table 16 associated with this proposed rule (available via the internet on the CMS website).
The proposed estimated impact analysis shows that, for the FY 2027 program year, the number of hospitals with a positive percent change in base operating DRG (51.5 percent) is higher than the number of hospitals with a negative percent change (48.5 percent). Approximately half of all hospitals experience a percent change in base operating DRG between -2.1 percent and 0.0 percent. On average, both urban hospitals in the West North Central region and rural hospitals in the Pacific region have the highest positive percent change in base operating DRG. Urban hospitals in the Middle Atlantic, South Atlantic, and East South Central regions experience an average negative percent change in base operating DRG. All other regions (both urban and rural) experience an average positive percent change in base operating DRG. Hospitals in higher MCR percent categories have higher average net percentage payment increases compared to hospitals with lower MCR percent. Hospitals in higher DSH percent categories (50-64 and 65 and over) have negative average net percentage payment, compared to hospitals in the lower DSH categories. On average, non-teaching hospitals have a higher percent change in base operating DRG compared to teaching hospitals.
The actual FY 2027 program year's TPSs will not be reviewed and corrected by hospitals until after the FY 2027 IPPS/LTCH PPS final rule has published. Therefore, the same historical universe of eligible hospitals and corresponding TPSs from the FY 2026 program year would be used for the updated impact analysis in the final rule, if the proposals, as previously described, for FY 2027 are not finalized.
We present the estimated impact of the FY 2027 Hospital-Acquired Condition (HAC) Reduction Program on hospitals by hospital characteristic based on previously adopted policies for the program. We are not proposing to add or remove any measures from the HAC Reduction Program in this proposed rule, nor are we proposing any changes to reporting or submission requirements. Table I.G.8.-01 in this
Table I.G.8.-01 includes 2,891 non-Maryland hospitals with an estimated FY 2027 Total HAC Score based on the most recently available data at the time of publication of this proposed rule. Maryland hospitals and hospitals without a Total HAC Score are excluded from the table. Actual results for FY 2027 will be determined in the fall of 2026 after a 30-day review and corrections period for hospitals to review their program results. The first column presents a breakdown of each characteristic and the second column indicates the number of hospitals for the respective characteristic.
The third column in Table I.G.8.-01 indicates the estimated number of hospitals for each characteristic that would be in the worst-performing quartile of Total HAC Scores. For example, with regard to teaching status, 401 hospitals out of 1,620 hospitals characterized as non-teaching hospitals would be subject to a payment reduction. Among teaching hospitals, 210 out of 959 hospitals with fewer than 100 residents and 100 out of 295 hospitals with 100 or more residents would be subject to a payment reduction.
The fourth column in Table I.G.8.-01 indicates the estimated proportion of hospitals for each characteristic that would be in the worst performing quartile of Total HAC Scores and thus receive a payment reduction under the FY 2027 HAC Reduction Program. For example, 24.8 percent of the 1,620 hospitals characterized as non-teaching hospitals, 21.9 percent of the 959 teaching hospitals with fewer than 100 residents, and 33.9 percent of the 295 teaching hospitals with 100 or more residents would be subject to a payment reduction.
In section V.L.2 of the preamble of this proposed rule for FY 2027, we discussed our general budget neutrality methodology for section 410A of Public Law 108173, as amended by sections 3123 and 10313 of Public Law 111-148, by section 15003 of Public Law 114-255, and most recently, by section 128 of Public Law 116-260, which requires the Secretary to conduct a demonstration that would modify payments for inpatient services for up to 30 rural hospitals.
Section 128 of Public Law 116-260 requires the Secretary to conduct the Rural Community Hospital Demonstration for a 15-year extension period (that is, for an additional 5 years beyond the previous extension period). In addition, the statute provides for continued participation for all hospitals participating in the demonstration program as of December 30, 2019.
Section 410A(c)(2) of Public Law 108-173, as amended, requires that in conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented (budget neutrality). To ensure budget neutrality, we propose to continue with the general methodology used in previous years, whereby we estimated the additional payments made by the program for each of the participating hospitals as a result of the demonstration and then adjusted the national IPPS rates by an amount sufficient to account for the added costs of this demonstration. This proposed methodology applies budget neutrality across the payment system as a whole rather than across the participants of this demonstration. The language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language requires that aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration was not implemented but does not identify the range across which aggregate payments must be held equal.
For this proposed rule, we are not yet able to finalize the estimated FY 2027 costs of the demonstration at this time, based on available “as submitted” cost reports to apply the budget neutrality offset to the national IPPS rates as we have done in previous years.
In previous years, we have also incorporated a second component into the budget neutrality offset amounts identified in the IPPS/LTCH PPS final rules. As finalized cost reports became available, we determined the amount by which the actual costs of the demonstration for an earlier given year differed from the estimated costs for the demonstration set forth in the IPPS/LTCH PPS final rule for the corresponding fiscal year, and we incorporated that amount into the budget neutrality offset amount for the upcoming fiscal year. We have calculated this difference for FYs 2018 through 2020 between the actual costs of the demonstration as determined from finalized cost reports once available, and estimated costs of the demonstration as identified in the applicable IPPS/LTCH PPS final rules for these years.
With the extension of the demonstration for another 5-year period, as authorized by section 128 of Public Law 116-260, we propose to continue with this general procedure. As stated, for the FY2027 proposed rule, we are not yet able to finalize the estimated the FY 2027 costs of the demonstration. Therefore, we are not proposing to apply a budget neutrality offset for the FY 2027 IPPS/LTCH PPS proposed rule. Instead, we are proposing to apply both the FY 2027 and FY 2028 estimated costs of the demonstration into the budget neutrality offset to national IPPS rates in the FY 2028 IPPS/LTCH PPS proposed rule. Consistent with our methods in previous years, these estimates will also include the difference between estimated costs and actual costs for the demonstration for FY 2021 and FY 2022 in the budget offset amount. We invite public comments.
In section VII.C.2 of the preamble of this proposed rule we discuss the implementation of the FCHIP Demonstration, which was authorized under section 123 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275), as amended by section 3126 of the Affordable Care Act of 2010 (Pub. L. 114-158), and most recently re-authorized and extended by the Consolidated Appropriations Act of 2021 (Pub. L. 116-260). The legislation authorized a demonstration project to allow eligible entities to develop and test new models for the delivery of health care in order to improve access to and better integrate the delivery of acute care, extended care and other health care services to Medicare beneficiaries in certain rural areas. The FCHIP demonstration initial period was conducted in 10 critical access hospitals (CAHs) from August 1, 2016, to July 31, 2019, and the demonstration “extension period” began on January 1, 2022, to run through June 30, 2027. Section 123(g)(1)(B) of Public Law 110-275 required that the demonstration be budget neutral. Specifically, this provision stated that, in conducting the demonstration project, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary estimates would have been paid if the demonstration project under the section were not implemented. Budget neutrality estimates for the demonstration described in the preamble of this proposed rule are based on the demonstration extension period.
As described in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36971 through 36975), CMS waived certain Medicare rules for CAHs participating in the demonstration extension period to allow for alternative reasonable cost-based payment methods in the three distinct intervention service areas: telehealth services, ambulance services, and skilled nursing facility/nursing facility services. These waivers were implemented with the goal of increasing access to care with no net increase in costs. As we explained in the FY 2026
As explained in the FY 2026 IPPS/LTCH PPS final rule, we based our selection of CAHs for participation in the demonstration with the goal of maintaining the budget neutrality of the demonstration on its own terms meaning that the demonstration would produce savings from reduced transfers and admissions to other health care providers, offsetting any increase in Medicare payments as a result of the demonstration. However, because of the small size of the demonstration and uncertainty associated with the projected Medicare utilization and costs, the policy we finalized for the demonstration extension period of performance in the FY 2026 IPPS/LTCH PPS final rule provides a contingency plan to ensure that the budget neutrality requirement in section 123 of Public Law 110-275 is met.
In the FY 2026 IPPS/LTCH PPS final rule, we adopted the same budget neutrality policy contingency plan used during the demonstration initial period to ensure that the budget neutrality requirement in section 123 of Public Law 110-275 is met during the demonstration extension period. If analysis of claims data for Medicare beneficiaries receiving services at each of the participating CAHs, as well as from other data sources, including cost reports for the participating CAHs, shows that increases in Medicare payments under the demonstration during the 5-year extension period is not sufficiently offset by reductions elsewhere, we will recoup the additional expenditures attributable to the demonstration through a reduction in payments to all CAHs nationwide.
As explained in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36971 through 36975), because of the small scale of the demonstration, we indicated that we did not believe it would be feasible to implement budget neutrality for the demonstration extension period by reducing payments to only the participating CAHs. Therefore, in the event that this demonstration extension period is found to result in aggregate payments in excess of the amount that would have been paid if this demonstration extension period were not implemented, CMS policy is to comply with the budget neutrality requirement finalized in the FY 2026 IPPS/LTCH PPS final rule, by reducing payments to all CAHs, not just those participating in the demonstration extension period.
In the FY 2026 IPPS/LTCH PPS final rule, we stated that we believe it is appropriate to make any payment reductions across all CAHs because the FCHIP Demonstration was specifically designed to test innovations that affect delivery of services by the CAH provider category. As we explained in the FY 2026 IPPS/LTCH PPS final rule, we believe that the language of the statutory budget neutrality requirement at section 123(g)(1)(B) of Public Law 110-275 permits the agency to implement the budget neutrality provision in this manner. The statutory language merely refers to ensuring that aggregate payments made by the Secretary do not exceed the amount which the Secretary estimates would have been paid if the demonstration project was not implemented and does not identify the range across which aggregate payments must be held equal.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 45328), CMS concluded that the initial period of the FCHIP Demonstration had satisfied the budget neutrality requirement described in section 123(g)(1)(B) of Public Law 110-275. Therefore, CMS did not apply a budget neutrality payment offset policy for the initial period of the demonstration. As explained in the FY 2022 IPPS/LTCH PPS final rule, we finalized a policy to address the demonstration budget neutrality methodology and analytical approach for the initial period of the demonstration. In the FY 2026 IPPS/LTCH PPS final rule, we finalized a policy to adopt the same budget neutrality methodology and analytical approach used during the demonstration initial period to be used for the demonstration extension period. As stated in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36971 through 36975), our policy for implementing the 5-year extension period for section 129 of Public Law 116-260 follows same budget neutrality methodology and analytical approach as the demonstration initial period methodology. While we expect to use the same methodology that was used to assess the budget neutrality of the FCHIP Demonstration during the initial period of the demonstration to assess the financial impact of the demonstration during this extension period, upon receiving data for the extension period, we may update and/or modify the FCHIP budget neutrality methodology and analytical approach to ensure that the full impact of the demonstration is appropriately captured. Therefore, we are not proposing to apply a budget neutrality payment offset to payments to CAHs in FY 2027. This policy will have no impact for any national payment system for FY 2027.
In section X.A. of the preamble of this proposed rule, we discuss testing the mandatory episode-based payment model titled the Transforming Episode Accountability Model (TEAM) under the authority of the CMS Center for Medicare and Medicaid Innovation (CMS Innovation Center). Section 1115A of the Act authorizes the CMS Innovation Center to test innovative payment and service delivery models that preserve or enhance the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program beneficiaries while reducing program expenditures. The intent of TEAM is to improve beneficiary care through financial accountability for episode categories that begin with one of the following procedures: coronary artery bypass graft, lower extremity joint replacement, major bowel procedure, surgical hip/femur fracture treatment, and spinal fusion. TEAM will test whether financial accountability for these episode categories reduces Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries. We anticipate that TEAM will benefit Medicare beneficiaries through improving the coordination of items and services paid for through Medicare fee-for-service (FFS) payments, encouraging provider investment in health care infrastructure and redesigned care processes, and incentivizing higher value care across the inpatient and post-acute care settings for the episode.
As finalized in the FY 2025 IPPS/LTCH PPS final rule (89 FR 68986), with subsequent updates made in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36536), TEAM is mandatory for acute care hospitals located within mandatory CBSAs and includes acute care hospitals that were eligible for voluntary opt-in participation.
Under TEAM, TEAM participants continue to bill Medicare under the traditional FFS system for items and services furnished to Medicare FFS beneficiaries. The TEAM participant may receive a reconciliation payment from CMS if Medicare FFS expenditures for a performance year are less than the reconciliation target price, subject to a quality adjustment. TEAM does not have downside risk for Track 1, meaning TEAM participants will only be accountable for performance year spending below their reconciliation target price, subject to a quality adjustment, that would result in a reconciliation payment amount. For Track 2 and Track 3, TEAM will be a two-sided risk model that requires TEAM participants to be accountable for performance year spending above or below their reconciliation target price, subject to a quality adjustment, that would result in a reconciliation payment amount or a repayment amount.
TEAM is a mandatory episode-based payment model which will have a direct effect on the Medicare program because TEAM participants are incentivized to reduce Medicare spending. Additionally, TEAM participants could receive a reconciliation payment amount from CMS or have to pay CMS a repayment amount based on their spending and quality performance. In the FY 2026 IPPS/LTCH PPS final rule (90 FR 37271), we estimated and projected financial impacts of TEAM over the course of the five-year model test. We estimated that on net, that CMS will pay TEAM participants $381 million and TEAM participants will pay CMS $469 million, and that TEAM will save the Medicare program approximately $368 million over the 5 performance years (2026 through 2030).
In this proposed rule, we are proposing several policies and soliciting comments on two Requests for Information (RFIs). We believe the policies that are being proposed would not have a material impact on the Medicare savings estimate. For example, we anticipate that our proposal to include the updated spinal fusion MS-DRGs would help maintain episode volume and spending, and we do not anticipate that updating the quality measure time periods would have a significant effect on Medicare spending or savings. Additionally, the proposals that affect the pricing methodology, such as changes to the construction of the normalization factor and adding update factors to capture current payment system changes, aim to improve the accuracy of target prices but we do not anticipate they would result in dramatic shifts to the Medicare savings estimate. We note that certain policy considerations in the RFIs, such as allowing additional voluntary participation for certain hospitals or adding ASC episodes to TEAM would impact the Medicare savings estimate. Generally, Medicare savings estimates are based on the proposed policies to reflect the potential financial implications of the proposals and are not generally updated based on policies from RFIs. Therefore, TEAM's financial impact to the Medicare program remains unchanged from the FY 2026 IPPS/LTCH PPS final rule.
We believe the refinements to TEAM proposed in this proposed rule would not materially alter the potential effects of the model on beneficiaries that we had initially indicated in the FY 2025 IPPS/LTCH PPS final rule (89 FR 70028). We believe the majority of the changes would not alter the effects of the model on beneficiaries because the changes predominantly alter how hospitals interact with the model, rather than how beneficiaries receive care. However, we believe any changes proposed that may have a direct effect on TEAM beneficiaries are positive. In section X.A.2.a.(2) of the preamble of this proposed rule, we proposed the policy to include new spinal fusion episode categories MS-DRGs with the belief that doing so would continue to capture Medicare beneficiaries in TEAM so they could benefit from improved care transitions and quality of care.
We welcome public comments on the impact of TEAM on Medicare beneficiaries.
In section X.C. of this proposed rule, we are proposing to expand the CJR Model, with the expanded model referred to as CJR-X. CJR-X would be a mandatory episode-based payment model under the authority of the Center for Medicare and Medicaid Innovation (Innovation Center). Section 1115A of the Act authorizes the Innovation Center to test innovative payment and service delivery models that preserve or enhance the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program beneficiaries while reducing program expenditures. We believe the CJR-X model would further the mission of the Innovation Center to pay for value rather than for volume because it holds CJR-X participants accountable for the cost and quality of care for Medicare beneficiaries during a lower extremity joint replacement (LEJR) episode and promotes alignment across all health care providers and suppliers during the episode of care. In the CJR-X model, the acute care hospital where the anchor hospitalization or anchor procedure occurs would be held accountable for spending during the episode. CJR-X participants would be afforded the opportunity to earn performance-based payments by appropriately reducing expenditures and meeting certain quality metrics. CJR-X participants would also gain access to claims data, pursuant to a request and data sharing agreement, to better understand CJR-X beneficiaries' post-acute care needs and associated spending. Payment approaches that reward providers that assume financial and performance accountability for a particular episode of care create incentives for the implementation and coordination of care redesign between hospitals and other providers and suppliers. Given evidence from the CJR Model, we anticipate CJR-X would continue to reduce Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries.
It is important to note that CJR-X may have effects beyond the effects to the Medicare program or to Medicare beneficiaries. Since CJR-X would be expanded nationally, except to hospitals excluded in section X.C.2.b.(2)(i). of this proposed rule, we anticipate there may
CJR-X would be a mandatory episode-based payment model that would have a direct effect on the Medicare program because CJR-X participants would be incentivized to reduce Medicare spending by aiming to have episode expenditures come under the reconciliation target price. CJR-X participants would be subject to two-sided financial risk, therefore CJR-X participants could receive a reconciliation payment amount from CMS or have to pay CMS a repayment amount based on their spending and quality performance. Financial safeguards have been proposed to ensure outlier high-cost episode spending is capped, stop-gain and stop-loss limits would be applied to prevent extreme reconciliation amounts or repayment amounts, and hospitals meeting the low volume threshold are not held accountable for episodes where there is insufficient volume to spread risk or have opportunities for savings.
Table K-CL-01 shows the projected financial impacts of CJR-X over a 5-year period, with estimated savings to Medicare in each performance year. For the first performance year (October 1, 2027-September 30, 2028), we project CJR-X would generate $128 million in Medicare savings. Estimated savings increase to $132 million in performance year 2 and $136 million in performance year 3. In performance years 4 and 5, projected savings rise to $159 million and $170 million, respectively.
We expect episode spending would increase in performance years 4 and 5 due to the conclusion of TEAM and the transition of those hospitals into CJR-X. Although these years reflect higher episode spending and expanded hospital participation, the overall estimated savings impact moderates slightly because a greater proportion of safety net hospitals previously participating in TEAM are included.
Across the five-year period, we project CMS would pay $1.429 billion to CJR-X participants, while we project CJR-X participants would repay $1.813 billion to CMS. Combined with expected savings from the assumed 1 percent behavior change from CJR-X participants, which affects both episode spending and reconciliation payments, CJR-X will result in estimated net Medicare savings of approximately $725 million. We note these projections represent a portion of the potential savings to Medicare that CJR-X may produce since the model does not have an end date.
Baseline episode spending is projected using 2024 actual spending trended forward for changes in price and Medicare enrollment. We assume price updates would be consistent with projections for payment increases to hospital payments included in the 2025 Trustees Report.
We also note that baseline spending includes a small impact assumption to account for previous CJR participants increasing spending as a result of not participating in a bundled payment model anymore. We assume about half of the savings from the most recent CJR Model evaluation report (3.4 percent) comes back as a cost to Medicare because they didn't sustain their episode spending reductions given the lapse of participation in an episode-based payment model from the end of CJR to the start of CJR-X.
CJR-X excludes TEAM participants and since TEAM ends in 2030, TEAM participants are assumed to enter CJR-X in 2031. However, since TEAM uses calendar years for performance, 2031 only includes 3 quarters of TEAM participant spending. We expect TEAM
We also assume that CJR-X participants would reduce episode spending by 1 percent in the first year of the model and maintain that reduction going forward. Comparing this assumption to CJR experience, our savings assumption is lower due to the unbiased selection of CJR hospitals (average episode spending for CJR hospitals was much greater than average) and perhaps less potential for similar spending reductions from less costly providers. Further, post-acute care has steadily decreased over time for LEJR procedures, and there may be less opportunity for future decreases in episode spending. This assumption was sensitivity tested in and displayed in Table K-CL-02.
We also note the assumed quality adjustment distribution is based on simulations provided by internal analysis and the average quality adjusted discount is 1.3 percent. Lastly, the financial impacts assume that the retrospective trend adjustment isn't capped, meaning the difference between prospective trend and retrospective trend are less than 3 percent in magnitude.
We also performed a sensitivity analysis to assess various intervention effects on CJR-X. Overall financial impacts are sensitive to the intervention effect CJR-X would have on participating hospitals' episode spending. Table K-CL.-02 includes financial impacts at various intervention effect assumptions (note that negative values indicate savings).
Reductions in episode spending lead to lower target prices, however costs from stop loss limits increase as targets prices become more aggressive, since more episode spending is capped. For this reason, overall CJR-X savings does not increase at the same rate as episode spending reductions.
CJR-X may benefit beneficiaries receiving lower extremity joint replacements because the model is intended to improve the coordination and transition of care, invest in infrastructure and redesigned care processes for high quality and efficient service delivery, and incentivize higher value care across the inpatient and post-acute care spectrum spanning the episode of care. We believe the model has a patient-centered focus such that healthcare delivery and communication with the patient and or patient caregivers is based on the needs of the beneficiary, thus benefitting the beneficiary community.
We have proposed several quality of care and patient experience measures to assess hospital quality performance in CJR-X with the intent that it will encourage the provider community to focus on and deliver improved quality care for the Medicare beneficiary. We are proposing the adoption and public reporting of five quality measures, as discussed in section X.C.2.e of this proposed rule, for CJR-X. Those measures include two complications measures, two patient experience survey measures, and one patient reported outcome measure. We propose to use these measures to ensure CJR-X participants are continually measured on the quality of their care and to also monitor for beneficiary safety. Additionally, CJR-X participants must meet the proposed quality performance standards to qualify to receive a reconciliation payment, as discussed in section X.C.2.f.(5).(f). of this proposed rule. The accountability of CJR-X participants for both quality and cost of care provided for Medicare beneficiaries with an LEJR episode provides the hospitals with incentives to improve the health and well-being of the Medicare beneficiaries they treat.
Additionally, the model does not affect the beneficiary's freedom of choice to obtain health services from any individual or organization qualified to participate in the Medicare program guaranteed under section 1802 of the Act. As proposed under CJR-X, eligible beneficiaries who choose to receive services from a CJR-X participant would not have the option to opt out of inclusion in the model. Although the proposed model allows CJR-X participants to enter into financial arrangements with certain other providers and these hospitals may recommend those providers to the beneficiary, hospitals may not prevent or restrict beneficiaries to any list of preferred or recommended providers.
Many controls exist under Medicare to ensure beneficiary access and quality and in addition we have proposed to monitor hospitals and, if necessary, to audit CJR-X participants if claims analysis indicates an inappropriate change in delivered services. As described in section X.C.2.f.(5)(i). of this proposed rule, given that CJR-X participants would receive a reconciliation payment when they are able to spend below the reconciliation target price and meet quality thresholds, they could have an incentive to avoid complex, high cost cases by referring them to nearby facilities or specialty referral centers. We intend to monitor the claims data from CJR-X participants—for example, to compare a hospital's case mix relative to a pre-model historical baseline to determine whether complex patients are being systematically excluded. Furthermore, we also proposed to require providers to supply beneficiaries with written information regarding the design and implications of this model as well as their rights under Medicare, including their right to use their provider of choice.
We have proposed to implement several safeguards to ensure that Medicare beneficiaries do not experience a delay in services. We believe that the longer the episode duration, the lower the risk of delaying care beyond the episode duration, and we believe that a 90-day episode is sufficiently long to minimize the risk that any lower extremity joint replacement related care will be delayed beyond the end of the episode. Moreover, we have proposed as part of the pricing methodology, as described in section X.C.2.f.(5).(h). of this proposed rule that certain outlier costs post-episode payments occurring in the 30-day window subsequent to the end of the 90-day episode will be counted as an adjustment against the reconciliation payment or repayment amount. Importantly, approaches to saving costs will include taking steps that facilitate patient recovery, that shorten recovery duration, and that minimize post-operative problems that might lead to readmissions. Thus, the model itself rewards better patient care.
We welcome public comments on the impact of CJR-X on Medicare beneficiaries.
In section X.D.1. of the preamble of this proposed rule, we are proposing to reconcile non-renal organ acquisition costs for independent organ procurement organizations (IOPOs) and histocompatibility laboratories (HCLs), and to require the Medicare administrative contractor (MAC) to establish, adjust if necessary, and publish non-renal standard acquisition charges (SACs) and non-renal testing rates. We are proposing a 1-year delay in implementation, to allow IOPOs and HCLs time to prepare for increased reporting that would be necessary. We estimate this proposal would result in an annual cost savings to the Medicare trust fund of $0 in FY 2027 due to the proposed 1-year delay in implementation, $100 million in FY 2028, $500 million over 5 years from FYs 2027 to 2031, and $1,280 million over 10 years from FY 2027 to FY 2036. The Office of the Actuary estimated these savings on a cash basis using 2024 Medicare cost report data for IOPOs, comparing total revenue to total organ acquisition costs, by organ type. We do not have the required data to estimate the impact on HCLs. In accordance with 42 CFR 413.20(a), CMS follows standardized definitions, accounting, statistics, and reporting practices that are widely accepted in the healthcare industry. Changes in these practices and systems are not required to determine costs payable under the principles of reimbursement.
The methods of determining costs payable under Medicare involve making use of data available from the institution's basis accounts, as usually maintained, to arrive at equitable and proper payment for services. Burden hours for each OPO/HCL are the estimated time required (number of hours) to complete ongoing data gathering and recordkeeping tasks, search existing data resources, review instructions, and complete the OMB number 0938-0102, Form CMS-216-94. Currently there are 94 Medicare certified OPOs/HCLs that file Form CMS-216-94 annually. The current estimated average burden per OPO/HCL is 45 hours (30 hours for recordkeeping and 15 hours for reporting). For this proposal, we do not estimate additional recordkeeping burden but estimate an average additional reporting burden of 10 hours per OPO/HCL and an estimated additional cost of $785.40 per OPO/HCL. The most recent median hourly wage data is available from the Bureau of Labor Statistics using their national table (available at
In section X.D.2. of the preamble of this proposed rule, we are proposing to change certain existing policy and proposing to codify certain longstanding Medicare reasonable cost reimbursement policies, applicable to all providers reimbursed for all or for some of their services on a reasonable cost basis. We believe these proposals would not result in additional costs to the Medicare program and there would be no increased burden placed upon providers. Additionally, we believe our proposals would alleviate burden on providers by providing more clarity as to certain cost reporting policies. We believe these proposals may result in cost savings to the Medicare program due to increased payment accuracy, but we do not have sufficient data to estimate an amount.
In section X.D.3. of the preamble of this proposed rule, we are proposing to codify cost allocation principles. This proposal is applicable to all providers. We believe there would be no additional costs to the Medicare program resulting from these proposals. However, we believe these proposals may result in a cost savings to the Medicare program due to increased payment accuracy, although we do not have sufficient data to estimate an amount. We believe these proposals would not increase burden to providers because providers are already required to follow the current cost reporting instructions that we are proposing to codify to properly allocate overhead costs.
In section X.D.4. of the preamble of this proposed rule, we are proposing to codify the discretionary Administrator review of CMS reviewing official determinations with respect to appeals under § 413.420(g) for IOPOs and HCLs. We believe there would be no additional costs to the Medicare program and no increased burden placed upon providers as a result of our proposal.
In section X.D.5. of the preamble of this proposed rule, we are proposing
As of January 2026, there were 95 children's hospitals, 11 cancer hospitals, 6 short term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, 1 extended neoplastic disease care hospital, and 8 RNHCIs being paid on a reasonable cost basis subject to the rate-of-increase ceiling under § 413.40. (In accordance with § 403.752(a) of the regulation, RNHCIs are paid under § 413.40.) Among the remaining providers, the rehabilitation hospitals and units, and the LTCHs, are paid the Federal prospective per discharge rate under the IRF PPS and the LTCH PPS, respectively, and the psychiatric hospitals and units are paid the Federal per diem amount under the IPF PPS. As stated previously, IRFs and IPFs are not affected by the rate updates discussed in this proposed rule. The impacts of the changes on LTCHs are discussed in section I.J. of the appendix of this proposed rule.
For the children's hospitals, cancer hospitals, short-term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, the extended neoplastic disease care hospital, and RNHCIs, the update of the rate-of-increase limit (or target amount) is the estimated proposed FY 2027 percentage increase in the 2023-based IPPS operating market basket, consistent with section 1886(b)(3)(B)(ii) of the Act, and §§ 403.752(a) and 413.40 of the regulations. Consistent with current law, based on IGI's fourth quarter 2025 forecast of the 2023-based IPPS market basket increase, we are estimating the FY 2027 update to be 3.2 percent (that is, the estimate of the market basket rate-of-increase), as discussed in section VI.B. of the preamble of this proposed rule. Section 1886(b)(3)(B)(xi)(I) of the Act requires a productivity adjustment (0.8 percentage point reduction proposed for FY 2027), resulting in a proposed 2.4 percent applicable percentage increase for IPPS hospitals that submit quality data and are meaningful EHR users, as discussed in section VI.B. of the preamble of this proposed rule. Children's hospitals, cancer hospitals, short term acute care hospitals located in the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, the extended neoplastic disease care hospital, and RNHCIs that continue to be paid based on reasonable costs subject to rate-of-increase limits under § 413.40 of the regulations are not subject to the reductions in the applicable percentage increase required under section 1886(b)(3)(B)(xi)(I) of the Act. Therefore, for those hospitals paid under § 413.40 of the regulations, the update is the percentage increase in the 2023-based IPPS operating market basket for FY 2027, currently estimated at 3.2 percent.
The impact of the update in the rate-of-increase limit on those excluded hospitals depends on the cumulative cost increases experienced by each excluded hospital since its applicable base period. For excluded hospitals that have maintained their cost increases at a level below the rate-of-increase limits since their base period, the major effect is on the level of incentive payments these excluded hospitals receive. Conversely, for excluded hospitals with cost increases above the cumulative update in their rate-of-increase limits, the major effect is the amount of excess costs that would not be paid.
We note that, under § 413.40(d)(3), an excluded hospital that continues to be paid under the TEFRA system and whose costs exceed 110 percent of its rate-of-increase limit receives its rate-of-increase limit plus the lesser of: (1) 50 percent of its reasonable costs in excess of 110 percent of the limit; or (2) 10 percent of its limit. In addition, under the various provisions set forth in § 413.40, hospitals can obtain payment adjustments for justifiable increases in operating costs that exceed the limit.
For the impact analysis presented in this section of this proposed rule, we used data from the December 2025 update of the FY 2025 MedPAR file and the December 2025 update of the Provider-Specific File (PSF) that was used for payment purposes. Although the analyses of the proposed changes to the capital prospective payment system do not incorporate cost data, we used the December 2025 update of the most recently available hospital cost report data to categorize hospitals. Our analysis has several qualifications and uses the best data available, as described later in this section of this proposed rule.
Due to the interdependent nature of the IPPS, it is very difficult to precisely quantify the impact associated with each change. In addition, we draw upon various sources for the data used to categorize hospitals in the tables. In some cases (for instance, the number of beds), there is a fair degree of variation in the data from different sources. We have attempted to construct these variables with the best available sources overall. However, it is possible that some individual hospitals are placed in the wrong category.
Using cases from the December 2025 update of the FY 2025 MedPAR file, we simulated payments under the capital IPPS for FY 2026 and the proposed payments for FY 2027 for a comparison of total payments per case. Short-term, acute care hospitals that are not paid under the general IPPS (for example, hospitals in Maryland) are excluded from the simulations.
The methodology for determining a capital IPPS payment is set forth at § 412.312. The basic methodology for calculating the capital IPPS payments in FY 2027 is as follows:
In addition to the other adjustments, hospitals may receive outlier payments for those cases that qualify under the threshold established for each fiscal year. We modeled payments for each hospital by multiplying the capital Federal rate by the geographic adjustment factor (GAF) and the hospital's case-mix. Then we added estimated payments for indirect medical education, disproportionate share, and outliers, if applicable. For purposes of this impact analysis, the model includes the following assumptions:
• The capital Federal rate was updated, beginning in FY 1996, by an analytical framework that considers changes in the prices associated with capital-related costs and adjustments to account for forecast error, changes in the case-mix index, allowable changes in intensity, and other factors. As discussed in section III.A.1. of the Addendum to this proposed rule, the update to the capital Federal rate is 3.1 percent for FY 2027.
• In addition to the proposed FY 2027 update factor, the proposed FY 2027 capital Federal rate was calculated based on a GAF/DRG budget neutrality adjustment factor of 1.0139, a proposed budget neutrality factor for the 5-percent cap on wage index decreases policy and the proposed continuation of the transition for the discontinuation of the low wage index hospital policy of 0.9913, and a proposed outlier adjustment factor of 0.9642.
We used the payment simulation model previously described in section I.I. of the Appendix of this proposed rule to estimate the potential impact of the changes for FY 2027 on total capital payments per case, using a universe of 3,013 hospitals. As previously described, the individual hospital payment parameters are taken from the best available data, including the December 2025 update of the FY 2025 MedPAR file, the December 2025 update to the PSF, and the most recent available cost report data from the December 2025 update of HCRIS. In Table III, we present a comparison of estimated total payments per case for FY 2026 and estimated proposed total payments per case for FY 2027 based on the proposed FY 2027 payment policies. Column 2 shows estimates of payments per case under our model for FY 2026. Column 3 shows estimates of proposed payments per case under our model for FY 2027. Column 4 shows the total proposed percentage change in payments from FY 2026 to FY 2027. The change represented in Column 4 includes the 3.1 percent update to the capital Federal rate and other proposed changes in the adjustments to the capital Federal rate. The comparisons are provided by: (1) geographic location; (2) region; and (3) payment classification.
The simulation results show that, on average, capital payments per case in FY 2027 are expected to increase 2.3 percent compared to capital payments per case in FY 2026. This expected increase is primarily due to the proposed 3.1 percent update to the capital Federal rate being partially offset by a projected decrease in capital outlier payments. In general, regional variations in estimated capital payments per case in FY 2027 as compared to capital payments per case in FY 2026 are primarily due to the proposed changes in GAFs, and are generally consistent with the projected changes in payments due to the proposed changes in the wage index (and proposed policies affecting the wage index), as shown in Table I in section I.F. of this proposed rule.
The net impact of these changes is an estimated 2.3 percent increase in capital payments per case from FY 2026 to FY 2027 for all hospitals (as shown in Table III). The geographic comparison shows that, on average, hospitals in both urban and rural classifications would experience an increase in capital IPPS payments per case in FY 2027 as compared to FY 2026. Capital IPPS payments per case would increase by an estimated 2.3 percent for hospitals in urban areas and 2.6 percent for rural areas from FY 2026 to FY 2027. The primary factor contributing to the difference in the projected increase in capital IPPS payments per case for rural hospitals as compared to urban hospitals is the estimated increase in capital payments to rural hospitals due to the effect of proposed changes in the GAFs.
The comparisons by region show that the change in capital payments per case from FY 2026 to FY 2027 for urban areas range from a 0.7 percent increase for the West South Central urban region to a 4.7 percent increase for the New England urban region. Meanwhile, the change in capital payments per case from FY 2026 to FY 2027 for rural areas range from a 0.4 percent increase for the Mountain rural region to a 6.4 percent increase for the New England rural region. Capital IPPS payments per case for hospitals located in Puerto Rico are projected to decrease by 0.3 percent. These regional differences are primarily due to the proposed changes in the GAFs.
The comparison by hospital type of ownership (Voluntary, Proprietary, and Government) shows that voluntary hospitals are expected to experience an increase in capital payments per case from FY 2026 to FY 2027 of 2.3 percent. Proprietary hospitals are expected to experience an increase in capital payments per case from FY 2026 to FY 2027 of 1.5 percent. Government hospitals are expected to experience an increase in capital payments per case from FY 2026 to FY 2027 of 2.3 percent.
Section 1886(d)(10) of the Act established the MGCRB. Hospitals may apply for reclassification for purposes of the wage index for FY 2027. Reclassification for wage index purposes also affects the GAFs because that factor is constructed from the hospital wage index. To present the effects of the hospitals being reclassified as of the publication of this proposed rule for FY 2027, we show the proposed average capital payments per case for reclassified hospitals for FY 2027. Urban reclassified hospitals are expected to experience an increase in capital payments per case of 2.4 percent; urban non-reclassified hospitals are expected to experience an increase in capital payments of 2.1 percent. Rural reclassified hospitals are expected to experience an increase in capital payments per case of 2.7 percent; rural non-reclassified hospitals are expected to experience an increase in capital payments per case of 2.5 percent.
In section X. of the preamble of this proposed rule and section V. of the Addendum to this proposed rule, we set forth the proposed annual update to the payment rates for the LTCH PPS for FY 2027. In the preamble of this proposed rule, we specify the statutory authority for the proposals that are presented, identify the proposed policies for FY 2027, and present rationales for our proposals as well as alternatives that were considered. In this section, we discuss the impact of the proposed changes to the payment rate, factors, and other payment rate policies related to the LTCH PPS that are presented in the preamble of this proposed rule in terms of their estimated fiscal impact on the Medicare budget and on LTCHs.
Section 1886(m)(6)(A) of the Act establishes a dual rate LTCH PPS payment structure with two distinct payment rates for LTCH discharges beginning in FY 2016. Under this statutory change, LTCH discharges that meet the patient-level criteria for exclusion from the site neutral payment rate (that is, LTCH PPS standard Federal payment rate cases) are paid based on the LTCH PPS standard Federal payment rate. LTCH discharges that do not meet the patient-level criteria for exclusion are paid the site neutral payment rate. Consistent with the statute, the site neutral payment rate is the lower of the IPPS comparable per diem amount as determined under § 412.529(d)(4), including any applicable outlier payments as specified in § 412.525(a), reduced by 4.6 percent for FYs 2018 through 2026; or 100 percent of the estimated cost of the case as determined under § 412.529(d)(2).
The basic methodology for determining a per discharge payment for LTCH PPS standard Federal payment rate cases is currently set forth under §§ 412.515 through 412.533 and 412.535. In addition to adjusting the LTCH PPS standard Federal payment rate by the MS-LTC-DRG relative weight, we make adjustments to account for area wage levels and short stay outliers (SSOs). LTCHs located in Alaska and Hawaii also have their payments adjusted by a COLA. Under our application of the dual rate LTCH PPS payment structure, the LTCH PPS standard Federal payment rate is generally only used to determine payments for LTCH PPS standard Federal payment rate cases (that is, those LTCH PPS cases that meet the statutory criteria to be excluded from the site neutral payment rate).
In addition, when certain thresholds are met, LTCHs also receive high-cost outlier (HCO) payments for both LTCH PPS standard Federal payment rate cases and site neutral payment rate cases that are paid at the IPPS comparable per diem amount.
This section details the proposed updates to the LTCH PPS payment rates and related factors that would affect payments for LTCH PPS standard Federal payment rate cases and serve as the basis for the impact analysis presented in this proposed rule.
• As discussed in section V.A.2. of the Addendum to this proposed rule, for FY 2027, we are proposing to establish an LTCH PPS standard Federal payment rate of $52,177.04 which reflects the proposed 2.4 percent annual update to the LTCH PPS standard Federal payment rate and the proposed budget neutrality factor for updates to the area wage level adjustment of 1.0025505. For LTCHs that fail to submit data for the LTCH QRP, in accordance with section 1886(m)(5)(C) of the Act, we are
• As discussed in section V.B.3. of the Addendum to this proposed rule, for FY 2027, we are proposing to establish a labor-related share of 73.0 percent for FY 2027, based on the most recent available data (IGI's fourth quarter 2025 forecast) of the relative importance of the labor-related share of operating and capital costs of the 2022-based LTCH market basket.
• As discussed in section V.B.4. of the Addendum to this proposed rule, for FY 2027, we are proposing to update the wage index values based on the most recent available data (data from cost reporting periods beginning during FY 2023 which is the same data used for the FY 2027 IPPS wage index).
• As discussed in section V.C. of the Addendum to this proposed rule, for FY 2027, we are proposing to update the COLA factors used to adjust non-labor related costs for LTCHs located in Alaska and Hawaii using the Overseas Cost-of-Living Allowance (OCOLA) data published by the Department of Defense (DOD).
• As discussed in section X.B of the preamble of this proposed rule, for FY 2027, we are proposing to update the MS-LTC-DRG classifications and MS-LTC-DRG relative weights.
• As discussed in section V.C. of the Addendum to this proposed rule, for FY 2027, we are proposing to maintain the fixed-loss amount for LTCH PPS standard Federal payment rate cases at its FY 2026 level of $78,936. We estimate this will result in estimated outlier payments projected to be equal to 7.975 percent of estimated FY 2027 payments for such cases.
To understand the impact of the changes to the LTCH PPS payments for LTCH PPS standard Federal payment rate cases presented in this proposed rule on different categories of LTCHs for FY 2027, it is necessary to estimate payments per discharge for FY 2026 using the rates, factors, and the policies established in the FY 2026 IPPS/LTCH PPS final rule and estimate payments per discharge for FY 2027 using the proposed rates, factors, and the policies in this proposed rule (as discussed in section X. of the preamble of this proposed rule and section V. of the Addendum to this proposed rule). The resulting analyses can then be used to compare how our proposed policies applicable to LTCH PPS standard Federal payment rate cases affect different groups of LTCHs.
Specifically, to estimate the per discharge payment effects of our proposals on payments for LTCH PPS standard Federal payment rate cases, we simulated FY 2026 and proposed FY 2027 payments on a case-by-case basis using historical LTCH claims from the FY 2025 MedPAR files that met or would have met the criteria to be paid at the LTCH PPS standard Federal payment rate if the statutory patient-level criteria had been in effect at the time of discharge for all cases in the FY 2025 MedPAR files. We note that in modeling payments for HCO cases, we scaled outlier payments to equal 7.975 percent of total estimated LTCH PPS payments for standard Federal payment rate cases in both FY 2026 and FY 2027.
There are 318 LTCHs included in this impact analysis. We note that, although there are currently approximately 325 LTCHs, for purposes of this impact analysis, we excluded the data of all-inclusive rate providers consistent with the development of the FY 2027 MS-LTC-DRG relative weights (discussed in section X.B.3. of the preamble of this proposed rule). Moreover, in the claims data used for this proposed rule, two of the 325 LTCHs only had claims for site neutral payment rate cases and, therefore, do not affect our impact analysis for LTCH PPS standard Federal payment rate cases presented in Table IV.
Based on the FY 2025 LTCH cases that were used for the analysis in this proposed rule, approximately 7 percent of those cases were classified as site neutral payment rate cases (that is, 7 percent of LTCH cases would not meet the statutory patient-level criteria for exclusion from the site neutral payment rate). Accordingly, based on the FY 2025 LTCH cases that were used for the analysis in this proposed rule, approximately 93 percent of LTCH cases would meet the patient-level criteria for exclusion from the site neutral payment rate in FY 2027 and would be paid based on the LTCH PPS standard Federal payment rate.
In the following section, we present in Table IV our provider impact analysis for the proposed changes that affect LTCH PPS payments for LTCH PPS standard Federal payment rate cases. Table IV illustrates the estimated aggregate impact of the change in LTCH PPS payments for LTCH PPS standard Federal payment rate cases among various classifications of LTCHs, reflecting the estimated “losses” or “gains” from FY 2026 to FY 2027 based on the proposed payment rates and policy changes presented in this proposed rule. We note that our analysis does not reflect changes in LTCH admissions or case-mix intensity, which will also affect the overall payment effects of the proposed policies in this proposed rule. Consistent with prior years, Table IV only reflects proposed changes in LTCH PPS payments for LTCH PPS standard Federal payment rate cases.
In Table IV, LTCHs are grouped based on characteristics provided in hospital cost report data and PSF data. LTCH groups included the following:
• Location: large urban/other urban/rural.
• Ownership control.
• Census region.
• Bed size.
We include the following columns in Table IV:
• The first column, LTCH Classification, identifies the type of LTCH.
• The second column lists the number of LTCHs of each classification type.
• The third column identifies the number of LTCH cases expected to meet the LTCH PPS standard Federal payment rate criteria.
• The fourth column shows the estimated FY 2026 payment per discharge for LTCH cases expected to meet the LTCH PPS standard Federal payment rate criteria.
• The fifth column shows the estimated FY 2027 payment per discharge for LTCH cases expected to meet the LTCH PPS standard Federal payment rate criteria (as described previously).
• The sixth column shows the percentage change in estimated payments per discharge for LTCH cases expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2026 to FY 2027 due to the proposed annual update to the standard Federal rate (as discussed in section V.A.2. of the Addendum to this proposed rule).
• The seventh column shows the percentage change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2026 to FY 2027 due to the proposed changes to the area wage level adjustment (that is, the proposed updated hospital wage data and the proposed labor-related share) and the application of the corresponding proposed budget neutrality factor (as
• The eighth column shows the percentage change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2026 (Column 4) to FY 2027 (Column 5) due to all changes.
Based on the FY 2025 LTCH cases (from 318 LTCHs) that were used for the analyses in this proposed rule, we have prepared the following summary of the impact (as shown in Table IV) of the proposed LTCH PPS payment rate and policy changes for LTCH PPS standard Federal payment rate cases presented in this proposed rule. The impact analysis in Table IV shows that estimated payments per discharge for LTCH PPS standard Federal payment rate cases are projected to increase 2.3 percent, on average, for all LTCHs from FY 2026 to FY 2027, as a result of the proposed payment rate and policy changes applicable to LTCH PPS standard Federal payment rate cases presented in this proposed rule. This estimated 2.3 percent increase in LTCH PPS payments per discharge was determined by comparing estimated FY 2027 LTCH PPS payments for LTCH PPS standard Federal payment rate cases (using the proposed payment rates and factors discussed in this proposed rule) to estimated FY 2026 LTCH PPS payments for LTCH PPS standard Federal payment rate cases.
As stated previously, we are proposing an annual update to the LTCH PPS standard Federal payment rate for FY 2027 of 2.4 percent. For LTCHs that fail to submit quality data under the requirements of the LTCH QRP, as required by section 1886(m)(5)(C) of the Act, a 2.0 percentage point reduction is applied to the annual update to the LTCH PPS standard Federal payment rate. The estimated change attributable solely to the proposed annual update of 2.4 percent to the LTCH PPS standard Federal payment rate is projected to result in an increase of 2.3 percent in payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2026 to FY 2027, on average, for all LTCHs (Column 6). The estimated increase of 2.3 percent shown in Column 6 also includes estimated payments for SSO cases, a portion of which are not affected by the annual update to the LTCH PPS standard Federal payment rate, as well as the reduction that is applied to the annual update for LTCHs that do not submit the required LTCH QRP data. For all hospital categories, the projected increase in payments based on the LTCH PPS standard Federal payment rate to LTCH PPS standard Federal payment rate cases also rounds to approximately 2.3 percent.
The vast majority of LTCHs are located in urban areas. The impact analysis presented in Table IV shows that the average percent increase in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2026 to FY 2027 for all LTCHs is 2.3 percent. Urban LTCHs are also projected to experience an increase of 2.3 percent.
Only approximately 5 percent of the LTCHs are identified as being located in a rural area, and approximately 2 percent of all LTCH PPS standard Federal payment rate cases are expected to be treated in these rural hospitals. As shown in Table IV, we are projecting a 1.7 percent increase in estimated payments for LTCH PPS standard Federal payment rate cases for LTCHs located in a rural area. This increase is primarily due to the proposed 2.4 percent annual update to the LTCH PPS standard Federal payment rate for FY 2027 being partially offset by a projected decrease in payments due to the proposed changes to the area wage level adjustment and the proposed changes to the MS-LTC-DRG classifications and relative weights.
LTCHs are grouped into three categories based on ownership control type: voluntary, proprietary, and government. Based on the best available data, approximately 16 percent of LTCHs are identified as voluntary (Table IV). The majority (approximately 81 percent) of LTCHs are identified as proprietary, while government owned and operated LTCHs represent approximately 3 percent of LTCHs. Based on ownership type, proprietary LTCHs are expected to experience an increase in payments to LTCH PPS standard Federal payment rate cases of 2.3 percent. Voluntary LTCHs are expected to experience an increase in payments to LTCH PPS standard Federal payment rate cases from FY 2026 to FY 2027 of 1.9 percent. Government owned and operated LTCHs are expected to experience an increase in payments to LTCH PPS standard Federal payment rate cases from FY 2026 to FY 2027 of 3.9 percent.
The comparisons by region show that the changes in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2026 to FY 2027 are projected to increase from 1.5 percent in the East South Central region to 3.4 percent in the Middle Atlantic region. These regional variations are primarily due to the changes to the area wage adjustment.
LTCHs are grouped into five categories based on bed size: 0-24 beds; 25-49 beds; 50-74 beds; 75-124 beds; and greater than 125 beds. We project that LTCHs with 0-24 beds will experience the largest increase in payments with 2.7 percent. The remaining bed size categories are projected to experience an increase in payments in the range of 2.0 to 2.6 percent.
We project that the provisions of this proposed rule will result in an increase in estimated aggregate LTCH PPS payments to LTCH PPS standard Federal payment rate cases in FY 2027 relative to FY 2026 of approximately 2.3 percent for the 318 LTCHs in our database. We estimate that aggregate FY 2027 LTCH PPS payments to LTCH PPS standard Federal payment rate cases will be approximately $2.459 billion, as compared to estimated aggregate FY 2026 LTCH PPS payments of approximately $2.404 billion, resulting in an estimated overall increase in payments of approximately $55 million.
As we discuss in detail throughout this proposed rule, based on the best available data, we believe that the provisions of this proposed rule relating to the LTCH PPS and the resulting LTCH PPS payment amounts will result in appropriate Medicare payments that are consistent with the statute.
Under the LTCH PPS, hospitals receive payment based on the average resources consumed by patients for each diagnosis. We do not expect any changes in the quality of care or access to services for Medicare beneficiaries as a result of this proposed rule, and we continue to expect that paying prospectively for LTCH services will enhance the efficiency of the Medicare program. As discussed previously, we do not expect the implementation of the site neutral payment system to have a negative impact on access to or quality of care. As demonstrated in areas where there is little or no LTCH presence, general short-term acute care hospitals are effectively providing treatment for the same types of patients that are treated in LTCHs.
In sections IX.B. and IX.C. of the preamble of this proposed rule, we discuss the proposed requirements for hospitals reporting quality data under the Hospital Inpatient Quality Reporting Program to receive the full annual percentage increase for the FY 2029 payment determination and subsequent years.
In this proposed rule, we are proposing to adopt three new measures: (1) the Advance Care Planning electronic clinical quality measure (eCQM) beginning with the CY 2028 reporting period/FY 2030 payment determination; (2) the Hospital Harm-Postoperative Venous Thromboembolism (VTE) eCQM beginning with the CY 2028 reporting period/FY 2030 payment determination; (3) the Excess Days in Acute Care After Hospitalization for Diabetes measure beginning with the July 1, 2025 through June 30, 2027 performance period, associated with the FY 2029 payment determination. We are also proposing to adopt five mortality measures for the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination, through the July 1, 2027 through June 30, 2029 performance period, associated with the FY 2031 payment determination: (1) the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction Hospitalization measure; (2) the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure Hospitalization measure; (3) the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization measure; (4) the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease Hospitalization measure; and (5) the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Coronary Artery Bypass Graft (CABG) Surgery measure. We are also proposing to modify three measures beginning with the July 1, 2024 through June 30, 2026 performance period, associated with the FY 2028 payment determination: (1) the Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction measure; (2) the Excess Days in Acute Care after Hospitalization for Heart Failure measure; and (3) the Excess Days in Acute Care after Hospitalization for Pneumonia measure. We are proposing to remove three eCQMs beginning with the CY 2028 reporting period/FY 2030 payment determination: (1) the VTE Prophylaxis eCQM; (2) the Intensive Care Unit VTE Prophylaxis eCQM; and (3) Discharged on Antithrombotic Therapy eCQM. We are also proposing an update to the reporting and submission requirements for the Maternal Morbidity Structural measure beginning with the CY 2026 reporting period/FY 2028 payment determination. Lastly, we are proposing to modify the reporting and submission requirements for eCQMs to require mandatory reporting of the Malnutrition Care Score eCQM beginning with the CY 2028 reporting period/FY 2030 payment determination, and to require mandatory reporting of Hospital Harm eCQMs after 2 years of self-selected reporting beginning with the CY 2028 reporting period/FY 2030 payment determination.
As shown in the summary tables in section XII.B.4.h. of the preamble of this proposed rule, we estimate an increase of 8,133 hours at a cost of $447,803 in information collection burden associated with the proposed policies compared to the currently approved information collection burden estimates under OMB control number 0938-1022 (expiration date December 31, 2028).
In section IX.B.1. of the preamble of this proposed rule, we are proposing to adopt the Advance Care Planning eCQM beginning with the CY 2028 reporting period/FY 2030 payment determination. Additionally, in sections IX.C.3.b. and IX.C.4. of the preamble of this proposed rule, we are proposing to adopt the Hospital Harm-Postoperative VTE eCQM and subsequently remove the VTE Prophylaxis and Intensive Care Unit VTE Prophylaxis eCQMs beginning with the CY 2028 reporting period/FY 2030 payment determination. While there is no change in information collection burden associated with these proposals because the VTE Prophylaxis and Intensive Care Unit VTE Prophylaxis eCQMs are available for hospitals to self-select to meet eCQM reporting requirements and the proposed Hospital Harm-Postoperative VTE eCQM would also be available for hospitals to self-select, we note that there would be a reduction in administrative burden as the proposals would result in replacing two process eCQMs with a single comprehensive outcome eCQM. We note that Hospital Harm-Postoperative VTE eCQM would become mandatory if the proposal to require Hospital Harm eCQMs after two years of self-selected reporting is finalized, and we have provided estimates for the Collection of Information burden in section XII.B.4.g. in the preamble of this proposed rule. We note the administrative costs associated with adoption of eCQMs are multifaceted and include not only the burden associated with reporting but also the costs associated with implementing and maintaining program requirements, such as maintaining measure specifications in hospitals' EHR systems for the eCQMs used in the Hospital Inpatient Quality Reporting Program.
We do not anticipate any additional economic impact beyond those discussed in section XII.B.4. of the preamble of this proposed rule (Collection of Information) for the remaining proposals.
Historically, 100 hospitals, on average, that participate in the Hospital Inpatient Quality Reporting Program do not receive the full annual percentage increase in any fiscal year due to the failure to meet all requirements. We anticipate that the number of hospitals not receiving the full annual percentage increase will be approximately the same as in past years based on review of previous performance.
In sections IX.B. and IX.D. of the preamble of this proposed rule, we discuss proposed requirements for PPS-Exempt Cancer Hospitals (PCHs) reporting quality data under the PCH Quality Reporting Program. The PCH Quality Reporting Program is authorized under section 1866(k) of the Act. There is no financial impact to Medicare reimbursement if a PCH does not submit data.
We are proposing to adopt two measures beginning with the CY 2028 reporting period/FY 2030 program year: (1) the Advance Care Planning electronic clinical quality measure (eCQM); and (2) the Malnutrition Care Score eCQM. We are also proposing to remove the COVID-19 Vaccination Coverage among Healthcare Personnel measure beginning with the CY 2026 reporting period/FY 2028 program year.
As shown in the summary tables in section XII.B.5. of the preamble of this proposed rule, across all PCHs we estimate an increase of 15 hours at a cost of $826 in information collection burden associated with the proposed policies compared to the currently approved information collection burden estimates under OMB control number 0938-1175 (expiration date January 31, 2029). We also estimate a decrease of between 88 hours at a savings of $4,972 and 99 hours at a savings of $5,801 in information collection burden associated with the finalized policies
With regard to administrative costs associated with adoption of eCQMs, we believe they are multifaceted and include not only the burden associated with reporting but also the costs associated with implementing and maintaining program requirements, such as maintaining measure specifications in PCHs' electronic health record systems for the eCQMs used in the PCH Quality Reporting Program. As discussed in section IX.D.5.b.(1). of this proposed rule, we intend to transition to a fully digital quality measure landscape by transitioning eCQMs to Health Level 7® Fast Healthcare Interoperability Resources® (FHIR®)-based eCQMs to promote interoperability and increase the value of quality measure data.
We do not believe removal of the COVID-19 Vaccination Coverage among Healthcare Personnel measure would result in any additional economic impact beyond that discussed in section XII.B.5.c. of the preamble of this proposed rule (Collection of Information).
In section IX.E.3. of the preamble of this proposed rule, we are proposing to remove the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) (HCP COVID-19 Vaccine) measure. We are also proposing, in section IX.E.4. of the preamble of this proposed rule, to remove the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date (Patient/Resident COVID-19 Vaccine) measure. If these proposals are finalized, both measure removals will be effective beginning with the FY 2028 LTCH QRP. In section IX.E.6.b. of the preamble of this proposed rule, we are proposing to revise the data submission deadline for LCDS assessment and CDC NHSN data for the LTCH QRP. Finally, in sections IX.E.5. of the preamble of this proposed rule, we seek public comments on future measure concepts for the LTCH QRP.
The effect of these proposals for the LTCH QRP would be an overall decrease in burden for LTCHs participating in the LTCH QRP. As shown in summary table I.M.-01, we estimate a decrease in total annual burden of 4,473 hours and $207,309.29 for 318 eligible LTCHs associated with our proposed policies. We refer readers to section XII.B.8. of the preamble of this proposed rule, where CMS has provided an estimate of the burden and cost to LTCHs.
We are seeking comments specific to the estimates.
In sections IX.B. and IX.F. of the preamble of this proposed rule, we discuss proposed requirements for eligible hospitals and critical access hospitals (CAHs) to report objectives and measures and electronic clinical quality measures (eCQMs) under the Medicare Promoting Interoperability Program.
In this proposed rule, we are proposing to adopt three new measures beginning with the EHR reporting period in CY 2028: (1) the Advance Care Planning eCQM beginning with the CY 2028 reporting period; (2) the Hospital Harm-Postoperative Venous Thromboembolism (VTE) eCQM beginning with the CY 2028 reporting period; and (3) the Unique Device Identifiers for Implantable Medical Devices measure beginning with the EHR reporting period in CY 2027. Additionally, we are proposing to remove two attestations and five measures: (1) the Office of the National Coordinator for Health Information Technology (ONC) Direct Review Attestation beginning with the EHR reporting period in CY 2026; (2) the optional ONC-Authorized Certification Body (ONC-ACB) Surveillance Attestation beginning with the EHR reporting period in CY 2026; (3) the Support Electronic Referral Loops by Sending Health Information measure beginning with the EHR reporting period in CY 2028; (4) the Support Electronic Referral Loops by Receiving and Reconciling Health Information measure beginning with the EHR reporting period in CY 2028; (5) the Venous Thromboembolism Prophylaxis (VTE) Prophylaxis eCQM beginning with the CY 2028 reporting period; (6) the Intensive Care Unit VTE Prophylaxis eCQM beginning with the CY 2028 reporting period; and (7) the Discharged on Antithrombotic Therapy eCQM beginning with the CY 2028 reporting period. We are also proposing updates to the Electronic Prior Authorization measure by modifying the ONC certification criteria eligible hospitals and CAHs must use to attest “Yes,” modifying the measure text, and proposing to make the measure an optional bonus measure for the EHR reporting period in CY 2027 and required for the EHR reporting period in CY 2028. Lastly, we are proposing to modify the reporting and submission requirements for the Malnutrition Care Score eCQM beginning with the CY 2028 reporting period and modify the reporting and submission requirements for Hospital Harm eCQMs to require mandatory reporting after 2 years of self-selected reporting beginning with the CY 2028 reporting period.
As discussed in section XII.B.7.i. of the preamble of this proposed rule, we estimate a decrease of 3,886 hours at a cost of $213,982 in information collection burden associated with our proposed policies and updated burden estimates for the EHR reporting period in CY 2026 and future years compared
In section IX.F.9.b. of the preamble of this proposed rule, we are proposing to adopt the Hospital Harm VTE eCQM and remove the VTE Prophylaxis and Intensive Care Unit VTE Prophylaxis eCQMs beginning with the CY 2028 reporting period. While there is no change in information collection burden associated with these proposals because the two current VTE eCQMs are available for CAHs to self-select to meet reporting requirements and the proposed Hospital Harm VTE eCQM would also be available for CAHs to self-select (we note that it would become mandatory after two years if the proposal to require Hospital Harm eCQMs after two years of self-selected reporting is finalized), we note that there would be a reduction in administrative burden as the proposals would result in replacing two process measures with a single comprehensive outcome measure. Additionally, in section IX.B.1. of the preamble of this proposed rule, we are proposing to adopt the Advance Care Planning eCQM beginning with the CY 2028 reporting period, for which there is also no change in information collection burden. Regarding administrative costs associated with adoption of eCQMs, we believe they are multifaceted and include not only the burden associated with reporting but also the costs associated with implementing and maintaining program requirements, such as maintaining measure specifications in EHR systems for the eCQMs used in the program.
In section IX.F.4. of the preamble of this proposed rule, we are proposing to remove the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures beginning with the EHR reporting period in CY 2028. If finalized, eligible hospitals and CAHs currently reporting these measures would be required to instead report either the Health Information Exchange (HIE) Bi-Directional Exchange measure or the Enabling Exchange Under the Trusted Exchange Framework and Common Agreement (TEFCA) measure. Based on Medicare Promoting Interoperability Program data from the EHR reporting period in CY 2024, the 26.6 percent of eligible hospitals and CAHs that reported on the Support Electronic Referral Loops by Sending Health Information and Support Electronic Referral Loops by Receiving and Reconciling Health Information measures may incur some onboarding labor and vendor costs associated with the process to plan, procure, configure, and validate new workflows as well as the transition to set up and technically validate the functioning of the information exchange. In addition, eligible hospitals and CAHs may also incur some recurring costs associated with joining a health information exchange or TEFCA QHIN, such as annual subscription fees, transaction fees, or vendor and maintenance support, depending on the nature of their agreement with health IT vendors or other entities through which they participate in TEFCA. However, because each eligible hospital, CAH, and health IT vendor or other entity is unique and we lack sufficient insight into the individual decisions of each, the extent of these costs is difficult to quantify. Published literature largely does not evaluate the costs and benefits associated with HIE or TEFCA adoption in any detail, although some published papers indicate a mixture of both cost benefits and savings associated with HIE adoption.
We do not believe the remaining provision results in any additional economic impact beyond those discussed in section XII.B.7. of the preamble of this proposed rule.
This proposed rule contains a range of policies. It also provides descriptions of the statutory provisions that are addressed, identifies the proposed policies, and presents rationales for our decisions and, where relevant, alternatives that were considered.
With regard to the proposals to remove both the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) and COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure, we considered keeping both measures. However, when these measures were adopted, there were well-defined parameters for receiving the COVID-19 vaccination. We determined that these measures no longer align with current clinical guidelines and therefore the publicly reported measures may not reliably give consumers information on the number of HCP that are vaccinated, or the percent of stays in which patients in an LTCH are up to date on their COVID-19 vaccinations.
With regard to the proposal to revise the LTCH QRP assessment data submission deadline from 4.5 months to 45 days, we considered keeping the deadline unchanged. We determined that 45 days is a reasonable amount of time for LTCHs to submit data and make any necessary corrections, and that the benefits of this shortened timeframe include making the data timelier and more actionable which increases the value of publicly reported data, both for consumers and their families and for LTCHs to use in their quality improvement activities.
In section X.A. of the preamble of this proposed rule, we discuss the mandatory episode-based payment model called the Transforming Episode Accountability Model (TEAM). TEAM is designed to improve beneficiary care through financial accountability for episodes categories that begin with one of the following procedures: coronary artery bypass graft, lower extremity joint replacement, major bowel procedure, surgical hip/femur fracture treatment, and spinal fusion. TEAM will test whether financial accountability for these episode categories reduces Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries. We anticipate that TEAM would benefit Medicare beneficiaries through improving the coordination of items and services paid for through Medicare FFS payments, encouraging provider investment in health care infrastructure and redesigned care processes, and incentivizing higher value care across the inpatient and post-acute care settings for the episode.
Throughout this proposed rule, we have identified our proposed policies and alternatives that we have considered and provided information as to the effects of these alternatives and
We solicit and welcome comments on our proposals, on the alternatives we have identified, including starting the proposed changes for MS-DRG and APC update factors in performance year 2, as discussed in section X.A.2.c.(2). of the preamble of this proposed rule, and on other alternatives that we should consider.
In section X.C. of this proposed rule, we are proposing the Comprehensive Care for Joint Replacement Expanded (CJR-X) Model to build upon the Comprehensive Care for Joint Replacement (CJR) Model that was tested from April 1, 2016 to December 31, 2024. Based on the strength of evidence from the CJR Model test, the Innovation Center is proposing to expand the model to all acute care hospitals in the 50 United States, District of Columbia, and U.S. Territories, except for hospitals participating in the Transforming Episode Accountability Model (TEAM) and hospitals located in Maryland. CJR-X would include several updates to the CJR Model. We propose that the model would begin October 1, 2027 (FY 2028).
The model would focus on improving care and reducing spending for Medicare beneficiaries undergoing lower extremity joint replacement (LEJR) procedures. Participant hospitals would be held accountable for spending and quality of care during an initial LEJR admission and for the 90 days following hospital discharge. Throughout the proposed rule, we identify proposed policies and any alternatives considered. We provide background and rationale for each of the proposed policies and discussion of alternative policies including their potential effects. For example, we considered several original CJR quality reporting and payment methodology policies but ultimately proposed updates in response to the CJR Model evaluation results, stakeholder feedback, and changes to national care delivery patterns among both CJR and non-CJR hospitals. Throughout the preamble, we solicit comments on our proposals, alternatives policies, and other options we should consider.
Acute care hospitals are estimated to experience an increase of approximately $1.9 billion in FY 2027, including operating, capital, and the effects of: (1) new technology add-on payment changes; (2) the changes to estimated uncompensated care payments; and (3) the statutory expiration of the MDH program and the temporary changes to the low-volume hospital payment adjustment on January 1, 2027. The estimated change in operating payments including outlier payments, and uncompensated care payments is approximately $1.5 billion (discussed in sections I.F of this Appendix). The estimated change in capital payments is approximately $0.18 billion (discussed in section I.I. of this Appendix). The estimated change in the combined effects of other proposed changes including new technology add-on payment changes and the statutory expiration of the temporary changes to the low-volume hospital payment adjustment on January 1, 2027, is approximately $0.18 billion as discussed in sections I.F and I.G. of the Appendix of this proposed rule. Totals may differ from the sum of the components due to rounding.
Table I. of section I.F. of the Appendix and Table III of section I.I. of this Appendix of this proposed rule also demonstrates the estimated redistributional impacts of the proposed FY 2027 changes on IPPS operating and capital payments, respectively, relative to FY 2026. The discussions presented in the previous pages, in combination with the remainder of this proposed rule, constitute a regulatory impact analysis.
Overall, LTCHs are projected to experience an increase in estimated payments in FY 2027. In the impact analysis, we are using the rates, factors, and policies presented in this proposed rule based on the best available data to estimate the change in payments under the LTCH PPS for FY 2027. Accordingly, based on the best available data for the 318 LTCHs included in our analysis, we estimate that aggregate FY 2027 LTCH PPS payments to LTCH PPS standard Federal payment rate cases would increase approximately $55 million relative to FY 2026, primarily due to the proposed annual update to the LTCH PPS standard Federal rate.
If regulations impose administrative costs on private entities, such as the time needed to read and interpret a rule, we should estimate the cost associated with regulatory review. Due to the uncertainty involved with accurately quantifying the number of entities that will review the rule, we assume that the total number of unique commenters on last year's proposed rule will be the number of reviewers of this proposed rule. We acknowledge that this assumption may understate or overstate the costs of reviewing the rule. It is possible that not all commenters reviewed last year's rule in detail, and it is also possible that some reviewers chose not to comment on the proposed rule. For these reasons, we believe that the number of past commenters would be a fair estimate of the number of reviewers of this rule. We welcome any comments on the approach in estimating the number of entities which will review this proposed rule.
We recognize that different types of entities are in many cases affected by mutually exclusive sections of the rule. Thus, for the purposes of our estimate we assume that each reviewer read approximately 50 percent of the proposed rule. Finally, in our estimates, we have used the 5,409 number of timely pieces of correspondence on the FY 2026 IPPS/LTCH PPS proposed rule as our estimate for the number of reviewers of this rule. We continue to acknowledge the uncertainty involved with using this number, but we believe it is a fair estimate due to the variety of entities affected and the likelihood that some of them choose to rely (in full or in part) on press releases, newsletters, fact sheets, or other sources rather than the comprehensive review of preamble and regulatory text. We seek comments on this assumption.
Using the wage information from the BLS for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing the proposed rule is $113.42 per hour, including overhead and fringe benefits (
As required by OMB Circular A-4 (available at
As shown in Table V. of the Appendix of this proposed rule, the net costs to the Federal Government associated with the policies in this proposed rule are estimated at $1.9 billion.
As discussed in section I.J. of the Appendix of this proposed rule, the impact analysis of the payment rates and factors presented in this proposed rule under the LTCH PPS is projected to result in an increase in estimated aggregate LTCH PPS payments to LTCH PPS standard Federal payment rate cases in FY 2027 relative to FY 2026 of approximately $55 million based on the data for 318 LTCHs in our analysis. Therefore, as required by OMB Circular A-4 (available at
As shown in Table VI. of the Appendix of this proposed rule, the net cost to the Federal Government associated with the policies for LTCHs in this proposed rule are estimated at $55 million.
As required by OMB Circular A-4 (available at
As required by OMB Circular A-4 (available at
The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small government jurisdictions. The North American Industry Classification System (NAICS) was adopted in 1997 and is the current standard used by the Federal statistical agencies related to the U.S. business economy. Hospitals and most other health care providers and suppliers are small entities, either by being nonprofit organizations or by meeting the Small Business Administration (SBA) definition of a small business (having revenues of less than $9.0 million to $47.0 million in any 1 year). (For details, see the SBA's website at
We utilized the NAICS U.S. industry title “Hospitals” and corresponding NAICS code 622 in determining impacts for small entities for this rule. The NAICS code 622 has a size standard of $47 million.
For purposes of the RFA, approximately half of all hospitals are considered to be small entities. As shown in Table IX, hospitals with enterprise size of $49 million or less (1,494) are approximately 48 percent of total firms (3,136). Because roughly half of hospitals qualify as small entities under the RFA, the impacts described in this proposed rule generally affect small entities. Individuals and States are not included in the definition of a small entity. MACs are also not considered to be small entities because they do not meet the SBA definition of a small business.
HHS interprets the RFA to consider economic effects “significant” when more than 5 percent of providers incur impacts of at least 3 to 5 percent or more of total revenue or total costs. Approximately 44 percent of Medicare-participating hospitals report Medicare utilization of at least 25 percent of their total inpatient days (see the “Medicare Utilization as a Percent of Inpatient Days” category in Table I in section I.F. of the Appendix to this proposed rule), indicating that Medicare payments constitute a substantial portion of hospital revenue. In addition, approximately 5 percent of hospitals qualify as MDHs and report Medicare utilization at least 60 percent of the hospital's inpatient days or discharges. Based on this analysis, we estimate that the policies proposed in this rule would affect more than 5 percent of hospitals with changes in Medicare revenue of at least 3 to 5 percent.
For example, we estimate that a majority of the 3,013 IPPS hospitals included in the impact analysis presented in “Table I.—Impact Analysis of Proposed Changes to the IPPS for Operating Costs for FY 2027” would experience average payment increases of approximately 1.2 percent. We attribute these increases primarily to the proposed outlier payments, the proposed hospital rate update, and the proposed uncompensated care payments, as described in section I.F. of the Appendix to this proposed rule. Across hospital categories, we estimate that impacts would range from an increase of 3.3 percent for urban New England hospitals to a decrease of 7.6 percent for MDHs, as described in section I.F. of the Appendix to this proposed rule.
We project that LTCHs would experience overall an increase in payments for LTCH PPS standard Federal payment rate cases in FY 2027. In this impact analysis, we use the rates, factors, and policies proposed in this rule, based on the best available data, to estimate payment changes for FY 2027. Accordingly, using the best available
We further estimate that the 318 LTCH PPS hospitals included in the impact analysis presented in “Table IV: Impact of Proposed Payment Rate and Policy Changes to LTCH PPS Payments for LTCH PPS Standard Federal Payment Rate Cases for FY 2027 (Estimated FY 2026 Payments Compared to Estimated FY 2027 Payments)” would experience an average increase of approximately 2.3 percent. We attribute this increase primarily to the proposed annual standard Federal rate update of 2.4 percent for FY 2027, as discussed in section I.J. of the Appendix to this proposed rule. Across LTCH categories, we estimate that impacts would range from an increase of 3.9 percent for government-owned LTCHs to an increase of 1.7 percent for rural LTCHs, as described in section I.J. of the Appendix to this proposed rule.
As shown in Tables V. and VI. of this Appendix, we estimate that this proposed rule will result in aggregate transfers of approximately $1.9 billion to IPPS hospitals and $55 million to LTCHs. In Table IX., we estimate the impact of this rule on small entities by applying the SBA size standards and approximating the share of affected firms and revenues attributable to small entities. Specifically, we assume that small firms represent 46.1 percent of affected entities and account for approximately 1.8 percent of total industry revenues. Using these assumptions, we estimate that of the 3,013 IPPS hospitals, approximately 1,389 are small entities, and of the 318 LTCHs, approximately 147 are small entities. Applying the 1.8 percent revenue share, we estimate that approximately $34.3 million of the IPPS impacts and approximately $1.0 million of the LTCH impacts would accrue to small entities, which corresponds to an average impact of approximately $24,727 per small IPPS hospital and approximately $6,782 per small LTCH.
This proposed rule includes a range of proposals. We describe the applicable statutory provisions, identify the proposed policies, present the rationale for these proposals, and, where appropriate, the alternatives considered. Rationales for various proposals are outlined in the Statement of Need in section I.A. of the Appendix to this proposed rule. For example, under the statutory requirement at section 1886(b)(3)(B) of the Act, we propose to update the national standardized amount for inpatient hospital operating costs by the applicable percentage increase of 2.4 percent, as described in section I.A of the Appendix to this proposed rule, and we did not consider an alternative for small businesses. Alternatives considered for various proposals are described in section I.O. of the Appendix to this proposed rule.
The analyses presented in this Appendix and throughout the preamble of this proposed rule constitute our initial regulatory flexibility analysis. We invite public comment on our estimates and our assessment of the impact of the proposed policies on small entities.
Section 1102(b) of the Act requires us to prepare a regulatory impact analysis for any proposed or final rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain New England counties as belonging to the adjacent urban area. Thus, for purposes of the IPPS and the LTCH PPS, we continue to classify these hospitals as urban hospitals.
As shown in Table I. in section I.F. of the Appendix of this proposed rule, rural IPPS hospitals with 0-49 beds (316 hospitals) are expected to experience a decrease in payments from FY 2026 to FY 2027 of 0.7 percent and rural IPPS hospitals with 50-99 beds (175 hospitals) are expected to experience a decrease in payments from FY 2026 to FY 2027 of 0.3 percent. These changes are primarily driven by the proposed hospital rate update and the increase in estimated uncompensated care payment offset by the statutory expiration of the MDH program and the budget neutral changes to the MS-DRGs and relative weights. We refer readers to Table I. in section I.F. of the Appendix of this proposed rule for additional information on the quantitative effects of the proposed policy changes under the IPPS for operating costs.
All rural LTCHs (16 hospitals) shown in Table IV. in section I.J. of the Appendix of this proposed rule have less than 100 beds. These hospitals are expected to experience an increase in payments from FY 2026 to FY 2027 of 1.7 percent. This increase is primarily due to the proposed 2.4 percent annual update to the LTCH PPS standard Federal payment rate for FY 2027 being partially offset by a projected decrease in payments due to the proposed changes to the area wage level adjustment and the proposed changes to the MS-LTC-DRG classifications and relative weights.
Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2026, that threshold is approximately $193 million. This proposed rule would not mandate any requirements that meet the threshold for State, local, or Tribal governments, nor would it affect private sector costs.
Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts state law, or otherwise has federalism implications. This proposed rule would not have a substantial direct effect on State or local governments, preempt states, or otherwise have a federalism implication.
Executive Order 13175 directs agencies to consult with Tribal officials prior to the formal promulgation of regulations having Tribal implications. Section 1880(a) of the Act states that a hospital of the Indian Health Service, whether operated by such Service or by an Indian Tribe or Tribal organization, is eligible for Medicare payments so long as it meets all of the conditions and requirements for such payments which are applicable generally to hospitals. Consistent with section 1880(a) of the Act, this proposed rule contains general provisions also applicable to hospitals and facilities operated by the Indian Health Service or Tribes or Tribal organizations under the Indian Self-Determination and Education Assistance Act. We continue to engage in consultations with Tribal officials on IPPS issues of interest. We use input received from these consultations, as
Executive Order 14192, titled “Unleashing Prosperity Through Deregulation,” was issued on January 31, 2025, and requires that “any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least 10 prior regulations.
Section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Under section 1886(e)(5) of the Act, we are required to publish update factors recommended by the Secretary in the proposed and final IPPS rules. Accordingly, this Appendix provides the recommendations for the update factors for the IPPS national standardized amount, the hospital-specific rate for SCHs and MDHs, and the rate-of-increase limits for certain hospitals excluded from the IPPS, as well as LTCHs. In prior years, we made a recommendation in the IPPS proposed rule and final rule for the update factors for the payment rates for IRFs and IPFs. However, for FY 2027, consistent with our approach for FY 2026, we are including the Secretary's recommendation for the update factors for IRFs and IPFs in separate
As discussed in section VI.B. of the preamble to this proposed rule, for FY 2027, consistent with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are setting the applicable percentage increase by applying the following adjustments in the following sequence. Specifically, the applicable percentage increase under the IPPS is equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of one-quarter of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket percentage increase or rate-of-increase (with no adjustments)) for hospitals that fail to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act and a reduction of three-quarters of the applicable percentage increase (prior to the application of other statutory adjustments; also referred to as the market basket percentage increase or rate-of-increase (with no adjustments)) for hospitals not considered to be meaningful electronic health record (EHR) users in accordance with section 1886(b)(3)(B)(ix) of the Act, and then an adjustment based on changes in economy-wide productivity (the productivity adjustment). Section 1886(b)(3)(B)(xi) of the Act, as added by section 3401(a) of the Affordable Care Act, states that application of the productivity adjustment may result in the applicable percentage increase being less than zero.
We note that, in compliance with section 404 of the MMA, in the FY 2026 IPPS/LTCH PPS final rule (90 FR 36859 through 36879), we replaced the 2018 based IPPS operating and capital market baskets with the rebased and revised 2023-based IPPS operating and capital market baskets beginning in FY 2026.
In this FY 2027 IPPS/LTCH PPS proposed rule, in accordance with section 1886(b)(3)(B) of the Act, we are proposing to base the proposed FY 2027 market basket update used to determine the applicable percentage increase for the IPPS on IGI's fourth quarter 2025 forecast of the 2023-based IPPS market basket rate-of-increase with historical data through third quarter 2025, which is estimated to be 3.2 percent. In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in section VI.B. of the preamble of this FY 2027 IPPS/LTCH PPS proposed rule, based on IGI's fourth quarter 2025 forecast, we are proposing a productivity adjustment of 0.8 percentage point for FY 2027. We are also proposing that if more recent data subsequently become available, we would use such data, if appropriate, to determine the FY 2027 market basket update and productivity adjustment for the FY 2027 IPPS/LTCH PPS final rule.
Therefore, based on IGI's fourth quarter 2025 forecast of the 2023-based IPPS market basket percentage increase and the productivity adjustment, depending on whether a hospital submits quality data under the rules established in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital that submits quality data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that is a meaningful EHR user), we are proposing four possible applicable percentage increases that could be applied to the standardized amount, as shown in the table that follows.
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase in the hospital-specific rate for SCHs and MDHs equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS). Therefore, the update to the hospital-specific rates for SCHs and MDHs is also subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act.
As discussed in section VI.F. of the preamble of this proposed rule, section 6202 of the Consolidated Appropriations Act, 2026 (Pub. L. 119-75) extended the MDH program for FY 2027 discharges occurring before January 1, 2027. Therefore, under current law, the MDH program will expire for discharges on or after January 1, 2027. We refer readers to section V.E. of the preamble of this proposed rule for further discussion of the MDH program.
As previously stated, the update to the hospital specific rate for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, depending on whether a hospital submits quality data and is a meaningful EHR user, we are proposing the same four possible applicable percentage increases in the previous table for the hospital-specific rate applicable to SCHs and MDHs.
Because Puerto Rico hospitals are no longer paid with a Puerto Rico-specific standardized amount under the amendments to section 1886(d)(9)(E) of the Act, there is no longer a need for us to make an update to the Puerto Rico standardized amount. Hospitals in Puerto Rico are now paid 100 percent of the national standardized amount and, therefore, are subject to the same update to the national standardized amount discussed under section VI.B.1. of the preamble of this proposed rule.
In addition, as discussed in section VI.B.2. of the preamble of this proposed rule, section 602 of Public Law 114-113 amended section 1886(n)(6)(B) of the Act to specify that subsection (d) Puerto Rico hospitals are eligible for incentive payments for the meaningful use of certified EHR technology, effective beginning FY 2016. In addition, section 1886(n)(6)(B) of the Act was amended to specify that the adjustments to the applicable percentage increase under section 1886(b)(3)(B)(ix) of the Act apply to subsection (d) Puerto Rico hospitals that are not meaningful EHR users, effective beginning FY 2022.
Section 1886(b)(3)(B)(ix) of the Act in conjunction with section 602(d) of Public Law 114-113 requires that for FY 2024 and subsequent fiscal years, any subsection (d) Puerto Rico hospital that is not a meaningful EHR user as defined in section 1886(n)(3) of the Act and not subject to an exception under section 1886(b)(3)(B)(ix) of the Act will have a reduction of three-quarters of the applicable percentage increase (prior to the application of other statutory adjustments).
Based on IGI's fourth quarter 2025 forecast of the 2023-based IPPS market basket update with historical data through third quarter 2025, in this FY 2027 IPPS/LTCH PPS proposed rule, in accordance with section 1886(b)(3)(B) of the Act, as previously discussed, for Puerto Rico hospitals, we are proposing an IPPS market basket increase of 3.2 percent and a productivity adjustment of 0.8 percentage point. Therefore, for FY 2027, depending on whether a Puerto Rico hospital is a meaningful EHR user, there are two possible applicable percentage increases that can be applied to the standardized amount. Based on these data, we are proposing the following applicable percentage increases to the standardized amount for FY 2027 for Puerto Rico hospitals:
• For a Puerto Rico hospital that is a meaningful EHR user, we are proposing an applicable percentage increase to the operating standardized amount of 2.4 percent (that is, the FY 2027 estimate of the proposed IPPS market basket rate-of-increase of 3.2 percent less an adjustment of 0.8 percentage point for the proposed productivity adjustment).
• For a Puerto Rico hospital that is not a meaningful EHR user, we are proposing an applicable percentage increase to the operating standardized amount of 0.0 percent (that is, the FY 2027 estimate of the proposed market basket rate-of-increase of 3.2 percent, less an adjustment of 2.4 percentage point (the proposed IPPS market basket rate-of-increase of 3.2 percent × 0.75 for failure to be a meaningful EHR user), and less an adjustment of 0.8 percentage point for the proposed productivity adjustment).
As noted previously, we are proposing that if more recent data subsequently become available, we would use such data, if appropriate, to determine the FY 2027 market basket percentage increase and the productivity adjustment for the FY 2027 IPPS/LTCH PPS final rule.
Section 1886(b)(3)(B)(ii) of the Act is used for purposes of determining the percentage increase in the rate-of-increase limits for children's hospitals, cancer hospitals, and hospitals located outside the 50 States, the District of Columbia, and Puerto Rico (that is, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and America Samoa). Section 1886(b)(3)(B)(ii) of the Act sets the rate-of-increase limits equal to the market basket percentage increase. In accordance with § 403.752(a) of the regulations, religious nonmedical health care institutions (RNHCIs) are paid under the provisions of § 413.40, which also use section 1886(b)(3)(B)(ii) of the Act to update the percentage increase in the rate-of-increase limits.
Currently, children's hospitals, PPS-excluded cancer hospitals, RNHCIs, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa are among the remaining types of hospitals still paid under the reasonable cost methodology, subject to the rate-of-increase limits. In addition, in accordance with § 412.526(c)(3) of the regulations, extended neoplastic disease care hospitals (described in § 412.22(i) of the regulations) also are subject to the rate-of-increase limits. As discussed in section VI. of the preamble of this proposed rule, we are proposing to use the percentage increase in the 2023-based IPPS operating market basket to update the target amounts for children's hospitals, PPS-excluded cancer hospitals, RNHCIs, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, and extended neoplastic disease care hospitals for FY 2027 and subsequent fiscal years. Accordingly, for FY 2027, the rate-of-increase percentage to be applied to the target amount for these children's hospitals, cancer hospitals, RNHCIs, extended neoplastic disease care hospitals, and short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa is the FY 2027 percentage increase in the 2023-based IPPS operating market basket. For this proposed rule, the current estimate of the IPPS operating market basket percentage increase for FY 2027 is 3.2 percent. We are proposing that if more recent data subsequently become available, we would use such data, if appropriate, to determine the FY 2027
Section 123 of Public Law 106-113, as amended by section 307(b) of Public Law 106-554 (and codified at section 1886(m)(1) of the Act), provides the statutory authority for updating payment rates under the LTCH PPS.
As discussed in section V.A. of the Addendum to this proposed rule, we are proposing to update the LTCH PPS standard Federal payment rate for FY 2027 by 2.4 percent, consistent with section 1886(m)(3) of the Act which provides that any annual update be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act (that is, the productivity adjustment). Furthermore, in accordance with the LTCH QRP under section 1886(m)(5) of the Act, we are proposing to reduce the annual update to the LTCH PPS standard Federal rate by 2.0 percentage points for failure of a LTCH to submit the required quality data. Accordingly, we are proposing to establish an update factor of 1.024 in determining the LTCH PPS standard Federal rate for FY 2027. For LTCHs that fail to submit quality data for FY 2027, we are proposing to establish an annual update to the LTCH PPS standard Federal rate of 0.4 percent (that is, the proposed annual update for FY 2027 of 2.4 percent less 2.0 percentage points for failure to submit the required quality data in accordance with section 1886(m)(5)(C) of the Act and our rules) by applying a proposed update factor of 1.004 in determining the LTCH PPS standard Federal rate for FY 2027. (We note that, as discussed in section IX.C. of the preamble of this proposed rule, the update to the LTCH PPS standard Federal payment rate of 2.4 percent for FY 2027 does not reflect any budget neutrality factors.)
MedPAC is recommending inpatient hospital rates be updated by the amount specified in current law. MedPAC's rationale for this update recommendation is described in more detail in this section. As previously stated, section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Consistent with current law, depending on whether a hospital submits quality data and is a meaningful EHR user, we are recommending the four applicable percentage increases to the standardized amount listed in the table under section II. of this Appendix. We are recommending that the same applicable percentage increases apply to SCHs and MDHs.
In addition to making a recommendation for IPPS hospitals, in accordance with section 1886(e)(4)(A) of the Act, we are recommending update factors for certain other types of hospitals excluded from the IPPS. Consistent with our policies for these facilities, we are recommending an update to the target amounts for children's hospitals, cancer hospitals, RNHCIs, short-term acute care hospitals located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa and extended neoplastic disease care hospitals of 3.2 percent.
For FY 2027, consistent with policy set forth in section IX.C. of the preamble of this proposed rule, for LTCHs that submit quality data, we are recommending an update of 2.4 percent to the LTCH PPS standard Federal rate. For LTCHs that fail to submit quality data for FY 2027, we are recommending an annual update to the LTCH PPS standard Federal rate of 0.4 percent.
In its March 2026 Report to Congress, MedPAC assessed the adequacy of current payments and costs, and the relationship between payments and an appropriate cost base. MedPAC recommended an update to the hospital inpatient rates by the amount specified in current law. MedPAC anticipates that their recommendation to update the IPPS payment rate by the amount specified under current law in FY 2027 would generally be adequate to maintain beneficiaries' access to hospital inpatient and outpatient care and keep IPPS payment rates close to, if somewhat below, the cost of delivering high-quality care efficiently.
MedPAC recommends redistributing the current Medicare safety-net payments (disproportionate share hospital and uncompensated care payments) using the MedPAC-developed Medicare Safety-Net Index (MSNI) for hospitals. In addition, MedPAC recommends adding $1 billion to this MSNI pool of funds to help maintain the financial viability of Medicare safety-net hospitals and recommended to Congress transitional approaches for a MSNI policy.
We refer readers to the March 2026 MedPAC report, which is available for download at
We are proposing an applicable percentage increase for FY 2027 of 2.4 percent as described in section 1886(b)(3)(B) of the Act, provided the hospital submits quality data and is a meaningful EHR user consistent with these statutory requirements. We note that, because the operating and capital payments in the IPPS remain separate, we are continuing to use separate updates for operating and capital payments in the IPPS. The update to the capital rate is discussed in section III. of the Addendum to this proposed rule.
We note that section 1886(d)(5)(F) of the Act provides for additional Medicare payment adjustments, called Medicare disproportionate share hospital (DSH) payments, for subsection (d) hospitals that serve a significantly disproportionate number of low-income patients. Section 1886(r) of the Act provides that, for FY 2014 and each subsequent fiscal year, the Secretary shall pay each such subsection (d) hospital that is eligible for Medicare DSH payments an empirically justified DSH payment equal to 25 percent of the Medicare DSH adjustment they would have received under section 1886(d)(5)(F) of the Act if subsection (r) did not apply. The remaining amount, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments if subsection (r) of the Act did not apply, reduced to reflect changes in the percentage of individuals who are uninsured, is available to make additional payments to each hospital that qualifies for Medicare DSH payments and has uncompensated care. These additional payments are called uncompensated care payments. We refer readers to section V. of the preamble of this proposed rule for further discussion of Medicare DSH and uncompensated care payments.
Centers for Medicare & Medicaid Services (CMS) and Office of the National Coordinator for Health Information Technology (ONC), Department of Health and Human Services (HHS).
Proposed rule.
These proposals are intended to improve the electronic exchange of health care data and streamline processes related to prior authorization by increasing the interoperability of systems used across the health care industry. We are proposing new requirements for Medicare Advantage (MA) organizations, state Medicaid fee-for-service (FFS) programs, state Children's Health Insurance Program (CHIP) FFS programs, Medicaid managed care plans, CHIP managed care entities, and Qualified Health Plan (QHP) issuers on the Federally-facilitated Exchanges (FFEs), including issuers that offer small group market QHPs on the Federally-facilitated Small Business Health Options Program (FF-SHOP) Exchanges (hereinafter referred to as “small group market QHP issuers on the FF-SHOPs”) (collectively “impacted payers”), to make available electronic prior authorization for drugs. We are also proposing to extend many existing interoperability requirements for the prior authorization of non-drug items and services to include prior authorizations for drugs to further reduce patient and provider burden.
We are also proposing to require impacted payers to report their application programming interfaces (API) endpoints and related information for the Patient Access, Provider Directory, Provider Access, Payer-to-Payer, and Prior Authorization APIs to CMS. To help assess the impact of our policies, we are proposing to collect API usage metrics. In addition, we are proposing to apply the existing interoperability requirements to small group market QHP issuers on the FF-SHOPs as impacted payers. To improve impacted payers' ability to exchange health information while continuing CMS's drive toward interoperability, we are proposing to require certain Health Level Seven (HL7®) Fast Healthcare Interoperability Resources (FHIR®) implementation guides (IGs) that are currently recommended. In addition, HHS is proposing to adopt the HL7 FHIR base standard and certain associated specifications and IGs as the Health Insurance Portability and Accountability Act of 1996 (hereinafter referred to as “HIPAA”) (Pub. L. 104-191, enacted Aug. 21, 1996) standards for dental, professional, and institutional “referral certification and authorization” transactions and “eligibility for a health plan” transactions associated with prior authorization. We are proposing to add a definition for “failure to report,” which would allow CMS to impose a civil monetary penalty (CMP) on applicable manufacturers or applicable group purchasing organizations (GPOs) if those entities fail to grant CMS timely access to documents for the purposes of an audit. Finally, ONC is using this rulemaking to propose to adopt updated versions of certain health information technology (health IT) standards and specifications for HHS use, such as CMS's interoperability requirements, to support a more robust health IT infrastructure.
To be assured consideration, comments must be received at one of the addresses provided below, by June 15, 2026.
In commenting, please refer to file code CMS-0062-P.
Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):
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Please allow sufficient time for mailed comments to be received before the close of the comment period.
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For information on viewing public comments, see the beginning of the
David Koppel, (303) 844-2883, for policy issues.
Shanna Hartman, (410) 786-0092, for standards issues.
Scott Weinberg, (410) 786-6017, for Access APIs issues.
Katie Brooks, 667-414-0612, for API endpoints issues.
Emmanuelle Vasilak, 667-290-9848, for compliance issues.
Nora Simmons, (410) 786-1981, for Collection of Information or Regulatory Impact Analysis issues.
Alexander Baker, (202) 260-2048, for ONC issues.
The “Medicare and Medicaid Programs; Patient Protection and Affordable Care Act; Interoperability and Patient Access for MA Organizations and Medicaid Managed Care Plans, State Medicaid Agencies, CHIP Agencies and CHIP Managed Care Entities, Issuers of Qualified Health Plans on the Federally-Facilitated Exchanges, and Health Care Providers” final rule (85 FR 25510) (hereinafter referred to as the “2020 CMS Interoperability and Patient Access final rule”) appeared in the
The “Medicare and Medicaid Programs; Patient Protection and Affordable Care Act; Advancing Interoperability and Improving Prior Authorization Processes for Medicare Advantage Organizations, Medicaid Managed Care Plans, State Medicaid Agencies, Children's Health Insurance Program (CHIP) Agencies and CHIP Managed Care Entities, Issuers of Qualified Health Plans on the Federally-Facilitated Exchanges, Merit-Based Incentive Payment System (MIPS) Eligible Clinicians, and Eligible Hospitals and Critical Access Hospitals (CAHs) in the Medicare Promoting Interoperability Program” final rule (89 FR 8758) (hereinafter referred to as the “2024 CMS Interoperability and Prior Authorization final rule”) appeared in the
In the 2024 CMS Interoperability and Prior Authorization final rule, we did not propose or finalize requirements that apply to drugs of any type because, as we discussed in the proposed and final rules, the processes and electronic standards for prior authorization of drugs differ from the non-drug items and services included in our final policies. We also acknowledged that there are existing laws and regulations around the prior authorization of drugs that may apply to impacted payers (such as the existing electronic prescribing requirements for covered Part D drugs in 42 CFR 423.160) (87 FR 76240 and 76241, and 89 FR 8762). However, we received many public comments in response to the “Medicare and Medicaid Programs; Patient Protection and Affordable Care Act; Advancing Interoperability and Improving Prior Authorization Processes for Medicare Advantage Organizations, Medicaid Managed Care Plans, State Medicaid Agencies, Children's Health Insurance Program (CHIP) Agencies and CHIP Managed Care Entities, Issuers of Qualified Health Plans on the Federally-Facilitated Exchanges, Merit-Based Incentive Payment System (MIPS) Eligible Clinicians, and Eligible Hospitals and Critical Access Hospitals in the Medicare Promoting Interoperability Program” proposed rule (87 FR 76238) (hereinafter referred to as the “2022 CMS Interoperability and Prior Authorization proposed rule”), which appeared in the
The 2024 CMS Interoperability and Prior Authorization final rule also established, improved, or shortened prior authorization timeframes for impacted payers other than QHP issuers on the FFEs (MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities) to respond to prior authorization requests for non-drug items and services. Specifically, we finalized timeframes of 7 calendar days for standard requests and 72 hours for expedited requests, with the possibility of an extension of up to 14 days in certain circumstances (89 FR 8878). For Medicaid and CHIP, state law may establish a shorter timeframe.
At the time, we did not propose to change those timeframes because they are aligned with other non-grandfathered group and individual market plans. However, we received numerous comments that opposed the exclusion of QHP issuers on the FFEs from these policies and urged that QHPs offered on the FFEs should be aligned with the requirements for other CMS programs. Some expressed concern that not doing so would have negative effects on enrollee care, and that enrollees with coverage through these plans should be entitled to the same protections as those with coverage through the other impacted payers. In addition, we received comments that recommended we reconsider the exclusion of drugs from our proposals and suggested that CMS finalize the prior authorization process and Prior Authorization API requirements in the 2024 CMS Interoperability and Prior Authorization final rule to cover drugs covered under a medical benefit. Commenters further expressed that by failing to include drugs in those requirements, CMS was failing to address the biggest culprit of delay to timely care and administrative burden.
We are proposing to require that impacted payers support electronic prior authorization for all drugs that require prior authorization. We are proposing two separate sets of standards to facilitate electronic prior authorization for all drugs, the HL7 FHIR standard (and certain FHIR IGs) as one set, and three NCPDP standards (the NCPDP SCRIPT standard, NCPDP Formulary & Benefit Standard Implementation Guide [NCPDP F&B standard], and the NCPDP Real-Time Prescription Benefit Standard Implementation Guide [NCPDP RTPB standard]) as the other set. The FHIR standard, including the IGs, and the three NCPDP standards, all facilitate electronic prior authorization for drugs; which standards set is applicable depends on whether the drug is covered under the payer's medical benefit or its pharmacy benefit. We are proposing to require impacted payers to expand their Prior Authorization API, finalized in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8758), to incorporate drugs covered under a medical benefit. We are also proposing to require impacted payers (other than MA organizations for whom requirements already exist) to support the proposed NCPDP standards for the electronic prior authorization of drugs covered under a pharmacy benefit.
As proposed in this proposed rule, the Prior Authorization API comprises the HL7 FHIR Da Vinci Coverage Requirements Discovery (CRD) IG, the HL7 FHIR Da Vinci Documentation Templates and Rules (DTR) IG, and the HL7 FHIR Da Vinci Prior Authorization Support (PAS) IG, and can be used to support drugs under a medical benefit, but should not be used for the prior authorization of drugs covered under a pharmacy benefit. Specifically, the PAS IG states that the IG “SHOULD NOT be used for any medication that is covered under a pharmacy benefit where prior authorization is provided by another electronic exchange process (for example, NCPDP SCRIPT).”
Health Level Seven International. (2026, March 27). Da Vinci Prior Authorization Support (PAS) FHIR: Use Cases and Overview. Retrieved from
Conversely, the NCPDP SCRIPT standard include instructions that it is to be used for “products covered by a patient's pharmacy benefit.” The NCPDP F&B and NCPDP RTPB standards complement the NCPDP SCRIPT standard and apply to the same category of drugs. Payers can use the NCPDP F&B standard to make available formulary and benefit information, including prior authorization requirements, at the health plan level. The NCPDP RTPB standard enables real-time exchange at the point-of-prescribing of patient-specific eligibility, coverage, and estimated cost-sharing information for drugs covered
Our proposals regarding the prior authorization of drugs are similar to the provisions finalized for non-drug items and services in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8897) but with special consideration to existing policies, operational processes, and standards for the electronic prior authorizations of drugs. The proposals would require impacted payers to support electronic prior authorization for all drugs, which should improve the process for impacted payers' patients and providers. In section II.A. of this proposed rule, we describe each of these standards and how they would be used. In section II.B. of this proposed rule, we describe our proposals as they apply to each category of impacted payer, including program specifics as to distinction of drugs covered under medical benefits versus drugs covered under pharmacy benefits.
For the proposed requirement to incorporate drugs covered under a medical benefit into the Prior Authorization API, we are proposing an October 1, 2027 compliance date. As discussed in section II.B.3. of this proposed rule, incorporating drugs into Prior Authorization APIs means that, using the proposed standards, information is available through the API as to whether prior authorization is required for drugs covered under a medical benefit, the coverage and documentation requirements for prior authorization are available, and that the API can transmit prior authorization requests and decisions between providers and the payer.
Medicare Part D sponsors (including MA organizations that offer a Medicare Advantage Prescription Drug [MA-PD] plan) are already required, in 42 CFR 423.160(b)(1), to use an unexpired version of the NCPDP SCRIPT standard adopted by the Secretary in 45 CFR 170.205(b) as part of their electronic prescription drug programs. Prescribers and dispensers are also required to use an adopted version of the NCPDP SCRIPT standard when electronically transmitting prescriptions and prescription-related information for covered Part D drugs for Part D-eligible individuals. Similarly, beginning January 1, 2027, Part D sponsors are required, in 42 CFR 423.160(b)(3) and (b)(5), to implement for uses described in those paragraphs unexpired versions of the NCPDP F&B and RTPB standards adopted by the Secretary in 45 CFR 170.205(u) and 45 CFR 170.205(c), respectively.
We propose that state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs, including small group market QHP issuers on the FF-SHOPs, similarly could use any unexpired version of the NCPDP standards adopted by the Secretary in 45 CFR 170.205(b), (c), and (u) to support electronic prior authorization of drugs covered under a pharmacy benefit. We are proposing an October 1, 2027 compliance date to support the proposed NCPDP standards to facilitate electronic prior authorization of drugs covered under a pharmacy benefit.
Consistent with section 3004(b)(3) of the PHSA, the Secretary adopts standards for HHS use, including those adopted in 45 CFR 170.215. We are proposing to require impacted payers to implement and maintain their required FHIR APIs in conformance with certain applicable standards adopted in 45 CFR 170.215, without specifying versions of each required standard, which would allow impacted payers to use unexpired versions of the required standards, as the Secretary adopts updated versions in 45 CFR 170.215. Where more than one unexpired version of a standard is adopted in 45 CFR 170.215, impacted payers would be able to use any of the unexpired standards, allowing for transition periods as updated versions are adopted by the Secretary and older versions expire. To support interoperability, these proposals require impacted payers to implement and maintain API technology conformant with certain IGs that were recommended in the 2024 CMS Interoperability and Prior Authorization final rule, as applicable to each interoperability API (89 FR 8945). We are proposing an October 1, 2027 compliance date to implement the proposed standards. We are also recommending additional IGs for some of the APIs that could be used to support certain use cases.
We are proposing to replace the policy finalized in the 2024 CMS Interoperability and Prior Authorization final rule that allows states with small FFS populations to request an exemption from CMS for the non-drug items and services Prior Authorization API requirements with a policy that would allow all state Medicaid and CHIP FFS programs to request extensions to the compliance date for that requirement. We are proposing that those extensions would only be available until the compliance date for the HIPAA Administrative Simplification proposals in this rule, if the proposals are finalized. In addition, we are proposing a process for state Medicaid and CHIP FFS programs to request from CMS extensions to allow additional time to meet the proposed requirement to incorporate drugs covered under a medical benefit into the Prior Authorization API and the proposed requirement to support the NCPDP standards for electronic prior authorization of drugs covered under a pharmacy benefit, if they meet certain criteria. We are also proposing that QHP issuers on the FFEs be permitted to request an exception from the requirement to support electronic prior authorization of drugs covered under a pharmacy benefit through the proposed NCPDP standards, as part of the annual QHP certification process. Issuers could seek an exception by submitting a narrative justification with information specified in 45 CFR 156.223(h), including why the QHP issuer on the FFEs cannot reasonably satisfy the requirements for the applicable plan year.
We are proposing to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to respond to the provider with a specific reason for denying a prior authorization request for any drugs. We are proposing an October 1, 2027 compliance date for those impacted payers to respond to a provider with a specific reason for denying a prior authorization request for any drugs. This proposal builds on the requirement finalized in the 2024 CMS Interoperability and Prior Authorization final rule that impacted payers must provide a specific reason to the provider for denying a prior authorization request for non-drug items and services.
For state Medicaid FFS programs, Medicaid managed care plans, and CHIP managed care entities, the timeframes for making decisions on prior authorization requests for covered outpatient drugs is 24 hours.
We are proposing to shorten timeframes within which QHP issuers on the FFEs, including small group market QHP issuers on the FF-SHOPs, must make a decision on prior authorization requests by establishing timeframes by which QHP issuers on the FFEs must notify requesting providers of their decision. The proposed timeframes generally align with the timeframes for other impacted payers that we finalized in the 2024 CMS Interoperability and Prior Authorization final rule for non-drug items and services (89 FR 8878) and that we are proposing for drugs in this proposed rule. Specifically, we propose to require QHP issuers on the FFEs to send notice of their decision to the requesting provider for standard prior authorization requests for non-drug items and services as expeditiously as the enrollee's health condition requires, but no later than 7 calendar days after receiving the request. We are not proposing to change the existing 72-hour timeframe to notify enrollees about prior authorization decisions on expedited requests for non-drug items and services, but are proposing that QHP issuers on the FFEs notify the requesting provider of their decision on a prior authorization request for non-drug items and services within the same timeframe. These proposed timeframes for non-drug items and services align with existing timeframes that were finalized in the 2024 CMS Interoperability and Prior Authorization final rule for MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities (89 FR 8878). We are also proposing to require QHP issuers on the FFEs to send notice of their decision to the requesting provider for standard prior authorization requests for drugs as expeditiously as the enrollee's health condition requires, but no later than 72 hours after receiving the request. We are further proposing to require QHP issuers on the FFEs to send notice of their decision to the requesting provider for expedited prior authorization requests for drugs as expeditiously as the enrollee's health condition requires, but no later than 24 hours after receiving the request. These proposed timeframes generally align with existing requirements for Part D sponsors in 42 CFR 423.568(b) and in 42 CFR 423.572(a). For these proposals, we are proposing an October 1, 2027 compliance date.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized an annual March 31 reporting deadline for all impacted payers to report Patient Access API usage metrics to CMS and to publicly post prior authorization metrics for non-drug items and services from the previous year (89 FR 8784, 8817, and 8855). However, we have determined that such deadlines may not align with Medicaid managed care plans' and CHIP managed care entities' contract rating periods and with the QHP certification process for QHP issuers on the FFEs. Therefore, to align the reporting deadlines with the contract rating period, we are now proposing to require Medicaid managed care plans and CHIP managed care entities to report Patient Access API usage metrics from each rating period to states no later than 90 days after the end of each rating period and to publicly post the required prior authorization metrics for non-drug items and services no later than 90 days after the end of each rating period. For QHP issuers on the FFEs, we are proposing regulatory text to refer to the reporting deadline for Patient Access API usage metrics in a manner similar to the reporting deadlines for other plan data that CMS collects during the annual QHP certification process. Specifically, we propose that following each year it offers a QHP on an FFE, a QHP issuer on the FFEs must report the specified metrics to CMS as aggregated, de-identified data at the issuer level in the form and manner and within the timeframes specified by the Secretary. That would allow flexibility for CMS to include API usage metrics reporting within specific deadlines set for the QHP certification process, which, in practice, is generally the final deadline for the QHP certification process that takes place the following year.
Building on the requirement finalized in the 2024 CMS Interoperability and Prior Authorization final rule that impacted payers must report Patient Access API usage metrics to CMS, we are proposing to require impacted payers to report similar usage metrics about their Provider Access, Payer-to-Payer, and Prior Authorization APIs.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements for impacted payers to report on their websites certain prior authorization metrics for non-drug items and services, including the percentage of prior authorizations that were approved, denied, approved after appeal, and approved after the timeframe for review was extended (89 FR 8897). In an effort to provide more useful and complete information, we are now proposing that impacted payers report a numeric count for each of those metrics (in addition to the percentages). We are also proposing that impacted payers report six new metrics: four new metrics about prior authorization denials after an extended timeframe and appeals for non-drug items and services and two new metrics about prior authorization approvals after an extended timeframe and appeals for non-drug items and services for expedited prior authorization requests only. The proposed metrics complement existing metrics finalized in the 2024 CMS Interoperability and Prior Authorization final rule about prior authorization approvals after an extended timeframe and appeals for non-drug items for standard prior authorization requests. We are proposing compliance dates beginning in 2028 for impacted payers to report the additional metrics.
Similarly, we are proposing to require impacted payers to publicly post on their websites a set of metrics on prior authorizations for all drugs (excluding covered Part D drugs for MA-PD plans). To align with the finalized requirements and our new proposals, we are proposing that these reports must be posted no later than March 31 following any calendar year that the impacted payer offered that type of plan for MA organizations, state Medicaid and CHIP FFS programs, and QHP issuers on the FFEs, and no later than 90 days after the end of each rating period for Medicaid managed care plans and CHIP managed care entities.
We propose to include small group market QHP issuers on the FF-SHOPs in the list of impacted payers for all the proposals in this proposed rule that apply to individual market QHPs on the FFEs. In addition, we are proposing to apply the existing requirements in 45 CFR 156.221, 45 CFR 156.222, and 45 CFR 156.223, which were finalized in the 2020 CMS Interoperability and Patient Access final rule and in the 2024 CMS Interoperability and Prior Authorization final rule (85 FR 25510 and 89 FR 8758), to small group market QHP issuers on the FF-SHOPs. We did not apply these policies to small group market QHP issuers on the FF-SHOPs in previous rulemaking due to concerns about placing burden on these issuers (85 FR 25553 and 89 FR 8767). However, based on subsequent research, all issuers that offer small group market QHPs on the FF-SHOPs, as of the time of this proposal, also offer individual market QHPs on the FFEs. Therefore, we anticipate that the burden for these issuers to implement these proposals for their small group market QHPs on the FF-SHOPs should be relatively low because these issuers are already required to implement the policies for their individual market QHPs on the FFEs. Since plan year 2021, we have only seen one instance of a new entrant into an FF-SHOP Exchange. However, should this change in the future—for example, if an issuer that does not offer one or more individual market QHPs on the FFEs newly enters an FF-SHOP, and this proposal has been finalized, we could still mitigate potential burden for such an issuer by considering whether an exception to one or more of these requirements is appropriate based on, for example, whether such an exception would be in the interests of qualified individuals and qualified employers.
Throughout this proposed rule, we will refer to “QHP issuers on the FFEs” where we propose requirements that apply to both individual market QHP issuers on the FFEs and small group market QHP issuers on the FF-SHOPs, and we will refer to “small group market QHP issuers on the FF-SHOPs” in proposals to apply requirements in 45 CFR 156.221, 45 CFR 156.222, and 45 CFR 156.223 that we previously finalized for individual market QHP issuers on the FFEs. We are proposing that references to QHP issuers on the FFEs in 45 CFR 156.221, 45 CFR 156.222, and 45 CFR 156.223 would include small group market QHP issuers on the FF-SHOPs, because that term is used throughout 45 CFR part 156 Subpart C to refer to QHPs offered in both the individual and small group markets. We will only use different terminology in cases where there is a need to distinguish between individual market QHP issuers on the FFEs and small group market QHP issuers on the FF-SHOPs, such as in proposals to apply a different compliance date for small group market QHP issuers on the FF-SHOPs. For example, because the requirements in 45 CFR 156.221 already took effect for plan years beginning on or after January 1, 2021, our proposed amendment to that regulation would apply the requirements to implement and maintain a Patient Access API to small group market QHP issuers on the FF-SHOPs as of plan years beginning on or after January 1, 2028. We are also proposing a compliance date of plan years beginning on or after January 1, 2028 for small group market QHP issuers on the FF-SHOPs to comply with rules in 45 CFR 156.222 to implement and maintain Provider Access and Payer-to-Payer APIs unless granted an exception pursuant to 45 CFR 156.222(c). We believe that aligning these compliance dates would simplify these requirements, and that it likely provides enough time for issuers that have already implemented the required APIs for their individual market QHPs on the FFEs.
The phrase “plan years beginning on or after January 1” already accommodates small group market QHP issuers on the FF-SHOPs that may have non-calendar year plan years. We solicit comments on the proposals throughout this rule specifically regarding the proposed compliance dates for small group market QHP issuers on the FF-SHOPs, including regarding whether these plans may need more time to implement these requirements. For instance, how could the prior authorization proposals in section II.B. of this proposed rule (electronic prior authorization proposal applicable to all QHP issuers on the FFEs) and II.C. of this proposed rule (prior authorization processes applicable to all QHP issuers on the FFEs) affect small group market QHP issuers on the FF-SHOPs' ability
To support implementation of the policies finalized in the 2020 CMS Interoperability and Patient Access and 2024 CMS Interoperability and Prior Authorization final rules, we propose to require impacted payers to report their API endpoints for each of the required APIs to CMS. In response to the 2022 CMS Interoperability and Prior Authorization proposed rule, we received numerous comments from the public indicating that a centralized directory of API endpoints would be necessary to unlock the full potential of our electronic data exchange policies and reduce administrative burden (89 FR 8932). For instance, a centralized directory of API endpoints could help providers locate a payer's Provider Access API to request patient data or Prior Authorization API to submit a prior authorization request. In addition, payers will need to discover each other's API endpoints to exchange data via the Payer-to-Payer API. Commenters emphasized that there would be a significant burden if payers' API endpoints had to be found individually rather than being listed in a centralized directory. Therefore, we are proposing to require impacted payers to report their Patient Access, Provider Directory, Provider Access, Payer-to-Payer, and Prior Authorization API endpoints and related information to CMS no later than 60 days after the effective date of a final rule, in a manner to be determined. We are also proposing that new impacted payers be required to report this information no later than 60 days before they begin covering patients under the applicable CMS program.
To ensure that patients, providers, and other payers can have complete and appropriate access to information about prior authorizations, we are proposing to require impacted payers to make information about prior authorization requests and decisions for all drugs available to patients via the Patient Access, Provider Access, and Payer-to-Payer APIs (collectively “Access APIs”). For the Patient Access and Provider Access APIs, this includes, as applicable, the status of the prior authorization; the date the prior authorization was approved or denied; the date or circumstance under which the authorization ends; the drug or drugs approved (including the dosage); if the prior authorization was denied, a specific reason why the request was denied; and related structured administrative and clinical documentation submitted by a provider. For the Payer-to-Payer API, that includes, as applicable, the status of the prior authorization; the date the prior authorization was approved; the date or circumstance under which the authorization ends; the drugs or drugs approved (including the dosage); and related structured and unstructured administrative and clinical documentation submitted by a provider, excluding denied prior authorization requests. We are proposing an October 1, 2027 compliance date for these proposals.
In addition, we are proposing to add a definition for “failure to report” in 42 CFR 403.902 to support the Open Payments program. The Open Payments program, mandated by section 1128G of the Social Security Act (hereinafter referred to as “the Act”) and codified in 42 CFR 403.900 through 403.914, requires the pharmaceutical and medical device industry to submit information about certain payments or other transfers of value made to certain types of health care providers. This proposal would allow CMS to impose a CMP on applicable manufacturers or applicable GPOs if those entities fail to grant CMS timely access to documents for the purposes of an audit authorized by 42 CFR 402.912(e)(2). We propose this definition be effective beginning on the effective date of the final rule.
Under the Administrative Simplification provisions of HIPAA (Part C of Title XI of the Act), HHS is proposing to adopt the FHIR standard and certain associated IGs as the standards for dental, professional, and institutional “referral certification and authorization” transactions and “eligibility for a health plan” transactions associated with prior authorization. Specifically, in addition to the FHIR standard, HHS is proposing to adopt the HL7 FHIR US Core (US Core), HL7 Substitutable Medical Applications, Reusable Technologies (SMART) Application Launch Framework (SMART App Lauch), CRD, DTR, and PAS IGs in place of the adopted versions of the X12N 278 Health Care Services Review—Request for Review and Response transaction standard (X12N 278 transaction standard) in 45 CFR 162.1302 and the existing X12N 270/271 Health Care Eligibility Benefit Inquiry and Response transaction standard (X12N 270/271 transaction standard) in 45 CFR 162.1202 for transactions related to prior authorization. Additionally, HHS is proposing to adopt the HL7 FHIR Da Vinci Clinical Data Exchange (CDex) IG in 45 CFR 162.1302(g)(2)(vii) as the attachment standard for prior authorization transactions. The proposals to adopt the FHIR standards would only apply to dental, professional, and institutional transactions, not to those for retail pharmacy drugs, which are currently required to be conducted using NCPDP standards. HHS proposes a compliance date for these HIPAA Administrative Simplification proposals 24 months after the effective date of a final rule, except for small health plans, for which HHS proposes a compliance date 36 months after the effective date of a final rule. HHS is making these proposals after evaluating the results of the exception from the currently adopted standards granted to the HL7 Da Vinci Project, as provided in 45 CFR 162.940, to test FHIR standards.
As part of this proposed rule, ONC
Finally, we are publishing five requests for information (RFIs) to gather information that may support future rulemaking or other initiatives. The RFIs are related to electronic event notifications for value-based care and care coordination, health care resiliency and securing health care operations in a modern health care ecosystem, improving the implementation of payer API technology through testing and
Electronic event notifications are valuable tools for coordinating care in the modern health care environment, and we are seeking comment on ways to improve this process with expanded use and content of electronic event notifications (often referred to as admission, discharge, and transfer, or “ADT” notifications). We want to understand the types of providers or other entities that should receive ADT notifications along with technical approaches that are currently in use or that could be used for patient event notifications. We also seek comments on health IT certification criteria for notification capabilities and strengthening enforcement of ADT notification requirements.
Hacking, ransomware, and other cybersecurity attacks on health care systems and electronic protected health information (ePHI) present an ever-increasing threat. These attacks have already caused, and could continue to cause, significant disruption to the health care industry, potentially resulting in significant harm to patients, providers, payers, and the health care ecosystem at large. We are seeking feedback on opportunities to strengthen, protect, and increase the resiliency of our health care system in cybersecurity spaces to prevent and better handle future threats. Additionally, we would like to hear about existing standards and technologies, as well as the current role of point-to-point connections within the health care system.
Monitoring compliance and technical conformance with standards is critical to effective interoperability within the health care ecosystem based on the API requirements that we have established for impacted payers. We are seeking comment on steps that we could take to improve oversight of payer APIs, for instance, through strengthening testing and transparency requirements. We are also exploring opportunities to leverage existing programs, such as the ONC Health IT Certification Program, to ensure that API technology used by payers meets the technical requirements we establish.
We are also seeking comments on ways to streamline the step therapy process through technology and data sharing (such as the Payer-to-Payer API) to allow payers access to historical patient information. We seek comment on how technology may facilitate step therapy determinations and improve current step therapy processes. This includes the role of technology in evaluating and applying step therapy criteria and how payers evaluate and honor step therapy criteria from other payers.
Prior authorization requirements for laboratory tests and DMEPOS items have emerged, in some instances, as a barrier to care and coverage that impacts both patients and providers. The primary issues associated with prior authorization for laboratory tests and DMEPOS items are coordination between providers and laboratories or DMEPOS suppliers and the length of time approval takes for tests and equipment. We are soliciting public comment on how prior authorization for laboratory tests and DMEPOS items impacts patient care and provider burden and what can be done to mitigate that burden.
Throughout this proposed rule, we use terms such as “patient,” “consumer,” “beneficiary,” “enrollee,” and “individual.” In this proposed rule, we use the term “patient” as an inclusive term. Each CMS program may use different terms to refer to patients in regulation. Therefore, in this proposed rule, we use “patients” collectively across programs. However, when discussing proposals for a particular program, we will use specific terms applicable to individuals covered under that program. Also, when we discuss patients, the term includes, where applicable, a patient's personal representative. For example, a patient or their personal representative may access certain types of information under the proposals in this proposed rule. However, when we refer to a patient's medical needs or health records, we do not include the medical needs or health records of the patient's personal representative. Pursuant to the “Standards for Privacy of Individually Identifiable Health Information” final rule (65 FR 82462) (hereinafter referred to as the “HIPAA Privacy Rule”), which appeared in the
We also use terms such as “payer,” “plan,” and “issuer” in this proposed rule. Certain portions of this proposed rule are applicable to MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans (managed care organizations [MCOs], Prepaid Inpatient Health Plans [PIHPs], and Prepaid Ambulatory Health Plans [PAHPs]), CHIP managed care entities (MCOs, PIHPs, and PAHPs), QHP issuers on the FFEs, including proposals for small group market QHP issuers on the FF-SHOPs. We use the term “impacted payer” in the preamble of this proposed rule as an inclusive term for all these entities and programs and, in the case of plans, plan types, but we also use specific terms as applicable in various sections of this proposed rule. Notably, the term “impacted payers” only applies to the CMS proposals in this proposed rule, not to the HHS proposals for HIPAA Administrative Simplification. As discussed in section II.H. of this proposed rule, the HIPAA Administrative Simplification proposals would apply to HIPAA covered entities, as described in section 1172(a) of the Act and defined in 45 CFR 160.103.
Some plans that participate in those CMS programs may not be permitted to use prior authorization (such as Private FFS MA plans) or may choose not to use prior authorization. Our prior authorization proposals only apply to the extent that a payer (or plan) uses prior authorization. Therefore, if an impacted payer does not use prior authorization, they would not be subject to the prior authorization proposals. However, other proposals, such as those related to the Access APIs and standards, would apply to all types of plans under the categories of impacted payers.
Many payers use a pharmacy benefit manager (PBM) to manage prescription drug benefits on their behalf, including through utilization management techniques such as prior authorization. These proposals do not apply directly to PBMs, but we understand that, if these proposals are finalized, PBMs may play a role in helping impacted payers meet the requirements proposed in this rule. For example, if a PBM is contracted by an impacted payer to manage its prescription drug benefits, including to
Although Medicare FFS is not directly affected by the CMS interoperability regulations, CMS continues to explore and initiate opportunities to enhance electronic prior authorization within the Medicare FFS program, as appropriate, including those for drugs. The Medicare FFS program has developed a Prior Authorization API that makes available Medicare coverage criteria rules and documentation requirements to providers. This API helps providers determine whether prior authorization is required and identify the necessary documentation. The API also facilitates the extraction of relevant clinical information from the provider's electronic health record (EHR) to compile the required documentation and enables the electronic submission of prior authorization requests in a structured format to CMS review contractors. We want to ensure that Medicare beneficiaries can benefit from the policies we are proposing, regardless of their coverage or delivery system. We intend for the Medicare FFS program to be a market leader on electronic prior authorization and therefore, seek comment throughout this proposed rule on how these proposals could apply to Medicare FFS. In addition, Medicare FFS is a HIPAA covered entity, subject to the HIPAA Administrative Simplification statutory provisions. Therefore, if HHS' proposals in section II.H. are finalized, Medicare FFS would be subject to the electronic transaction standards adopted by the Secretary.
As was the case for the 2020 CMS Interoperability and Patient Access and the 2024 CMS Interoperability and Prior Authorization final rules, Medicare Supplemental Insurance plans (commonly known as Medigap) are not impacted payers. Medigap plans do not perform prior authorization but rely on coverage determinations by Medicare FFS. In addition, as stated in the 2020 CMS Interoperability and Patient Access final rule, Program of All-Inclusive Care for the Elderly (PACE) organizations are not impacted payers under the CMS interoperability rules (85 FR 25621).
For purposes of this proposed rule, references to QHP issuers on the FFEs exclude issuers offering stand-alone dental plans (SADPs) on the FFEs. In the 2024 CMS Interoperability and Prior Authorization final rule, we did not propose or finalize requirements applicable to SADP issuers because they have relatively lower enrollment and premium intake compared to individual market QHP issuers on the FFEs. In addition, we had concerns that requiring those plans to comply with the final rule's policies could result in those issuers no longer participating in the FFEs, which would not be in the best interest of enrollees (89 FR 8766). Several public comments also made this point, that a requirement for SADP issuers to implement the required FHIR APIs would impose burden with minimal or no benefit (85 FR 25552 and 25553). Additionally, SADP issuers are not required to cover prescription drugs. When a dental provider writes a prescription, that drug is generally processed through the enrollee's non-dental medical benefit. Although dental providers may provide medication as part of a dental procedure, such as local anesthesia, it is our understanding that this is generally part of the dental procedure itself and therefore dental providers are reimbursed for the service as a bundle rather than through a separate claim for drugs. Therefore, we are not proposing to apply requirements to SADP issuers, but we solicit comment on whether the considerations described previously do in fact diminish the need for electronic prior authorization requirements and prior authorization process requirements for SADP issuers. We solicit comments on whether we should consider future rulemaking to apply these proposed requirements and those finalized in the 2024 CMS Interoperability and Prior Authorization final rule to SADP issuers.
For the purposes of this proposed rule, FFEs include FFEs in states that perform plan management functions, and as noted in the 2024 CMS Interoperability and Prior Authorization final rule, State-based Exchanges on the Federal Platform (SBE-FPs) are not FFEs, even though patients in those states enroll in coverage through
In this proposed rule, we use the terms “provider” and “supplier” to mean individuals, organizations, and institutions that provide or furnish health services, such as clinicians (that is, physicians and other practitioners), hospitals, skilled nursing facilities (SNFs), home health agencies, hospice settings, laboratories, pharmacies, suppliers of DMEPOS items, and community-based organizations, as appropriate in the context used. Similarly, we are generally not using the term “prescriber” in this rule, as “provider” is a broader term that includes any individual who authorizes a particular prescription or order. Our proposals related to the prior authorization of drugs are discussed in the context of providers who request
Many of the existing and proposed interoperability standards are based on API technology. An API is a set of rules that lets different software systems communicate with each other. It defines how one program (a client, often an app) can request data or services from another system (a server), and how the response should be structured. APIs are commonly used to connect apps. For example, a health app can use an API implemented within a payer's system to request and receive a specific patient's data. This allows developers to build on and communicate with existing systems without needing to understand their internal workings. APIs are essential for building modern, integrated digital experiences in a variety of industries, including health care, banking, and e-commerce.
Throughout this rule, we collectively refer to the APIs finalized in the 2020 CMS Interoperability and Patient Access and 2024 CMS Interoperability and Prior Authorization final rules—the Patient Access, Provider Directory, Provider Access, Payer-to-Payer, and Prior Authorization APIs—as the “interoperability APIs.” When we refer to “access APIs,” we mean those that are used primarily to access a specific patient's health record, the Patient Access, Provider Access, and Payer-to-Payer APIs. Each of the interoperability APIs are required to be built using the FHIR standard. FHIR is a standards framework created by HL7 to electronically exchange health information via APIs using the latest technology standards. FHIR defines categories of data, called “Resources” that, individually or in combination, satisfy most common use cases. The Patient Resource, for example, includes demographic data related to a patient, such as their name, address, and phone number. Using these FHIR Resources enables granular data retrieval, so that a request returns just the relevant data rather than a full record or document that itself must then be searched. Once they are modified for specific requirements using FHIR's built-in capabilities, combinations of Resources are brought together in an IG to address a specific use case, such as a provider directory or prior authorization. This structure lends itself well to expansion beyond FHIR's core capabilities.
As in the 2024 CMS Interoperability and Prior Authorization final rule, we use the term “prior authorization” to refer to the process through which a provider, such as an individual clinician, acute care hospital, ambulatory surgical center, or clinic, obtains approval from a payer before providing care (89 FR 8761). A prior authorization is made up of two parts—a request from a provider and a decision/response by a payer. We refer to the provider's workflow and associated information and documentation as the “prior authorization request” and the payer's processes and associated information and documentation as the “prior authorization decision.” Payers establish prior authorization requirements to help control costs and ensure payment accuracy by verifying that an item, service, or drug is medically necessary for the specific patient, meets coverage criteria, and, for some payers, is consistent with standards of care before being provided. As we explained in the 2024 CMS Interoperability and Prior Authorization final rule, prior authorization has an important place in the health care system for utilization management, but the process and delays continue to be challenging for providers (89 FR 8914). Furthermore, issuers with complex payer policies, inconsistent use of electronic standards, and other technical barriers create provider workflow challenges and an environment in which the prior authorization process is a primary source of burden for both providers and payers and can create a health risk for patients if they don't receive medically necessary care in a timely manner.
In this proposed rule, we refer to two categories of drugs—“drugs covered under a pharmacy benefit” and “drugs covered under a medical benefit.” We acknowledge that these terms do not have statutory or regulatory correlations for impacted payers other than MA organizations (based on the distinctions between Parts A, B, and D). For instance, for Medicaid and CHIP, we propose that the distinction can be distinguished by the systems used to process claims. We are using “drugs covered under a pharmacy benefit” to reflect how the NCPDP SCRIPT standard describes the category of drugs within its scope.
When we refer to both drugs covered under a pharmacy benefit and drugs covered under a medical benefit, throughout this rule we use the terms “all drugs” or “any drugs.” Further discussion of these terms is included in the discussion of those standards in section II.A. of this proposed rule.
HL7 is an American National Standards Institute (ANSI)-accredited SDO that develops the FHIR standard and the IGs referenced throughout this proposed rule. In addition, they are a designated standard maintenance organization (DSMO), designated by the Secretary under 45 CFR 162.910.
In this proposed rule, CMS and HHS propose a variety of policies related to prior authorization. To the extent a court may enjoin one provision of this final rule, CMS and HHS propose that the other provisions should remain in effect, ensuring the continuity of the regulations. We propose that any provision of the requirements of this rule that is held to be invalid or unenforceable by its terms or as applied to any person or circumstance would be construed so as to continue to give maximum effect to the provision permitted by law, unless such holding is one of utter invalidity or unenforceability, in which event we
We propose that if any section, subsection, sentence, clause, phrase, word, provision, or application of this final rule shall be found to be invalid, illegal, unconstitutional, or unenforceable, that finding shall not affect or undermine the validity of any other section, subsection, sentence, clause, phrase, word, provision, or application which can be enforced without the use of the offending provision. We request comments from the public on severability, particularly which policies could be severable, if finalized, and how the other policies in a final rule would operate absent those particular provisions.
Standards set the foundation for consistent technical implementation to support interoperable exchange of information, which facilitates efficient, safe, and high-quality care for patients. In the 2024 CMS Interoperability and Prior Authorization final rule, we require impacted payers to use API technology conformant with specific standards in 45 CFR 170.215 applicable to the interoperability APIs (89 FR 8927). We finalized requirements to use these standards through cross-references to 45 CFR 170, subpart B, where ONC adopts standards that may be used across HHS programs. Those standards, which are applicable to different APIs, include the following:
• Health Level Seven (HL7®) Fast Healthcare Interoperability Resources (FHIR®), Release 4.0.1 in 45 CFR 170.215(a)(1);
• HL7 FHIR US Core IG, Standard for Trial Use (STU) 3.1.1 in 45 CFR 170.215(b)(1)(i) (US Core IG);
• HL7 Substitutable Medical Applications, Reusable Technologies (SMART) Application Launch Framework IG, Release 1.0.0 in 45 CFR 170.215(c)(1) (SMART App Launch IG);
• FHIR Bulk Data Access (Flat FHIR) IG, v1.0.0: STU 1 in 45 CFR 170.215(d)(1) (Bulk Data Access IG); and
• OpenID Connect Core 1.0, incorporating errata set 1, in 45 CFR 170.215(e)(1) (OpenID Connect Core).
The specific standards for the interoperability APIs are listed in Table H3 of the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8945). In that same final rule, we finalized policies that allow impacted payers to use updated standards for these APIs, if specific conditions are met, which are similar to policies previously finalized in the 2020 CMS Interoperability and Patient Access final rule.
The “Health Data, Technology, and Interoperability: Certification Program Updates, Algorithm Transparency, and Information Sharing” proposed and final rules (88 FR 23746 and 89 FR 1192) (hereinafter referred to as the “HTI-1 proposed rule” and the “HTI-1 final rule”), appeared in the
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements to use the versions of the standards in 45 CFR 170.215 that we had proposed, not those that were newly adopted in the HT1-1 final rule. For example, when the 2022 CMS Interoperability and Prior Authorization proposed rule appeared in the
The Secretary also finalized a January 1, 2026 expiration date for the US Core IG, STU 3.1.1 (in 45 CFR 170.215(b)(1)(i)) and the SMART App Launch IG, Release 1.0.0 (in 45 CFR 170.215(c)(1)). Upon the specified expiration date, the expired versions of the standards are no longer eligible for certification of Health IT Modules through the ONC Health IT Certification Program (89 FR 1285 and 1292). As of this proposed rule, there are two adopted versions of the US Core IG: (1) the US Core IG, STU 3.1.1 (in 45 CFR 170.215(b)(1)(i)), which expired on January 1, 2026, and (2) the US Core IG, STU 6.1.0 (in 45 CFR 170.215(b)(1)(ii)) without an expiration date.
Through our proposals in this rule, we are seeking to align with the regulatory framework established by ONC to adopt, update, and expire health IT standards incorporated by reference in the Code of Federal Regulations (CFR). Accordingly, under our proposals, if ONC establishes an expiration date for an adopted standard, or for a specific version thereof, in subpart B of 45 CFR part 170, upon the specified expiration date, impacted payers would no longer be permitted to use that standard or version to meet the interoperability requirements. We believe these proposals will support greater alignment across interoperability standards requirements that impact payers, health care providers, health IT developers and other parties.
In the 2020 CMS Interoperability and Patient Access and 2024 CMS Interoperability and Prior Authorization final rules, we also finalized policies that allow impacted payers to voluntarily conform with updated versions of the standards we have required payers to use in 45 CFR 170.213 and 45 CFR 170.215 (such as the US Core IG and SMART App Launch IG), provided that (1) the National Coordinator for Health Information Technology (hereinafter referred to as the “National Coordinator”) has approved the updated version for use in the ONC Health IT Certification Program; (2) the updated version of the standard does not disrupt an end user's ability to access the required data via that API; and (3) the updated standard is not prohibited by law (85 FR 25532 and 89 FR 8946). In addition, impacted payers may use an
Finally, in the 2022 CMS Interoperability and Prior Authorization proposed rule, we did not propose, nor did we finalize any requirements in the 2024 CMS Interoperability and Prior Authorization final rule, that applied to any drugs because, as we discussed in the proposed and final rules, the processes and standards for prior authorization of drugs differ from the non-drug items and services included in our final policies (89 FR 8762). However, we received many public comments in response to the 2022 CMS Interoperability and Prior Authorization proposed rule, as well as additional feedback from providers, payers, and SDOs, indicating that while some prior authorization processes and standards for drugs currently exist, patients and other stakeholders would benefit from consistent requirements to provide patients timely access to drugs, and from a streamlined electronic prior authorization process that alleviates burden for providers and impacted payers.
After considering stakeholder comments on the 2022 CMS Interoperability and Prior Authorization proposed rule, our goals for interoperability across impacted payers, and the technical standards available to support electronic prior authorization for drugs, we are now proposing to require impacted payers to support electronic prior authorization for drugs. We are proposing to require impacted payers to use either the FHIR standards and IGs required for the Prior Authorization API or the NCPDP SCRIPT standard depending upon whether the drugs are covered under a medical benefit or a pharmacy benefit, as detailed by the standards implementation specifications, and further discussed below.
As discussed further in section II.B. of this proposed rule, we are proposing to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP SCRIPT Standard Implementation Guide (NCPDP SCRIPT)
NCPDP is a not-for-profit ANSI-accredited SDO representing the pharmacy services industry and is responsible for developing and maintaining standards for the exchange of information between providers, pharmacies, and payers. NCPDP is an SDO for pharmacy standards, including billing, subrogation, formulary and benefits, electronic prior authorization, electronic prescribing, and real-time benefit checks. The NCPDP SCRIPT standard can be used for multiple transactions between entities during the prescribing and dispensing processes including between providers, pharmacies, and payers for electronic prescribing; electronic prior authorization; and medication history exchange. This proposed rule focuses only on the electronic prior authorization functionality of the standard.
The NCPDP SCRIPT standard is the most widely used standard by providers and payers for electronic prescribing and electronic prior authorization for drugs covered under a pharmacy benefit. The NCPDP SCRIPT standard can be used by providers to submit a prior authorization request to the payer (including the payer's processor or PBM, as appropriate). The NCPDP SCRIPT standard is designed specifically and solely for a category of drugs, which are described as “drugs covered under a pharmacy benefit.”
(1) Scope of the NCPDP SCRIPT Standard and FHIR IGs for Electronic Prior Authorization of Drugs
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a policy that established HL7 FHIR, Release 4.0.1 as the API base standard for the Prior Authorization API.
The 2024 Part D and Health IT Standards final rule requires prescribers, dispensers, and Part D sponsors (as part of their electronic prescription drug programs) to use a version of the NCPDP SCRIPT standard adopted in 170.205(b) to transmit electronic prior authorization for covered Part D drugs for Part D eligible individuals (89 FR 51239). Any drugs covered by MA plans other than covered Part D drugs, that is, drugs payable under Part A or Part B, are not within the scope of the NCPDP SCRIPT standard and instead are within the scope of the Prior Authorization API (using HL7 FHIR, Release 4.0.1). However, we acknowledge that for state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs, there is currently no statutory or regulatory definition that distinguishes between drugs covered under a pharmacy benefit and drugs covered under a medical benefit, as described in the NCPDP SCRIPT or Da Vinci FHIR IGs for electronic prior authorization. Therefore, if these proposals, found in sections II.A.2. and II.B.3. of this proposed rule, are finalized as proposed, we anticipate that state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs would analyze their list of covered drugs for which they require prior authorization and determine whether electronic prior authorization for each drug could be supported by the NCPDP SCRIPT standard or should instead be provided through the Prior Authorization API. Drugs covered under a pharmacy benefit, which would use the NCPDP SCRIPT standard for electronic prior authorization requests, are often those medications dispensed at a retail pharmacy. Drugs covered under a medical benefit, which would use the Prior Authorization API, are often those dispensed by a medical provider in a health care setting. We understand that the same drug could fall into different categories for different impacted payers based on their terms of coverage, but we do not think that would undermine this proposal's effectiveness because impacted payers could indicate which method a provider should use to submit a particular prior authorization.
The CRD IG has the technical capability to return specific coverage information through the “CoverageInformation” extension, and we seek comment on how the “CoverageInformation” extension could best be utilized to indicate whether a particular drug is covered under a medical benefit and, therefore, that the Prior Authorization API should be used for electronic prior authorization. Similarly, we seek comment on whether the impacted payers could utilize the NCPDP Real-Time Prescription Benefit (RTPB) standard to indicate whether a drug is covered under a medical benefit. We also solicit comment on whether there are existing technical solutions or methods that show promise but would require additional development that impacted payers could utilize to indicate to providers how a prior authorization request for a drug should be submitted. In addition, we discuss below how the NCPDP Formulary & Benefit (F&B) or NCPDP RTPB standards could be used.
As of the date this proposed rule appears in the
Therefore, we are proposing to require that state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs support an unexpired version of the NCPDP SCRIPT standard adopted by the Secretary in 45 CFR 170.205(b) for the following transactions to support electronic prior authorization of drugs covered under a pharmacy benefit:
We emphasize that our proposals in this rule would not impose requirements directly on providers. We are not proposing to require providers to use the NCPDP SCRIPT standards or to conduct electronic prior authorization, but we acknowledge other HHS programs aim to support providers' ability to conduct electronic prior authorization using the NCPDP SCRIPT standard.
The “Health Data, Technology, and Interoperability: Patient Engagement, Information Sharing, and Public Health Interoperability: Electronic Prescribing, Real-Time Prescription Benefit and Electronic Prior Authorization” final rule (hereinafter referred to as the “HTI-4 final rule”) (90 FR 36536) appeared in the
Eligible hospitals and CAHs that participate in the Medicare Promoting Interoperability Program and MIPS eligible clinicians that participate in the MIPS Promoting Interoperability performance category must use certified EHR technology (42 CFR 495.4, 495.24(f)(1), and 414.1375(b)(1)). As provided in 42 CFR 414.1305 and 42 CFR 495.4, we define certified EHR technology (CEHRT) for these programs as EHR technology that has been certified under the ONC Health IT Certification Program to meet the 2015 Edition Base EHR definition or subsequent Base EHR definition
We believe that providers would embrace electronic prior authorization using the NCPDP SCRIPT standard, as electronic prior authorization is less burdensome than manual prior authorization, as commenters told CMS in response to the 2022 CMS Interoperability and Prior Authorization proposed rule (89 FR 8765). In section II.C.4. of this proposed rule, we propose to require impacted payers to conduct electronic prior authorization using the NCPDP SCRIPT standard, which supports CMS's interoperability goals by reducing burden on providers and impacted payers. Requiring impacted payers to support the NCPDP SCRIPT standard also aligns with requirements for Medicare Part D prescribers, dispensers, and Part D sponsors, as finalized in the 2024 Part D and Health IT Standards final rule (89 FR 51238) and previous rulemaking, and enables other payers and providers to benefit from consistent standards.
The NCPDP F&B standard complements standards utilized for electronic prescribing, electronic prior authorization, and real-time prescription benefit applications, including the NCPDP SCRIPT standard, by providing formulary and benefit information at the health plan level. As discussed in section II.B. in this proposed rule, we are proposing to require impacted payers to support an unexpired version of the NCPDP F&B standard adopted by the Secretary in 45 CFR 170.205(u), for providers to use in their prior authorization workflow for drugs covered under a pharmacy benefit. In the 2024 Part D and Health IT Standards final rule, the Secretary adopted the NCPDP F&B standard version 60 in 45 CFR 170.205(u)(1) (89 FR 51260). This is the most recently published and adopted version of the standard as of the date this proposed rule appears in the
If this proposal is finalized, impacted payers could use an unexpired version of the NCPDP F&B standard adopted by the Secretary to provide a range of formulary and benefit information, such as formulary status, preferred alternatives, benefit coverage, and estimated co-pay information to end users, including providers, at the time of prescribing. This formulary and benefit information enables providers to determine at the point of prescribing whether a particular drug is covered and whether the impacted payer requires prior authorization. The information can then be used to create and send an electronic prior authorization request, using the NCPDP SCRIPT standard, to the payer or PBM, as appropriate.
The NCPDP F&B standard relies on payers producing a periodic flat file (or simple, plain text database) that includes point-in-time information about drugs covered under a pharmacy benefit.
The NCPDP RTPB standard enables the real-time exchange of patient-specific eligibility, drug coverage (including any restrictions and alternatives), and estimated cost sharing to enable access to this information at the point of prescribing. In the 2024 Part D and Health IT Standards final rule, the Secretary adopted the NCPDP RTPB standard version 13 in 45 CFR 170.205(c)(1) (89 FR 51260). This is the most recently published and adopted version of the standard as of the date this proposed rule appeared in the
As discussed in section II.B.6. of this proposed rule, we are proposing to require impacted payers to support an unexpired version of the NCPDP RTPB standard adopted by the Secretary in 45 CFR 170.205(c). Accordingly, if ONC establishes an expiration date for the NCPDP RTPB standard or for a specific version thereof, upon the specified expiration date, impacted payers would no longer be permitted to use that standard or version to meet the interoperability requirements, and would be required to use another unexpired version adopted by the Secretary in 45 CFR 170.205(c). We are proposing an October 1, 2027 compliance date for this proposed requirement.
While the NCPDP F&B standard provides group-level coverage information to the provider, the NCPDP RTPB standard provides member-specific information to the provider. The NCPDP F&B and NCPDP RTPB standards can complement each other in the provider's workflow to allow for relevant formulary, coverage, cost, and prior authorization information to be utilized when prescribing a drug. Findings from NCPDP grant-funded research on the NCPDP F&B and NCPDP RTPB standards showed that when the NCPDP F&B standard is used in conjunction with the NCPDP RTPB standard, providers had a more complete view of patient-specific medication options, costs, and prior authorization information at the point of prescribing.
Utilizing the proposed NCPDP standards for electronic prior authorization in the provider's workflow would likely lead to faster prior authorization processes and thus result in improved patient access to prescribed medications.
In summary, we request comment on our proposals in the CFR citations listed in Table 2, and specifically on the following:
• The proposal to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP SCRIPT standard adopted by the Secretary in 45 CFR 170.205(b) for the electronic prior authorization of drugs covered under a pharmacy benefit.
• The proposal to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP F&B standard adopted by the Secretary in 45 CFR 170.205(u) to make available formulary and benefits information for drugs covered under a pharmacy benefit.
• The proposal to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP RTPB standard adopted by the Secretary in 45 CFR 170.205(c) for exchanging real-time coverage information regarding drugs covered under a pharmacy benefit.
• The proposed October 1, 2027 compliance date for these proposals, as discussed in section II.B.2.c. of this proposed rule.
In addition, we request comments on the following:
• Through what mechanisms do payers make their NCPDP F&B files available today?
• How frequently do payers or their PBMs update their F&B flat file today? How often should payers update their F&B flat file to account for formulary or benefit changes?
• How often do payers update the indicators for whether prior authorization is required within their F&B flat files? How often does that information change and is there typically a lag between policy changes and published F&B flat files?
• How frequently do providers use the NCPDP F&B standard as part of their prior authorization workflow today?
• How well integrated is the NCPDP F&B standard into providers' EHRs today?
• How accurate is the group-level information included in the NCPDP F&B standard to specific patients?
• How could impacted payers utilize the NCPDP RTPB standard to indicate whether a drug is covered under a medical benefit?
• Through what mechanisms do payers make information available using the NCPDP RTPB standard today?
• How frequently do providers use tools conforming to the NCPDP RTPB standard as part of their prior authorization workflow today?
• How prevalent is implementation of the NCPDP RTPB standard into providers' EHRs today? How automated are current interactions with the NCPDP RTPB standard within providers' EHRs and clinical workflow?
• For electronic prior authorization, would or could requiring impacted payers to make available information using the NCPDP RTPB standard negate the need for impacted payers to make available information using the NCPDP F&B standard? Does the NCPDP RTPB standard include all the necessary formulary and benefits information and functionality that would be available by using the NCPDP F&B standard for electronic prior authorization?
• Would requiring impacted payers to make information available using both standards add value, or create additional burden, specifically related to electronic prior authorization of drugs?
• Does the CRD IG have the technical capability to return specific coverage information through the “CoverageInformation” extension?
++ How could the “CoverageInformation” extension be best utilized to indicate whether a particular drug is covered under a medical benefit and whether the Prior Authorization API should be used for electronic prior authorization?
• Are there other existing technical solutions or methods that impacted payers could utilize to indicate to providers how a prior authorization request for a drug should be submitted?
We are proposing to require each impacted payer to implement and maintain APIs that are conformant with applicable standards in 45 CFR 170.215 in a manner that will allow for progressive adoption of new versions of these required standards. Under this approach, impacted payers would be permitted to conform with any updated versions of the required standards as the Secretary adopts them, via notice and comment rulemaking, in 45 CFR 170.215. In addition, if ONC establishes an expiration date for a standard in 45 CFR 170.215, or for a specific version thereof, upon the specified expiration date, impacted payers would no longer be permitted to use that standard or version to meet the interoperability requirements. When more than one unexpired version of a required standard is adopted in 45 CFR 170.215, impacted payers would be able to use any of the unexpired versions of the adopted standard to meet the interoperability requirements. This would allow impacted payers to have more predictable transition periods to update their APIs, and to conform with newer versions of the required standards in 45 CFR 170.215 as they are adopted, and older versions expire. CMS and ONC will work in close collaboration to evaluate the standards adopted in 45 CFR 170.215 and determine whether and when updated versions are ready for adoption through rulemaking.
For example, in the 2024 CMS Interoperability and Prior Authorization final rule, we required impacted payers to use API technology conformant with the SMART App Launch IG, Release 1.0.0, in 45 CFR 170.215(c)(1) (89 FR 8927-8928). In this proposed rule, we are proposing to revise this requirement so that impacted payers would be required to use API technology conformant with an unexpired version of the SMART App Launch IG adopted by the Secretary in 45 CFR 170.215(c). As of the date this proposed rule appears in the
We propose to update the technical requirements for each API, for each impacted payer, to cross reference to
• HL7 FHIR Standard in 45 CFR 170.215(a);
• US Core IG in 45 CFR 170.215(b)(1);
• SMART App Launch IG in 45 CFR 170.215(c);
• Bulk Data Access IG in 45 CFR 170.215(d); and
• OpenID Connect Core in 45 CFR 170.215(e).
We propose that the revised references to 45 CFR 170.215(a), (b)(1), and (c) through (e), as listed in Table 3, would be effective beginning on the effective date of the final rule, for all interoperability APIs.
Impacted payers would continue to be required to maintain the Patient Access and Provider Directory APIs that they are presently required to maintain. In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements for impacted payers to make the Provider Access, Payer-to-Payer, and Prior Authorization APIs available beginning in 2027 (by January 1, 2027, for MA organizations and state Medicaid and CHIP FFS programs; by the first rating period beginning on or after January 1, 2027, for Medicaid managed care plans and CHIP managed care entities; and for plan years beginning on or after January 1, 2027, for individual market QHP issuers on the FFEs) (89 FR 8759-8760). This proposal would not change those compliance dates but would allow impacted payers to better plan for implementation by those dates as the Secretary adopts new standards or specifies new expiration dates for existing standards, or specific versions thereof, adopted in 45 CFR 170.215.
As discussed in section II.A.1. of this proposed rule, ONC has adopted additional versions of certain required standards, which are included in Table 2. We also expect that several of the standards and IGs we currently require, or recommend and are proposing to require, may have newer versions published before this rule is finalized. For example, we expect that some of the IGs discussed in this proposed rule will be updated to support newer versions of the US Core IG. In this proposed rule, we discuss either the most recently published or most recently adopted versions of the standards and IGs at the time this proposed rule appears in the
In summary, we request comment on our proposals in the CFR citations listed in Table 2, and specifically on the following:
• The proposal to require impacted payers to implement and maintain API technology conformant with unexpired versions of the standards adopted by the Secretary in 45 CFR 170.215, specifically 45 CFR 170.215(a), (b)(1), and (c), (d), and (e), as applicable.
• The proposal to become effective beginning on the effective date of the final rule.
In addition, we request comments on the following:
• Whether there are opportunities to streamline our regulatory requirements in instances where requiring conformance with the previously recommended IGs proposed in II.A.4.b. of this proposed rule for specific API use cases would achieve the same functional goal as explicitly requiring conformance with both the use-case specific IGs and required IGs or standards. For instance, whether it is necessary to require the base FHIR standard as well as the CRD, DTR, and PAS IGs that we propose to require for the Prior Authorization API, or whether requiring the CRD, DTR, and PAS IGs alone, which are based on the FHIR standard, would provide comparable technical guidance for implementers while reducing regulatory complexity.
+ Scenarios in which independently requiring both the required standards in this section (II.A.3.a. of the proposed rule) and use-case specific IGs proposed in section II.A.4.b. of the proposed rule could introduce alignment challenges. For instance, where one required standard references a specific version of another required standard, independent adoption of the latter standard could present further alignment challenges.
+ Instances in which requiring conformance with both the required standards in this section (II.A.3.a. of this proposed rule) and the use-case specific IGs proposed in section II.A.4.b. of the proposed rule are necessary to fully represent necessary technical requirements and should be maintained.
• Comments on whether it would be helpful to payers to more specifically identify capabilities of required IGs relevant to a specific API, to further streamline requirements and reduce unnecessary development. For instance, whether we should specify only those capabilities of the SMART App Launch IG relevant to the Patient Access API use case (
Using standards and IGs supports consistent implementation across the industry, thus leading to interoperable data exchange. There are many FHIR IGs that exist to support data exchange between payers, providers, and patients and enable the exchange of data such as claims, encounter, clinical, and coverage information; drug formulary information; and prior authorization information.
Here, we provide descriptions of FHIR IGs that we require or recommend impacted payers support (89 FR 8927 and 8928, 8937, and 8945). Specifically, we required impacted payers to use the Bulk Data Access IG for the Provider Access and Payer-to-Payer APIs, while the other IGs described later in this section were recommended.
The Creating Access to Real-time Information Now through Consumer Directed Exchange (CARIN) Alliance designed the HL7 FHIR CARIN Consumer Directed Payer Data Exchange (CARIN IG for Blue Button) IG
The HL7 FHIR Da Vinci Payer Data Exchange (PDex) IG
The HL7 FHIR Da Vinci PDex US Drug Formulary IG (PDex US Drug Formulary IG)
The HL7 FHIR Da Vinci PDex Plan Net IG (PDex Plan Net IG)
The FHIR Bulk Data Access (Flat FHIR) IG (Bulk Data Access IG)
These three IGs are designed to be used by payers to develop and implement the Prior Authorization API. The HL7 FHIR Da Vinci Coverage Requirements Discovery (CRD) IG
The HL7 FHIR Da Vinci Documentation Templates and Rules (DTR) IG
The HL7 FHIR Da Vinci Prior Authorization Support (PAS) IG
In the 2024 CMS Interoperability and Prior Authorization final rule, we discussed use-case specific IGs that impacted payers can use to implement their interoperability APIs (89 FR 8937). Using those IGs supports interoperability because impacted payers need not develop an approach independently, which should save time and resources. In that final rule, we strongly encouraged payers to use the IGs listed as “recommended” in Table H3 for each API, in addition to the required standards in 45 CFR 170.215 (89 FR 8945). We recommended specific IGs for each API to provide guidance to the industry without locking payers into the versions of those IGs available at the time of the 2022 CMS Interoperability and Prior Authorization proposed rule (89 FR 8937). We carefully considered the versions of the recommended IGs that were available at the time and determined that they were not ready to be proposed as requirements. However, we acknowledged that by recommending rather than requiring certain IGs, there is potential for implementation variation that could limit interoperability and ultimately lead to rework for impacted payers if we required the IGs in the future (89 FR 8937). We believed that those IGs would continue to be refined as they were tested and implemented in the real world. We stated that we would continue to monitor and evaluate the IGs' development and consider whether to propose to require their use in the future (89 FR 8937). Since publication of the 2022 CMS Interoperability and Prior Authorization proposed rule, those IGs have continued to mature, and updated versions of many of the recommended IGs have been published.
Therefore, we are now proposing to require impacted payers to implement and maintain API technology conformant with specific IGs for each applicable API. We propose to require these IGs to through cross references to the applicable citations in 45 CFR 170.215. For readability purposes, citations where we propose to require the IGs for each type of impacted payer are listed in Table 2.
In the HTI-4 final rule, the Secretary adopted the following IGs (90 FR 37167 and 37182):
• CARIN IG for Blue Button, Version 2.0.0—STU 2 in 45 CFR 170.215(k)(1)(i);
• PDex IG, Version 2.1.0—STU 2.1 in 45 CFR 170.215(k)(2)(i);
• PDex US Drug Formulary IG, Version 2.0.1—STU 2 in 45 CFR 170.215(m)(1);
• PDex Plan Net IG, Version 1.1.0—STU 1.1 US in 45 CFR 170.215(n)(1);
• CRD IG, Version 2.0.1—STU 2 in 45 CFR 170.215(j)(1);
• DTR IG, Version 2.0.1—STU 2 in 45 CFR 170.215(j)(2)(i); and
• PAS IG, Version 2.0.1—STU 2 in 45 CFR 170.215(j)(3)(i).
Since publication of the “Health Data, Technology, and Interoperability: Patient Engagement, Information Sharing, and Public Health Interoperability” proposed rule (89 FR 63498) (hereinafter referred to as the “HTI-2 proposed rule”), which appeared in the
• CARIN IG for Blue Button in 45 CFR 170.215(k)(1);
• PDex IG in 45 CFR 170.215(k)(2);
• PDex US Drug Formulary IG in 45 CFR 170.215(m)(1);
• PDex Plan Net IG in 45 CFR 170.215(n)(1);
• CRD IG in 45 CFR 170.215(j)(1);
• DTR IG in 45 CFR 170.215(j)(2); and
• PAS IG in 45 CFR 170.215(j)(3).
Requiring impacted payers to use an unexpired version of the standards adopted in 45 CFR 170.215 automatically incorporates updated versions into the interoperability requirements as they are adopted by the Secretary. Specifically, if the Secretary adopts updated versions of any of these standards, such as the updated versions ONC has proposed for adoption in section II.J. of this proposed rule (subject to finalization), those versions would be incorporated in 45 CFR 170.215. As noted previously, if the Secretary establishes an expiration date for a standard, or for specific version thereof, upon the specified expiration date, impacted payers would no longer be permitted to use that standard or version to meet the interoperability requirements.
We propose that impacted payers would be required to implement and maintain API technology conformant with an unexpired version of the proposed additional FHIR IGs for each API as described in section II.A.4.b. of this proposed rule beginning on October 1, 2027. In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized compliance dates beginning in 2027 for impacted payers to implement and maintain Provider Access, Payer-to-Payer, and Prior Authorization APIs (89 FR 8790, 8820, and 8860). We recognize that impacted payers may already be developing and implementing their APIs to comply with the technical requirements established in the 2024 CMS Interoperability and Prior Authorization final rule in preparation for the January 1, 2027 compliance deadline. Some impacted payers may have opted not to use the currently recommended IGs, which we now propose to require. Therefore, we believe that the proposed October 1, 2027 compliance date would provide impacted payers with additional time to update their APIs to conform to the additional IGs we are proposing to require beginning on October 1, 2027. Table 3 in this proposed rule lists the required standards finalized in the 2024 CMS Interoperability and Prior Authorization final rule and additional FHIR IGs proposed in this rule by applicable API.
In the 2020 CMS Interoperability and Patient Access final rule, we required impacted payers to implement and maintain a standards-based Patient Access API (85 FR 25558).
To further support consistent implementation of the Patient Access API, we are now proposing to require impacted payers to implement and maintain API technology conformant with an unexpired version of the CARIN IG for Blue Button, the PDex IG, and the PDex US Drug Formulary IG adopted by the Secretary. Specifically, we are proposing to require impacted payers to implement and maintain a Patient Access API conformant with the CARIN IG for Blue Button to support sharing claims and encounter data, the PDex IG to support sharing clinical data and prior authorization information, and the PDex US Drug Formulary IG to share a formulary of drugs covered by the payer under the patient's health plan through the Patient Access API. We believe that by requiring these IGs, impacted payers would format data available through the Patient Access API in a consistent manner that would allow health app developers to easily access and display patients' health data, thus having those data readily available and easily accessible to patients. Enabling patients to easily access their health information electronically through an API should allow patients to better manage their health care.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a requirement for impacted payers to implement and maintain a Provider Access API conformant with standards in 45 CFR 170.215, including FHIR, US Core IG, SMART App Launch IG, and the Bulk Data Access IG (85 FR 25521-25522 and 89 FR 8788). Providers would be able to use that API to access current patient data from impacted payers, including adjudicated claims and encounter data (excluding provider remittances and patient cost-sharing information), all data classes and data elements included in a content standard (USCDI) in 45 CFR 170.213, and certain information about prior authorizations for non-drug items and services.
To facilitate care coordination and to further standardize impacted payers' APIs, we are now proposing to require impacted payers to implement and maintain API technology conformant with an unexpired version of the CARIN IG for Blue Button and the PDex IG adopted by the Secretary in their Provider Access API implementation. Specifically, we are proposing to require impacted payers to implement and maintain a Provider Access API conformant with the CARIN IG for Blue Button, to support sharing claims and encounter data, as well as the PDex IG, to support sharing clinical data and prior authorization information.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements for impacted payers to make drug formulary information available through the Provider Access API in alignment with the Patient Access API requirements set forth in the 2020 CMS Interoperability and Patient Access final rule.
In the 2020 CMS Interoperability and Patient Access final rule, we finalized a requirement that impacted payers (excluding QHP issuers on the FFEs) must implement and maintain a Provider Directory API to make available specific information about their provider networks.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a requirement that, beginning in 2027 (by January 1, 2027, for MA organizations and state Medicaid and CHIP FFS programs; by the rating period beginning on or after January 1, 2027, for Medicaid managed care plans and CHIP managed care entities; and for plan years beginning on or after January 1, 2027, for QHP issuers on the FFEs), impacted payers must implement and maintain a Payer-to-Payer API to exchange patient data when a patient moves between payers or has concurrent coverage to ensure continued access to their health data and support care continuity and coordination between payers.
To ensure impacted payers are implementing the Payer-to-Payer API in an interoperable and standardized way, we are now proposing to require impacted payers to implement and maintain API technology conformant with the CARIN IG for Blue Button and the PDex IG. Specifically, we are proposing to require impacted payers to implement and maintain a Payer-to-Payer API conformant with an unexpired version of the CARIN IG for Blue Button adopted by the Secretary to support sharing claims and encounter data, as well as the PDex IG to support sharing clinical data and prior authorization information.
In the 2024 CMS Interoperability and Prior Authorization final rule, we require impacted payers to make drug formulary information available through the Payer-to-Payer API in alignment with the Patient Access API requirements set forth in the 2020 CMS Interoperability and Patient Access final rule.
To streamline the prior authorization process, in the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a requirement that impacted payers must implement and maintain a Prior Authorization API beginning in 2027 (by January 1, 2027, for MA organizations and state Medicaid and CHIP FFS programs; by the rating period beginning on or after January 1, 2027, for Medicaid managed care plans and CHIP managed care entities; and for plan years beginning on or after January 1, 2027, for QHP issuers on the FFEs).
At the time of the 2022 CMS Interoperability and Prior Authorization proposed rule, we did not believe that the CRD, DTR, and PAS IGs were mature enough to propose requiring impacted payers to use them, and therefore, we only recommended their use. In the final rule, we updated our recommendations to the latest versions of the CRD, DTR, and PAS IGs (89 FR 8937 and 8945). Upon reviewing updated versions of the CRD, DTR, and PAS IGs that have been published since the 2022 CMS Interoperability and Prior Authorization proposed rule appeared in the
Specifically, we are proposing to require impacted payers to implement and maintain a Prior Authorization API conformant with an unexpired version of the CRD IG adopted by the Secretary to define the technical implementation to allow providers to access coverage requirements through their EHR or other health IT system. The CRD IG allows providers to then discover specific payer requirements for what services are covered by the payer and whether prior authorization is required.
In summary, we request comment on our proposals in the CFR citations listed in Table 2, and specifically the following:
• The proposal to require impacted payers to use an unexpired version of the CARIN IG for Blue Button, the PDex IG, and the PDex US Drug Formulary IG adopted by the Secretary for their Patient Access API.
• The proposal to require impacted payers to use an unexpired version of the CARIN IG for Blue Button and the PDex IG adopted by the Secretary for their Provider Access API.
• The proposal to require impacted payers to use an unexpired version of the PDex Plan Net IG adopted by the Secretary for their Provider Directory API.
• The proposal to require impacted payers to use an unexpired version of the CARIN IG for Blue Button and the
• The proposal to require impacted payers to use an unexpired version of the CRD, DTR, and PAS IGs adopted by the Secretary for their Prior Authorization API.
• The alternative proposal to require impacted payers to use an unexpired version of the PDex US Drug Formulary IG adopted by the Secretary, if the drug formulary data requirement is retained, for impacted payers' Provider Access and Payer-to-Payer API.
• The proposed October 1, 2027 compliance date for the proposed requirements for impacted payers.
The technical requirements for the APIs we finalized in the 2020 CMS Interoperability and Patient Access and the 2024 CMS Interoperability and Prior Authorization final rules include general requirements for impacted payers to test their interoperability APIs (85 FR 25514 and 89 FR 8927).
Testing tools are available that can help impacted payers to meet existing testing requirements for APIs, for instance, with ensuring conformance to specified standards. The Inferno testing tool on HealthIT.gov (hereinafter referred to as “Inferno”) is an HL7 FHIR testing tool offered by ONC.
• CRD IG, Version 2.0.1—STU 2;
• DTR IG, Version 2.0.1—STU 2;
• PAS IG, Version 2.0.1—STU 2;
• CARIN IG for Blue Button, Version 2.0.0—STU 2;
• PDex IG, Version 2.0.0—STU 2;
• PDex US Drug Formulary IG, Version 2.0.1—STU 2; and
• PDex Plan Net IG, Version 1.1.0—STU 1.1.
Inferno uses a combination of automated and manual verification to assess a system's conformance. Inferno can act as a server to test an app by receiving requests, returning appropriate responses, and validating the conformance of the app's requests and its ability to handle the responses appropriately. Inferno can also test a server by acting as an app, making requests against the server and validating the conformance and appropriateness of the server's responses. We intend to work with ONC on additional and updated test kits for subsequently adopted versions of the IGs above, new versions of the IGs identified through the Standards Version Advancement Process (SVAP) that may be available for voluntary use by payers, and additional IGs identified to support payer APIs.
CMS strongly encourages impacted payers to utilize available testing tools, such as the Inferno testing tool, to meet the existing testing requirements and ensure conformance with the required IGs. We also encourage impacted payers to publish testing results to demonstrate conformance with the technical requirements. Doing so would increase transparency and trust that the technology has been properly implemented to facilitate interoperability. Inferno can be downloaded for local deployment and is hosted on ONC's website at
We also note that we include an RFI in section III.C. of this proposed rule soliciting public feedback on how we can continue to strengthen oversight mechanisms to ensure the required interoperability APIs are appropriately implemented.
As discussed in section II.A.1. of this proposed rule, we previously finalized policies that allow impacted payers to conform with updated versions of the required standards in 45 CFR 170.213 and 45 CFR 170.215 under certain conditions. There are certain conditions that must be met for impacted payers to be permitted to use updated versions of the required standards, for example, the conditions described in 42 CFR 422.119(c) for MA plans. We emphasize two of those conditions here.
First, we note that if impacted payers choose to use updated standards, it must not disrupt an end user's ability to access the required data as finalized in the 2020 CMS Interoperability and Patient Access and 2024 CMS Interoperability and Prior Authorization final rules (85 FR 25532 and 89 FR 8935). Another condition that permits impacted payers to voluntarily use an updated version of a required standard in 45 CFR 170.213 or 45 CFR 170.215 is when the National Coordinator has approved the updated version for use in the ONC Health IT Certification Program.
Under SVAP, after a standard has been adopted through notice and comment rulemaking, ONC engages in an open and transparent process to timely ascertain whether an updated version of the adopted standard or implementation specification should be
As we have discussed, using common standards and IGs supports consistent implementations across the industry. However, as noted in the 2024 CMS Interoperability and Prior Authorization final rule, IGs take time to mature (89 FR 8839 through 8841). We believe it is important to recommend these additional IGs, although they may not be fully mature, to provide direction towards a common set of specifications. If we did not include these recommendations, it could lead to more implementation variation and cause a greater burden on implementers. We are now recommending additional IGs for certain interoperability APIs.
For the Provider Access API we are recommending the HL7 FHIR Da Vinci Member Attribution (ATR) List IG (ATR List IG).
For the Provider Access API specifically, the ATR List IG can be used to identify members with an established patient treatment, contractual, or other type of relationship with providers, provider groups, and organizations to enable data exchange access. Impacted payers could also use the ATR List IG to identify groups of members that are opting out of sharing data with providers.
For the Prior Authorization API, we are recommending the HL7 FHIR Da Vinci Clinical Data Exchange (CDex) IG.
In the 2024 CMS Interoperability and Prior Authorization final rule, we discussed different methods of authentication and authorization (89 FR 8841-8842). We recognized that while protocols involving specific user credentials managed by an impacted payer could be used for the Provider Access and Prior Authorization APIs, other protocols, such as SMART Backend Services, mutual Transport Layer Security (mTLS), Unified Data Access Profiles (UDAP
As discussed in the 2024 CMS Interoperability and Prior Authorization final rule, efforts have been made to further refine the specifications for security (including authentication) at scale through UDAP via the FHIR at Scale Taskforce (FAST) Security for Scalable Registration, Authentication, and Authorization IG (FAST Security IG) (89 FR 8802). We are recommending the FAST Security IG
We are recommending the FAST Security IG, rather than proposing to require it, given nascent adoption of business-to-business API-based technologies among impacted payers. We acknowledge that for the FAST Security IG to work successfully, there needs to be an entity or a set of entities to manage the trust between participating organizations (trust community). While the FAST Security
CMS is considering whether it would be valuable to recommend additional authentication and authorization standards within FHIR. One authentication and authorization method that can be used within the FAST Security IG is Tiered Open Authorization (Tiered OAuth).
In addition to the NCPDP implementation standards discussed in sections II.A.2.b. and II.A.2.c. of this proposed rule that facilitate the exchange of prescription drug benefit information, we also recognize that HL7 has developed a FHIR IG called the CARIN Consumer Real-Time Pharmacy Benefit Check (RTPBC) IG.
In summary, we request comment on our recommendations, and specifically on the following:
• The recommendation for impacted payers to use the ATR List IG to document and share attribution lists that identify whose patient data may be shared with a provider through the Provider Access API.
• The recommendation for impacted payers to use the CDex IG for the Prior Authorization API for exchanging attachments related to prior authorization.
• The recommendation for impacted payers to use the FAST Security IG for registration, authentication, and authorization for the Patient Access, Provider Access, Payer-to-Payer, and Prior Authorization APIs.
• Whether any of these IGs are now mature and important enough for CMS to adopt in a final rule.
In addition, we request comment on the following:
• How can CMS know whether and when the ATR List, CDex, and FAST Security IGs are ready for us to propose to require their use?
• Should CMS consider recommending or requiring the FAST Security IG “Tiered OAuth” in future rulemaking?
• If CMS proposes, in future rulemaking, to require the FAST Security IG, should we also propose to require impacted payers to use Tiered OAuth for user authentication? If so, to which APIs should that proposal apply? Would this be a useful solution to enable authentication and authorization at scale?
• Are there trust communities that exist today that impacted payers can utilize for business-to-business authentication and authorization? Do such communities exist for other stakeholders in the health care system, such as providers, or in other industries that could be used or expanded for this purpose?
• How much testing is necessary and under what readiness conditions would it be appropriate for us to propose to require use of the FAST Security IG for the Patient Access, Provider Access, Payer-to-Payer, and Prior Authorization APIs?
• Should CMS consider recommending the RTPBC IG?
• Are there differences in scope or use cases between the RTPBC IG and the Da Vinci PDex Drug Formulary IG? Specifically, would RTPBC IG provide additional or distinct benefits compared to the PDex Drug Formulary IG, or do the two largely address overlapping use cases?
• Is there value in providing patients with real-time prescription drug cost and coverage information through the Patient Access API?
• Are there potential technical or operational challenges associated with implementing the RTPBC IG within the Patient Access API?
• Is there enough patient demand via third-party apps to justify the burden of implementing the RTPBC IG?
• Do any third-party apps currently include this functionality, or would developers build it, if recommended?
• Do payers or PBMs currently support the required technical standards to enable third-party apps to use the RTPBC IG and would payers build that functionality, if recommended?
In the 2024 CMS Interoperability and Prior Authorization final rule, we stated that we were removing the SMART App Launch IG in 45 CFR 170.215(c)(1) and OpenID Connect Core in 45 CFR 170.215(e), which were erroneously included as required standards for the Provider Directory API in Table 10 of the 2022 CMS Interoperability and Prior Authorization proposed rule (87 FR 76320 and 89 FR 8928) and codified in the CFR. CMS also discussed this in the 2020 CMS Interoperability and Patient Access final rule, where we finalized a policy that security protocols related to user authentication and authorization in 45 CFR 170.215, namely the SMART App Launch IG and OpenID Connect Core standard, would not apply to the Provider Directory API (85 FR 25560).
We are now proposing that impacted payers be required to implement and maintain a Provider Directory API (MA organizations in 42 CFR 422.120(a), state Medicaid FFS programs in 42 CFR 431.70(a), state CHIP FFS programs in 42 CFR 457.760(a), Medicaid managed care plans through cross reference to 42 CFR 431.70 in 42 CFR 438.242(b)(6), and CHIP managed care entities through cross reference to 42 CFR 438.242 in 42 CFR 457.1233(d)) conformant with FHIR in 45 CFR 170.215(a) and US Core IG in 45 CFR 170.215(b)(1), but not the SMART App Launch IG in 45 CFR 170.215(c)(1) or OpenID Connect Core in 45 CFR 170.215(e)(1).
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements for impacted payers to implement and maintain a Prior Authorization API with compliance dates beginning in 2027 (by January 1, 2027 for MA organizations and state Medicaid and CHIP FFS programs; by the rating period beginning on or after January 1, 2027 for Medicaid managed care plans and CHIP managed care entities; and for plan years beginning on or after January 1, 2027 for individual market QHP issuers on the FFEs).
In that final rule, we limited the required content accessible through the Prior Authorization API to non-drug items and services. We excluded all drugs covered by impacted payers (for example, drugs that may be self-administered, administered by a provider, or that may be dispensed or administered in a pharmacy or hospital) (89 FR 8762). We explained in the 2022 CMS Interoperability and Prior Authorization proposed rule and 2024 CMS Interoperability and Prior Authorization final rule that existing processes and standards for prior authorization of drugs differ significantly from those for non-drug items and services (87 FR 76240-76241 and 89 FR 8765).
In response to the 2022 CMS Interoperability and Prior Authorization proposed rule, we received numerous comments requesting that we reconsider the exclusion of drugs from the proposed requirements. Those comments stated that providers face similar challenges with prior authorizations for drugs as with non-drug items and services, and that the current prior authorization processes sometimes delay access to medically necessary drug treatments. Commenters noted that the inconsistent use of technology and standards can create barriers to care and burden both providers and payers. For example, providers are sometimes unaware that a prior authorization is required until a payer rejects a prescription claim presented to a pharmacy, which causes delays for patients to receive necessary medication and affects the provider's ability to timely identify and prescribe an alternative medication. In many cases, providers still have to use fax, telephone, or payer-specific web portals for drug prior authorizations. While portals are used for data entry, they typically do not provide immediate feedback to providers about prior authorization requirements or accept supporting documentation, nor do they provide real time responses. Thus, current methods can be inefficient and create additional process challenges (89 FR 8765-8766).
Many commenters, including payers and providers, advocated that prior authorization for drugs could and should be incorporated into the Prior Authorization API. Commenters specifically emphasized the need for more streamlined electronic prior authorization processes for drugs administered in a medical setting, such as infusions, oral cancer drugs, oral antiemetics, and drugs for terminal or chronic conditions, such as cancer or multiple sclerosis. Other commenters pointed to existing rules that require Medicare Part D sponsors to offer electronic prior authorization for covered Part D drugs via a standard adopted by the Secretary, which includes NCPDP SCRIPT standard versions 2017071 and 2023011, adopted in 45 CFR 170.205(b)(1) and 45 CFR 170.205(b)(2) (89 FR 8765-8766).
In the 2024 CMS Interoperability and Prior Authorization final rule, we stated that we would gather additional information and consider opportunities for future rulemaking (89 FR 8765). After considering stakeholder comments, our goals for interoperability, and the technical standards available to support electronic prior authorization for drugs, we are now proposing to require impacted payers to support electronic prior authorization for all drugs using a combination of standards, including the HL7® FHIR® standards that compose the Prior Authorization API and the NCPDP standards required for covered Part D drugs.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements for impacted payers to implement and maintain a FHIR API to facilitate prior authorization for non-drug items and services.
Under the HIPAA Administrative Simplification rules, the Secretary has adopted standards for use by covered entities—which includes all impacted payers—for, among other transactions, referral certification and authorization, a subset of which are used for prior authorization.
The 2020 Medicare Part D ePA final rule (85 FR 86824-86827) extensively details the NCPDP SCRIPT standard's history. For context, we provide here some of the narrative from that final rule. Congress required electronic prior authorization in the Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (hereinafter referred to as the “SUPPORT Act”) (Pub. L. 115-271, enacted October 24, 2018). Section 6062 of the SUPPORT Act amended section 1860D-4(e)(2) of the Act to require Part D sponsors and prescribing health care professionals to use technical standards adopted by the Secretary when transmitting electronic prior authorization requests and responses for coverage of a covered Part D drug for a Part D eligible individual enrolled in a Part D plan (PDP).
The 2020 Medicare Part D ePA final rule established the NCPDP SCRIPT standard version 2017071 as the required standard for electronic prior authorization for covered Part D drugs in 42 CFR 423.160(b)(8) (85 FR 86832). Part D sponsors and providers were permitted to use the standard beginning
In the 2024 Part D and Health IT Standards final rule, ONC finalized a January 1, 2028 expiration date for the NCPDP SCRIPT standard version 2017071 in 45 CFR 170.205(b)(1) and adopted the NCPDP SCRIPT standard version 2023011 in 45 CFR 170.205(b)(2). In the same final rule, CMS finalized the requirement in 42 CFR 423.160(b)(1) that communication of electronic prior authorization must comply with a standard in 45 CFR 170.205(b). Therefore, Part D sponsors, providers, and dispensers are permitted to use either version of the NCPDP SCRIPT standard to conduct electronic prior authorization for drugs until January 1, 2028, when the NCPDP SCRIPT standard version 2023011 must be used exclusively (89 FR 51247).
In 2009, the Secretary adopted the NCPDP Telecommunication Standard IG, Version D, Release 0 (Version D.0) as a HIPAA Administrative Simplification transaction standard to improve the efficiency of retail pharmacy transactions.
On December 13, 2024, the “Administrative Simplification: Modifications of Health Insurance Portability and Accountability Act of 1996 (HIPAA) National Council for Prescription Drugs (NCPDP) Retail Pharmacy Standards; and Modification of the Medicaid Pharmacy Subrogation Standard” final rule (89 FR 100763) (hereinafter referred to as the “2024 HIPAA NCPDP Pharmacy Standards final rule”) appeared in the
The NCPDP Version F6 Telecommunications standard, like Version D.0, is designed for transactions between pharmacies and payers, not between non-pharmacy providers and payers (89 FR 100767-100768). The CMS proposal to require payers to support the NCPDP SCRIPT standard for electronic prior authorization does not conflict with the HIPAA transaction standard because electronic prior authorizations utilizing the NCPDP SCRIPT standard are not intended to be used by pharmacies. This rulemaking does not affect pharmacies, which will continue to be required by HIPAA to use Version F6.
We are now proposing to require impacted payers to expand the scope of the required Prior Authorization API to incorporate drugs covered under a medical benefit, as that term is explained in section I.C. of this proposed rule. We are proposing an October 1, 2027 compliance date for MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs.
Stakeholder input indicates that enhancing the Prior Authorization API by incorporating drugs covered under a medical benefit would improve the prior authorization process by giving providers and patients more timely information about prior authorization requirements to obtain these drugs. As with non-drug items and services, a Prior Authorization API enables EHRs or other health IT to determine whether prior authorization is required, collect documentation, and submit a request. Expanding the scope of impacted payers' Prior Authorization APIs to incorporate drugs covered under a medical benefit would streamline the administrative process for providers and result in payers receiving more complete requests and fewer unnecessary requests, which could accelerate decision-making. Reducing those burdens should mitigate ambiguity and reduce delays in providing patients with medically necessary drugs.
Therefore, we are proposing to require impacted payers to enhance their Prior Authorization APIs by incorporating prior authorization coverage and documentation requirements for drugs covered under a medical benefit, as we describe that term in section I.C. of this proposed rule, beginning October 1, 2027. The IGs we are proposing to require for the Prior Authorization API include a set of workflows designed to support prior authorization. Those workflows specifically include drugs covered under a medical benefit and exclude drugs covered under a pharmacy benefit, for which prior authorization is conducted by another electronic exchange process, such as the NCPDP SCRIPT standard.
We emphasize that adding drugs covered under a medical benefit to the non-drug items and services included in the Prior Authorization API requires no changes to the existing standards, the IGs we are proposing to require in section II.A. of this proposed rule, or other recommended IGs. Furthermore, the functionality of the Prior Authorization API would not need to be modified, but the specific coverage and documentation requirements for drugs covered under a medical benefit would have to be added to the content available via the API.
While we describe some of the
In Medicare FFS, drugs are either payable by Part A or Part B, or covered by Part D prescription drug coverage. Medicare Part B may pay for prescription drugs and biologicals (hereinafter referred to as “drugs”)
• A drug that may be dispensed only upon a prescription that is described in sections 1927(k)(2)(A)(i) through (iii) of the Act.
• A biological product described in sections 1927(k)(2)(B)(i) through (iii) of the Act.
• Insulin described in section 1927(k)(2)(C) of the Act.
• Medical supplies associated with the injection of insulin.
• A vaccine licensed under section 351 of the Public Health Service Act (hereinafter referred to as the “PHSA”) (Pub. L. 115-5, enacted November 21, 1997) and its administration.
• A combination product approved and regulated by the Food and Drug Administration (FDA) as a drug, vaccine, or biologic.
The following are excluded from the definition of Part D drugs:
• Drugs for which payment as so prescribed and dispensed or administered to an individual is available for that individual under Part A or Part B.
• Drugs that may be excluded from coverage or otherwise restricted under sections 1927(d)(2) or (d)(3) of the Act, except for smoking cessation agents.
• Medical foods that are not regulated as drugs under section 505 of the Federal Food, Drug, and Cosmetic Act (Pub. L. 75-717, enacted June 25, 1938).
With some limited exceptions, MA plans are statutorily required to cover Part A and Part B benefits, including drugs. Most MA plans also include Part D prescription drug coverage for their Medicare enrollees. These MA-PDs include drug coverage as a single plan, and patients enrolled in an MA-PD plan likely do not experience a distinction between drugs that are payable under Part A or Part B and those covered under Part D. Medicare patients who are enrolled in an MA plan that cannot offer Part D coverage (like Medical Savings Account plans) or choose not to offer Part D coverage (like certain MA-only plans) can join a separate, standalone PDP.
For MA plans, the term “drugs covered under a pharmacy benefit” as used in this proposed rule means covered Part D drugs, as defined in 42 CFR 423.100. Conversely, “drugs covered under a medical benefit” as used in this rule means any drugs payable under Part A or Part B.
For Medicaid, although “prescribed drugs” is an optional Medicaid benefit category under section 1905(a)(12) of the Act, all states currently provide this benefit for all categorically eligible individuals and most other enrollees within their Medicaid programs. States are permitted to apply prior authorization requirements to covered outpatient drugs as long as the prior authorization program complies with the requirements of section 1927(d)(5) of the Act.
For Medicaid and CHIP FFS, we believe that the distinction between drugs within the proposed scope of the Prior Authorization API and within the scope of the proposed NCPDP standards can be distinguished by the systems used to process claims. We expect drugs that are processed in a claims adjudication system that is not at the point of sale would be within the proposed scope of the Prior Authorization API. Conversely, we expect that drugs that are processed in a point of sale or real-time claims adjudication system would be within the scope of the proposed NCPDP standards. Thus, the systems that state Medicaid and CHIP FFS programs use to process claims may serve as an effective framework for determining which drugs fit within the scope of the Prior Authorization API and which drugs fit within the scope of the NCPDP standards.
States that cover drugs under state Medicaid or CHIP FFS or both programs generally use their Medicaid Management Information System (MMIS) to process medical claims and another pharmacy system, such as an electronic claims management system (ECMS), described in 42 CFR 456.722, or PBM, to process pharmacy claims. We believe that the systems that states use to process claims may be directly relevant to the state's determination of whether the proposed FHIR or NCPDP standards should apply for particular prior authorization requests. To meet the requirements of the 2024 CMS Interoperability and Prior Authorization final rule, states should already be planning to integrate the Prior Authorization API for non-drug items and services with their MMIS or related systems.
Section 1301(a)(1)(B) of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (hereinafter referred to as the “Affordable Care Act”) (Pub. L. 111-148, enacted March 23, 2010 and Pub. L. 111-152, enacted March 30, 2010), and section 2707 of the PHSA require QHP issuers on the FFEs to cover the essential health benefits (EHBs), which includes items and services in the categories described in section 1302(b) of the Affordable Care Act, one of which is prescription drugs. There is no statutory or regulatory distinction between drugs covered under a medical benefit, as described by the scope of the Prior Authorization API, and drugs covered under a pharmacy benefit, as described by the NCPDP SCRIPT standard, for QHP issuers on the FFEs. There are also no existing requirements for QHP issuers on the FFEs to support electronic prior authorization for drugs
Should these electronic prior authorization proposals be finalized, impacted payers would need to review the list of covered drugs for which they require prior authorization to determine whether they fit into the scope of the Prior Authorization API (drugs covered under a medical benefit) or the NCPDP SCRIPT standard (drugs covered under a pharmacy benefit). Once each payer has evaluated those drugs that require prior authorization and identified those that may be processed through the Prior Authorization API, the applicable rules, requirements, and templates would need to be developed and incorporated into the API.
We are proposing compliance dates beginning October 1, 2027 for this proposal. We believe 1 year is the appropriate period for impacted payers to evaluate and incorporate the additional prior authorization rules and requirements into their Prior Authorization API. In response to the 2022 CMS Interoperability and Prior Authorization proposed rule, commenters stated that payers and developers generally need 1 to 2 years to implement a new system (89 FR 8824-8825). In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized compliance dates for policies that require API development and enhancement beginning in 2027, which provided impacted payers approximately 3 years to implement the finalized requirements (89 FR 8784, 8817, 8855, and 8897). That feedback was based on the totality of our policies that require API development or enhancement—to require three new APIs and to update the Patient Access API. This proposal would not require impacted payers to build new APIs from scratch, but to incorporate prior authorization requirements for drugs covered under a medical benefit into the existing Prior Authorization APIs. Based on previous industry feedback on development timelines and our experience implementing the CMS Medicare FFS Prior Authorization API, we believe the effort to add those prior authorization rules to the API would not require more than a year.
In summary, we request comment on our proposals in the CFR citations listed in Table 4, and specifically on the following:
• The proposal to require impacted payers to incorporate coverage and documentation requirements into the Prior Authorization API to support electronic prior authorization for drugs covered under a medical benefit, as that term describes the scope of the Prior Authorization API FHIR standards.
• The proposed October 1, 2027 compliance date for MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHPs issuers on the FFEs.
In addition, we request comments on the following:
• Is the scope of the Prior Authorization API, as defined by its implementation guidance and the description of drugs covered under a medical benefit, clear and appropriate for impacted payers?
• For MA organizations, are there drugs other than those payable under Part B, such as supplemental benefits, that should be covered by our proposals to require MA organizations to support electronic prior authorization?
• Is the rubric to categorize drugs as within the scope of the Prior Authorization API (covered under a medical benefit) or within the scope of the NCPDP standards (covered under a pharmacy benefit) based on the system through which the claims are processed applicable to and appropriate for all or most state Medicaid and CHIP FFS programs?
• Is the system through which claims are processed the accurate and appropriate way to differentiate the categories of drugs that are within scope of the Prior Authorization API versus the NCPDP standards for other types of impacted payers?
We propose to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP SCRIPT standard adopted by the Secretary in 45 CFR 170.205(b) for the electronic prior authorization of drugs covered under a pharmacy benefit, as that term is described in the standard, further discussed in section I.C. of this proposed rule. We are making these proposals in response to comments we received on the 2022 CMS Interoperability and Prior Authorization proposed rule that stated that requiring impacted payers to support electronic prior authorization of drugs would support faster access to necessary medications for patients and reduce administrative burden on providers.
We are proposing an October 1, 2027 compliance date for state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs. Requiring state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP SCRIPT standard adopted by the Secretary would align requirements for these payers with the existing requirement for Medicare Part D sponsors, prescribers, and dispensers in 42 CFR 423.160(b)(1).
Specifically, as discussed in section II.A. of this proposed rule, we propose that those impacted payers would be required to support an adopted version of the NCPDP SCRIPT standard to enable providers to electronically submit prior authorization requests and receive prior authorization decisions for drugs covered under a pharmacy benefit using the following transactions:
• PAInitiationRequest and PAInitiationResponse
• PARequest and PAResponse
• PAAppealRequest and PAAppealResponse
• PACancelRequest and PACancelResponse
• PANotification (NCPDP SCRIPT standard version 2023011 only)
We are not proposing to require providers to use electronic prior authorization in this proposed rule. Rather, we are proposing that an unexpired version of the NCPDP SCRIPT standard adopted by the Secretary must be available for providers to use for prior authorization, and that the payer must send the response to the prior authorization request using the same standard. If ONC establishes an expiration date for an adopted version of the NCPDP SCRIPT standard in 45 CFR 170.205(b), upon the specified expiration date, that version would no longer be eligible for use by impacted payers to meet the interoperability requirements. State Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs may continue to make non-electronic means of conducting prior authorization (for example, fax, phone call, or direct data entry through a payer portal) available to providers. However, should these proposals be finalized, an unexpired version of the NCPDP SCRIPT standard adopted by the Secretary would be the only electronic method these payers would be
The NCPDP SCRIPT standard is already used by Medicare Part D sponsors, prescribers, and dispensers and required for various purposes by 15 states (for example, for electronic prior authorization and for electronic prescribing). The proposal to require other impacted payers to support the standard should create greater efficiency for providers and drive interoperability across CMS programs.
We propose an October 1, 2027 compliance date for state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP SCRIPT standard adopted by the Secretary. That aligns with the feedback we received in response to the 2022 CMS Interoperability and Prior Authorization proposed rule that payers and developers generally need at least a year to implement a new system (89 FR 8824). In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized compliance dates beginning in 2027 for policies that require API development and enhancement. That afforded impacted payers approximately 3 years to implement from when the rule was finalized (89 FR 8784, 8817, 8855, and 8897). That feedback was based on the totality of our proposals that require API development or enhancement—to require three new APIs and to update the Patient Access API. We believe it is appropriate to afford payers and developers approximately a year to implement this proposal, which will require time for programming, testing, education, and outreach.
In summary, we request comment on our proposals in the CFR citations listed in Table 4, and specifically on the following:
• The proposal to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP SCRIPT standard adopted by the Secretary in 45 CFR 170.205(b) for the electronic prior authorization of drugs covered under a pharmacy benefit.
• The proposal to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an adopted version of the NCPDP SCRIPT standard using the following transactions: PAInitiationRequest, PAInitiationResponse, PARequest, PAResponse, PAAppealRequest, PAAppealResponse, PACancelRequest, PACancelResponse, and PANotification (currently NCPDP SCRIPT standard version 2023011 only).
• The proposed October 1, 2027 compliance date for state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs.
We are proposing to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP F&B standard adopted by the Secretary in 45 CFR 170.205(u) by October 1, 2027. Accordingly, upon the specified expiration date of a version of the NCPDP F&B standard adopted in 45 CFR 170.205(u), that version would no longer be eligible for use by impacted payers to meet this proposal, if finalized.
As discussed in section II.A.2.b. of this proposed rule, the NCPDP F&B standard enables providers to view formulary and benefit information at a group level. The NCPDP F&B standard supports the NCPDP SCRIPT standard by giving providers information at the point of prescribing about whether a payer covers a particular drug and whether the payer requires prior authorization. Therefore, our proposal to require impacted payers to support an unexpired version of the NCPDP F&B standard adopted by the Secretary should enhance providers' ability to electronically request prior authorization for drugs covered under a pharmacy benefit. As with our other proposals, the NCPDP F&B standard should enable a more seamless exchange of prior authorization requirements, which should help state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs more efficiently manage their pharmacy benefits and prior authorization programs. A standardized approach to providing formulary and prior authorization information could make provider and payer operations more efficient and reduce costs.
The 2024 Part D and Health IT Standards final rule also includes requirements for transmitting formulary and benefits information between Part D sponsors and providers using the NCPDP F&B standard. Specifically, until January 1, 2027, that rule requires Part D sponsors to use either NCPDP F&B standard version 3.0 or an unexpired version of the NCPDP F&B standard adopted by the Secretary in 45 CFR 170.205(u). Beginning January 1, 2027, Part D sponsors are required to use an unexpired version of a standard adopted by the Secretary in 45 CFR 170.205(u), which is currently NCPDP F&B standard version 60 (89 FR 51250-51251).
In summary, we request comment on our proposals in the CFR citations listed in Table 4, and specifically on the following:
• The proposal to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP F&B standard adopted by the Secretary in 45 CFR 170.205(u) to make available formulary and benefits information for drugs covered under a pharmacy benefit.
• The proposed October 1, 2027 compliance date for state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs.
We also propose that state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs support an unexpired version of the NCPDP RTPB standard adopted by the Secretary in 45 CFR 170.205(c) by October 1, 2027.
The 2024 Part D and Health IT Standards final rule requires, beginning January 1, 2027, Part D sponsors' real-time benefit tools to comply with an unexpired version of a standard adopted by the Secretary in 45 CFR 170.205(c) (89 FR 51247 and 51251).
Our proposal to require these standards continues our goal towards interoperability and adoption of modern standards, reducing industry fragmentation. This standardization could encourage innovation and development of more sophisticated clinical decision support tools.
In summary, we request comment on our proposals in the CFR citations listed in Table 4, and specifically on the following:
• The proposal to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support an unexpired version of the NCPDP RTPB standard adopted by the Secretary in 45 CFR 170.205(c) to make available real-time coverage information for drugs covered under a pharmacy benefit.
• The proposed October 1, 2027 compliance date for state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized processes for state Medicaid and CHIP FFS programs to request an extension to the compliance date or an exemption from requirements to build some of the interoperability APIs if they meet certain criteria.
However, if HHS finalizes its proposal to adopt the FHIR specifications that compose the Prior Authorization API as the HIPAA standard for “referral certification and authorization” transactions (further discussed in section II.H. of this proposed rule), it could affect impacted payers' (which are HIPAA covered entities) ability to request extensions, exemptions, and exceptions from the requirement to implement the Prior Authorization API finalized in the 2024 CMS Interoperability and Prior Authorization final rule.
The process for state Medicaid and CHIP agencies to request an exemption from the Prior Authorization API includes requirements, in 42 CFR 431.80(c)(2)(ii)(B)(
Because the purpose of the HIPAA Administrative Simplification provisions is to ensure that covered entities do not use electronic transactions other than those adopted by the Secretary, there would be no other permissible alternative electronic methods for state Medicaid and CHIP FFS programs to use. Since there would be no other HIPAA-permitted alternative electronic methods once HIPAA proposals are finalized, state Medicaid and CHIP FFS programs previously eligible for an exemption to the Prior Authorization API would no longer have the ability to sustain an alternative plan to support electronic prior authorization.
However, to provide additional flexibility to state Medicaid and CHIP FFS programs, we are proposing to extend the policy that allows any state to request extensions for additional years until the HIPAA compliance date, if HHS finalizes its proposals. As discussed in section II.H.8. of this proposed rule, we are proposing a multiple year gap between the finalized Prior Authorization API compliance dates for impacted payers and the proposed compliance dates to our proposals to adopt FHIR standards as the HIPAA transaction standard for prior authorization transactions. As discussed in section II.H. of this proposed rule, we believe it would be appropriate to give 24 months for implementation between the effective date of the final rule and the proposed compliance date for most covered entities and 36 months for small health plans. As defined in 45 CFR 160.103, small health plans are those with annual receipts of $5 million or less. As state Medicaid and CHIP agencies are not commercial entities, they may generally be considered small health plans.
Some states may be unable to meet the proposed CMS interoperability compliance dates in this proposed rule due to funding challenges for necessary contracting and staff resources to develop and implement the technical requirements, depending on when the final rule is published in relation to a state's FY, legislative session, budget process, and related timelines. Some states may need to initiate a public procurement process to secure contractors with the necessary skills to support a state's implementation of these proposals. The timeline for an openly competed procurement process and the time required to onboard the contractor and develop the technical capabilities proposed here can be lengthy for states. A state might need to hire new staff with the necessary skills to implement our finalized policies and proposals to require impacted payers to support electronic prior authorization.
Overlapping requirements with varying timelines and exceptions add significant uncertainty to state FFS operations and makes responsible stewardship of federal funding more challenging. If HHS finalizes its proposals to modify the HIPAA transaction standard for prior authorization transactions, states would need to track multiple compliance dates, understand which standards are permissible at different times, and potentially procure funding and staffing to revise new API system implementations accordingly in coordination with state legislatures. These requirements, whether final or proposed, come at a time when state resources are allocated toward implementation of recent statutory changes, notably the Working Families Tax Cut legislation (Pub. L. 119-21, enacted July 4, 2025), making it difficult for them to reallocate or redirect resources. Providing state Medicaid and CHIP FFS programs the ability to request extensions to the compliance dates proposed here could mitigate these challenges. In addition, it could align with the requirements for covered entities that are not CMS impacted payers to use the proposed FHIR standard if they engage in electronic prior authorization.
To align with the proposals to support electronic prior authorization for drugs with those for electronic prior authorization of non-drug items and services, we also propose to offer similar flexibilities for state Medicaid and CHIP FFS programs to request extensions to the October 1, 2027 compliance date for the proposed requirements to incorporate drugs into the Prior Authorization API and to support the NCPDP standards for the electronic prior authorization of drugs.
Should our proposals be finalized, a state Medicaid or CHIP FFS program could request from CMS extensions to the compliance dates for (1) the non-drug items and services Prior Authorization API requirements finalized in the 2024 CMS Interoperability and Prior Authorization final rule; (2) the proposal to incorporate drugs into the Prior Authorization API; and (3) the proposal to require impacted payers to support NCPDP standards for the electronic prior authorization of drugs. States must be clear to which of these requirements they are requesting an extension and the required justification must be attenuated to the specific requirements.
We propose that a state must submit that request as a part of its annual Advance Planning Document (APD) for MMIS operations expenditures in sufficient time to be approved before the applicable compliance date. The state's request would have to include the following: (1) a narrative justification describing the specific reasons why the state cannot satisfy the requirement(s) by the compliance date and why those reasons result from circumstances that are unique to the agency operating the state Medicaid or CHIP FFS program; (2) a report on completed and ongoing state activities that evidence a good faith effort towards compliance; and (3) a comprehensive plan to meet the requirements before a finalized HIPAA compliance date.
Under this proposal, CMS would approve an extension if, based on the information provided in the APD, CMS were to determine that the request adequately establishes a need to delay implementation and that the state has a comprehensive plan to implement the proposed requirements before a finalized HIPAA compliance date.
We understand that state Medicaid and CHIP FFS programs have numerous competing priorities and face additional funding and staff limitations compared to commercial entities (89 FR 8902). Therefore, we encourage states to contact their Medicaid Enterprise Systems (MES) officer, if necessary for proper and efficient operations, to discuss their extenuating circumstances. Any flexibility granted to a state Medicaid or CHIP FFS program would be temporary and limited to the unique circumstances of the program.
In the 2020 CMS Interoperability and Patient Access and the 2024 CMS Interoperability and Prior Authorization final rules, we finalized a process for individual market QHP issuers on the FFEs to submit a request for an exception from the technical requirements finalized in those rules.
Those final rules established that individual market QHP issuers on the FFEs that apply for an exception must submit a narrative justification as part of their QHP application. That narrative
CMS takes a similar approach during the QHP certification process in other instances where flexibility may be warranted based on a QHP issuer's circumstances. For example, per 45 CFR 156.230(a)(2)(ii), if a plan applying for QHP certification to be offered through the FFE does not satisfy the network adequacy standards described in paragraphs 45 CFR 156.230(a)(2)(i)(A) and 45 CFR 156.230(a)(2)(i)(B), as part of its QHP application, the issuer must include a justification describing how the plan's provider network provides an adequate level of service for enrollees and how the plan's provider network will be strengthened and brought closer to compliance with the network adequacy standards prior to the start of the plan year. The issuer must provide information as requested by the FFE to support this justification. Our experience with these exceptions processes for rules that are currently in effect suggest that making an exception available prevents the FFE from potentially losing issuer participation based on concerns the issuer will ultimately be able to address during or before the plan year, typically resulting in no potential harm to consumers. In particular, we have observed that QHP issuers have submitted narrative justifications that may meet or be close to meeting the standards of providing an adequate level of service to enrollees by the start of the applicable plan year.
Therefore, we propose an exception process to the proposed NCPDP standards requirements for QHP issuers on the FFEs in 45 CFR 156.223(i). We propose that if an issuer applying for QHP certification to be offered through an FFE believes it cannot satisfy the proposed requirement to support the proposed NCPDP standards, the issuer would have to include in its QHP application a narrative justification describing the reasons why it could not satisfy the requirements for the applicable plan year, the effect of non-compliance upon providers and enrollees, the current or proposed means of providing health information to providers and facilitating prior authorization, and solutions and a timeline to achieve compliance with the applicable requirements.
We propose that an FFE may grant an exception to the proposed requirement to support the NCPDP standards if it determines that making QHPs of such issuer available through the Exchange is in the interests of qualified individuals and qualified employers in the state or states in which the Exchange operates and that an exception is warranted to permit the issuer to offer QHPs through the FFE. This proposal is consistent with the exceptions for individual market QHP issuers on the FFEs that we finalized for the Patient Access, Provider Access, Payer-to-Payer, and Prior Authorization APIs.
In addition, we propose to amend the requirements in 45 CFR 156.223(h)(1)(iii) to specify that QHP issuers on the FFEs, as part of a request for an exception from the Prior Authorization API requirements in 45 CFR 156.223(b), describe the current or proposed means of conducting prior authorization. Under the current requirement finalized in the 2024 CMS Interoperability and Prior Authorization final rule, QHP issuers on the FFEs that are applying for an exception must describe their current or proposed means of providing health information to providers. However, providing health information to providers does not describe the full scope of the Prior Authorization API. While part of the purpose of the Prior Authorization API is to make available to providers information about prior authorization requirements, it is also to facilitate prior authorization using bidirectional data exchanges between providers and payers. To align with the full scope and purpose of the Prior Authorization API, we believe that any QHP issuer on the FFE that applies for an exception should describe how they will facilitate prior authorization, not just how health information will be provided to providers.
In summary, we request comment on our proposals in the CFR citations listed in Table 4, and specifically on the following:
• The proposal to remove the policy finalized in the 2024 CMS Interoperability and Prior Authorization final rule that allows states with small FFS populations to request an exemption from CMS for the non-drug items and services Prior Authorization API requirements.
• The proposal that state Medicaid and CHIP FFS programs may request extensions to the finalized compliance date to implement the Prior Authorization API and the proposed compliance date to incorporate drugs covered under a medical benefit into the Prior Authorization API.
• The proposal that state Medicaid and CHIP FFS programs may request extensions and that QHP issuers on the FFEs may request an exception from the proposed requirement to support an unexpired version of the NCPDP standards that the Secretary has adopted in 45 CFR 170.205(b), (c), or (u).
• The proposal to amend language in 45 CFR 156.223(i)(1)(iii) to require that a QHP issuer on the FFEs seeking an exception from the Prior Authorization API requirements and/or proposed requirement to support an unexpired version of the NCPDP standards that the Secretary has adopted in 45 CFR 170.205(b), (c), or (u) to describe their current or proposed means of conducting prior authorization.
In addition, we request comments on the following:
• Flexibilities and options that can be provided to state Medicaid and CHIP FFS programs eligible for an exemption and QHP issuers on the FFEs eligible for an exception that would reduce burden for the reasons outlined previously, while ensuring compliance with the proposed or adopted HIPAA transaction standards.
Section 1856(b) of the Act directs the Secretary to establish regulatory standards for MA organizations that are consistent with and carry out Part C of the Medicare statute, including the provisions in section 1852 of the Act. Section 1852(c)(1)(G) of the Act requires that MA organizations disclose to their enrollees any rules regarding prior authorization, and section 1852(g)(1) of the Act requires MA organizations to have procedures for making timely determinations regarding whether an enrollee is entitled to receive a health service. Section 1857(e)(1) of the Act authorizes the addition of contract terms for contracts between the Secretary and an MA organization determined by the Secretary to be “necessary and appropriate” for the MA program. This broad authority encompasses the adoption of standards for electronic prior authorization, which are important for improving efficiency and reducing burdens in health care delivery.
The Prior Authorization API is an electronic means for receiving and responding to requests for coverage determinations before the services are rendered or items furnished. The proposed requirement to incorporate drugs covered under a medical benefit that may require prior authorization into the Prior Authorization API is consistent with MA organizations' obligations under sections 1852(c)(1)(G) and 1852(g)(1) of the Act. Pursuant to the Secretary's authority under sections 1856(b) and 1857(e)(1) of the Act, we are proposing to require MA organizations to expand the scope of the Prior Authorization API to incorporate drugs covered under a medical benefit.
We propose additional requirements for MA organizations to ensure that providers have further information about drug prior authorization through the Prior Authorization API required under regulations in 42 CFR 422.122(b). This proposed requirement would necessitate updating the Prior Authorization API with information about the coverage and documentation requirements for prior authorization of drugs covered under a medical benefit and responding to prior authorization requests for such drugs through the Prior Authorization API.
We propose requiring MA organizations to expand the Prior Authorization API using recommended or updated implementation specifications discussed in section II.A. of this proposed rule. These implementation specifications are expected to improve the prior authorization process by addressing absences in providers' access to information about the prior authorization rules and documentation requirements for drugs. Under our proposal, the mandatory Prior Authorization API would communicate the coverage and documentation requirements for prior authorization for drugs covered under a medical benefit, indicating if authorization is required and what documentation is required to support an authorization request. This electronic API-enabled access to information should improve timely access to care for patients by mitigating delays for necessary medications known to occur when a provider is trying to determine drug coverage or eligibility requirements or does not know what documents to submit to obtain prior authorization.
If applicable, providers' burden may be reduced if they can submit a prior authorization request and access status and decision information for drugs through an MA organization's Prior Authorization API. The required Prior Authorization API can potentially improve the efficiency of the prior authorization process for drugs covered under a medical benefit as much as it does for non-drug items and services if the number of appeals, denials, and requests for additional documentation can be reduced.
We believe this proposal to extend the scope of the Prior Authorization API to incorporate drugs covered under a medical benefit should contribute to program efficiency and effective operations and should be in the best interest of MA enrollees.
For Medicaid, most of the proposals described in this section are authorized by sections 1902(a)(4), 1902(a)(8), and 1902(a)(19) of the Act. Section 1902(a)(4) of the Act requires that a state Medicaid plan provide such methods of administration as are found by the Secretary to be necessary for the proper and efficient operation of the state Medicaid plan. Section 1902(a)(8) of the Act requires states to ensure that Medicaid services are furnished with reasonable promptness to all eligible individuals, which may result in faster beneficiary access to services. Section 1902(a)(19) of the Act requires states to ensure that care and services under a Medicaid state plan are provided in a manner consistent with the simplicity of administration, which can result in more uniform IT regulations and standards that are in the best interests of the recipients. For Medicaid managed care, section 1932(c)(1)(A) of the Act requires that states that contract with Medicaid MCOs develop and implement a quality assessment and improvement strategy that includes standards for access to care so that covered services are available within reasonable timeframes. CMS relies on our authority in section 1902(a)(4) of the Act to apply these standards for PIHPs and PAHPs.
The proposals to incorporate drugs covered under a medical benefit into the Prior Authorization API and to improve electronic prior authorization for covered outpatient drugs by supporting the adopted version of the NCPDP SCRIPT standard by the Medicaid programs is supported by the sections of the Act referenced previously. For this proposal, CMS would rely on our authority in section 1902(a)(4) of the Act to adopt these standards for PIHPs and PAHPs. This would ensure that the same requirements apply to MCOs, PIHPs, and PAHPs.
The proposal for state Medicaid FFS programs and Medicaid managed care plans to implement electronic prior authorization for drugs is expected to improve the efficiency and timeliness of the prior authorization process for Medicaid beneficiaries, providers, state Medicaid agencies, and Medicaid managed care plans by addressing inefficiencies that might exist in the process today. Support for the proposed FHIR and NCPDP standards could allow a provider to determine whether a prior authorization is required and the documentation requirements for that prior authorization request. The Prior Authorization API and NCPDP SCRIPT standard can improve the prior authorization process by making it more efficient, including by reducing the number of denials and appeals or eliminating requests for additional documentation. Those standards could—
• Enable providers to submit a complete prior authorization request faster and easier;
• Support more timely notice to the provider and beneficiary of the disposition of the prior authorization request; and
• Permit improved scheduling of services or filing appeals, depending on the decision.
For CHIP, we are proposing these requirements under the authority of section 2101(a) of the Act, which sets forth that the purpose of Title XXI is to provide funds to states to provide child health assistance to uninsured, low-income children effectively and efficiently that is coordinated with other sources of health benefits coverage.
We are proposing to require state CHIP FFS programs and CHIP managed
Section 1311(e)(1)(A) of the Affordable Care Act requires that Exchanges only certify plans as QHPs if they meet the requirements for certification promulgated by the Secretary under section 1311(c)(1) of the Affordable Care Act, while section 1311(e)(1)(B) of the Affordable Care Act provides discretion to certify QHPs if the Exchange determines that making such plans available is in the interests of qualified individuals and qualified employers in the state or states in which the Exchange operates.
For QHP issuers on the FFEs, we are proposing to amend the QHP certification standard that we finalized in the 2024 CMS Interoperability and Prior Authorization final rule using the same authority under section 1311(e)(1) of the Affordable Care Act. These proposals would expand the use of specific technology and standards to promote efficiency and transparency in the prior authorization process for drugs, which should improve access to care for enrollees in QHPs offered by issuers on the FFEs by ensuring that the QHP issuers on the FFEs respond to prior authorization requests promptly through a modernized process and clearly explain their rationale in cases of denial. Our proposal to require that QHP issuers on the FFEs support electronic prior authorization for all covered drugs either through the Prior Authorization API as described in 45 CFR 156.223(b) or through an unexpired version of the NCPDP SCRIPT standard that the Secretary has adopted in 45 CFR 170.205(b), combined with the ability of QHP issuers on the FFEs to request an exception, is in the interest of qualified individuals and qualified employers because it balances the goals of ensuring access to health care with robust QHP issuer participation on the FFEs.
Enrollees in QHPs on the FFEs may receive approved covered drugs more quickly when their providers can submit a prior authorization request electronically. These proposed requirements would allow providers to determine whether prior authorization is required for drugs, submit the necessary documentation, and receive an electronic response in real-time or near real-time. As we explained in the 2024 CMS Interoperability and Prior Authorization final rule regarding the APIs required in that final rule (89 FR 8786), we believe that, with limited exceptions, certifying only health plans that support electronic prior authorization for all covered drugs and adhere to the other requirements described in this section of the preamble is in the interests of qualified individuals and qualified employers in the state or states in which a QHP issuer on the FFEs operates because of the opportunities for improvements in patient care. We encourage SBEs, including SBE-FPs, to consider whether a similar requirement should apply to issuers participating in their Exchanges.
In the 2024 CMS Interoperability and Prior Authorization final rule, we described the impact of excessive wait times for prior authorization decisions on patients, providers, and payers (89 FR 8858 and 8859). We discussed surveys, federal reports, and studies, including a multi-year survey conducted by the American Medical Association (AMA) about delays in care and medical risks to patients due to issues with prior authorization (89 FR 8859).
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized specific process requirements for impacted payers to improve the prior authorization process for non-drug items and services. We established prior authorization decision timeframes for impacted payers other than QHP issuers on the FFEs (MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities) and required that, when denying a prior authorization request for non-drug items and services, impacted payers respond to the requesting provider with a specific reason for the denial (89 FR 8897). Shortening and standardizing timeframes for prior authorization decisions across programs improves access to health care and can mitigate the negative impacts of delays, particularly for individuals with chronic or complex conditions. The term “denial” means that the payer has refused to authorize coverage for a recommended medical treatment, procedure, or medication. Payers deny coverage for various reasons, such as a determination that the service or medication is not medically necessary or does not meet their coverage criteria. Requesting providers need to clearly understand the reason for denial so that additional information can be provided or alternative care options can be considered.
In the 2024 CMS Interoperability and Prior Authorization final rule, we also finalized requirements on impacted payers to publicly report certain prior authorizations metrics for non-drug items and services annually beginning in 2026.
The proposals in this proposed rule to extend our technical and process requirements for prior authorization to all drugs should improve patients' access to services. We intend these proposals to create more unified processes for providers to request and receive prior authorization for drugs. Such standardization and consistency should allow providers to spend more time on patient care and less time on administrative tasks and paperwork. Additionally, standardized processes could reduce wait times and resubmissions and result in more efficient and accurate decision-making.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a requirement that, beginning in 2026, impacted payers must provide a specific reason for denial in their response to a provider's prior authorization request for non-drug items and services, regardless of the method used to communicate the prior authorization request or decision.
In the 2024 CMS Interoperability and Prior Authorization final rule, we explained that payers deny prior authorizations for a variety of reasons, including because the payer does not consider the items to be medically necessary, the patient exceeded limits on allowable covered care, or documentation to support the request was missing or inadequate (89 FR 8872). The reasons for denying prior authorizations for drugs may be similar. Health plan formularies are lists of generic and brand-name drugs covered by a health plan and may include drug tiering information. If prior authorization is denied because of a payer's formulary or utilization management policies and that is not clearly communicated, then the provider cannot effectively act on behalf of the patient. When a payer provides a specific reason for a denial, a provider can take appropriate actions such as resubmitting the request with updated information, appealing the decision, or identifying alternative drugs or treatments. Payers send denials through various channels—electronically, by mail, via portal, or by fax. When doing so, they often use proprietary codes or narrative text to communicate the reasons for denial. For some payers, the process of communicating denials remains both inefficient and inconsistent. The result is that providers may not have timely, clear direction on the next steps for providing appropriate care for their patients after a denied prior authorization request.
As described in the 2024 CMS Interoperability and Prior Authorization final rule, some impacted payers are required by existing federal laws and regulations to notify providers or patients when the payer denies or makes an adverse decision on a prior authorization request (89 FR 8874-8876). We are not proposing to alter or replace existing requirements for payers to notify patients, but to add requirements to ensure a specific reason for denial is communicated to providers. In addition to the existing program notification requirements, communicating specific reasons for denial increases transparency, reduces burden, and improves efficiencies for both payers and providers.
Under existing regulations, an MA organization must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination on a request for a Part B drug as expeditiously as the enrollee's health condition requires but no later than 72 hours after receiving a standard request and no later than 24 hours after receiving an expedited request.
Similarly, Medicaid managed care plans and CHIP managed care entities must notify the requesting provider and give the beneficiary written notice of any decision by the plan to deny a service authorization request or to authorize a service in an amount, duration, or scope that is less than requested.
While 45 CFR 156.223(a) requires QHP issuers on the FFEs to include a specific reason for the denial of a prior authorization request to the provider, this requirement explicitly excludes prescription drugs.
We propose that beginning October 1, 2027, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs be required to provide a specific reason to providers when denying a prior authorization request for drugs, regardless of the method used to send the prior authorization request or decision. This proposal is an effort to improve the communication between those impacted payers and providers when they deny a prior authorization request for drugs. This proposal would align with the requirement finalized in the 2024 CMS Interoperability and Prior Authorization final rule that impacted payers send to providers a specific reason for denying a prior authorization request for non-drug items and services.
The content of the response should include a specific reason for denying a prior authorization request for drugs that helps a provider to understand why the request was denied and what actions must be taken to resubmit or appeal the decision. A specific reason for denial could include information about the specific plan coverage criteria on which the denial is based, why documentation did not support the medication or prescription, or why the drug is not deemed necessary. This proposal could improve the current processes and reduce manual effort and costs by increasing the likelihood that providers whose prior authorization request for drugs is denied have all the information they need to decide the next steps to care for the patient, including whether and how to appeal the denial. We are proposing an October 1, 2027 effective date for this proposal, as these protections are important to patients.
This proposal does not affect existing patient notice requirements for state Medicaid and CHIP FFS programs and QHP issuers on the FFEs. State Medicaid and CHIP FFS programs are required to provide a beneficiary with timely and adequate written notice of a “denial or change in benefits and services.”
In addition to these new requirements, we are proposing to reorganize 42 CFR 438.210(c) and 42 CFR 438.242 to improve readability. This proposal maintains existing program requirements for non-drug items and services while proposing these new requirements for Medicaid managed care plans to provide specific denial reasons for drug prior authorization requests.
In summary, we request comment on our proposals in the CFR citations listed in Table 6, and specifically on the following:
• The proposal to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to communicate to providers a specific reason for denying a prior authorization request for any drugs, regardless of the method used to send the prior authorization request or decision.
• The proposed October 1, 2027 compliance date for state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs.
• The proposed structural changes to 42 CFR 438.210(c) and 42 CFR 438.242 to improve readability.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements for MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities to make prior authorization decision requests on non-drug items and services as expeditiously as a patient's health condition requires but no later than 7 calendar days after receiving a standard request and no later than 72 hours after receiving an expedited request, effective in 2026 (89 FR 8897). However, we did not propose or finalize those requirements for QHP issuers on the FFEs, in part because existing regulations in 45 CFR 147.136 establish timelines for all non-grandfathered
In addition to the requirements for non-drug items and services, MA organizations, state Medicaid FFS programs, Medicaid managed care plans, and CHIP managed care entities have existing decision timeframe requirements for prior authorization of certain drugs. MA organizations must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of a determination regarding coverage of a Part B drug as expeditiously as the enrollee's health condition requires, but no later than 72 hours after receiving the standard request and no later than 24 hours after receiving the expedited request.
State Medicaid FFS programs, Medicaid managed care plans, and CHIP managed care entities also have existing decision timeframe requirements for covered outpatient drugs.
As discussed in sections II.C.3.c. and II.C.3.d. of this proposed rule, we are now requesting information on whether there are gaps in timeframe requirements for some drugs and if there are we are proposing to apply the prior authorization decision timeframes for non-drug items and services outlined in the 2024 CMS Interoperability and Prior Authorization final rule to that subset of drugs for which there are not already established prior authorization timeframes. This would apply to both state Medicaid FFS programs and Medicaid managed care plans. We are also proposing to modify state CHIP FFS programs' decision-making timeframes for the prior authorization of drugs comport with section 1927(d)(5)(A) of the Act to align with the requirements for those programs.
In response to the 2022 CMS Interoperability and Prior Authorization proposed rule, many commenters disagreed with excluding QHP issuers on the FFEs from the shortened timeframe requirements and asked that CMS reconsider the exclusion. Commenters stated it would be more consistent and equitable for CMS to apply the same timeframe requirements for standard prior authorization decisions for all impacted payers (89 FR 8880). Commenters stated that patients covered by these plans should be entitled to the same protections as those covered by other impacted payers, and that excluding QHP issuers on the FFEs could negatively affect patients by delaying access to care based only on the type of insurance they have. One commenter stated that they did not believe that shortening the prior authorization decision timeframe for QHP issuers on the FFEs from a 15 day response time for standard requests to 7 days would cause an undue burden to those plans. We also received many comments requesting CMS consider adding additional standards to the prior authorization process to address the adverse effects of delays on patients and providers (89 FR 8859). Multiple commenters wrote that CMS should apply even shorter prior authorization decision timeframes to QHP issuers on the FFEs, such as 72 hours for standard
In response to the comments received, we stated that we would evaluate opportunities for future rulemaking to alleviate provider burdens and mitigate delays associated with prior authorization (89 FR 8859). We are aware that a growing number of states have passed laws to reduce prior authorization decision timeframes, require technical standards, limit procedural justifications for denials, tie decisions to clinical criteria, and increase transparency.
Hence, we are now proposing, in 45 CFR 156.223(i)(1)(i), that beginning October 1, 2027 in response to a request for prior authorization for non-drug items and services, QHP issuers on the FFEs must notify the requesting provider of their decision as expeditiously as a patient's health condition requires but no later than 7 days after receiving a standard prior authorization request and no later than 72 hours after receiving an expedited prior authorization request.
We also propose, in 45 CFR 156.223(i)(1)(ii), that beginning October 1, 2027 in response to a prior authorization request for any drug, QHP issuers on the FFEs must notify a requesting provider of their decision as expeditiously as the enrollee's health condition requires, but no later than 72 hours after receiving a standard prior authorization request and no later than 24 hours after receiving an expedited prior authorization request. These are similar to the timeframes for prior authorization decisions for drugs that we propose for other impacted payers in this proposed rule. The proposed timeframes to require QHP issuers on the FFEs to notify the requesting provider of a prior authorization decision would be new; that is, there is currently no requirement for QHP issuers on the FFEs to notify providers of a prior authorization decision within any specific period of time. This proposal would not change existing prior authorization notification requirements in 45 CFR 147.136 for patients but would create a new requirement for QHP issuers on the FFEs to notify the requesting provider of a prior authorization decision within a specific timeframe based on the nature of the request, and these timeframes would generally be shorter than the maximum amount of time that QHP issuers on the FFEs have to notify patients regarding standard prior authorization requests under existing regulations in 45 CFR 147.136.
Establishing a new requirement for QHP issuers on the FFEs to notify providers of prior authorization decisions on non-drug items and services and drugs, and aligning those timelines with current and proposed timelines for other impacted payers, could improve patient care and minimize administrative burden for providers who would be able to expect prior authorization decisions within the same timeframe from all impacted payers. We are not proposing to shorten the timeframes for QHP issuers on the FFEs to notify patients of prior authorization decisions as established in 45 CFR 147.136(b)(3); however, we recognize that QHP issuers on the FFEs may voluntarily adopt shorter patient notification timeframes that align with the proposed provider notification timeframes to minimize administrative burden. Therefore, this proposal may result in faster notification for patients than is required by 45 CFR 147.136(b)(3) and may result in QHP issuers on the FFEs notifying patients more quickly than plans and issuers subject to 45 CFR 147.136(b)(3), including issuers on SBEs.
We expect that the proposed timeframes for notifying providers would be feasible for QHP issuers on the FFEs given the notification functionality of the Prior Authorization API and NCPDP standards that we are proposing QHP issuers on the FFEs to support for electronic prior authorization. Those standards support direct electronic communications between payers and providers about prior authorizations. In addition, that available technology can accelerate the decision-making itself and we are of the view that QHP issuers on the FFEs should be part of this trend in process improvement.
As noted above, we are proposing that QHP issuers on the FFEs notify the requesting provider “as expeditiously as the enrollee's health condition requires,” subject to the proposed time limits, which is the standard for non-drug items and services used by MA organizations,
We also propose, in 45 CFR 156.223(i)(2), that for purposes of 45 CFR 156.223(i)(1), a standard prior authorization request has the meaning given in 29 CFR 2560.503-1(m)(2) to a “pre-service claim” and an expedited prior authorization request has the meaning given in 29 CFR 2560.503-1(m)(1) to a “claim involving urgent care,” as determined by the attending provider, and the issuer shall defer to such determination of the attending provider. By relying on existing definitions, we seek to maintain consistency across requirements related to prior authorization for QHP issuers on the FFEs.
We also propose, in 45 CFR 156.223(i)(3)(i), that the QHP issuer on the FFEs may extend the timeframes to notify the requesting provider of a prior authorization decision by up to 14 calendar days under any of the following circumstances: (1) if the provider requests the extension; (2) the extension is justified and in the provider's or enrollee's interest because the QHP issuer on the FFEs needs additional medical evidence from another provider or the enrollee in order to issue a decision; or (3) the extension is justified due to extraordinary, exigent, or other non-routine circumstances and is in the provider's or enrollee's interest. If extended, the QHP issuer on the FFEs
In summary, we request comment on our proposals in the CFR citations listed in Table 6, and specifically on the following:
• The proposal to require QHP issuers on the FFEs to provide notice to the requesting provider of prior authorization decisions as expeditiously as the enrollee's health condition requires, but no later than 7 calendar days after receiving a standard prior authorization request for non-drug items and services and as expeditiously as the enrollee's health condition requires, but no later than 72 hours after receiving an expedited request for non-drug items and services.
• The proposal to require QHP issuers on the FFEs to provide notice to the requesting provider of prior authorization decisions as expeditiously as the enrollee's health condition requires, but no later than 72 hours after receiving a standard prior authorization request for drugs and as expeditiously as the enrollee's health condition requires, but no later than 24 hours after receiving an expedited request for drugs.
• The proposal that QHP issuers on the FFEs may extend the timeframes to notify the requesting provider of a prior authorization decision by up to 14 calendar days under certain circumstances, and the QHP issuers on the FFEs must notify the requesting provider in writing of the reasons for the delay and inform the provider of the right to file an expedited grievance if the provider disagrees with the QHP issuer on the FFEs' decision to grant an extension.
• The proposal that for purposes of 45 CFR 156.223(i)(1), a standard prior authorization request has the meaning given in 29 CFR 2560.503-1(m)(2) to a “pre-service claim” and an expedited prior authorization request has the meaning given in 29 CFR 2560.503-1(m)(1) to a “claim involving urgent care” for QHP issuers on the FFEs.
• The proposed October 1, 2027 compliance date.
In addition, we request comments on the following:
• Whether requiring QHP issuers on the FFEs to provide notice to requesting providers of prior authorization decisions in a shorter timeframe than they are currently required to provide notice to patients of prior authorization decisions is sufficient to improve enrollees' care, or if CMS should consider also applying shorter timeframes for notification to patients, as well.
• Whether there would be burden due to the different timeframes for QHP issuers on the FFEs to notify a requesting provider of a prior authorization decision and to notify participants, beneficiaries, and enrollees of prior authorization decisions, and how we could potentially alleviate that burden.
• Whether we should finalize shorter timeframes for QHP issuers on the FFEs to notify the requesting provider of prior authorization requests for drugs, specifically, 24 hours for all requests (standard or expedited), to align with the existing requirements for state Medicaid FFS programs, Medicaid managed care plans, and CHIP managed care entities, and our proposal for state CHIP FFS programs.
• Whether the requirement to make decisions as “expeditiously as the enrollee's health condition requires” is appropriate, or whether additional or alternative language or sub-regulatory guidance is necessary to help ensure impacted payers make timely decisions and for consistency with existing decision timeframes in 45 CFR 147.136(b)(3) and 29 CFR 2560.503-1(f).
• Whether QHP issuers' parent organizations that participate in multiple CMS-regulated programs, such as MA organizations or Medicaid managed care plans, already have experience responding to prior authorization requests more quickly than it is currently required by existing market wide rules that they can leverage to improve processes for their QHPs offered on the FFEs.
• Whether QHP issuers on the FFEs' plan management systems can readily distinguish between a policy applicable to a QHP offered on an FFE, a policy applicable to off-Exchange individual or small group coverage, or a QHP issuer in an SBE.
As discussed previously, section 1927(d)(5)(A) of the Act establishes a 24-hour timeframe for state Medicaid FFS programs to respond to requests for prior authorization of covered outpatient drugs for which FFP is available. However, that timeframe may not apply to all drugs that are covered by states for which states receive FFP. In the 2022 CMS Interoperability and Prior Authorization proposed rule, which addressed prior authorization decision timeframes for non-drug items and services, CMS received comments indicating that drugs should have been included in the prior authorization timeframe policies and that gaps exist regarding timeframe requirements on prior authorizations for certain drugs. Given that covered outpatient drugs already have an established statutory timeframe for prior authorization pursuant to section 1927 of the Act, we seek to address the comments concerning a possible gap in prior authorization timeframes for a subset of drugs which are not covered outpatient drugs. In addition, to address concerns by commenters, we explain the prior authorization decision timeframes for drugs that otherwise meet the definition of covered outpatient drugs in section 1927(k)(2) of the Act but are excluded from the definition of covered outpatient drugs due to meeting the criteria in the limiting definition of covered outpatient drug in section 1927(k)(3) of the Act.
Section 1927(k)(3) of the Act limits the term “covered outpatient drug” to exclude any drug, biological product, or insulin provided as part of, or as incident to and in the same setting as, certain services (and for which payment may be made under that subchapter as part of payment for those services and not as direct reimbursement for the drug).
One example of this subset of drugs are those that are administered in an inpatient hospital setting. Drugs administered in an inpatient setting are typically paid for as part of a bundled payment, which includes a variety of items, services, and drugs. Under that payment model, when prior authorization is required, it is typically submitted as a bundle and drugs are not separated from non-drug items and services; drugs and non-drug items and services are reviewed under the same prior authorization request and therefore same timeframe. In those situations, we do not believe there is a need for a separate timeframe for the drug component of the prior authorization; the prior authorization timeframes established in the 2024 CMS Interoperability and Prior Authorization final rule would apply to the entirety of the prior authorization request.
In addition, we request comment on whether there are categories of non-covered outpatient drugs for which it would be more appropriate to finalize a decision timeframe that aligns with the statutory requirement for covered outpatient drugs at section 1927(d)(5)(A) of the Act. It is unclear whether there are drugs (that are not covered outpatient drugs) for which states require prior authorization and for which 24 hours would be the appropriate decision timeframe, rather than the longer decision timeframe for non-drug items and services. As stated, we do not desire to create different timeframes for prior authorization decisions for drugs versus non-drug items and services for which reimbursement and prior authorization requests are bundled. However, we also want to address any gaps for standalone prior authorization requests for drugs that either do not have an existing prior authorization decision timeframe requirement, or for which the prior authorization decision timeframe is misaligned with our other proposals in this proposed rule.
We propose that if commenters identify gaps in the decision timeframe requirements for drugs, we would apply the same requirements to Medicaid MCOs, PIHPs, and PAHPs by amending 42 CFR 438.210 and CHIP managed care entities by the existing cross reference to 42 CFR 438.210 in 42 CFR 457.1230(d).
We are proposing an October 1, 2027 compliance date for these proposals for state Medicaid FFS programs, Medicaid managed care plans, and CHIP managed care entities.
In summary, we request comments on the following:
• The scope of drugs for which we are proposing these prior authorization requirements. Are there additional drugs that currently have no established prior authorization timeframe requirements for which such timeframes should be established? Is there a need to apply prior authorization timeframe requirements to the scope of drugs proposed in this rule? Are there other types of drugs for which we should finalize a requirement that aligns with the 24 hour timeframe established for covered outpatient drugs by section 1927(d)(5)(A) of the Act?
• The proposed October 1, 2027 compliance date for state Medicaid FFS programs, Medicaid managed care plans, and CHIP managed care entities.
• Whether we should consider future rulemaking to propose a requirement for MA organizations to respond to all prior authorization requests for drugs no later than 24 hours to align with the Medicaid and CHIP requirements for covered outpatient drugs.
• Whether there are any drugs payable under Medicare Part A that are not included as part of a larger bundle of inpatient services to which the timeframe to make prior authorizations decisions should apply for MA organizations.
To align with the existing requirements for state Medicaid FFS programs, Medicaid managed care plans, and CHIP managed care entities requirements for covered outpatient drugs, as well as the proposals described in section II.C.3.c. of this proposed rule, we propose to shorten the timeframe for state CHIP FFS programs to make prior authorization decisions on prescription drugs for which the state receives FFP, as described in section 2110(a)(6) of the Act. As noted previously, the current requirement is the same 7 days for standard requests and 72 hours for expedited requests as for non-drug items and services, while other payers have shorter decision timeframes for the prior authorization of drugs than for non-drug items and services.
We are proposing to establish a requirement that state CHIP FFS programs must provide notice to providers and beneficiaries of prior authorization decisions for prescription drugs for which FFP is available in accordance with the beneficiary's medical needs but no later than 24 hours after receiving the prior authorization request. This proposal would align with the existing state Medicaid FFS program requirements for covered outpatient drugs in section 1927(d)(5)(A) of the Act.
This proposed alignment for timeframe requirements should ensure that providers and patients have similarly efficient processes across all impacted payers and within CMS programs, regardless of how drugs are categorized under the Act. We are proposing an October 1, 2027 compliance date.
In summary, we request comment on our proposals in the CFR citations listed in Table 6, and specifically on the following:
• The proposal to require state CHIP FFS programs to provide notice to providers and patients of prior authorization decisions in accordance with the beneficiary's medical needs, but no later than 24 hours after receiving a prior authorization request for prescription drugs for which FFP is available.
• The proposed October 1, 2027 compliance date.
After finalizing the 2024 CMS Interoperability and Prior Authorization final rule, we determined that the regulations in 42 CFR 440.230(e) and 42 CFR 457.495(d) needed to be written more clearly to align with the finalized policy as explained in that rule (89 FR 8897). In 42 CFR 440.230(e), we established that state Medicaid FFS programs must make prior authorization decisions on requests for non-drug items and services no later than 7 calendar days for standard requests and 72 hours for expedited requests. We also provided that states could establish shorter timeframes, with which the state
Similarly, 42 CFR 457.495(d) accounts for state laws that may establish different timeframes but does not limit those requirements to being shorter than the 14 days for standard requests and 72 hours for expedited requests. Therefore, we are proposing to align the language for state CHIP FFS program timeframes with that for state Medicaid FFS program timeframes by specifying that state CHIP FFS programs must make prior authorization decisions for non-drug items and services no later than 7 calendar days for standard requests and 72 hours for expedited requests unless a shorter timeframe is established by the state. Both these proposals are consistent with the explanation of our finalized policies in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8879). We propose that this change would be effective on the effective date of the final rule, as it does not change the existing regulatory requirement.
In summary, we request comment on our proposals in the CFR citations listed in Table 6, and specifically on the following:
• The proposal to revise regulatory language for state Medicaid FFS programs and add regulatory language for state CHIP FFS programs to explain that state Medicaid and CHIP FFS programs must make prior authorization decisions available for non-drug items and services no later than 7 calendar days for standard requests and 72 hours for expedited requests unless a shorter timeframe is established by the state.
• The proposal to become effective beginning on the effective date of the final rule.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements for impacted payers to publicly report certain prior authorizations metrics about non-drug items and services annually beginning in 2026.
We finalized an annual March 31 deadline for all impacted payers to publicly post prior authorization metrics for the previous year.
We also propose to amend the existing requirements for Medicaid managed care plans and CHIP managed care entities to require that they report the prior authorization metrics finalized in the 2024 CMS Interoperability and Prior Authorization final rule by program, as well as by plan. For consistency with the other Medicaid and CHIP managed care reporting requirements, we believe that it is appropriate to also collect these metrics at the program level. Specifically, if a managed care plan contracts with the state for multiple programs (for example, an adult and child acute care program and a long-term services and supports [LTSS] program), each program's prior authorization metrics would be reported separately. This is also consistent with how states must report all data in the Managed Care Program Annual Report (MCPAR), as described in 42 CFR 438.66(e). Integrated plans would continue to report non-drug items and services covered by MA organizations at the MA contract level, as the separate requirements for MA organizations and Medicaid managed care plans apply under their respective contracts. However, integrated plans would be required to report non-drug items and services covered by Medicaid managed care plans at both the plan and program level. That approach is consistent with the reporting requirements finalized in the 2024 CMS Interoperability and Prior Authorization final rule for non-drug items and services (89 FR 8897). We propose that this change would be effective on the effective date of the final rule to align the reporting requirements as soon as practicable.
In summary, we request comment on our proposals in the CFR sections listed in Table 6, and specifically on the following:
• The proposal to modify the deadlines for Medicaid managed care plans and CHIP managed care entities to report certain metrics about prior authorizations for non-drug items and services to be no later than 90 days after the end of their contract rating period.
• The proposal to require Medicaid managed care plans and CHIP managed care entities to report certain metrics about prior authorizations for non-drug items and services, finalized in the 2024 Interoperability and Prior Authorization final rule, by program, as well as by plan.
• The proposals to become effective beginning on the effective date of the final rule.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a requirement that impacted payers report certain prior authorization metrics aggregated for all non-drug items and services on their public websites (89 FR 8897). After further consideration, we are proposing to amend those metrics to provide more useful and complete information. Currently, impacted payers must report the percentage of prior authorizations that were approved, denied, approved after appeal, and approved after the timeframe for review was extended (89 FR 8889-8890). We are proposing to also require impacted payers to report a numeric count of prior authorization requests, as well as percentages, for certain existing metrics.
In addition, we are proposing to add four metrics that are complementary to existing metrics. For simplicity, we use the term “reporting period” to describe the period from which data must be reported. Specifically, the reporting period for MA organizations, state Medicaid and CHIP FFS programs, and QHP issuers on the FFEs would be the calendar year and the reporting period for Medicaid managed care plans and CHIP managed care entities would be the rating period. We propose to require impacted payers to report the following:
• The total number and percentage of standard prior authorization requests for non-drug items and services that remain denied after appeal during the reporting period.
++ Numerator: The total number of standard prior authorization requests for non-drug items and services that were appealed and the denial was upheld.
++ Denominator: The total number of adjudicated appeals for standard prior authorization requests for non-drug items and services.
• The total number and percentage of expedited prior authorization requests for non-drug items and services that remain denied after appeal during the reporting period.
++ Numerator: The total number of expedited prior authorization requests for non-drug items and services that were appealed and the denial was upheld.
++ Denominator: The total number of adjudicated appeals for expedited prior authorization requests for non-drug items and services.
• The total number and percentage of standard prior authorization requests for non-drug items and services for which the timeframe for review was extended, and the request was denied during the reporting period.
++ Numerator: The total number of standard prior authorization requests for non-drug items and services for which the timeframe for review was extended and the request was denied.
++ Denominator: The total number of standard prior authorization requests for non-drug items and services.
• The total number and percentage of expedited prior authorization requests for non-drug items and services for which the timeframe for review was extended, and the request was denied during the reporting period.
++ Numerator: The total number of expedited prior authorization requests for non-drug items and services for which the timeframe for review was extended and the request was denied.
++ Denominator: The total number of expedited prior authorization requests for non-drug items and services.
The proposed metrics for standard prior authorization requests that are “denied after appeal” and “for which the timeframe for review was extended and the request was denied” are complementary to the existing metrics for the percentage of standard prior authorization requests that are “approved after appeal” or “for which the timeframe for review was extended and the request was approved.” The two sets of metrics should generally sum to the total number of standard prior authorization requests for non-drug items and services that were appealed and the total number of standard prior authorization requests for non-drug items and services for which the timeframe for review was extended. For all metrics we are proposing that are related to appeals, appeals include both appeals reviewed internally by the impacted payer as well as by external organizations an impacted payer may contract with to review and process appeals. Appeals include all levels of appeal; internal and external appeals should not be differentiated between and should be aggregated as one metric. Appeals that have not been fully adjudicated within the reporting period may be excluded from the metrics. In addition, we propose that impacted payers report on the following:
• The total number and percentage of expedited prior authorization requests for non-drug items and services for which the timeframe for review was extended, and the request was approved during the reporting period.
++ Numerator: The total number of expedited prior authorization requests for non-drug items and services for which the timeframe for review was extended and the request was approved.
++ Denominator: The total number of expedited prior authorization requests for non-drug items and services.
• The total number and percentage of expedited prior authorization requests for non-drug items and services that were approved after appeal during the reporting period.
++ Numerator: The total number of expedited prior authorization requests for non-drug items and services that were appealed, and the denial was overturned.
++ Denominator: The total number of adjudicated appeals for expedited prior authorization requests for non-drug items and services.
These two metrics would align the metrics for expedited prior authorizations with those for standard prior authorizations. For MA organizations, extensions are described in 42 CFR 422.568(b)(2). For state Medicaid FFS programs, extensions are described in 42 CFR 440.230(e)(1)(i). For state CHIP FFS programs, extensions are described in 42 CFR 457.495(d). For Medicaid managed care plans, extensions are described in 42 CFR 438.210(d), and by cross-reference in 42 CFR 457.1230(d) for CHIP managed care entities. For QHP issuers on the FFEs, extensions would be described by the proposal, discussed earlier, in 45 CFR 156.223(h)(3). Notably, 42 CFR 440.230 does not provide for expedited prior authorization requests to be extended by state Medicaid FFS programs. Therefore, we are not proposing those metrics for state Medicaid FFS programs. The existing and proposed metrics for non-drug items and services are listed in Table 5.
We are proposing to require impacted payers to publicly report these additional data to ensure these reports are useful and robust, as well as to align with other CMS reporting requirements. We believe that to make these metrics truly useful, CMS and the public must understand the scope of the prior authorization requests, both as an absolute number and as a percentage, because these numbers are complementary. The absolute number provides a scale and reveals the number of prior authorization requests submitted to the payer over the previous
We also propose minor wording changes to simplify the existing metrics and specify that the proposal include the “total number” of prior authorizations for each metric rather than “aggregated for all items and services.” We do not intend this proposal to change any policy or the definition of the metrics.
We are proposing that, if finalized, these additional metrics be effective beginning on the effective date of the final rule to be reported in the following year. We believe that producing these metrics would be a relatively straightforward task for impacted payers that have built their systems to generate the metrics required to be reported beginning in 2026. For example, percentages are derived from numeric counts of numerators and denominators. The numerator should reflect the subset of interest, such as requests approved or denied, and the denominator should be the total number of prior authorization requests (for all metrics not related to appeals). For metrics related to appeals, the denominator should be the total number of decided appeals of prior authorization requests during the reporting period. If an impacted payer has calculated the percentages for the existing metrics, they should already have available the numeric counts without additional burden. The proposals would require impacted payers to publicly report those numeric counts that they should already have. In addition, several of the proposed metrics are complementary to the existing metrics. For example, impacted payers must currently report on the percentage of standard prior authorization requests that were approved after appeal. In order to calculate that percentage, impacted payers would also have to know how many requests were denied after appeal, as those two percentages should total to 100 percent of the adjudicated appeals. Therefore, we believe there should be minimal additional burden to report the proposed new metrics and impacted payers should be able to report the additional metrics by the effective date of the final rule. We believe that the immediate transparency benefits to the public weigh in favor of an effective date as soon as possible. Finally, these additional metrics should provide much-needed context to the payer's prior authorization program; therefore, we are proposing that the additional metrics be required for the first reporting deadline after the effective date of the final rule.
In summary, we request comment on our proposals in the CFR citations listed in Table 6, and specifically on the following:
• The proposal to require impacted payers to report the prior authorization metrics regarding non-drug items and services listed as “new” metrics in Table 5 on their public websites.
• The proposal to become effective beginning on the effective date of the final rule.
To incorporate drugs into the existing prior authorization metrics, we are now proposing to require impacted payers to annually report certain metrics about prior authorizations for all drugs (excluding covered Part D drugs for MA-PDs) by posting this information on their public website. Covered Part D drugs and PDPs are not included in this proposal because they are covered in other reporting regulations, and it would be burdensome to add new, duplicative reporting requirements on these plans. The Part D program already has reporting requirements for aggregated coverage determinations,
We propose that impacted payers, other than Medicaid managed care plans and CHIP managed care entities, be required to annually report the previous calendar year's metrics regarding all drugs, excluding covered Part D drugs for MA-PDs, on their public websites beginning in 2028 (with data from 2027) following any calendar year that any of these impacted payers offered that type of plan. We propose to require that these metrics be made publicly available on those impacted payers' websites no later than March 31 to be consistent with the reporting requirements finalized in the 2024 CMS Interoperability and Prior Authorization final rule for non-drug items and services.
To tie the metrics to the appropriate terminology for covered drugs, we propose that for these metrics, MA organizations would include any drugs payable under Part B that require prior authorization. Our understanding is that MA organizations do not require separate prior authorization requests for drugs payable under Part A. Rather, when prior authorization is required, it is requested and approved as part of a bundled payment for inpatient services. Therefore, because they are aggregated into requests for other items and services, we are not including drugs payable under Part A in the scope of the metrics we are proposing to require MA organizations to report. However, we request comment on whether there are drugs payable under Part A that require prior authorization separate from other items and services. If that is the case, we believe that metrics about drugs payable under Part A would be as important as those we are proposing for drugs payable under Part B. Therefore, we would consider finalizing that MA organizations report the proposed metrics by aggregating data from drugs payable under Part A and Part B.
State Medicaid and Medicaid managed care plans would report on all prescribed drugs described in section 1905(a)(12) of the Act that require prior authorization. State CHIP FFS programs and CHIP managed care entities would report on all prescription drugs described in section 2110(a)(6) of the Act that require prior authorization. Finally, QHP issuers on the FFEs would include all drugs covered by the issuer that require prior authorization.
Excluding any category of drug would provide an incomplete picture of the burden and impact of a payer's prior authorization practices. Some specialty and high-cost drugs may be subject to different utilization management requirements or denial rates. By being inclusive, we promote transparency and accountability for the prior authorization process across all types of drugs. For all of the reports for which we are proposing a percentage, we are also proposing that each impacted payer provide, as part of its report, the metrics' calculated numerators and denominators to provide a greater level of detail. Appeals that have not been fully adjudicated within the reporting period may be excluded. Furthermore, we recommend that impacted payers consider the format of their reports so that the data can be easily understood both in writing and graphically. An example of this type of report is available on the Medicare website for the FFS program.
We propose to require MA organizations to post the following metrics from the previous calendar year on their public websites:
• A list of all drugs payable under Part B that require prior authorization.
• The total number and percentage of approved standard prior authorization requests for Part B drugs during the calendar year.
++ Numerator: The total number of approved standard prior authorization requests for Part B drugs.
++ Denominator: The total number of standard prior authorization requests for Part B drugs.
• The total number and percentage of denied standard prior authorization requests for Part B drugs during the calendar year.
++ Numerator: The total number of denied standard prior authorization requests for Part B drugs.
++ Denominator: The total number of standard prior authorization requests for Part B drugs.
• The total number and percentage of standard prior authorization requests for Part B drugs for which the timeframe for review was extended, and the request was approved during the calendar year.
++ Numerator: The total number of standard prior authorization requests for Part B drugs for which the timeframe for review was extended and the request was approved.
++ Denominator: The total number of standard prior authorization requests for Part B drugs.
• The total number and percentage of standard prior authorization requests for Part B drugs for which the timeframe for review was extended, and the request was denied during the calendar year.
++ Numerator: The total number of standard prior authorization requests for Part B drugs for which the timeframe for review was extended and the request was denied.
++ Denominator: The total number of standard prior authorization requests for Part B drugs.
• The total number and percentage of standard prior authorization requests for Part B drugs approved after appeal during the calendar year.
++ Numerator: The total number of standard prior authorization requests for Part B drugs that were appealed, and the denial was overturned.
++ Denominator: The total number of adjudicated appeals for standard prior authorization requests for Part B drugs.
• The total number and percentage of standard prior authorization requests for Part B drugs that remain denied after appeal during the calendar year.
++ Numerator: The total number of standard prior authorization requests for Part B drugs that were appealed, and the denial was upheld.
++ Denominator: The total number of adjudicated appeals for standard prior authorization requests for Part B drugs.
• The average and median time that elapsed between the submission of requests and decisions for standard prior authorizations for Part B drugs during the calendar year.
• The total number and percentage of approved expedited prior authorization requests for Part B drugs during the calendar year.
++ Numerator: The total number of approved expedited prior authorization requests for Part B drugs.
++ Denominator: The total number of expedited prior authorization requests for Part B drugs.
• The total number and percentage of denied expedited prior authorization requests for Part B drugs during the calendar year.
++ Numerator: The total number of denied expedited prior authorization requests for Part B drugs.
++ Denominator: The total number of expedited prior authorization requests for Part B drugs.
• The total number and percentage of expedited prior authorization requests for Part B drugs for which the timeframe for review was extended, and the request was approved during the calendar year.
++ Numerator: The total number of expedited prior authorization requests for Part B drugs for which the timeframe for review was extended and the request was approved.
++ Denominator: The total number of expedited prior authorization requests for Part B drugs.
• The total number and percentage of expedited prior authorization requests for Part B drugs for which the timeframe for review was extended, and the request was denied during the calendar year.
++ Numerator: The total number of expedited prior authorization requests for Part B drugs for which the timeframe for review was extended and the request was denied.
++ Denominator: The total number of expedited prior authorization requests for Part B drugs.
• The total number and percentage of expedited prior authorization requests for Part B drugs approved after appeal during the calendar year.
++ Numerator: The total number of expedited prior authorization requests for Part B drugs that were appealed, and the denial was overturned.
++ Denominator: The total number of adjudicated appeals for expedited prior authorization requests for Part B drugs.
• The total number and percentage of expedited prior authorization requests for Part B drugs that remain denied after appeal during the calendar year.
++ Numerator: The total number of expedited prior authorization requests for Part B drugs that were appealed, and the denial was upheld.
++ Denominator: The total number of adjudicated appeals for expedited prior authorization requests for Part B drugs.
• The average and median time that elapsed between the submission of requests and decisions for expedited prior authorizations for Part B drugs during the calendar year.
We propose to require state Medicaid and CHIP FFS programs to post the following metrics from the previous calendar year on their public websites and to require Medicaid managed care plans and CHIP managed care entities to post the following metrics from the previous rating period on their public websites:
• A list of all drugs that require prior authorization.
• The total number and percentage of prior authorization requests for all drugs that were approved during the reporting period.
++ Numerator: The total number of prior authorization requests for all drugs that were approved.
++ Denominator: The total number of prior authorization requests for all drugs.
• The total number and percentage of prior authorization requests for all drugs that were denied during the reporting period.
++ Numerator: The total number of prior authorization requests for all drugs that were denied.
++ Denominator: The total number of prior authorization requests for all drugs.
• The total number and percentage of prior authorization requests for all drugs approved after appeal during the reporting period.
++ Numerator: The total number of prior authorization requests for all drugs that were appealed, and the denial was overturned.
++ Denominator: The total number of adjudicated appeals for prior authorization requests for all drugs.
• The total number and percentage of prior authorization requests for all drugs that remain denied after appeal during the reporting period.
++ Numerator: The total number of prior authorization requests for all drugs that were appealed, and the denial was upheld.
++ Denominator: The total number of adjudicated appeals for prior authorization requests for all drugs.
• The average and median time that elapsed between the submission of requests and decisions for prior authorizations for all drugs during the reporting period.
We propose to require QHP issuers on the FFEs to post the following metrics from the previous calendar year on their public websites:
• A list of all drugs that require prior authorization.
• The total number and percentage of standard prior authorization requests for all drugs that were approved during the calendar year.
++ Numerator: The total number of standard prior authorization requests for all drugs that were approved.
++ Denominator: The total number of standard prior authorization requests for all drugs.
• The total number and percentage of standard prior authorization requests for all drugs that were denied during the calendar year.
++ Numerator: The total number of standard prior authorization requests for all drugs that were denied.
++ Denominator: The total number of standard prior authorization requests for all drugs.
• The total number and percentage of standard prior authorization requests for all drugs for which the timeframe for review was extended, and the request was approved during the calendar year.
++ Numerator: The total number of standard prior authorization requests for all drugs for which the timeframe for review was extended and the request was approved.
++ Denominator: The total number of standard prior authorization requests for all drugs.
• The total number and percentage of standard prior authorization requests for all drugs for which the timeframe for review was extended, and the request was denied during the calendar year.
++ Numerator: The total number of standard prior authorization requests for all drugs for which the timeframe for review was extended and the request was denied.
++ Denominator: The total number of standard prior authorization requests for all drugs.
• The total number and percentage of standard prior authorization requests for all drugs approved after appeal during the calendar year.
++ Numerator: The total number of standard prior authorization requests for all drugs that were appealed, and the denial was overturned.
++ Denominator: The total number of adjudicated appeals for standard prior authorization requests for all drugs.
• The total number and percentage of standard prior authorization requests for all drugs that remain denied after appeal during the calendar year.
++ Numerator: The total number of standard prior authorization requests for all drugs that were appealed, and the denial was upheld.
++ Denominator: The total number of adjudicated appeals for standard prior authorization requests for all drugs.
• The average and median time that elapsed between the submission of requests and decisions for standard prior authorizations for all drugs during the calendar year.
• The total number and percentage of expedited prior authorization requests for all drugs that were approved during the calendar year.
++ Numerator: The total number of expedited prior authorization requests for all drugs that were approved.
++ Denominator: The total number of expedited prior authorization requests for all drugs.
• The total number and percentage of expedited prior authorization requests for all drugs that were denied during the calendar year.
++ Numerator: The total number of expedited prior authorization requests for all drugs that were denied.
++ Denominator: The total number of expedited prior authorization requests for all drugs.
• The total number and percentage of expedited prior authorization requests for all drugs for which the timeframe for review was extended, and the request was approved during the calendar year.
++ Numerator: The total number of expedited prior authorization requests for all drugs for which the timeframe for review was extended and the request was approved.
++ Denominator: The total number of expedited prior authorization requests for all drugs.
• The total number and percentage of expedited prior authorization requests for all drugs for which the timeframe for review was extended, and the request was denied during the calendar year.
++ Numerator: The total number of expedited prior authorization requests for all drugs for which the timeframe for review was extended and the request was denied.
++ Denominator: The total number of expedited prior authorization requests for all drugs.
• The total number and percentage of expedited prior authorization requests for all drugs approved after appeal during the calendar year.
++ Numerator: The total number of expedited prior authorization requests for all drugs that were appealed, and the denial was overturned.
++ Denominator: The total number of adjudicated appeals for expedited prior authorization requests for all drugs.
• The total number and percentage of expedited prior authorization requests for all drugs that remain denied after appeal during the calendar year.
++ Numerator: The total number of expedited prior authorization requests for all drugs that were appealed, and the denial was upheld.
++ Denominator: The total number of adjudicated appeals for expedited prior authorization requests for all drugs.
• The average and median time that elapsed between the submission of requests and decisions for expedited prior authorizations for all drugs during the calendar year.
We propose to align impacted payers' reporting levels with those we finalized in the 2024 CMS Interoperability and Prior Authorization final rule.
We believe that the contract level is appropriate for MA organizations because they generally have multiple plans under the same contract (89 FR 8890). It is common for MA organizations to offer a variety of plans within a service area. The contract-level data are aggregated data collected from the plan benefit packages (PBPs) for all MA plans provided under an individual contract. Data are specific to the contract to which they correspond. CMS already requires MA organizations to report some contract-level data about their organization determinations on an annual basis and assigns Star Ratings at the contract level.
We are proposing to align the reporting levels for state Medicaid and CHIP FFS programs in this proposed rule with those finalized in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8897) and the proposed amendment for Medicaid managed care plans and CHIP managed care entities described in section II.C.5. of this proposed rule—that is, at the state level for state Medicaid and CHIP FFS programs and at the plan and program level for Medicaid managed care plans and CHIP managed care entities—to create a cohesive and standardized approach to reporting for the long-term for comparability and analysis for both medical services and drugs.
Similarly, requiring individual market QHP issuers on the FFEs to report at the issuer level is consistent with their reporting on quality improvement strategies as described in section 1311(g) of the Affordable Care Act and 45 CFR 156.1130, which also provides consistency with other reporting requirements for QHP issuers on the FFEs' (89 FR 8890). Our proposals for consistency across reporting requirements aim to reduce the reporting burden on issuers and ensure the publication of metrics in a method that issuers are familiar with. We note that it is also consistent with the Transparency in Coverage (TiC) reporting requirements in 45 CFR 156.220 and the level at which a QHP issuer on the FFEs must submit its certification application to participate in an FFE or an SBE-FP. This level is represented by the six-digit “Issuer ID” assigned to each QHP issuer on the FFEs as part of the QHP Certification application process, as explained in CMS's Application Instructions.
In summary, we request comment on our proposals in the CFR sections listed in Table 6, and specifically on the following:
• The proposal to require MA organizations to report metrics about prior authorization for drugs payable under Part B, and to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to report metrics about prior authorization metrics for drugs on their public websites.
• The proposal to require MA organizations, state Medicaid and CHIP FFS programs, and QHP issuers on the FFEs to annually report the previous calendar year's metrics on their public websites no later than March 31 following any calendar year that the impacted payer offered that type of plan.
• The proposal to require Medicaid managed care plans and CHIP managed care entities to annually report the previous rating period's metrics on their public websites no later than 90 days after the end of their rating period.
• The proposal to require MA organizations to report at the contract level (applicable integrated plans would report drugs covered by MA organizations at the MA contract level), state Medicaid and CHIP FFS programs to report at the state level, Medicaid managed care plans and CHIP managed care entities to report at the plan and program level (if coverage of drugs is included in their contract), and QHP issuers on the FFEs to report at the issuer level.
• The proposed 2028 compliance dates to report metrics from the 2027 reporting period.
In addition, we request comments on the following:
• Whether there are drugs payable under Part A that require prior authorization separate from other non-drug items and services that should be included in the scope of the proposed metrics for MA organizations.
Section 1856(b) of the Act directs the Secretary to establish regulatory standards for MA organizations that are consistent with and carry out Part C of Title XVIII of the Act. In addition, section 1857(e)(1) of the Act explicitly authorizes the addition of reporting requirements by MA organizations as a contract term between the Secretary and a MA organization where not inconsistent with Part C of Title XVIII of the Act and as the Secretary may find necessary and appropriate. The proposal for MA plans to publicly report additional prior authorization metrics for drugs payable under Part B reflects a necessary and appropriate requirement that is consistent with and carries out Part C, as it should enable patients to assess the implementation of the proposals in this rule. A review of these metrics on individual websites may help CMS understand the impact of the proposed requirements, including the effects of using the Prior Authorization API for drugs payable under Part B. These data may also help plans evaluate and modify their operational policies, improve their use of the Prior Authorization API, and determine if any policy updates would be appropriate.
Section 1902(a)(3) of the Act addresses the requirements for the states to provide policies to protect beneficiaries through opportunities for fair hearings when their services are denied or not acted upon with reasonable promptness. Section 1902(a)(19) of the Act underpins timeliness standards and requires Medicaid state plans to provide safeguards necessary to assure that eligibility for Medicaid-covered services will be determined and such services will be provided consistently with simplicity of administration and in the best interests of recipients. We have proposed that state Medicaid FFS programs and Medicaid managed care plans publish additional data about their prior authorization performance specific to drugs, and we rely on the authorities for Medicaid managed care plans under section 1932(c)(2)(A)(i) of the Act, which supports managed care access standards and requires that states that contract with Medicaid MCOs develop and implement a quality assessment and improvement strategy that includes standards for access to care so that covered services are available within reasonable timeframes. For this proposal, CMS would rely on our authority in section 1902(a)(4) of the Act to adopt these standards for PIHPs and PAHPs. This would ensure that the same requirements apply to MCOs, PIHPs, and PAHPs.
For CHIP, we propose these requirements under the authority of section 2101(a) of the Act, which sets forth that the purpose of Title XXI is to provide funds to states to provide child health assistance to uninsured, low-income children effectively and efficiently that is coordinated with other sources of health benefits coverage. This provision authorizes us to propose these requirements for CHIP to obtain access to program data for analysis. Such analysis supports improvements in the efficacy of CHIP programs and more efficient administration of services.
We expect that the proposal for state CHIP FFS programs to make prior authorization decisions on all drugs no later than 24 hours should improve timeliness and support process improvements for the state, which is consistent with our authorities under section 2101(a) of the Act in that it enhances the efficiency of the CHIP program.
Further, as authorized under section 2107(b)(1) of the Act, the proposal to require state CHIP FFS programs and CHIP managed care entities to report prior authorization metrics publicly should also support the states' oversight, evaluation, and administration responsibilities.
The proposals to require QHP issuers on the FFEs to provide the specific reason for denial of prior authorizations of drugs when notifying the provider; notify providers of prior authorization decisions for non-drug items and services and drugs, and to do so within specified timeframes; and publish certain metrics on their websites, are authorized by section 1311(e)(1) of the Affordable Care Act. Section 1311(e)(1)(A) of the Affordable Care Act requires that Exchanges only certify plans as QHPs if they meet the requirements for certification promulgated by the Secretary under section 1311(c)(1) of the Affordable Care Act, and section 1311(e)(1)(B) of the Affordable Care Act provides discretion to certify QHPs if the Exchange determines that making available such plans available is in the interests of qualified individuals and qualified employers in the state or states in which such Exchange operates. We are of the view that these proposals are appropriate QHP certification requirements because they strive to expand several key regulatory and patient-protection obligations established under the Affordable Care Act.
We are proposing to require QHP issuers on the FFEs to notify providers of prior authorization decisions for non-drug items and services within the same timeframes applicable to other impacted payers, as established in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8878). Specifically, we are proposing to require QHP issuers on the FFEs to notify providers of prior authorization decisions on non-drug items and services as expeditiously as a patient's health condition requires but no later than 7 calendar days after receiving a standard request and no later than 72 hours after receiving an expedited request. If finalized, this proposal would allow enrollees in health plans on the FFEs to receive covered services more quickly, which may improve patient care.
We also propose to require that QHP issuers on the FFEs make prior authorization decisions to providers on all drugs as expeditiously as the enrollee's health condition requires, but no later than 72 hours after receiving a standard request and, as expeditiously as the enrollee's health condition requires, but no later than 24 hours after receiving an expedited request. This proposal to require QHP issuers on the FFEs to provide notice to requesting providers of prior authorization decisions in a shorter timeframe than they are currently required to provide notice to patients of prior authorization decisions should allow providers to more quickly alter treatment plans, including to send updated prescriptions to pharmacies if a prior authorization is denied. We consider the proposal to require QHP issuers on the FFEs to notify the requesting provider of a prior authorization decision within a specific timeframe based on the nature of the request necessary because delays can directly impact a patient's health. Drugs sometimes need to be taken soon after a diagnosis is rendered and often need to be taken consistently and on time for optimal effectiveness. Delays in obtaining and taking medication could lead to a worsening of a patient's condition, create complications, and potentially require more intensive or costly interventions at a later time.
With respect to the proposal to require QHP issuers on the FFEs to publish certain metrics on their websites, we believe that, as payers create and analyze prior authorization metrics reports, they would use the data to learn about and improve their own
If finalized, publicly reported prior authorization metrics for drugs could enable CMS to assess the implementation of the policies proposed in this rule. Reviewing these metrics on individual websites may help CMS understand the impact of the proposed requirements, including using the Prior Authorization API for drugs. At the same time, the reports could help QHP issuers on the FFEs evaluate and improve their own operational processes.
For the reasons stated in the paragraphs in this section above, we have determined that the proposed changes described in sections II.C.2.c. and II.C.3.b. of this proposed rule are in the interests of qualified individuals and qualified employers in the state or states in which an QHP issuer on the FFEs operates.
We propose to apply the existing requirements in 45 CFR 156.221, 45 CFR 156.222, and 45 CFR 156.223, which were finalized in the 2020 CMS Interoperability and Patient Access final rule and in the 2024 CMS Interoperability and Prior Authorization final rule (85 FR 25510 and 89 FR 8758), to small group market QHP issuers on the FF-SHOPs. As discussed in section I.B. of this proposed rule, we are also proposing that small group market QHP issuers on the FF-SHOPs be considered impacted payers for purposes of the proposed QHP issuer requirements described throughout this proposed rule.
For requirements in 45 CFR 156.221 that have already taken effect for issuers offering individual market QHPs on the FFEs, we propose compliance dates in the future for small group market QHP issuers on the FF-SHOPs. For example, we are proposing a compliance date of plan years beginning on or after January 1, 2028 for small group market QHPs on the FF-SHOPs to comply with 45 CFR 156.221(a), whereas the compliance date for individual market QHPs on the FFEs was for plan years beginning on or after January 1, 2021. For requirements in 45 CFR 156.222 and 45 CFR 156.223 that we expect to take effect before this proposed rule can be finalized, we are also proposing separate compliance dates for small group market issuers on the FF-SHOPs that we believe are reasonable. For example, we are proposing compliance dates for plan years beginning on or after January 1, 2028 for the Provider Access and Payer-to-Payer API requirements in 45 CFR 156.222(a) and (b), and the requirement in 45 CFR 156.221(f) to report Patient Access API usage metrics to CMS. We are also proposing compliance dates of October 1, 2027 for the Prior Authorization API requirements in 45 CFR 156.223(b) and the requirement in 45 CFR 156.223(a) to provide a reason to providers for denying a prior authorization for non-drug items and services. We believe that the proposed compliance dates are the earliest dates that are feasible to implement proposals for small group market QHP issuers given the rulemaking timeline.
We are proposing the same compliance dates of October 1, 2027 for certain proposals in this rule that would newly apply to both small group market QHPs on the FF-SHOPs and individual market QHPs on the FFEs. Those proposals include the requirements to implement and maintain certain HL7® FHIR® and NCPDP standards to support electronic prior authorization for drugs in 45 CFR 156.223(b)(1)(iii) and (e), as well as notice requirements that create prior authorization decision timeframes in 45 CFR 156.223(i). We are also proposing the same compliance dates, beginning in 2028, for proposals in this rule that would newly apply to both small group market QHPs on the FF-SHOPs and individual market QHPs on the FFEs regarding reporting API usage metrics to CMS in 45 CFR 156.222(a)(6) and (b)(8) and 45 CFR 156.223(e) and publicly reporting prior authorization metrics for drugs in 45 CFR 156.223(d).
We did not apply these policies to small group market QHP issuers on the FF-SHOPs in previous rulemaking due to concerns about placing burden on these issuers (85 FR 25553 and 89 FR 8767). However, based on additional research, all issuers that offer small group market QHPs on the FF-SHOPs as of the time of this proposal also offer individual market QHPs on the FFEs. Therefore, we anticipate that the burden for these issuers to implement these policies for their small group market QHPs on the FF-SHOPs should be relatively low because these issuers are already required to implement the policies for their individual market QHPs on the FFEs. Additionally, we believe that enrollees in small group market QHPs on the FF-SHOPs should have access to the benefits of health data transparency discussed in previous rulemaking such as better coordinated care and the ability to make more informed decisions about their care (85 FR 25523 and 89 FR 8820). If these policies are finalized as proposed, and these considerations change in the future—for example, if an issuer that does not offer one or more individual market QHPs on the FFEs newly enters an FF-SHOP, then under this proposal, we could consider whether to provide an exception to one or more of these requirements through our established process, as described in section II.D.7. of this proposed rule, during the annual QHP certification process, if it is appropriate based on the interests of qualified individuals and qualified employers in the state or states in which such Exchange operates and an exception is warranted to permit the issuer to offer QHPs through the FFE.
In the 2020 CMS Interoperability and Patient Access and the 2024 CMS Interoperability and Prior Authorization final rules, we finalized general API requirements that apply across the Patient Access, Provider Access, Payer-to-Payer, and Prior Authorization APIs.
The previously finalized rules required impacted payers, including individual market QHP issuers on the FFEs, to implement and maintain API technology conformant with certain applicable standards adopted by ONC in 45 CFR 170.215.
To ensure that the APIs function properly, impacted payers must conduct routine testing and monitoring and perform updates as appropriate. That includes assessments to verify that the API is fully and successfully implementing privacy and security features, such as those required for compliance with the HIPAA Privacy Rule and “Security Standards for the Protection of Electronic Protected Health Information” (68 FR 8334) (hereinafter referred to as the “HIPAA Security Rule”) which appeared in the
As established in the 2020 CMS Interoperability and Patient Access final rule, to ensure that developers have the information necessary to interact with the APIs, impacted payers must make publicly accessible, by posting on their website or via publicly accessible hyperlink(s), complete accompanying documentation. That documentation must contain: (1) API syntax, function names, required and optional parameters supported and their data types, return variables and their types/structures, exceptions and exception handling methods and their returns; (2) the software components and configurations an app must use in order to successfully interact with the API and process its response(s); and (3) all applicable technical requirements and attributes necessary for an app to be registered with any authorization server(s) deployed in conjunction with the API.
As established in the 2020 CMS Interoperability and Patient Access and the 2024 CMS Interoperability and Prior Authorization final rules, the only reason impacted payers may deny an app or developer API access is if it would present an unacceptable level of risk to the security of PHI on the payer's system.
As discussed in the 2020 CMS Interoperability and Patient Access final rule, one critical issue in the U.S. health care system is that people cannot easily access their health information in interoperable forms. Patients and the health care providers caring for them are often presented with an incomplete picture of their health and care as pieces of their information are stored in various, unconnected systems and do not accompany them to every care setting (85 FR 25511). There are numerous benefits associated with individuals having access to their health data through a method that is built upon widely used standards. In the 2020 CMS Interoperability and Patient Access final rule, we finalized requirements for impacted payers, including individual market QHP issuers on the FFEs, to implement and maintain a Patient Access API conformant with certain FHIR standards that permit third-party apps to retrieve certain health information, with the approval and at the direction of a current individual enrollee or the enrollee's personal representative (85 FR 25558). The ability to easily obtain, use, and share claims, encounter, and other health data enables patients to more effectively and easily use the health care system. Providing this ability to enrollees in all QHPs on the FFEs, including small group market QHPs on the FF-SHOPs, would empower more people to access their health information in a manner best suited for them.
In the 2020 CMS Interoperability and Patient Access final rule, we finalized a requirement that individual market QHP issuers on the FFEs must implement and maintain a Patient Access API conformant with certain FHIR standards that permit third-party apps to retrieve certain health information, with the approval and at the direction of a current individual enrollee or the enrollee's personal representative.
Per the 2024 CMS Interoperability and Prior Authorization final rule, impacted payers would be required to make available through the Patient Access API certain data about prior authorizations for non-drug items and services that they maintain, beginning in 2027.
To inform and assist patients who want to access their health information via the Patient Access API, the 2020 CMS Interoperability and Patient Access final rule also requires impacted payers to provide, in an easily accessible location on their public websites and through other appropriate mechanisms that they ordinarily use to communicate with current and former enrollees, educational resources in non-technical, simple, and easy-to-understand language. These resources must explain at a minimum: (1) general information on steps the individual may consider taking to help protect the privacy and security of their health information, including factors to consider in selecting an app including secondary uses of data, and the importance of understanding the security and privacy practices of any app to which they would entrust their health information; and (2) an overview of which types of organizations or individuals are and are not likely to be HIPAA covered entities, the oversight responsibilities of the Office for Civil Rights (OCR) and the Federal Trade Commission (FTC), and how to submit a complaint to those entities.
In the 2024 CMS Interoperability and Prior Authorization final rule, we also finalized a requirement that, beginning in 2026, impacted payers, including individual market QHP issuers on the FFEs, must annually report Patient Access API metrics to CMS in the form of aggregated, de-identified data. Specifically, individual market QHP issuers on the FFEs must report at the issuer level the following metrics: (1) the total number of unique patients whose data are transferred via the Patient Access API to a health app designated by the patient; and (2) the total number of unique patients whose data are transferred more than once via the Patient Access API to a health app designated by the patient. The 2024 CMS Interoperability and Prior Authorization final rule requires individual market QHP issuers on the FFEs to report the previous calendar year's metrics to CMS by March 31 following any year that they offer an individual market QHP on the FFEs.
We are now proposing to apply each of these requirements to small group market QHP issuers on the FF-SHOPs to report data from plan years beginning on or after January 1, 2028, with reporting deadlines beginning in 2029.
For reporting on Patient Access API usage, we are proposing to require small group market QHP issuers on the FF-SHOPs to annually report the metrics in 45 CFR 156.221(f) at the issuer level in the form and manner and within the timeframes specified by the Secretary. That would allow flexibility for CMS to include API usage metrics reporting within specific deadlines set for the QHP certification process, which in practice is generally the final deadline for the QHP certification process that takes place the following year.
In summary, we request comment on our proposal to apply the policies and their compliance dates described previously, and in the CFR citations listed in Table 7, to small group market QHP issuers on the FF-SHOPs.
While the Patient Access API was a significant first step toward sharing individual patient health information with providers, in the 2024 CMS Interoperability and Prior Authorization final rule we explained our belief that it would benefit patients if payers were required to make patient data directly available to providers via an API that is conformant with certain FHIR standards. In the normal course of business, many providers already maintain EHRs and share data for a variety of purposes authorized by the patient and/or existing law. Therefore, in the 2024 CMS Interoperability and Prior Authorization final rule, we required impacted payers to implement and maintain a FHIR API that makes patient data available to providers who have a contractual relationship with the payer and a treatment relationship with the patient.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a policy that, beginning in 2027, impacted payers, including individual market QHP issuers on the FFEs, must implement and maintain a Provider Access API to make available patient data upon request from an in-network provider if all the following conditions are met: (1) the payer authenticates the identity of the provider that requests access and attributes the patient to the provider under the required attribution process; (2) the patient does not opt out of the Provider Access API; and (3) disclosure of the data is not prohibited by law. Individual market QHP issuers on the FFEs must make those data available no later than 1 business day after receiving a request from such a provider.
The data that impacted payers must make available via the Provider Access API include claims and encounter data (excluding provider remittances and patient cost-sharing information), all data classes and data elements included in a content standard in 45 CFR 170.213 (USCDI), and certain information about prior authorizations that the payer maintains with a date of service after January 1, 2016. The required prior authorization information includes the prior authorization status; the date the prior authorization was approved or denied; the date or circumstance under which the prior authorization ends; the non-drug items and services approved; if denied, a specific reason why the request was denied; and related structured administrative and clinical documentation submitted by a provider. That prior authorization information must be accessible no later than 1 business day after the individual market QHP issuer on the FFE receives a prior authorization request, must be updated no later than 1 business day after any
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a requirement that impacted payers, including individual market QHP issuers on the FFEs, beginning in 2027, must establish and maintain an attribution process to associate patients with their in-network providers to ensure that the payer only sends a patient's data to providers who have a treatment relationship with that patient.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a policy that impacted payers, including individual market QHP issuers on the FFEs, beginning in plan years that start on or after January 1, 2027, must establish and maintain a process for patients to opt out of data exchange via the Provider Access API and that allows patients to change their permission at any time.
We are now proposing to apply each of these requirements to small group market QHP issuers on the FF-SHOPs for plan years beginning on or after January 1, 2028. We believe that this proposal's compliance date provides sufficient time for those issuers to incorporate their small group market QHPs on the FF-SHOPs into their previous API implementation for individual market QHPs on the FFEs given that small group market QHP issuers on the FF-SHOPs also offer individual market QHPs on the FFEs. However, we solicit comment on whether this is the case.
In summary, we request comment on our proposal to apply the policies and their compliance dates described previously, and in the CFR citations listed in Table 7, to small group market QHP issuers on the FF-SHOPs.
In addition to sharing data with their providers, having a patient's data follow them when they change payers, or shared when they have health insurance coverage through multiple payers, can have a multitude of benefits for patient care. For example, a payer receiving data when a new patient enrolls can better support the patient through care coordination related to a chronic condition or ongoing treatment needs. If necessary, patient data can give payers the information they need to assign a case manager or help the patient find providers in their new network. Data exchange among payers—specifically, sending patient data from a patient's previous payer to their new one—is a powerful way to ensure that data follows patients through the health care system and improves care continuity, and helps patients to maintain access to their record over time. In the 2024 CMS Interoperability and Prior Authorization final rule, we required impacted payers, including individual market QHP issuers on the FFEs, to build a Payer-to-Payer API, with certain standards that would facilitate patient data exchange at the start of coverage and between concurrent payers.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a policy that, for plan years beginning on or after January 1, 2027, individual market QHP issuers on the FFEs must implement and maintain a Payer-to-Payer API to exchange patient health information when an enrollee changes payers or has concurrent coverage with two or more payers if the following conditions are met: (1) the payer that requests access has its identity authenticated and includes an attestation with the request that the patient is enrolled with the payer and has opted into the data exchange; and (2) the exchange is not prohibited by law. Impacted payers, including individual market QHP issuers on the FFEs, must make those data available no later than 1 business day after receiving a request from another payer that meets those requirements.
The data that impacted payers must make available via the Payer-to-Payer API include claims and encounter data (excluding provider remittances and patient cost-sharing information), all data classes and data elements included in a content standard in 45 CFR 170.213 (USCDI), and certain information about prior authorizations that the payer maintains with a date of service within 5 years of the request. The required prior authorization information does not include denied prior authorization requests. It does include the prior authorization status, the date the prior authorization was approved, the date or circumstance under which the prior authorization ends, the non-drug items and services approved, and related structured and unstructured administrative and clinical documentation submitted by a provider. This prior authorization information must be accessible no later than 1 business day after the impacted payer receives a prior authorization request, must be updated no later than 1 business day after any status change, and must continue to be accessible for the duration that the authorization is active and at least 1 year after the prior authorization's last status change.
In the 2024 CMS Interoperability and Prior Authorization final rule, we also
If an enrollee opts in and provides sufficient information about their previous or concurrent payers, then impacted payers, including individual market QHP issuers on the FFEs, must request the specified data from those payers no later than 1 week after they have sufficient identifying information about previous or concurrent payers and the enrollee has opted in.
We are now proposing to apply each of these requirements to small group market QHP issuers on the FF-SHOPs for plan years beginning on or after January 1, 2028. We believe that this proposal's compliance date provides sufficient time for those issuers to incorporate their small group market QHPs on the FF-SHOPs into their previous API implementation for individual market QHPs on the FFEs given that small group market QHP issuers on the FF-SHOPs also offer individual market QHPs on the FFEs. However, we solicit comment on whether this is the case.
In summary, we request comment on our proposal to apply the policies and their compliance dates described previously, and in the CFR citations listed in Table 7, to small group market QHP issuers on the FF-SHOPs.
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a requirement for impacted payers, including individual market QHP issuers on the FFEs, to implement and maintain a Prior Authorization API to improve the prior authorization process between payers and providers for non-drug items and services.
The 2022 CMS Interoperability and Prior Authorization proposed rule and the 2024 CMS Interoperability and Prior Authorization final rule both discussed the current burden associated with prior authorization processes and explained how making the prior authorization process electronic would reduce the time and burden, expediting patients' access to care and allowing providers to put time back into direct patient care (87 FR 76286 and 89 FR 8862). Requiring all QHP issuers on the FFEs, including small group market QHP issuers on the FF-SHOPs, to adopt electronic prior authorization processes for non-drug items and services would provide these benefits to more patients, and potentially help more providers and administrative staff to mitigate burnout. Including small group market QHP issuers on the FF-SHOPs in requirements to publicly report certain prior authorization metrics and to provide a reason for denial of prior authorization in responses to providers would improve understanding of prior authorization processes' impact on more enrollees and help ensure transparency for more prior authorization requests.
The 2024 CMS Interoperability and Prior Authorization final rule also required impacted payers other than individual market QHP issuers on the FFEs (MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities), to respond to prior authorization requests within shorter timeframes than they were previously subject to (89 FR 8897). We are proposing to apply these requirements, and additional requirements related to drug prior authorization, to all QHP issuers on the FFEs, including individual market QHP issuers on the FFEs and small group market QHP
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized a requirement for individual market QHP issuers on the FFEs to implement and maintain a Prior Authorization API to improve the prior authorization process between payers and providers for non-drug items and services.
We finalized a policy that, for plan years beginning on or after January 1, 2027, individual market QHP issuers on the FFEs must implement and maintain a Prior Authorization API that—(1) is populated with the payer's list of non-drug items and services that require prior authorization; (2) can identify all documentation required for approval of any non-drug items or services that require prior authorization; (3) supports a HIPAA-compliant prior authorization request and response; and (4) communicates whether the payer approves the prior authorization request (and the date or circumstance under which the authorization ends), denies the prior authorization request (with a specific reason), or requests more information.
In addition, we finalized two process requirements for impacted payers, including individual market QHP issuers on the FFEs, to improve the prior authorization process generally. We finalized a policy that beginning January 1, 2026, if an impacted payer denies a prior authorization request (excluding a request for coverage of drugs as defined for QHPs on the FFEs in 45 CFR 156.221(b)(1)(v)), the response to the provider must include a specific reason for the denial, regardless of the method used to communicate that information.
We also finalized a requirement that beginning in 2026, following each year it offers an individual market QHP on the FFEs, an individual market QHP issuer on the FFE must report prior authorization data, excluding data on drugs as defined in 45 CFR 156.221(b)(1)(v), at the issuer level by March 31. The individual market QHP issuer on the FFE must make the following data from the previous calendar year publicly accessible by posting them on its website:
• A list of all non-drug items and services that require prior authorization.
• The percentage of standard prior authorization requests that were approved, aggregated for all non-drug items and services.
• The percentage of standard prior authorization requests that were denied, aggregated for all non-drug items and services.
• The percentage of standard prior authorization requests that were approved after appeal, aggregated for all non-drug items and services.
• The percentage of prior authorization requests for which the timeframe for review was extended, and the request was approved, aggregated for all non-drug items and services.
• The percentage of expedited prior authorization requests that were approved, aggregated for all non-drug items and services.
• The percentage of expedited prior authorization requests that were denied, aggregated for all non-drug items and services.
• The average and median time that elapsed between the submission of a request and a determination by the individual market QHP issuer on the FFE, for standard prior authorizations, aggregated for all non-drug items and services.
• The average and median time that elapsed between the submission of a request and a decision by the individual market QHP issuer on the FFE for expedited prior authorizations, aggregated for all non-drug items and services.
We are now proposing to apply each of these requirements to small group market QHP issuers on the FF-SHOPs. Specifically, we propose to amend the requirements in 45 CFR 156.223(a) to respond to providers with a reason for denial and in 45 CFR 156.223(b) to implement and maintain a Prior Authorization API to include small group market QHP issuers on the FF-SHOPs with a compliance date of October 1, 2027. In addition, we propose to amend the requirement in 45 CFR 156.223(c) to publicly report prior authorization metrics to apply it to small group market QHP issuers on the FF-SHOPs beginning in 2028 for calendar year 2027 data. Given that those issuers have met or are working on meeting these proposed requirements for their individual market QHPs on the FFEs, we believe that the proposed compliance dates provide sufficient time to extend their technology solutions and business processes to their small group market QHPs on the FF-SHOPs. However, we solicit comment on whether this is the case.
In summary, we request comment on our proposal to apply the policies and their compliance dates described previously, and in the CFR citations listed in Table 7, to small group market QHP issuers on the FF-SHOPs.
The 2020 CMS Interoperability and Patient Access final rule and the 2024 CMS Interoperability and Prior Authorization final rule finalized an exceptions process for individual market QHP issuers on the FFEs that are not able to implement the Patient Access API. An individual market QHP issuer on the FFE can apply for an exception for a particular plan year by submitting a narrative justification as part of its QHP certification application that describes the reasons why it cannot reasonably satisfy the requirements for the applicable plan year, the effect of non-compliance upon providers and enrollees, the current or proposed means of providing the required information to providers or other payers, and solutions and a timeline to achieve compliance with the requirements.
As discussed in the 2024 CMS Interoperability and Prior Authorization final rule, we believe that certifying only health plans that implement these APIs is generally in the interests of enrollees (89 FR 8786 and 8820). However, as also discussed in that final rule, while some individual market QHP issuers on the FFEs are in a position to implement the updates that the rule requires, a wide range of issuers participate in the FFEs and vary in terms of available resources to adopt these requirements (89 FR 8906). Plan offerings can also vary by region and even by county, with some areas in the FFEs having more limited plan offerings than others. Therefore, this exceptions process exists as a safeguard to prevent potential enrollees from going without access to QHP coverage because an issuer is unable to implement these APIs.
We propose to apply the same exceptions process to the proposed requirements for small group market
In summary, we request comment on our proposal to apply the policies and their compliance dates described previously, and in the CFR citations listed in Table 7, to small group market QHP issuers on the FF-SHOPs.
In the 2020 CMS Interoperability and Patient Access final rule, we finalized a requirement that impacted payers must implement and maintain Patient Access and Provider Directory APIs (85 FR 25513). In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements that impacted payers must also implement and maintain Provider Access, Payer-to-Payer, and Prior Authorization APIs (89 FR 8759). During those rulemakings, we received numerous public comments that emphasized the importance of a centralized location to discover payers' API endpoints, which would realize the full potential of these interoperability APIs (85 FR 25562 and 89 FR 8767).
An API's endpoint is the digital location, often a URL or IP address, that is set up to accept secure queries to the API. Developers need to know an API's endpoint to configure their apps to interact with the API. Without properly structured and functioning endpoints, an API will not work as intended. APIs can be set up with multiple endpoints, each used for specific data or purposes, or a single endpoint that offers different data depending on how it is queried.
We have received public feedback that a centralized listing of impacted payers' API endpoints would significantly improve the ability of payers, providers, patients, and developers to use the interoperability APIs (89 FR 8767). Various entities within the health care system need to have information about payers' API endpoints to achieve the envisioned ecosystem of data exchange via the interoperability APIs. For the Patient Access API, app developers must connect to payers' API endpoints for patients to access their data maintained by that payer. For the Provider Access API, EHR developers must configure providers' EHRs or other health IT to query payers' API endpoints to retrieve patient information maintained by that payer. To use the Payer-to-Payer API, payers must locate patients' previous or concurrent payers' API endpoints in order to send a request for patient data, as required in the 2024 CMS Interoperability and Prior Authorization final rule. For the Prior Authorization API, providers must be able to find the correct payer API endpoint to submit electronic prior authorization requests. Similarly, for the Provider Directory API, third-party developers and health care entities need discoverable endpoints to create innovative apps that help patients find in-network providers and enable care coordination between providers, making centralized endpoint reporting essential for realizing the full potential of publicly accessible provider directory information.
Stakeholder feedback from our 2019 CMS Interoperability and Patient Access proposed rule, 2020 CMS Interoperability and Patient Access final rule, 2022 CMS Interoperability and Prior Authorization proposed rule, and 2024 CMS Interoperability and Prior Authorization final rule demonstrates that endpoint discovery remains a significant implementation challenge, with multiple commenters requesting a centralized directory and noting that third-party apps currently struggle with implementation barriers when working with payers. Finding API endpoints individually in myriad locations could be a significant task for app developers, EHR developers, providers, and payers, because without specific requirements, those endpoints are unlikely to be listed or discoverable in a standardized manner. While payers may have some incentive to make their endpoints discoverable, market dynamics may create barriers to voluntary standardization. For example, individual payers may invest resources into comprehensive endpoint discovery while competitors benefit without making similar investments or competitive considerations, which could lead some payers to maintain integration complexity. As part of our oversight and compliance process, CMS has engaged in exercises to discover endpoints from a sampling of impacted payers. Our own work was heavily manual, and we have experienced first-hand that endpoints are listed in a wide variety of locations and formats, including PDFs, from which automated data retrieval is particularly difficult. Instead, we believe it would help everyone in the health care industry for CMS to collect API endpoints and make them publicly available in a standardized format that can easily be accessed and used by app developers, EHR developers, providers, and payers.
Furthermore, if payers' API endpoints have to be discovered individually by developers, or entities that want to use the API, the endpoint is more likely to be hard coded into the software systems used by those developers or entities. Individual endpoint discovery is likely to create a manual, resource-intensive process where developers must research each payer's documentation, extract endpoint information, and integrate it directly into their code. The alternative—building a dynamic endpoint discovery system—requires industry-wide coordination and significant development resources that many organizations cannot justify, making individual developer hard coding the more practical, albeit less flexible, solution. Once endpoints are hard coded, maintenance becomes increasingly burdensome, as developers must manually monitor hundreds of payers for changes, modify code, test, and redeploy systems for each endpoint update. Developers may not realize that an endpoint has changed until they receive reports that their software is no longer successfully connecting to an API, at which point they would have to push software updates. This process could take days or weeks, during which API integrations may fail and end users may experience service disruptions. This creates operational challenges for all entities that depend on API access; entities may need to wait for software updates to restore connectivity and access accurate data, potentially causing delays in patient care, data exchange, and administrative processes. Providers using EHRs, health systems relying on integration platforms, and payers using third-party software solutions would all experience service interruptions when hard-coded endpoints become outdated, regardless of whether they maintain in-house development capabilities.
Instead, a centralized registry could create greater flexibility and allow for more timely endpoint data availability. Software could make a call to that registry and, with appropriate identifying data, find the latest information about a payer's API endpoint. The software could then automatically use that information to call the payer's API without manual intervention by the developer or entity making the request. Such a process could be implemented into health apps (for the Patient Access and Provider Directory APIs), EHRs or other provider systems (for the Provider Access, Prior Authorization, and Provider Directory APIs), and payers' systems (for the Payer-to-Payer API).
Therefore, we are proposing to require, in the CFR citations listed in Table 8, impacted payers to report to CMS their API endpoints for each required interoperability API unless the impacted payer is a state Medicaid or CHIP FFS program that has been granted an extension or a QHP issuer on the FFEs that has been granted an exception from implementing any or all of the
In the 2020 CMS Interoperability and Patient Access final rule, we finalized a requirement that impacted payers make the specific business and technical documentation necessary to interact with their Patient Access and Provider Directory APIs freely and publicly accessible (85 FR 25542). In the 2024 CMS Interoperability and Prior Authorization final rule, we extended that requirement to the Provider Access, Payer-to-Payer, and Prior Authorization APIs (89 FR 8815). We explained that transparency is necessary for developers to easily obtain the information needed to develop systems technically compatible with the payer's API. Transparency is also needed so that developers can understand how to successfully interact with a payer's API. This includes how to satisfy any requirements the payer may establish for verifying a developer's identity and their apps' authenticity.
As explained in the preamble to the 2020 CMS Interoperability and Patient Access final rule (85 FR 25542), impacted payers must make publicly accessible documentation necessary to interact with their APIs. The existing regulations in 42 CFR 422.119(d), 42 CFR 431.60(d), 42 CFR 457.730(d), and 45 CFR 156.221(d) require impacted payers to make publicly available documentation that includes API syntax, function names, required and optional parameters, software components and configurations, and technical requirements for apps to interact with their APIs. FHIR capability statements are mandatory resources, as defined by an unexpired version of the FHIR standard adopted in 45 CFR 170.215(a), making them inherently part of this required documentation.
The required authorization and authentication protocols and implementation details build upon the existing requirement for impacted payers to use the SMART App Launch IG and OpenID Connect Core—to implement certain interoperability APIs.
To ensure that the business and technical documentation is publicly available and easily discoverable, we are proposing to require impacted payers to report to CMS the URLs for specific required documentation, at the CFR citations listed in Table 8.
The proposed URL reporting requirements directly correspond to existing requirements to make technical documentation publicly available, as follows:
(1) FHIR Capability Statement—The capability statement can satisfy the existing requirements to make publicly accessible documentation that includes API syntax, function names, required and optional parameters supported and their data types, return variables and their types/structures, exceptions and exception handling methods and their returns.
(2) Authorization and Authentication Protocols and Implementation Details—This documentation should satisfy the existing requirements to make publicly accessible all applicable technical requirements and attributes necessary for an app to be registered with any authorization server(s) deployed in conjunction with the API.
(3) API Registration Information—This documentation can satisfy the requirements to make publicly accessible the software components and configurations an application must use in order to successfully interact with the API and process its response(s).
These three documentation types—capability statements, authorization and authentication protocols and implementation details, and API registration information—represent discrete components of the broader documentation already required under existing regulations. The proposed URL reporting requirements do not expand the scope of required documentation but rather add to existing requirements by establishing a standardized mechanism for verifying compliance and facilitating discoverable access to required documentation.
The URL reporting proposal is integral to the effectiveness of API endpoint reporting. API endpoints are only functional when developers can access the technical documentation needed to integrate with them, including FHIR capability statements, authorization and authentication protocols and implementation details, and API registration information. Without discoverable documentation, centralized endpoint information provides limited value to the health care ecosystem. Both proposals, to report API endpoints and documentation URLs, could facilitate patient access to health information, support care coordination, enable efficient program administration, and reduce administrative burden on developers, providers, and payers.
While impacted payers must already make API documentation publicly available under existing regulations, CMS currently lacks an efficient mechanism to systematically verify compliance and facilitate standardized discovery of this documentation across hundreds of payers. The URL reporting proposal could enable CMS to systematically verify that required documentation is publicly accessible, monitor ongoing compliance with existing documentation obligations, and identify compliance gaps more efficiently than manual discovery processes. This could transform fragmented compliance into systematic, verifiable accessibility that serves both regulatory oversight and industry needs. CMS cannot efficiently gather this information independently because doing so would require continuous monitoring of hundreds of payer websites across multiple programs (MA, Medicaid, CHIP, and QHPs on the FFEs), technical staff to locate and verify documentation across varying website structures, and ongoing maintenance as payers modify their websites. Manual discovery by CMS could result in outdated information, discovery delays, and verification challenges, while requiring disproportionate resource allocation compared to the benefit for the industry.
This proposal explicitly addresses registration requirements that impacted payers must already meet. The proposed URL reporting requirements are authorized under the same statutory provisions that support the existing documentation requirements and would enable CMS to facilitate centralized discovery of documentation that must already be publicly available under existing regulations.
Maintaining API technology conformant with an unexpired version of the FHIR standard adopted in 45 CFR 170.215(a) is a requirement for all the interoperability APIs; and within that FHIR standard, capability statements are a mandatory resource. A capability statement documents how a FHIR API has been implemented, including the particular unexpired version of the FHIR standard, and which aspects of the standard have been implemented and how.
Because capability statements document API implementation details, functional capabilities, and operational parameters, they are a primary source technical documentation that could satisfy the requirement to make documentation that includes API syntax, function names, required and optional parameters, software components and configurations, and technical requirements for apps to interact with their APIs publicly accessible. Ensuring that direct URLs to capability statements are readily available for all payers in a centralized location would reduce developer burden to find each payer's capability statement. Reducing developer burden—whether for a developer of patient apps, EHRs, or payer systems—could expedite patient data exchange and lead to more timely and informed care. We emphasize that we are proposing that impacted payers would have to provide a direct URL to the capability statement itself and not to a documentation site that includes the capability statement. Because the capability statement is a structured file, we believe it is important that software be able to find it automatically without additional manual intervention to find
In addition, we propose to require impacted payers to report to CMS a URL or URLs with information about authorization and authentication protocols and implementation details for their API. That information is already required to be posted in a publicly accessible location by impacted payers, but we are now proposing to require impacted payers to report to CMS the location where they have made it available.
Often, API servers require apps or other software that interact with an API to be registered with the server and receive a key that verifies the app or program making the API call (API key).
We propose that CMS would publish those API endpoints and URLs in a centralized location for easy discovery by developers. We emphasize that we are not proposing that impacted payers would be required to report their supporting documentation itself to CMS. Rather, we are proposing that impacted payers would be required to report to CMS one or more public URLs where that documentation can be publicly accessed. However, we request comment on whether a single URL to a site that contains the authorization and authentication protocols and implementation details and API registration information is sufficient, or whether impacted payers should report a separate URL for each of these items. In addition, we request comment on whether there are discrete pieces of information, such as the specific authentication protocol a payer uses, that we should collect to facilitate faster API integration with patient health apps, provider EHRs, and payer systems. We wish to balance the benefits of making as much information available in a standardized and centralized location against the burden of reporting.
As an alternative to our primary proposal, the National Directory of Healthcare Providers & Services (NDH) IG could provide a framework for payers to report the proposed information.
Under this alternative proposal, we propose to require impacted payers to report NDH IG Endpoint Profile compliant resources containing the relevant information for each interoperability API. A single Endpoint Resource would be sufficient for cases where a single endpoint manages multiple API types with the same server or service address (URL), requirements, and other documentation. Under this alternative proposal, impacted payers would be required to populate all elements and extensions identified in the profile that are relevant to the specific interoperability API, including, but not limited to: FHIR IGs and
In the 2020 CMS Interoperability and Patient Access final rule, we finalized compliance dates in 2021 for the Patient Access and the Provider Directory APIs (except for QHP issuers on the FFEs, which are not subject to the Provider Directory API requirement) (85 FR 25558 and 25559 and 85 FR 25563 and 25564). Therefore, the information we are proposing to require impacted payers to report to CMS should already be publicly available for those two APIs. In the 2024 CMS Interoperability and Prior Authorization final rule, we established compliance dates in 2027 for impacted payers to implement the Provider Access, Payer-to-Payer, and Prior Authorization APIs. We believe that it would benefit payers, providers, and patients to have endpoints publicly available as soon as possible. Therefore, rather than tying a compliance date to the beginning of a calendar year, plan year, or rating period, we are proposing that all impacted payers be required to report the proposed data to CMS no later than 60 days after the effective date of a final rule. The proposed information about their own APIs should be readily available to impacted payers. Therefore, we believe the benefits of making endpoints publicly available, as discussed here, compel an expedited reporting process and deadline.
As new payers participate in CMS programs, we propose that they would be required to report the proposed information to CMS no later than 60 days before they begin covering patients under the applicable CMS program. Specifically, that means that a new impacted payer would be required to report 60 days before January 1 for MA organizations and state Medicaid and CHIP FFS programs, 60 days before the beginning of a rating period for Medicaid managed care plans or CHIP managed care entities, and 60 days before a plan year for QHP issuers on the FFEs, depending on the type of plan(s) the impacted payer is offering.
After the proposed deadline, we propose that impacted payers would be required to update the information reported to CMS within 1 week of any changes. In addition, to ensure that the latest information is available, we propose that impacted payers would be required to verify that the reported information is still correct every 12 months from the date of the last update or verification. We believe that the burden of reporting API endpoints to CMS would be minimal compared to the burden on payers to individually locate other payers' API endpoints for the Payer-to-Payer API. We seek comment on the burden that reporting API endpoints could place on payers and how CMS can reduce that burden, either with the information we collect or the method of collection. Impacted payers could meet the proposed requirements to verify their information at any time during the year. For instance, we expect that QHP issuers could report (if a new QHP issuer) or verify every 12 months (if an existing QHP issuer) at the same time they apply for certification on the FFEs, which could streamline their reporting requirements and allow CMS to verify that the QHP issuer has met the conditions for certification.
While only impacted payers would be subject to these proposals, if finalized, CMS would collect and publish API endpoints and URLs from any payer that implements interoperability APIs, including those that are not impacted payers under the CMS interoperability rules. As we continue to strongly encourage payers not subject to our interoperability rules to participate in data exchange, according to the requirements and standards established in those rules, we would want to facilitate their participation by publishing their API endpoints and documentation URLs.
While we are not making any proposals as to the specific methods, formats, or systems that could be used to collect and publish the proposed information, we seek comment on how CMS could do so in a manner that would balance the burden on payers with the benefits to developers, patients, providers, and payers.
In summary, we request comment on our proposals in the CFR citations listed in Table 8, and specifically on the following:
• The proposal to require impacted payers to report all API endpoints to CMS, in the form of an Endpoint Resource, as defined by an unexpired version of the FHIR standard adopted in 45 CFR 170.215(a), including, if multiple, appropriate use cases for each.
• The proposal to require impacted payers to report URLs with the required documentation for each of their interoperability APIs, as applicable:
++ A direct URL to the API FHIR capability statement.
++ Authorization and authentication protocols and implementation details.
++ API registration information.
• The proposal to require impacted payers to report this information to CMS no later than 60 days after the effective date of a final rule.
• The proposal to require new impacted payers to report this information no later than 60 days before they begin covering patients under the applicable CMS program.
• The proposal to require impacted payers to update CMS within 1 week of any changes to the reported information and verify their information at least once every 12 months.
• The alternative proposal to require impacted payers to report to CMS all NDH IG Endpoint Profile resources containing the relevant information for each interoperability API.
In addition, we request comment on the following:
• Is the proposal to collect a direct URL for the FHIR capability statements necessary, or would a payer endpoint be sufficient to indicate that the capability statement is located at [API endpoint]/metadata, as is required by the FHIR standard, or is that data element duplicative?
• Whether a single URL to a site that contains the authorization and authentication protocols and implementation details, and API registration information is sufficient, or whether impacted payers should report separate direct URLs for each of these items?
• Whether there are discrete pieces of information, such as the specific authentication protocol a payer uses, that we should collect to facilitate faster API integration with patient health apps, provider EHRs, and payer systems?
• Would aligning the reporting requirements with the NDH Endpoint Profile resource reduce payer burden to report the proposed information and/or developer burden to use a centralized registry?
• If the alternative proposal is finalized, would it negate the need for impacted payers to report URLs to documentation related to authorization and authentication protocols and implementation details and API registration information?
• The burden that reporting API endpoints could place on payers and how CMS can reduce that burden, either with the information we collect or the method of collection.
• How CMS could collect and publish the reported information in a manner that would balance the burden on payers with the benefits to developers, patients, providers, and payers. For example:
++ Would a machine-readable file on CMS's website be sufficient?
++ What would the benefits be of a FHIR-enabled registry, either for reporting or publishing? Would using FHIR standards allow a more streamlined and automated reporting process for payers? Would it allow greater flexibility for third-party app developers and EHR developers, which could improve the patient and provider experience?
For MA organizations, we are proposing these new requirements under our authority in the following sections of the Act:
• Section 1852(d)(1)(A) of the Act requires MA organizations offering an MA plan to, as a condition of using a network of providers, make covered benefits available and accessible to enrollees in a manner that assures continuity in the provision of benefits.
• Section 1852(g)(1)(A) of the Act requires an MA organization to have a procedure for making determinations about whether an enrollee is entitled to receive a health service, how much the enrollee is required to pay for such service, and to provide an enrollee with a written notice if the plan denies coverage. Section 1852(g)(1)(A) of the Act also requires that coverage determinations be made on a timely basis.
• Section 1852(h) of the Act requires that MA organizations have procedures in place to maintain accurate and timely medical records and other health information regarding MA enrollees and to assure enrollees have timely access to such records and information.
• Section 1856(b) of the Act authorizes the Secretary to establish regulatory standards for MA organizations that are consistent with and carry out Part C of the Medicare statute, including the provisions in section 1852 of the Act.
• Section 1857(e)(1) of the Act explicitly authorizes the adoption of additional MA contract terms and conditions, including required reporting to CMS by MA organizations, where necessary and appropriate and not inconsistent with Part C of the Medicare statute.
For state Medicaid FFS programs and Medicaid managed care plans, we are proposing these new requirements under our authority in the following sections of the Act:
• Section 1902(a)(4) of the Act requires that a state Medicaid plan provides such methods of administration as are found by the Secretary to be necessary for the proper and efficient operation of the state Medicaid plan, which includes ensuring that contracted managed care plans comply with federal interoperability requirements.
• Section 1902(a)(6) of the Act requires states to make reports in a form and containing information required by the Secretary, which can include ensuring that managed care plans under contract provide necessary endpoint information to the state for reporting to CMS.
• Section 1902(a)(8) of the Act requires states to ensure that Medicaid services are furnished with reasonable promptness to all eligible individuals.
• Section 1902(a)(19) of the Act requires states to ensure that care and services are provided in a manner consistent with simplicity of administration and the best interests of the recipients.
• Section 1903(m)(2)(A)(xi) of the Act requires that contracts with Medicaid MCOs include provisions that ensure compliance with applicable requirements. This provides direct authority to impose endpoint reporting requirements on managed care plans through their contracts with states.
• Section 1932(a) of the Act provides authority for states to implement managed care arrangements and includes certain waiver provisions. Section 1932(d)(1) of the Act establishes that managed care entities must comply with requirements the Secretary determines necessary to carry out the purposes of the Medicaid program
For state CHIP FFS programs and CHIP managed care entities, we are proposing these new requirements under our authority in the following sections of the Act:
• We finalized the interoperability APIs under our general authority in section 2101(a) of the Act, which sets forth that the purpose of Title XXI is to provide funds to states to provide child health assistance to uninsured, low-income children in an effective and efficient manner that is coordinated with other sources of health benefits coverage.
• Section 2107(b)(1) of the Act requires state CHIP agencies to collect data, maintain records, and furnish reports in order to enable the Secretary to monitor state program administration and compliance and to evaluate and compare the effectiveness of state plans under this title.
For QHP issuers on the FFEs, we finalized the API requirements under our authority in section 1311(e)(1) of the Affordable Care Act. Section 1311(e)(1)(A) of the Affordable Care Act requires that Exchanges only certify plans as QHPs if they meet the requirements for certification promulgated by the Secretary under section 1311(c)(1) of the Affordable Care Act, while section 1311(e)(1)(B) of the Affordable Care Act affords the Exchanges the discretion to certify QHPs if the Exchange determines that making available such health plans through the Exchange is in the interests of qualified individuals and qualified employers in the state or states in which such Exchange operates.
In the 2024 CMS Interoperability and Prior Authorization final rule, we required impacted payers to make available certain information about prior authorizations for non-drug items and services via a Patient Access API.
• The prior authorization status.
• The date the prior authorization was approved or denied.
• The date or circumstance under which the prior authorization ends.
• The items and services approved.
• If denied, a specific reason why the request was denied.
• Related structured administrative and clinical documentation submitted by a provider (89 FR 8784 and 8817).
Impacted payers must make the same prior authorization information available through the Payer-to-Payer API, except they are not required to include denied prior authorizations (or a specific reason why the request was denied).
We emphasize the importance of access to prior authorization information for drugs in section II.B. of this proposed rule. For the reasons we explained in that section and in response to public feedback received on the 2022 CMS Interoperability and Prior Authorization proposed rule, we propose to add information about prior authorization requests and decisions for all drugs to the categories of data impacted payers are required to make available through the Access APIs. We propose to amend the Access API
• The prior authorization status.
• The date the prior authorization was approved or denied.
• The date or circumstance under which the prior authorization ends.
• The drug or drugs approved (including the dosage).
• If denied, a specific reason why the request was denied.
• Related structured administrative and clinical documentation submitted by a provider.
For the Payer-to-Payer API, the information about prior authorizations for drugs we propose is the following:
• The prior authorization status.
• The date the prior authorization was approved.
• The date or circumstance under which the prior authorization ends.
• The drug or drugs approved (including the dosage).
• Related structured and unstructured administrative and clinical documentation submitted by a provider.
In the 2024 CMS Interoperability and Prior Authorization final rule, we excluded denied prior authorization requests for non-drug items and services from the set of information that must be exchanged between payers via the Payer-to-Payer API and are proposing the same for prior authorizations for drugs (89 FR 8827). We propose to exclude denied prior authorization requests because they generally would not reflect ongoing treatment, as it does not demonstrate that patients actually received items, services, or drugs. If a patient ultimately received those items, services, or drugs despite the denied request, that information would have to be gathered from elsewhere (such as clinical data), regardless of whether the requesting payer receives information about the prior authorization decision. Many commenters cited similar justifications for excluding denied prior authorizations in response to the 2022 CMS Interoperability and Prior Authorization proposed rule, and we thus did not finalize a requirement to include denied prior authorization decisions in the Payer-to-Payer API policies. The value of including such information would likely be outweighed by the additional burden on impacted payers to include it and we therefore believe its exclusion remains justified. We refer readers to the 2024 CMS Interoperability and Prior Authorization final rule for a full discussion of our reasoning for this exclusion (89 FR 8830).
We propose an October 1, 2027 compliance date for MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to make the proposed information about prior authorizations for drugs available via the Access APIs. Because impacted payers are already required to make available information about prior authorizations for non-drug items and services beginning in 2027 (by January 1, 2027, for MA organizations and state Medicaid and CHIP FFS programs; by the rating period beginning on or after January 1, 2027, for Medicaid managed care plans and CHIP managed care entities; and for plan years beginning on or after January 1, 2027, for QHP issuers on the FFEs) (89 FR 8784, 8817, and 8855), we believe a 9-month implementation window following that date strikes the appropriate balance between urgency and operational feasibility. An October 1, 2027 compliance date allows impacted payers to build upon the infrastructure and processes established for the January 1, 2027 deadline, while providing a defined period to extend that infrastructure to drug prior authorization data. However, we encourage these payers to make this information available via their APIs as soon as possible to benefit their patients.
We propose that the requirement to make available information about prior authorization for drugs would be subject to the same timeframes established for making available prior authorization information for non-drug items and services—no later than 1 business day after the payer receives a prior authorization request—and the payer must update that information no later than 1 business day after any status change. This proposal not only aligns with our previously finalized policy, but we continue to believe that 1 business day is the appropriate timeframe for the reasons discussed in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8775-8776). Similarly, that 1 business day timeframe aligns with the existing requirements to make claims and encounter data and all data classes and data elements included in a content standard in 45 CFR 170.213 (USCDI) available via the Access APIs no later than 1 business day after being processed or received by the payer.
Additionally, we propose that information about prior authorizations for drugs be required to be available via the Access APIs for as long as the authorization is active and at least 1 year after the last status change. Information about denied and expired prior authorizations for drugs would therefore be available for at least 1 year after expiring or being denied. Consistent with the requirements to make available information about prior authorizations for non-drug items and services, we are not proposing to require payers to share a patient's full prior authorization history because that could comprise a significant amount of information that may no longer be clinically relevant. Furthermore, as payers' prior authorization policies may change over time, that information has a limited lifespan of usefulness for a patient's current care. However, our proposal would require payers to make available information about all active authorizations for as long as they are active, which may indicate a relationship to ongoing care.
In summary, we request comment on our proposals in the CFR citations listed in Table 10, and specifically on the following:
• The proposal to require impacted payers to add information about prior authorization requests and decisions for all drugs to the categories of data they are required to make available through the Access APIs, within the timeframes established for non-drug items and services.
• The proposed October 1, 2027 compliance dates for MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs.
Beginning in 2026, impacted payers are required to annually report to CMS certain metrics about patient data requests made via the Patient Access API. Impacted payers must annually report Patient Access API metrics to CMS in the form of aggregated, de-identified data following any year that the payer was subject to the requirement to make the Patient Access API available. Specifically, by March 31, 2026, MA organizations at the contract level, state Medicaid and CHIP FFS programs at the state level, and Medicaid managed care plans and CHIP managed care entities at the plan level must report the following metrics: (1) the total number of unique patients whose data are transferred via the
These data will help CMS better understand whether the Patient Access API requirement is effectively and efficiently providing patients access to their health information and whether payers are providing that required information in a transparent and timely way. Additionally, aggregated usage data from each impacted payer will help us evaluate whether the Patient Access API policies are achieving the desired goals. By gathering that information, we can provide targeted support or guidance to impacted payers, if needed, to ensure that patients have access to their data and can use their data consistently across impacted payers. Multiple data transfers indicate repeat access, showing that patients are either using multiple apps or allowing apps to update their information over the course of the year. While data transfers may not indicate to what extent patients are using apps to manage their health care, it would be a preliminary indicator of interest in the technology (89 FR 8779).
The current regulation requires that impacted payers report metrics from the previous calendar year to CMS by March 31 of each year.
After finalizing the Patient Access API usage metrics in the 2024 CMS Interoperability and Prior Authorization final rule, we determined that additional proposals would be appropriate for Medicaid managed care plans, CHIP managed care entities, and individual market QHP issuers on the FFEs to align reporting deadlines for API usage metrics with other reporting deadlines. Similar proposals for small group market QHP issuers on the FF-SHOPs, with a later applicability date, are discussed in section II.D. of this proposed rule.
Specifically, Medicaid managed care plans' and CHIP managed care entities' program contracts do not all use the same time period, and each state may choose different contract rating periods for each managed care program. Medicaid managed care plans' and CHIP managed care entities' contracts may use any 12-month period and collecting Patient Access API usage data based on a calendar year would thus be out of alignment with other reporting obligations in the contracts. Because rating periods do not necessarily align with calendar years, we now believe that the March 31 reporting deadline finalized in the 2024 CMS Interoperability and Prior Authorization final rule may not be appropriate for all Medicaid managed care plans and CHIP managed care entities. Therefore, to align the reporting deadlines with the contract rating period and its requirements, we are now proposing to require Medicaid managed care plans and CHIP managed care entities to report Patient Access API usage metrics from each rating period to the state no later than 90 days after the end of each rating period. For Medicaid managed care plans, these metrics will be reported to CMS by states in their MCPARs, which are due 180 days after the end of the rating period. Having Medicaid managed care plans report Patient Access API usage metrics to the state no later than 90 days after the end of each rating period provides states with ample time to collect and process the data for inclusion in their MCPARs. To simplify the cross-referencing regulatory text, we also propose, in 42 CFR 438.242(b)(5)(ii)(B), to be explicit that the requirement for Medicaid managed care plans and CHIP managed care entities is to report API usage metrics to the state, rather than to CMS directly.
Furthermore, we propose to amend the requirements for Medicaid managed care plans and CHIP managed care entities to clarify that they would be required to report the Patient Access API usage metrics by program, as well as by plan. We plan to collect metrics from Medicaid managed care plans via the states through the MCPAR system, which is set up to receive reports from plans by program.
The certification process for new and existing QHP issuers on the FFEs for the next plan year begins in the prior calendar year. QHP issuers on the FFEs are required to submit to CMS their initial application for plan certification for each plan year in June of the previous calendar year. Because the current annual March 31 reporting deadline finalized in 45 CFR 156.221(f) in the 2024 CMS Interoperability and Prior Authorization final rule falls before the annual QHP certification application deadline, we believe it would be more appropriate to align the deadlines so that QHP issuers on the FFEs can submit Patient Access API usage metrics as part of the annual QHP certification process. Further, other
In summary, we request comment on our proposals in the CFR citations listed in Table 10, and specifically on the following:
• The proposal for Medicaid managed care plans and CHIP managed care entities to report Patient Access API usage metrics to the state no later than 90 days after the end of each rating period.
• The proposal for QHP issuers on the FFEs to report Patient Access API usage metrics to CMS in the form and manner and within the timeframes specified by the Secretary.
• The proposal to require Medicaid managed care plans and CHIP managed care entities to report certain metrics about Patient Access API usage, as finalized in the 2024 CMS Interoperability and Prior Authorization final rule, by program, as well as by plan.
• The proposal to become effective beginning on the effective date of the final rule.
We are proposing that impacted payers be required to report metrics about usage of the Provider Access, Payer-to-Payer, and Prior Authorization APIs, which are required under the 2024 CMS Interoperability and Prior Authorization final rule. We propose that, beginning in 2028, MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs would be required to annually report metrics in the form of aggregated, de-identified data.
The reporting period for MA organizations, state Medicaid and CHIP FFS programs, and QHP issuers on the FFEs would be the calendar year, while the reporting period for Medicaid managed care plans and CHIP managed care entities would be the rating period. We propose that, beginning in 2028, MA organizations and state Medicaid and CHIP FFS programs be required to report the previous calendar year's metrics to CMS by March 31 of each year. We propose that by the first rating period beginning on or after January 1, 2028, Medicaid managed care plans and CHIP managed care entities be required to report metrics to states from each rating period no later than 90 days after the end of each rating period. We propose that for plan years beginning on or after January 1, 2028, following each year it offers a QHP on a FFE, unless granted an exception for the previous year, a QHP issuer on the FFEs must report usage metrics to CMS in the form and manner and within the timeframes specified by the Secretary. Impacted payers would thus be required to begin reporting these data in 2028 for the previous reporting period (for most impacted payers, calendar year 2027). As discussed in section II.C.6. of this proposed rule, we use the term “reporting period” to describe the period from which data must be reported in order to account for certain differences between impacted payers.
We also propose that MA organizations, state Medicaid and CHIP FFS programs, and QHP issuers on the FFEs would report the metrics at the same reporting levels, that is, the organizational levels at which the payer aggregates and submits the required data, as finalized for the Patient Access API usage metrics. MA organizations would thus report at the contract level, state Medicaid and CHIP FFS programs at the state level, and QHP issuers on the FFEs at the issuer level. We also propose that Medicaid managed care plans and CHIP managed care entities would report metrics at the plan and program level for the reasons discussed previously. By way of examples, reporting at the issuer level means that a QHP issuer on the FFEs would aggregate data across the plans it offers on a FFE, while reporting at the plan level means that a Medicaid managed care plan would report data specific to that individual plan. As we finalized for the Patient Access API (89 FR 8780), dual eligible special needs plans (D-SNPs) would report consistent with MA organizations at the contract level, and with Medicaid managed care plans at the plan level. Therefore, the MA organization would report information about Provider Access, Payer-to-Payer, and Prior Authorization API usage by its D-SNP enrollees to CMS at the contract level. The affiliated Medicaid managed care plan would report on information about Patient Access API usage by its enrollees to CMS at the plan and program level.
In the 2024 CMS Interoperability and Prior Authorization final rule, we explained that we believe that it is most appropriate for MA organizations to report these usage data at the contract level (89 FR 8780). Contract level data represent aggregated information from all PBPs that fall under a single MA contract, with reporting organized by individual contracts rather than by individual plans. We already require MA organizations to annually report contract level data about their organization's determinations to CMS. Maintaining consistent contract level reporting in the MA program would give us useful information while limiting payer burden. By requiring contract level reporting for these metrics, the format of these reported data would remain consistent with other data that MA organizations are required to report. There could be value in requiring MA organizations to report on a plan level in the future to get more discrete data.
Commenters agreed with our proposals in the 2022 CMS Interoperability and Prior Authorization proposed rule that requiring state Medicaid and CHIP FFS programs to report at the state level, Medicaid managed care plans and CHIP managed care entities to report at the plan level, and individual market QHP issuers on the FFEs to report at the issuer level balances the reporting burden and the meaningfulness of the data (89 FR 8780). We explained in the 2024 CMS Interoperability and Prior Authorization final rule that requiring individual market QHP issuers on the FFEs to report at the issuer level, thereby aggregating plans under their purview, is consistent with their reporting on quality improvement strategies, as described in section 1311(g) of the Affordable Care Act and codified in 45 CFR 156.1130(a), which provides consistency with other QHP reporting requirements (89 FR 8890). Likewise, for these proposals, state Medicaid and CHIP FFS programs would report at the state level, Medicaid managed care plans and CHIP managed care entities at the plan and program level, and QHP issuers on the FFEs at the issuer level. Our proposed reporting levels and deadlines are summarized in Table 9.
As with the existing Patient Access API metrics (89 FR 8781), if we finalize this proposal, we do not plan to publicly report these metrics at the contract, state, plan and program, or issuer level, but may reference or publish aggregated and de-identified data that does not include names of specific payers or plans.
We are also not proposing a specific form or manner of reporting these metrics at this time but would issue specific format and process guidance for submitting these metrics, should they be finalized.
We propose that, beginning in 2028, impacted payers be required to annually report Provider Access API usage metrics in the form of aggregated, de-identified data. MA organizations, state Medicaid and CHIP FFS programs, and QHP issuers on the FFEs would be required to report these metrics directly to CMS and Medicaid managed care plans and CHIP managed care entities would be required to report these metrics to states.
Specifically, impacted payers would be required to report the following metrics about their Provider Access API:
• The total number of unique providers who requested patient data via their Provider Access API.
• The total number of unique patients whose data were transferred via their Provider Access API to a provider's health IT system (for example, an EHR or health IT system).
• The total number of patient data transfers via their Provider Access API.
In response to the 2022 CMS Interoperability and Prior Authorization proposed rule, some commenters expressed skepticism that providers would use the Provider Access API (89 FR 8792 through 8794). We are proposing these metrics because we believe that they would give us valuable insight into how frequently the Provider Access API is being used. In addition, we believe that obtaining these metrics would be manageable for impacted payers and thus not present a substantial burden.
For the purposes of this proposal, payers must count each provider who queries the Provider Access API. As we established in the 2024 CMS Interoperability and Prior Authorization final rule, the Provider Access API should be available to all providers, whether they are an individual, a facility, or a group of providers who have come together as an accountable care organization (ACO), who are appropriately licensed, provide items and services, or drugs eligible for coverage by the payer, and are enrolled with the payer or in the payer's provider network. Though we do not require payers to share patient data with out-of-network or unenrolled providers, we encourage them to do so to the extent permitted by law if they can verify a treatment relationship (89 FR 8790 and 8791). This proposed approach ensures payers would comprehensively report all usage of the Provider Access API, including out-of-network and unenrolled providers where applicable. We believe that impacted payers would be able to obtain these metrics based on their records of which providers have been authenticated and authorized to receive requested patient data. We also recognize, however, that there may be other ways for these payers to obtain these metrics, as well as other outstanding factors that they would need to address to obtain the metrics that we may not be considering.
We propose that, beginning in 2028, impacted payers be required to annually report Payer-to-Payer API usage metrics in the form of aggregated, de-identified data. MA organizations, state Medicaid and CHIP FFS programs, and QHP issuers on the FFEs would be required to report these metrics directly to CMS and Medicaid managed care plans and CHIP managed care entities would be required to report these metrics to states.
Specifically, impacted payers would be required to report all of the following metrics about their Payer-to-Payer API:
• The percent of patients who have opted in to the payer to payer data exchange.
• The total number of unique patients whose data have been sent to other payers.
• The total number of unique patients whose data have been received from other payers.
We believe that by monitoring the patient opt in rate, we could better understand patient receptiveness to payer to payer data exchange, as well as how impacted payers are implementing it. For example, this information may identify potential barriers to patient opt in, such as unclear patient educational resources.
We propose that, beginning in 2028, impacted payers would be required to annually report Prior Authorization API usage metrics in the form of aggregated, de-identified data. MA organizations, state Medicaid and CHIP FFS programs, and QHP issuers on the FFEs would be required to report these metrics directly to CMS and Medicaid managed care plans and CHIP managed care entities would be required to report these metrics to states.
Specifically, impacted payers would be required to report all of the following metrics about their Prior Authorization API:
• The total number of unique providers who request a prior authorization for items, services, or drugs through their Prior Authorization API.
• The number of unique prior authorization requests for items, services, and drugs received through their Prior Authorization API.
• The percentage of all prior authorization requests that were received through their Prior Authorization API.
We finalized a requirement in the 2024 CMS Interoperability and Prior Authorization final rule that impacted payers implement and maintain a Prior Authorization API to facilitate electronic prior authorization for providers to send prior authorization requests and receive decisions from payers.
In summary, we request comment on our proposals in the CFR citations listed in Table 10, and specifically on the following:
• The proposal to require impacted payers to report metrics about the usage of the Provider Access, Payer-to-Payer, and Prior Authorization APIs in the form of aggregated, de-identified data.
• The proposal to require MA organizations to report at the contract level, state Medicaid and CHIP FFS programs to report at the state level, Medicaid managed care plans and CHIP managed care entities to report at the plan and program level, and QHP issuers on the FFEs at the issuer level.
• The proposed compliance dates beginning in 2028 to report metrics from the 2027 reporting period, and the proposed reporting deadlines thereafter (summarized in Table 9).
In addition, we request comments on the following:
• CMS's position that it does not plan to publicly report these metrics at the contract, state, plan and program, or issuer level, but may reference or publish aggregated and de-identified data that does not include names of specific payers or plans.
• With respect to the proposed Provider Access API usage metrics, the feasibility of separately reporting the total number of individual providers and groups of providers who request patient data via the Provider Access API, and whether we should finalize requirements for these payers to report separate metrics for individuals and groups of providers.
• With respect to the proposed Payer-to-Payer API usage metrics, whether we should disaggregate these metrics by data exchanges between an old and new payer and those between concurrent payers.
• Whether there are different metrics that we should consider requiring impacted payers to report.
• With respect to states reporting usage metrics to CMS via the APD process described in 45 CFR part 95, subpart F, whether there are existing or alternative reporting mechanisms for Medicaid and CHIP data for states to leverage to better facilitate the reporting process. Specifically, whether the use of an online portal or form would be simpler to meet the annual deadlines or whether a FHIR® server to automate reporting would be preferred, and what the anticipated level of burden would be.
In the 2020 CMS Interoperability and Patient Access and 2024 CMS Interoperability and Prior Authorization final rules, we required that certain impacted payers make available information about their drug formularies through the Access APIs. MA-PDs must make available drug formulary information, including covered Part D drugs and any tiered formulary structure or utilization management procedure which pertains to those drugs. State Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities must make available information about covered outpatient drugs, including, where applicable, preferred drug list information.
Upon further examination of this finalized policy, we determined that the inclusion of drug formulary data in the Provider Access API and Payer-to-Payer API may be unnecessary and burdensome. We believe that providers already have sufficient access to drug formulary information through other means, such as payer websites and standard payer communications materials, and both impacted payers and patients would have little use for this information if they received it from a previous or concurrent payer. We thus believe that the benefit of including drug formulary data in these APIs does not outweigh the additional effort it would take impacted payers to make them available. Therefore, we propose to remove drug formulary information as data required to make available via the Provider Access and Payer-to-Payer APIs for MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities. If finalized, we propose that this would be effective beginning on the effective date of the final rule. While we propose removing these data from our requirements, we remind impacted payers that they would not be prohibited from continuing to include them should they see value in doing so. We emphasize that we are not proposing to change the current requirement for MA organization, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities to make the required formulary information available via the Patient Access API.
In summary, we request comment on our proposals in the CFR citations listed in Table 10, and specifically on the following:
• The proposal to remove drug formulary information as data required to be made available via the Provider Access and Payer-to-Payer APIs for MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities.
• The proposal to become effective beginning on the effective date of the final rule.
In addition, we request comments on the following:
• Whether there are use cases where it would be helpful for any party to have access to drug formulary data via those APIs.
In the 2020 CMS Interoperability and Patient Access final rule and 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements that impacted payers must implement and maintain Patient Access, Provider Access, Payer-to-Payer, and Prior Authorization APIs conformant with certain technical standards, documentation requirements, and denial or discontinuation policies (85 FR 25524 through 25559, 89 FR 8817, 8855, and 8897). We believe that consistently applying these requirements to all of the APIs would minimize the cost and burden of implementation and support payer risk mitigation strategies. However, we do not currently require the Provider Directory API, also finalized in the 2020 CMS Interoperability and Patient Access final rule, to be conformant with the denial or discontinuation policies for the other APIs.
To align requirements across all APIs, we are now proposing that MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities update their Provider Directory API policies to conform with the denial or discontinuation policies that apply to the other APIs. We are proposing that impacted payers would be required to implement that policy by the effective date of the final rule. We believe that those impacted payers should not have difficulty implementing this policy change, as it would not require developing or modifying any technology but rather applying the same denial and discontinuation policy that exists for other APIs to the Provider Directory API. However, we encourage the impacted payers to whom this proposal applies to update their denial and discontinuation policy for the Provider Directory APIs as soon as possible.
In summary, we request comment on our proposals in the CFR citations listed in Table 10, and specifically on the following:
• The proposal to require MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities to update their Provider Directory APIs denial or discontinuation policies.
• The proposal to become effective beginning on the effective date of the final rule.
In the 2020 CMS Interoperability and Patient Access final rule, we finalized requirements that impacted payers must implement and maintain a Patient Access API beginning in 2021 (by January 1, 2021 for MA organizations and state Medicaid and CHIP FFS programs; by the rating period beginning on or after January 1, 2027 for Medicaid managed care plans and CHIP managed care entities; and for plan years beginning on or after January 1, 2027 for individual market QHP issuers on the FFEs). We also finalized a requirement that impacted payers make available through the Patient Access API the specified data they maintain with a date of service on or after January 1, 2016 (85 FR 25558 through 25560). We finalized those requirements in an applicability paragraph in 42 CFR 422.119 for MA organizations, 42 CFR 431.60 for state Medicaid FFS programs, 42 CFR 457.730 for state CHIP FFS programs, through cross reference to 42 CFR 431.60 in 42 CFR 438.242(b)(5) for
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements that impacted payers must implement and maintain Provider Access, Payer-to-Payer, and Prior Authorization APIs with compliance dates in 2027 (by January 1, 2027 for MA organizations and state Medicaid and CHIP FFS programs; by the rating period beginning on or after January 1, 2027 for Medicaid managed care plans and CHIP managed care entities; and for plan years beginning on or after January 1, 2027 for individual market QHP issuers on the FFEs) (89 FR 8817, 8855, and 8897). We also finalized requirements that impacted payers make available through the Provider Access API specified data they maintain with a date of service on or after January 1, 2016 and, through the Payer-to-Payer API, to exchange data they maintain with a date of service within 5 years of the request (89 FR 8799 and 8855).
To simplify the regulatory text, we propose to incorporate the 2021 applicability date into the paragraph that includes the Patient Access API requirements in 42 CFR 422.119(a) for MA organizations, 42 CFR 431.60(a) for state Medicaid FFS programs, 42 CFR 457.730(a) for state CHIP FFS programs, and 45 CFR 156.221(a) for QHP issuers on the FFEs. We further propose to incorporate the requirement for impacted payers to make available data with a date on or after January 1, 2016 in 42 CFR 422.119(b)(1) for MA organizations, 42 CFR 431.60(b) for state Medicaid FFS programs, 42 CFR 457.730(b) for state CHIP FFS programs, and 45 CFR 156.221(b)(1) for individual market QHP issuers on the FFEs. These proposals would not change any existing requirements or impose any new requirements.
Because the requirements for the Provider Access and Payer-to-Payer APIs cross reference to the accessible content available through the Patient Access API, we believe that this would simplify and explain the regulatory requirements for all three of these APIs. This proposal would become effective beginning on the effective date of the final rule.
In summary, we request comment on our proposals in the CFR citations listed in Table 10, and specifically on the following:
• The proposal to incorporate the existing Patient Access API 2021 implementation date into 42 CFR 422.119(a), 42 CFR 431.60(a), 42 CFR 457.730(a), and 45 CFR 156.221(a).
• The proposal to incorporate the existing requirement for impacted payers to make available data with a date on or after January 1, 2016 into 42 CFR 422.119(b)(1), 42 CFR 431.60(b), 42 CFR 457.730(b), and 45 CFR 156.221(b)(1).
• The proposal to become effective beginning on the effective date of the final rule.
In the preambles to the 2022 CMS Interoperability and Prior Authorization proposed rule and 2024 CMS Interoperability and Prior Authorization final rule, we discussed that issuers seeking to offer QHPs on the FFEs that submit an exception request would have to describe the effect of non-compliance upon enrollees, providers, and payers and the current or proposed means of providing the required information to providers or other payers, as applicable to each API (87 FR 76263, 87 FR 76281, and 89 FR 8905). However, the regulatory text in 45 CFR 156.222(c)(1)(iii) only requires QHP issuers on the FFEs that are applying for an exception to describe the impact of non-compliance on providers and enrollees and the current or proposed means of providing health information to payers.
Therefore, we propose to amend 45 CFR 156.222(c)(1)(ii) and 45 CFR 156.222(c)(1)(iii) to incorporate the requirement to describe the impact on all applicable parties. Specifically, we propose to amend 45 CFR 156.222(c)(1)(ii) to require QHP issuers on the FFEs applying for an exception describe the impact of non-compliance upon enrollees and providers, if the exception request is for the Provider Access API, or upon enrollees and payers, if the exception request is for the Payer-to-Payer API. In addition, we propose to amend 45 CFR 156.222(c)(1)(iii) to refer to the current or proposed means of providing health information to providers if the exception is for the Provider Access API, or to other payers if the exception request is for the Payer-to-Payer API. Similarly, we propose to amend 45 CFR 156.223(i)(1)(iii) to require QHP issuers on the FFEs that apply for an exception to describe the current or proposed means of providing prior authorization coverage and documentation requirements and facilitating prior authorization requests and decisions.
In summary, we request comment on our proposals in the CFR citations listed in Table 10, and specifically on the following:
• The proposal to amend language in 45 CFR 156.222(c)(1)(ii) and 45 CFR 156.222(c)(1)(iii), and 45 CFR 156.223(i)(1)(iii) to require QHP issuers on the FFEs applying for an exception to describe the impact of non-compliance on all applicable parties.
In the 2024 CMS Interoperability and Prior Authorization final rule, we stated that we expected that states operating state Medicaid and CHIP FFS programs would be able to access federal matching funds to support their implementation of the required APIs (89 FR 8907). We explained that all of the required APIs would support the efficient data exchange and prior authorization processes, consistent with sections 1902(a)(4) and 2101(a) of the Act. Similarly, FFP could be available for state expenditures to meet the proposals in this proposed rule at a rate of 50 percent under section 1903(a)(7) of the Act for the proper and efficient administration of the Medicaid state plan.
Furthermore, as with requirements in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8907), state expenditures to implement certain proposals in this proposed rule could be eligible for 90 percent enhanced FFP under section 1903(a)(3)(A)(i) of the Act if the expenditures can be attributed to the design, development, and installation of mechanized claims processing and information retrieval systems. Additionally, 75 percent enhanced FFP, under section 1903(a)(3)(B) of the Act, could be available for state expenditures to operate Medicaid mechanized claims processing and information retrieval systems. States can request Medicaid enhanced FFP under section 1903(a)(3)(A)(i) or (B) of the Act through the APD process described in 45 CFR part 95, subpart F. Additionally, 42 CFR 433.112(b)(12) and 42 CFR 433.116(c) require that any system for which states are receiving enhanced FFP under section 1903(a)(3)(A)(i) or (B) of the Act align with and incorporate the ONC Health IT standards adopted in 45 CFR part 170, subpart B. The proposals that would require API implementation or enhancement in this proposed rule complement this requirement to support interoperability by using standards adopted by ONC.
Separately, for CHIP agencies, section 2105(c)(2)(A) of the Act and 42 CFR 457.618 limiting administrative costs to no more than 10 percent of a state's total computable expenditures for a FY
For MA organizations, we are proposing the new requirement to add information about prior authorizations for drugs to the Access APIs under our authority at the following sections of the Act:
• Section 1856(b)(1) of the Act, which requires the Secretary to promulgate regulations implementing MA standards, including the requirements in section 1852(h) of the Act for MA organizations that maintain medical records or other health information about enrollees to maintain such records in a manner that is accurate and timely and to ensure access for enrollees to such records and information.
• Section 1857(e)(1) of the Act, which authorizes the Secretary to add contract terms determined by the Secretary to be necessary and appropriate and not inconsistent with the requirements in Part C of Title XVIII of the Act (that is, Part C of the Medicare statute).
• Section 1852(d)(1)(A) of the Act, which requires MA organizations to, as a condition of using a network of providers, make covered benefits available and accessible to enrollees in a manner which assures continuity in the provision of benefits.
The Patient Access API proposal in section II.E.1.b. of this proposed rule that would require MA organizations to make an enrollee's prior authorization requests and related clinical documentation for drugs available through the APIs, would, if finalized as proposed, allow these enrollees to have access to that information in a convenient, timely, secure, and portable way, which is in enrollees' best interests. This proposed requirement is consistent with section 1852(h) of the Act. It is essential for CMS to ensure that each MA organization has a standardized system in place that offers enrollees access to their own data, including data that pertain to their prior authorizations for drugs, using existing and emerging technologies of their choice, specifically in this case, health apps. Therefore, making these data available through the Patient Access API is consistent with our programmatic authority to establish standards to implement section 1852(h) of the Act, and could encourage patients to be more active participants in their own care, which could potentially lead to better health outcomes.
Making this information available via the Patient Access API could help enrollees support the prior authorization process, as well. Enrollees could see what information is needed and what information has been provided on their behalf to facilitate a prior authorization request. Enrollees, using a third-party app, could monitor the process and give their provider any missing information needed by the payer to reach a decision. This could allow MA organizations to address prior authorization requests more promptly, streamlining this process, and thus simplifying prior authorization for the MA organizations. This could also improve an enrollee's experience with the process, by facilitating timelier and potentially more successful initial prior authorization requests. This, again, supports efficient operation and timely provision of information and services.
For the Provider Access API, our proposals would provide a mechanism for providers to access information about pending, approved, or denied prior authorization requests for all drugs in a timely and efficient manner. As noted in this section of this proposed rule, these regulations are consistent with and facilitate the requirements in section 1852(d)(1)(A) of the Act that MA organizations, as a condition of using a network of providers, make covered benefits available and accessible to enrollees in a manner which assures continuity in the provision of benefits. The Secretary has authority under section 1856(b)(1) of the Act to promulgate regulations implementing MA standards, including the requirements in section 1852(d)(1)(A) of the Act. As previously stated, the Secretary also has authority under section 1857(e)(1) of the Act to add new contract terms, including additional standards and requirements, for MA organizations that the Secretary finds necessary and appropriate and that are not inconsistent with Part C of the Medicare statute.
In implementing section 1852(d)(1)(A) of the Act, we previously adopted a regulation, in 42 CFR 422.112(b)(4), that requires MA organizations offering coordinated care plans to ensure the continuity of care and integration of services through arrangements with providers that include procedures to ensure that the MA organization and the contracted providers have access to the information necessary for effective and continuous patient care. This proposal to expand the scope of information available to providers through the Provider Access API aligns with, and provides a means for, MA organizations to comply with that existing regulatory requirement. Our proposal for MA organizations to add prior authorization information for all drugs to their existing Provider Access API would facilitate exchanges of information about enrollees that are necessary for effective and continuous patient care, which is consistent with the requirement in section 1852(d)(1)(A) of the Act for assuring continuity in the provision of benefits. In addition, if a patient moves from one provider to another, the new provider would be able to ensure continuity of care if they are able to access additional relevant health information about the patient (such as prior or existing prior authorization approvals and denials) from the MA organization in an efficient and timely way. The inclusion of prior authorization information for drugs in the Provider Access API could support this; thus, the proposal would carry out and be consistent with the Part C statute.
This proposal would complement and align with MA organization obligations in 42 CFR 422.112(b)(4) by providing more information through the Provider Access API, which could further support effective and continuous patient care. The inclusion of drug prior authorization information in the API would make the Provider Access API an even more effective and efficient way to fulfill program requirements. Adding this information could increase the efficiency and simplicity of administration. It would give providers access to more of their patients' information with limited effort, and it could reduce the amount of time needed during provider visits to establish a patient's prior history, which could introduce efficiencies and improve care. This proposal would also allow for better access to prior authorization decisions for all drugs requested by other providers for the patient, which could give a provider a more holistic view of a patient's care and reduce the likelihood of ordering duplicate or misaligned services. Ultimately, we anticipate that sharing more patient information through an established Provider Access API would ensure that providers receive patient information in a timely manner and could lead to more appropriate service utilization and higher patient satisfaction. Thus, the proposed inclusion of drug prior authorization data in the Provider Access API would be necessary and appropriate for the MA program and consistent with existing requirements.
For the Payer-to-Payer API, the exchange of drug prior authorization data about enrollees could further
In addition, to ensure the requirements proposed here and finalized in the 2024 CMS Interoperability and Prior Authorization final rule would be most effective, CMS proposes in this rule that MA organizations report specific metrics to CMS on enrollee and provider use of the Provider Access, Payer-to-Payer, and Prior Authorization APIs. Section 1857(e)(1) of the Act authorizes the Secretary to adopt additional MA contract terms and conditions, including required reporting by MA organizations, where necessary and appropriate and not inconsistent with Part C of the Medicare statute. Here, required reporting of these proposed metrics would facilitate CMS's oversight, evaluation, and administration of patient health data access in the Part C program and therefore, these data collections are necessary and appropriate to adopt.
To the extent that the proposals discussed in this section apply to prior authorization information for Part D drugs offered by MA-PD plans, we are also relying on our authority under sections 1857(e)(1) and 1860D-12(b)(3)(D) of the Act. Section 1860D-12(b)(3)(D) of the Act provides that MA-PD plans are subject to the requirements of section 1857 of the Act to the extent the Secretary determines appropriate. Together, these authorities support CMS's proposal to require MA-PD plans to make information about prior authorization requests and decisions for Part D drugs available through the Access APIs.
Our proposed requirements in this section for state Medicaid FFS programs and Medicaid managed care plans fall generally under the authority in all of the following provisions of the statute:
• Section 1902(a)(4) of the Act, which requires that a state Medicaid plan provide such methods of administration as are found by the Secretary to be necessary for the proper and efficient operation of the state Medicaid plan.
• Section 1902(a)(8) of the Act, which requires states to ensure that Medicaid services are furnished with reasonable promptness to all eligible individuals.
• Section 1902(a)(19) of the Act, which requires states to ensure that care and services are provided in a manner consistent with simplicity of administration and the best interests of the recipients.
• Section 1932(b)(4) of the Act, which provides that each Medicaid MCO (and PIHP and PAHP, which this section of the Act extends to through regulations based on our authority under section 1902(a)(4) of the Act) must establish an internal grievance procedure under which a beneficiary who is eligible for medical assistance may challenge the denial of coverage or payment for such assistance.
• Section 1932(c)(1)(A) of the Act, which requires states that contract with Medicaid MCOs (and extended to PIHPs and PAHPs through regulations based on our authority under section 1902(a)(4) of the Act), to develop and implement a quality assessment and improvement strategy that includes standards for access to care so that covered services are available within reasonable timeframes and in a manner that ensures continuity of care and adequate primary care and specialized services capacity and procedures for monitoring and evaluating the quality and appropriateness of care and services to enrollees and requirements for provision of quality assurance data to the state.
For the Patient Access API, we expect that beneficiaries would more easily obtain information about the status of prior authorization requests for drugs submitted on their behalf. Beneficiaries could potentially use that information to make more informed decisions about their health care, and, if needed and desired by the beneficiary, provide missing information to their provider that the state (or Medicaid managed care plan, if applicable) needs to reach a decision. Receiving missing information more quickly could enable more prompt responses from state Medicaid FFS programs and Medicaid managed care plans to drug prior authorization requests, thus facilitating more timely and successful prior authorizations, which would help states fulfill their obligations to provide care and services in a manner consistent with simplicity of administration and the best interests of the recipients, and to furnish services with reasonable promptness to all eligible individuals. Improving the prior authorization process could also improve the efficient operation of the state plan by potentially improving the speed and consistency of prior authorizations, which could, in turn, facilitate faster access to care for beneficiaries. In these ways, these proposals are consistent with section 1902(a)(4), (8), and (19) of the Act.
In addition, the proposal for the Patient Access API would implement section 1932(b)(4) of the Act. CMS has traditionally extended requirements applicable to Medicaid MCOs via regulations to other Medicaid managed care plan types as efficient and proper methods of administration under section 1902(a)(4) of the Act to ensure that Medicaid beneficiaries have the same protections, benefits, and responsibilities regardless of the type of managed care plan in which they are enrolled. Allowing beneficiaries to access the status of their denied drug prior authorization requests within 1 business day could enable beneficiaries to file appeals timelier and receive faster resolution. Enabling beneficiaries to monitor the status of drug prior authorization requests submitted on their behalf is also consistent with section 1932(c)(1)(A) of the Act. Knowing within 1 business day that a prior authorization has been approved could enable a beneficiary to more promptly schedule or obtain care.
Finally, section 1902(a)(7) of the Act requires that a state's plan for medical assistance provides safeguards which restrict the use or disclosure of information concerning applicants and beneficiaries,
Our proposal to require that the drug prior authorization data described in this section be shared via the Patient Access API would be consistent with the requirement that states may share these data only for purposes directly connected to the administration of the Medicaid state plan, since providing beneficiaries with their own data could directly affect their ability to receive appropriate Medicaid services, a permissible purpose listed in 42 CFR 431.302(c). As mentioned in the 2024 CMS Interoperability and Prior Authorization final rule, giving a patient access to their own health information can make them a more active participant in ensuring they receive timely and appropriate care (89 FR 8785).
For the Provider Access API, a requirement for states to include information about prior authorizations for drugs could improve states' ability to ensure that care and services are provided in a manner consistent with simplicity of administration, and to cover services more efficiently. The proposal would support efficient and prompt delivery of care, which would be in the beneficiaries' best interests. This proposal would also be expected to give providers better access to prior authorization decisions for care provided by other enrolled Medicaid providers, which would give a provider a more holistic view of a patient's care and reduce the likelihood of ordering duplicate or misaligned drugs. This could also facilitate easier and more informed decision-making by the provider and would therefore support efficient coverage decisions in the best interest of patients. The inclusion of drugs would result in a more complete picture of the patient to the provider at the point of care, which could improve the quality and efficiency of a patient visit, thus enabling the provider to treat more patients. These outcome and process efficiencies could help states fulfill their obligations to ensure prompt access to services that are in the best interest of beneficiaries, consistent with sections 1902(a)(8) and (19) of the Act, and the efficiencies created for providers might help the state administer its Medicaid program more efficiently, consistent with section 1902(a)(4) of the Act. These analyses apply similarly to state Medicaid FFS programs and Medicaid managed care plans and delivery systems, so we are exercising our authority to adopt regulatory requirements for adding prior authorization data for all drugs to the Provider Access API for both state Medicaid FFS programs and Medicaid managed care plans.
Finally, consistent with section 1902(a)(7) of the Act and our implementing regulations in 42 CFR part 431, subpart F, any request for beneficiary information via the Provider Access API would be from an enrolled Medicaid provider and for purposes directly connected with the administration of the state plan. An enrolled Medicaid provider would have a provider agreement with the state Medicaid agency in order to provide Medicaid benefits and services under its state plan. As such, enrolled Medicaid providers are part of the state's Medicaid program, assisting the state agency in carrying out core functions of the state's Medicaid state plan, providing benefits and services to beneficiaries. Therefore, the state Medicaid agency would not be required to obtain additional consent (beyond the beneficiary not opting out of sharing the specified data via the Provider Access API, as finalized in 42 CFR 431.61(a)(4)) from the beneficiary or their authorized representative, as generally required under 42 CFR 431.306(d),
While the beneficiary's permission would not be required under 42 CFR 431.306(d) for the Provider Access API proposals we discuss here, other laws or regulations, such as the regulations that address the confidentiality of substance use disorder patient records in 42 CFR part 2, may require such permission.
For the Payer-to-Payer API, these proposals are consistent with sections 1902(a)(4), (a)(8), and (a)(19) of the Act for the following reasons. First, because the Payer-to-Payer API is designed to enable efficient exchange of data between payers, we anticipate that adding information about prior authorizations for drugs would help state Medicaid FFS programs improve the efficiencies and simplicity of their own operations, consistent with sections 1902(a)(4) and (a)(19) of the Act. It could give Medicaid and CHIP agencies and their managed care plans access to more of their beneficiaries' information in a standardized manner and enable the state to then make that information available to providers and to patients through the Patient Access and Provider Access API. It could also reduce the amount of time needed to evaluate a patient's current care plan, which could in turn introduce efficiencies and improve care.
As discussed in the 2022 CMS Interoperability and Prior Authorization proposed rule, if a state Medicaid FFS program has access to a previous payer's prior authorization decisions, the Medicaid program could choose to accept the existing decision and support continued patient care without requiring a new prior authorization or duplicate tests (87 FR 76284).
This information exchange might also improve care continuity for beneficiaries who have concurrent coverage in addition to Medicaid by improving the coordination of health coverage they receive, reducing gaps, or duplication of coverage.
Our proposal, if finalized, is expected to help states and Medicaid managed care plans furnish Medicaid services with reasonable promptness and in a manner consistent with beneficiaries' best interests, consistent with sections 1902(a)(8) and (a)(19) of the Act. A significant portion of Medicaid beneficiaries experience coverage changes and churn each year.
For Medicaid managed care plans, the proposed exchange of the patient's drug prior authorization requests and decisions would greatly enhance an MCO's, PIHP's, or PAHP's ability to fulfill its obligations under 42 CFR 438.208(b) to implement procedures to deliver care to and coordinate services for all enrollees, including coordinating services between settings of care, with services an enrollee receives from any other MCO, PIHP, or PAHP, with services an enrollee receives in FFS Medicaid, and with services an enrollee receives from community and social support providers. The proposed additional data provided via the Payer-to-Payer API in this rule would give Medicaid managed care plans more information needed to perform these required functions more easily, thus enhancing the effectiveness of the care coordination, and helping beneficiaries receive the most appropriate care in an effective and timely manner.
(4) Reporting Provider Access, Payer-to-Payer, and Prior Authorization API Metrics
We are also proposing to require state Medicaid agencies and Medicaid managed care plans to report Provider Access, Payer-to-Payer, and Prior Authorization APIs metrics to CMS annually. We believe that having these metrics would support CMS's oversight, evaluation, and administration of the Medicaid program, as it would allow us to evaluate beneficiary and provider use to these APIs. Use of these APIs could indicate that the policies are supporting program efficiencies and ensuring access to information in a timely and efficient way and in the best interest of beneficiaries, as intended, and as is consistent with sections 1902(a)(4) and (19) of the Act. Additionally, section 1902(a)(6) of the Act requires Medicaid state plans to provide that the state Medicaid agency will make such reports, in such form and containing such information, as the Secretary may from time to time require. These metrics would serve as a report to evaluate the implementation and execution of the Provider Access, Payer-to-Payer, and Prior Authorization APIs.
Our proposed requirements in this section for CHIP generally fall under the authority in section 2101(a) of the Act, which states that the purpose of Title XXI of the Act is to provide funds to states to provide child health assistance to uninsured, low-income children in an effective and efficient manner that is coordinated with other sources of health benefits coverage. We believe the proposed requirements could strengthen states' abilities to fulfill these statutory obligations under Title XXI of the Act in a way that would recognize and accommodate the use of electronic information exchange in the health care industry today and would facilitate a significant improvement in the delivery of quality health care to CHIP beneficiaries.
Additionally, the requirements to safeguard applicant and beneficiary information in 42 CFR part 431, subpart F (which implement section 1902(a)(7) of the Act) are also applicable to CHIP for each of the Access APIs through a cross reference in 42 CFR 457.1110(b). Finally, section 2107(b)(1) of the Act requires that state child health plans include an assurance that the state will collect the data, maintain the records, and furnish the reports to the Secretary, at the times and in the standardized format the Secretary may require in order to enable the Secretary to monitor state program administration and compliance and to evaluate and compare the effectiveness of state plans under this title.
For the Patient Access API, this provision provides us with authority to adopt these requirements for CHIP because the proposed requirements increase the access of patients and of the parents/legal guardians (or personal representatives) of minor patients to their health information, which can improve the efficacy of CHIP programs, allow for more efficient communication and administration of services, and promote coordination across different sources of health benefits coverage.
We believe that requiring CHIP agencies, as well CHIP managed care entities, to make CHIP beneficiaries' drug prior authorization data available to these beneficiaries or their personal representatives (usually the parent or guardian of a minor child) through the existing Patient Access API would ultimately lead to these beneficiaries or personal representatives accessing that information in a convenient, timely, and portable way. This improved access would help administer services effectively, efficiently, and in the best interests of beneficiaries, consistent with the requirements in section 2101(a) of the Act. We believe making these additional data available would result in better health outcomes and patient satisfaction and improve the cost effectiveness of the entire health care system, including CHIP.
These proposals also align with section 2101(a) of the Act in that they also would improve the efficiency of CHIP programs. Adding information about drug prior authorization requests to the Patient Access API would allow beneficiaries or their personal representatives to easily obtain the status of prior authorization requests made on their behalf. This would in turn allow patients or their personal representatives to make scheduling decisions, and provide any missing information needed by a payer to reach a decision, which makes the prior authorization process more efficient, and ultimately streamlining the entire process.
For the Provider Access API, when providers have access to more prior authorization information—namely, that information about drugs—from payers or other health IT systems, they can provide higher quality care. Improving the quality of care aligns with section 2101(a) of the Act, which requires states to provide CHIP services (via either state CHIP FFS programs or CHIP managed care entities) in an effective and efficient manner. The more information a provider has to make informed decisions about a patient's care, the more likely it is that patients would receive care that best meets their needs. Additionally, providers could be more effective and efficient in their delivery of CHIP services by having direct access to prior authorization information. If a provider has more drug information about a patient prior to or at the point of care, the provider would be able to spend more time focused on the patient, rather than on their need to collect information. In addition, the information that providers do collect would not be based solely on patient or personal representative recall. This could save time, improve the quality of care, and increase the total amount of direct care provided to CHIP beneficiaries. When data are standardized, and able to be incorporated directly into the provider's EHR or health IT system, they can be leveraged as needed at the point of care by the provider and also can be used to support coordination across providers and payers. This is inherently more efficient, and ultimately, more cost-effective, as the information does not have to be regularly repackaged and reformatted to be shared or used in a valuable way. As such, the Provider Access API proposals also align with section 2101(a) of the Act in that these proposals could improve coordination between either CHIP agencies or CHIP managed care entities and other health coverage. For these reasons, we believe this proposal is in the best interest of the beneficiaries and within our long-established statutory authorities.
For the Payer-to-Payer API, the current payer could use data from the previous payer to respond to a request for a prior authorization more effectively or accurately, because under this proposal, a new payer would have drug prior authorization information along with the currently required historical claims and clinical data upon which they may review a request with more background data. Access to more information about new patients could enable appropriate staff within the CHIP program, whether it is a state CHIP FFS program or CHIP managed care entity, to coordinate care and conduct care management more effectively because they would have more data available to make decisions for planning. In many cases, patients or their personal representatives do not remember the drugs they were prescribed or other possibly relevant encounters that could help payers manage their care. This proposal is consistent with the goal of providing more informed and effective care coordination, which could help to ensure that CHIP services are provided in a way that supports quality care, which aligns with section 2101(a) of the Act.
Additionally, the requirements to safeguard applicant and beneficiary information in 42 CFR part 431, subpart F are also applicable to CHIP through a cross reference in 42 CFR 457.1110(b). As discussed previously for Medicaid, CHIP agencies' data exchange through the Access APIs would be related to providing services to beneficiaries, which is described in 42 CFR 431.302(c) as a purpose directly related to state plan administration.
Finally, proposing to require state CHIP agencies and CHIP managed care entities to report Provider Access, Payer-to-Payer, and Prior Authorization API metrics to CMS annually would help states and CMS understand how these APIs can be used to continuously improve the effectiveness and efficiency of state CHIP operations by providing information about their use, which is an indication of the APIs' uptake among patients (or their personal representatives) and providers, including how many only use it for a one-time setup, consistent with section 2107(b)(1) of the Act. The more we understand about the use of the Provider Access, Payer-to-Payer, and Prior Authorization APIs, the better we can assess that the APIs are leading to improved operational efficiencies and providing information to beneficiaries (or their personal representatives) and providers in a way that supports their best interests.
For QHP issuers on the FFEs, we propose these new requirements for the Access APIs under our authority in section 1311(e)(1) of the Affordable Care Act. Section 1311(e)(1)(A) of the Affordable Care Act requires that Exchanges only certify plans as QHPs if they meet the requirements for certification promulgated by the Secretary under section 1311(c)(1) of the Affordable Care Act, while section 1311(e)(1)(B) of the Affordable Care Act provides discretion to certify QHPs if the Exchange determines that making available such plans available is in the interests of qualified individuals and qualified employers in the state or states in which such Exchange operates.
For the Patient Access API, we believe generally that certifying only health plans that take steps to make qualified individuals' and qualified employers' prior authorization requests for drugs and related clinical documentation available through interoperable technology (unless they have been granted an exception under 45 CFR 156.221(i)) would ultimately lead to these qualified individuals and qualified employers having access to that information in a convenient, timely, and portable way, which is in qualified individuals' and qualified employers' best interests. Adding information about prior authorization requests for drugs to the Patient Access API would allow qualified individuals and qualified employers to more easily obtain the status of prior authorization requests submitted on their behalf and use that information effectively to make more informed decisions about their health care, improve the efficiency of accessing and scheduling services, and, if needed, provide missing information needed by the QHP issuer on the FFEs to reach a decision on a prior authorization request. This could allow QHP issuers on the FFEs to more promptly address drug prior authorization requests. This would also facilitate timelier and potentially more successful initial prior authorization requests. We encourage SBEs, including SBE-FPs, to consider whether a similar requirement should be applicable to issuers participating in their Exchanges.
For the Provider Access API, we believe that certifying only health plans that make enrollees' health information available to their providers (unless they have been granted an exception under 45 CFR 156.222(c)) is in the interests of enrollees. Giving providers access to their patients' information supplied by QHP issuers on the FFEs would ensure that providers are better positioned to provide enrollees with seamless and coordinated care and could reduce duplicate prescriptions or delays in care and diagnosis. Access to the patient's more complete medical information could also maximize the efficiency of an enrollee's office visits. We encourage SBEs, including SBE-FPs, to consider whether a similar requirement should be applicable to issuers participating in their Exchanges.
For the Payer-to-Payer API, we believe that adding more information to this existing API would reduce administrative burden and result in more timely and efficient care coordination and responses to prior authorization requests. We believe it is in the interest of qualified individuals and qualified employers that QHP issuers on FFEs continue to have systems in place that send information that is important to care coordination with departing enrollees, and that QHP issuers on FFEs also have systems in place to receive such information from payer to payer on behalf of new and concurrent enrollees, as appropriate and consistent with the proposals in this section. Therefore, we believe certifying health plans that make enrollees' health information available to other payers (unless they have been granted an exception under 45 CFR 156.222(c)) in a convenient, timely, and portable way is in the interests of qualified individuals and qualified employers in the state in which an FFE operates.
Finally, proposing to require QHP issuers on the FFEs to report Provider Access, Payer-to-Payer, and Prior Authorization API metrics to CMS annually would help CMS assess the effect these APIs are having on enrollees and providers. In addition, those data would inform how CMS could either enhance the policies or improve access or usage, whether through activities, such as additional patient and provider education, or additional rulemaking. These data could help CMS understand how best to leverage these APIs, improve meaningful patient and provider access to data, ensure these requirements are being met efficiently, and are adding value to QHP operations, including leading to the efficiencies intended.
The Open Payments program
Payments or other transfers of value that must be reported include, but are not limited to, such things as research-related payments, honoraria, gifts, travel expenses, meals, grants, and other compensation.
Section 1128G of the Act establishes certain minimum dollar thresholds for required reporting of individual and aggregate payments or transfers of value. To determine if multiple small individual payments or other transfers of value made to a covered recipient exceed the
The Open Payments program yields information about providers for the general public and researchers may use Open Payments data to study whether there may be any relation between provider behavior and their financial relationships. This information is collected and published on an annual cycle, with the data annually becoming public by June 30. The Open Payments program has made public more than 118.2 million records between its August 2013 start and the June 2024 publication cycle, enabling significant transparency into applicable exchanges of value. We are committed to stakeholder engagement in an effort to limit the Open Payments program reporting burden and improve clarity for the public. The estimated burden of these reporting requirements, as outlined under the Office of Management and Budget (OMB) control number 0938-1237, is approximately 1.9 million hours over the course of 1 year. Additional background about the program and guidance, including frequently asked questions, regarding how the program works and what type of information is required to be reported is available at
Section 1128G(e)(10)(A) of the Act defines the term “payment or other transfer of value” as a transfer of anything of value, though some exclusions apply, while sections 1128G(e)(4) and (5) of the Act define covered drugs, devices, biologicals, or medical supplies as those covered under Medicare, a state plan under Medicaid or CHIP (or a waiver of either such state plan). Section 1128G(a) of the Act requires applicable manufacturers and applicable GPOs to disclose any ownership or investment interests in such entities held by physicians or physicians' immediate family members, as well as information on any payments or other transfers of value provided to such physician owners or investors.
As a statutorily mandated public reporting program, our ability to validate the timeliness, completeness, and accuracy of the Open Payments records that entities are required to report to us is crucial to ensuring data accuracy and reliability, and hence, the value of the program itself. Section 1128G(b)(1) of the Act authorizes penalties for non-compliance and gives us the authority to impose CMPs for instances of “failure to report,” for records that were not reported to CMS. Because it is axiomatic that CMS cannot find unreported information in records that are reported, we interpret the language of section 1128G(b)(1) of the Act, which provides that any applicable manufacturer or applicable GPO “that fails to submit information required . . . in a timely manner in accordance with rules or regulations promulgated to carry out such subsection, shall be subject to a civil money penalty,” as encompassing our ability to impose a CMP upon an applicable manufacturer or applicable GPO that fails to timely submit, in accordance with our regulations, required information, including the information requested to perform an audit.
We codified our authority to require audit responsiveness via regulation in 42 CFR 403.912(e)(2), which states that “HHS, CMS, [Office of Inspector General (OIG)] or their designees may audit, inspect, investigate and evaluate any books, contracts, records, documents, and other evidence of applicable manufacturers and applicable group purchasing organizations that pertain to their compliance with the requirement to timely, accurately or completely submit information in accordance with the rules established under this subpart.” The Open Payments final rule preamble repeatedly mentioned audits because access to such information is essential to facilitating our ability to adequately oversee regulated entities' Open Payments program compliance.
To facilitate audits, we finalized in the Open Payments final rule a requirement under 42 CFR 403.912(e)(1) that applicable manufacturers and applicable GPOs must maintain all books, records, documents, and other materials sufficient to enable an audit, evaluation or inspection of the applicable manufacturer's or applicable GPO's compliance with the requirements in section 1128G of the Act and the implementing regulations. To ensure that those materials are available for a sufficient period to allow audits, we require applicable manufacturers and applicable GPOs to maintain these books, records, documents, and other materials for a period of at least 5 years from the date the payment or other transfer of value, or ownership or investment interest is published publicly on the website.
The Open Payments final rule preamble frequently mentioned audits because access to this information is essential to facilitating our ability to adequately oversee regulated entities' Open Payments program compliance. CMS began exercising the Open Payments program audit authority in 2022 by requiring certain reporting entities to provide relevant documentation pertaining to their reported records—such as copies of checks, written agreements, or a general ledger—to verify that payments had been reported accurately. But upon attempting to conduct such audits, certain reporting entities thwarted our efforts by refusing to comply with our audit requests and rendering it impossible for us to evaluate their Open Payments reporting compliance. We must remedy that to ensure we can effectively oversee Open Payment reporting compliance, and, therefore, in this proposed rule we propose certain new measures to refine the effectiveness of our auditing authority.
To do that, first we propose to include in section 42 CFR 403.902 a definition of “failure to report,” which would be foundational to enabling us to impose a CMP upon a reporting entity that failed to provide records pursuant to a CMS audit. Our rationale is succinct: the information reported by entities statutorily required to report to the Open Payments program can be verified by an audit, but in administering the program we currently have no way to compel an Open Payment program reporting entity to comply with our audit request. Absent our ability to issue
The phrase “failure to report”—that we borrow from the statute in section 1128G(b)(1)(A) of the Act—is not presently a defined term within the definitions section of our rules in 42 CFR 403.902, but we do explicitly apply the “failure to report” concept in 42 CFR 403.912(a)(1) which refers to the failure “to timely, accurately or completely report the information required in accordance with the rules established under this subpart” (and auditing already is encompassed in the subpart in 42 CFR 403.912(e)(2). To ensure clarity that we not only require applicable manufacturers and applicable GPOs to provide us the specified information required when reporting a record, but also that they furnish the required item of information that CMS determines necessary when it conducts an Open Payment audit, we believe that we must define “failure to report” in 42 CFR 403.902, and propose here to do so. The proposed definition is based on the existing reference in 42 CFR 403.912(a)(1), and its scope would encompass the information already required to be provided to CMS under the Open Payment regulations. This addition would help clarify that an Open Payment reporting party's refusal to comply with or respond to an audit request would carry consequences.
If finalized as proposed, our proposal would encourage Open Payment reporting party compliance with the exercise of our auditing oversight authority. Absent compliance, for each requested document that an entity would fail to provide we could impose a CMP under a “failure to report” category (limited by the statutory ceiling and floor amounts per record and per program year). This would align with the current regulation in 42 CFR 403.912(e) as the auditable documentation would correspond to a reported or reportable record. We do not propose to alter the existing CMP calculation methodology and would continue to calculate CMPs using records and their documents on a per-record “failure to report” basis as required by section 1128G(b) of the Act. This proposed rule would define the information applicable manufacturers and applicable GPOs are required to timely, accurately, and completely provide in the course of reporting information to HHS, CMS, OIG or their designees.
Explicitly defining “failure to report” to make clear that it includes reporting entities' furnishing the required item of information that CMS determines necessary when it conducts an Open Payment audit would rectify this shortcoming, clarify that there would be consequences for applicable manufacturers and applicable GPOs that refuse to participate in a program audit, and enhance program compliance. Reporting entities are already required to keep contact information updated, per 42 CFR 403.908(c)(3), and this information would be used to notify audited entities. We propose to make it unambiguously clear that CMS may impose a CMP should an applicable manufacturer or applicable GPO fail to grant timely access to documents for the purposes of an audit authorized by 42 CFR 402.912(e)(2). We would accomplish this by adding a definition for “failure to report” in 42 CFR 403.902.
We propose to define a “failure to report” in 42 CFR 403.902 to include a failure to submit requested information, to the Open Payments program per existing requirements in 42 CFR 403.912. This definition would include a failure to timely, accurately, and completely provide to HHS, CMS, OIG or their designees the documentation that is required according to program requirements, including records that are subject to CMS's audit authority in 42 CFR 403.912(e)(2). We propose that an applicable manufacturer's or applicable GPO's failure to provide, within 30 calendar days of the date of the audit request, the documents or other listed items requested by CMS or its agents, would constitute a “failure to report.” We propose that each document requested but not provided to CMS within the timeframe would be subject to the CMP calculation within the annual cap.
We propose that a CMP associated with a “failure to report” for the purposes of an audit would explicitly be considered a violation of reporting requirements, including the requirement to maintain documents for the purposes of audits in 42 CFR 403.912(e), and therefore would be subject to the monetary limitations imposed by the Open Payments statute in section 1128G(b)(2) of the Act. If finalized as proposed, the authority to impose a CMP for documents requested for the purposes of an audit that applicable manufacturers or applicable GPO fail to provide within 30 calendar days of the request would begin on the effective date of the final rule. This proposal does not alter the definition of “know, knowing, or knowingly” and therefore a “failure to report” may escalate to a “knowing failure to report” under the existing circumstances.
In summary, we request comment on our proposals, and specifically on the following:
• The proposal to add a definition for “failure to report” in 42 CFR 403.902, which would allow CMS to impose a CMP on applicable manufacturers or applicable GPOs should either of those entities fail to grant timely access (within 30 calendar days of the date of the audit request) to any books, contracts, records, documents, and other evidence sufficient to enable the audit, evaluation, and inspection of the records for the purposes of an audit authorized by 42 CFR 402.912(e)(2).
• The proposal to become effective beginning on the effective date of the final rule.
Four legal authorities ground our proposals:
• Sections 1102 and 1871 of the Act, which provide general authority for the Secretary to prescribe regulations for the efficient administration of the Medicare program.
• Section 1861 of the Act, which defines providers and suppliers.
• Section 1128G of the Act, as amended by section 6111 of the SUPPORT Act, which requires applicable manufacturers of drugs, devices, biologicals, or medical supplies covered under Medicare or a state plan under Medicaid or CHIP to report annually to the Secretary certain payments or other transfers of value to physicians and teaching hospitals, and to PAs, NPs, CNSs, CRNAs, and CNMs for information required to be submitted under section 1128G of the Act on or after January 1, 2022.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA)
Section 1172(a) of the Act applies HIPAA Administrative Simplification transaction standards to health plans, health care clearinghouses, and health care providers that electronically transmit health information in connection with those transactions, collectively referred to as HIPAA covered entities.
The HIPAA statutory paradigm contemplates that processes and standards continue to evolve, and as such, paves the way for such change by speaking to additions and modifications to standards and requiring periodic review processes to ensure standards are continually updated and improved.
Prior authorization is the process by which a health care provider obtains approval from a health plan before rendering certain items, services, or drugs to a patient. Health plans establish prior authorization requirements to help control costs and ensure payment accuracy by verifying, before they are rendered, that certain items, services, or drugs are medically necessary for the specific patient, meet coverage criteria, and are consistent with standards of care.
Prior authorization is not a single transmission, but an interactive process that fundamentally comprises two parts—a prior authorization request from a health care provider and a prior authorization decision issued by a health plan. However, it may also involve intermediate information exchanges. For instance, a health plan may transmit a request for clarification or additional documentation, and health care providers would transmit responses before a final health plan determination. Each such step would occur within the scope of the standards we propose here. Although prior authorization can serve an important function in the health care system by improving utilization management and controlling costs, effectuating it often involves burdensome processes. Specifically, issues with complex health plan policies, limited use of electronic standards, and other technical barriers can create workflow challenges and burden health care providers and their staff with challenging requirements that lead to delays in the provision of medically necessary care and can compromise patient safety and health outcomes.
Section 1173(a) of the Act requires the Secretary to adopt HIPAA standards and data elements for nine specified transactions, including the “referral certification and authorization” transaction in section 1173(a)(2)(I) of the Act. We have promulgated standards to conduct the transmissions composing the electronic prior authorization process at 45 CFR 162, subpart M, the “referral certification and authorization” transaction. As described in 45 CFR 162.1301, the “referral certification and authorization” transaction comprises the following transmissions: (1) a request from a health care provider to a health plan for the review of health care to obtain an authorization for a health care service for a patient; (2) a request from a health care provider to a health plan to obtain authorization for referring a patient to another health care provider; and (3) a response from a health plan to a health care provider to a request described in (1) or (2).
In the 2000 Standards for Electronic Transactions final rule, the Secretary adopted standards for eight electronic health care transactions, including “referral certification and authorization.” There, the Secretary adopted, in 45 CFR 162.1302, the Accredited Standards Committee (ASC) X12N 278—Health Care Services Review—Request for Review and Response, Version 4010 transaction standard for dental, professional, and institutional “referral certification and authorization” transactions (65 FR 50341). HHS amended the standard in 45 CFR 162.1302(b)(2), to include the Addenda to the Electronic Data Interchange (EDI) Transaction Set IG for X12N 278 Health Care Services Review Request for Review and Response, Version 4010 in the “Health Insurance Reform: Modifications to Electronic Data Transaction Standards and Code Sets” final rule (68 FR 8381), which appeared in the
Notably, the “referral certification and authorization” transaction, and the transmissions it comprises, includes, but is not limited to, prior authorization. Aside from prior authorization, the “referral certification and authorization” transaction's scope may pertain to many different health care events, treatment authorizations, specialty referrals, pre-admission certifications, certifications for health
These are the same transmissions, within the ambit of the “referral certification and authorization” transaction, for which we proposed an attachment standard in the “Administrative Simplification: Adoption of Standards for Health Care Attachments Transactions and Electronic Signatures, and Modification to Referral Certification and Authorization Transaction Standard proposed rule” (87 FR 78438) (hereinafter referred to as the “2022 HIPAA Standards for Health Care Attachments proposed rule”), which appeared in the
In that proposed rule, we proposed to adopt the X12N 275 attachment standard for “health care claims or equivalent encounter information” transactions and “referral certification and authorization” transactions. However, commenters to that proposed rule overwhelmingly and persuasively counseled us against finalizing the proposed X12N 275 attachment standard for prior authorization transactions for which the X12N 278 is the transaction standard. Commenters cited concerns including limited industry experience implementing the X12N 275 attachment standard for prior authorization transactions, variability in current prior authorization workflows, and potential conflict with other federal interoperability initiatives requiring FHIR-based standards to support Prior Authorization application programming interface (API) capabilities. Specifically, commenters asserted that previous attempts to leverage the X12N 275 attachment standard to support prior authorizations had failed and the X12N 278 transaction standard itself has never fully been embraced or implemented in the industry. Commenters added that while the X12N 275 attachment standard supports the types of attachments used with “health care claims or equivalent encounter information” transactions, it does not support the full scope of file types that may be attached to prior authorization transactions, such as FHIR questionnaires. Commenters urged us to consider FHIR standards, both for attachments and the underlying prior authorization transactions, to align with separate CMS rulemaking in the 2024 CMS Interoperability and Prior Authorization final rule. We agreed with commenters that efficient, cost-effective, simplified standards would be impeded by mismatches between HHS requirements under HIPAA and CMS requirements under its interoperability rulemaking.
In this proposed rule, we propose to adopt the HL7 FHIR standard and certain FHIR IGs for prior authorization transactions. Importantly, our proposals address prior authorization transactions between health care providers and health plans;
In addition, and in the alternative, we are proposing to adopt the proposed standards for all “referral certification and authorization transactions” described in 45 CFR 162.1301, including those related to referral certification, as the FHIR standards we are proposing herein are capable of performing referral certification as well as authorization transmissions.
Prior to submitting a request for prior authorization, health care providers must first determine whether prior authorization is required, and, if so, the health plan's documentation requirements that are required to obtain an approval. That antecedent for prior authorization falls in the scope of the HIPAA “eligibility for a health plan” transaction, which describes a health care provider's inquiry to a health plan (or a health plan's inquiry to another health plan) for eligibility, coverage, or benefits information for a patient, and the constituent transmissions described in 45 CFR 162.1201. In 45 CFR 162.1202(a)(2), the Secretary adopted standards for the dental, professional, and institutional “eligibility for a health plan” transaction, specifically the ASC X12N 270/271 Health Care Eligibility Benefit Inquiry and Response transaction standard (X12N 270/271 transaction standard). The “eligibility for a health plan” transaction serves multiple purposes, and in this proposed rule we are proposing to modify the standard for that transaction only when an inquiry and response are used to determine whether prior authorization, as HHS proposes to define that term in 45 CFR 162.103, is required. Our proposals would not alter the standards for other “eligibility for a health plan” transactions described in 45 CFR 162.1202 unrelated to prior authorization, for which the adopted standard would remain the X12N 270/271 transaction standard.
Section 1173(g) of the Act requires the Secretary to adopt a single set of operating rules for each adopted HIPAA transaction with the goal of creating as much uniformity in the implementation of the electronic standards as possible. We have not yet adopted operating rules for the “referral certification and authorization” transaction, but have adopted operating rules associated with the present X12N 270/271 transaction standard for the “eligibility for a health plan” transaction. We are not proposing operating rules for the proposed subset of “referral certification and authorization” transactions because, unlike existing X12N transaction standards, the proposed FHIR base
In summary, HHS requests comment on its proposals summarized in section II.H.10. of this proposed rule, which includes the proposals discussed above, and the CFR citations listed in Table 11.
Based on the recommendations of the National Council for Vital and Health Statistics (NCVHS), the positive results of the HL7 Da Vinci Project's testing discussed herein, consultation with HL7 International as a DSMO, extensive public comment to various notices of HHS and CMS proposed rulemaking, and our own analysis, we are proposing a modification to the dental, professional, and institutional “referral certification and authorization” transaction standard for transmissions related to prior authorization to replace the present X12N 278 transaction standard with the FHIR standard. We propose to add a new 45 CFR 162.1302(g)(2) that would adopt the following specifications as the standard for the “referral certification and authorization” transactions within the contours of our proposed definition of prior authorization. Our proposals to adopt specific versions of the following specifications are discussed further later in this section:
• The HL7 FHIR Standard,
• HL7 FHIR US Core IG (US Core IG),
• HL7 Substitutable Medical Applications, Reusable Technologies (SMART) Application Launch Framework IG (SMART App Launch IG),
• HL7 FHIR Da Vinci Coverage Requirements Discovery IG (CRD IG),
• HL7 FHIR Da Vinci Documentation Templates and Rules IG (DTR IG), and
• HL7 FHIR Da Vinci Prior Authorization Support IG (PAS IG).
In addition, in a new 45 CFR 162.1202(f)(2)(i), we propose adopting the following specifications as the standards for “eligibility for a health plan” transactions for dental, professional, and institutional health care eligibility inquiry and response, when used to determine whether prior authorization is required:
• The HL7 FHIR Standard,
• US Core IG,
• SMART App Launch IG, and
• CRD IG.
Collectively, the proposed standards would enable the use of a Prior Authorization API. An API is a set of rules or protocols defining how requests for data should be made and responses should be returned that enables different software applications to communicate and exchange data with each other, and a Prior Authorization API is an API used to electronically transmit and receive health information related to prior authorizations. Per our proposal, the system resulting from the appropriate implementation of the proposed FHIR specifications would be known as a “Prior Authorization API.” Independently, the proposed IGs do not have a functionality; rather they define how to implement a Prior Authorization API, which comprises multiple FHIR IGs integrated to support the full prior authorization workflow from initial coverage inquiry through final authorization decision, in a manner that has been standardized for industry interoperability.
The FHIR standard, US Core IG, and SMART App Launch IG are implementation specifications widely used across FHIR APIs for a variety of use cases. The CRD, DTR, and PAS IGs work in concert to inform, submit, and respond to prior authorization requests. These IGs' capabilities and functionality, briefly discussed here for reference, are discussed more extensively in section II.A.4.a. of this proposed rule. When used to implement a Prior Authorization API, the proposed IGs define the format and data content (as those terms are defined in 45 CFR 162.103) for the relevant transactions.
The HL7 FHIR standards architecture is built upon a foundational base FHIR standard, that is open source and free to use with no restrictions, to which health care entities can add specific functionalities via modular building blocks that can be assembled into a variety of systems and applications, including payer servers, provider EHRs, mobile apps, and cloud communications to standardize interoperable health data exchange.
Frequently, health care entities have specific technical requirements, for needs such as custom data fields or workflow processes, beyond the standard FHIR specifications. For use cases that are common across a large segment of the health care industry, those added functionalities can be standardized as IGs that effect a common solution to those use cases. This add-on approach keeps the base FHIR standard manageable while allowing health care entities to tailor systems to meet specific operational needs. In the case of prior authorization, the CRD, DTR, and PAS IGs are designed using the FHIR base standard, but to the specific requirements of their use cases within the prior authorization process. As the needs of industry and technology evolve, developers and implementers can customize FHIR APIs within the strictures of the IGs, and HL7, as the Standards Setting Organization (SSO), has greater flexibility to modify FHIR standards and IGs.
The US Core IG is a set of rules that define how data, such as patient records, medication, and lab results, are formatted and exchanged in the United States.
SMART is an open standard that enables health apps to securely connect to and interact with EHRs and other health IT systems. The SMART App Launch IG is a set of technical implementation specifications that define how client health apps can securely authorize, authenticate, and integrate with a FHIR-based data
The SMART App Launch IG allows SMART apps to access the FHIR server, regardless of the underlying architecture of the client's health IT system.
The CRD IG is used to define a workflow for health plans to transmit information about coverage requirements, such as health plans' requirements to request and receive prior authorization, to health care providers through their health IT system.
The CRD IG is designed solely for prior authorization use cases, not any other type of eligibility or benefit information, so prior authorization-related transmissions are the sole use case for which we propose to modify the X12N 270/271 transaction standard adopted in 45 CFR 162.1202. Therefore, our proposal for the “eligibility for a health plan” transaction is limited to those where the CRD IG can be used, that is, for transmissions related to prior authorization (as we propose to define that term in 45 CFR 162.103) to determine whether prior authorization is required. We propose no changes to “eligibility for a health plan” transactions described in 45 CFR 162.1202 unrelated to prior authorization, for which the standard transactions would continue to be the adopted X12N 270/271 transaction standard.
The DTR IG specifies how a health plan's documentation requirements for prior authorization requests are communicated to a health care provider,
The PAS IG, used when a health care provider submits a prior authorization request and required documentation to a health plan, enables a prior authorization request to be transmitted via FHIR API from a health care provider's EHR or other health IT system and a health plan to notify a provider of its decision.
On April 20, 2021, the Secretary approved exceptions requested by the HL7 Da Vinci Project to test FHIR standards.
The Health Information Technology Advisory Committee (HITAC) is a Federal Advisory Committee established by section 3002 of the PHSA, as amended by the 21st Century Cures Act (hereinafter referred to as the “Cures Act”) (Pub. L. 114-255, enacted December 13, 2016). HITAC offers recommendations to ONC on health IT policies, standards, implementation specifications, and certification criteria
ICAD's report stated that one of the primary factors contributing to the X12N 278 transaction standard's low adoption is the transaction set's lack of specificity and flexibility.
On July 28, 2022, the NCVHS sent HHS a recommendation letter to “support the transformative changes occurring in health care delivery systems, payment methodologies, standards development, and rule adoption.”
In that letter, the NCVHS also recommended that HHS adopt multiple standards for each transaction to co-exist for specific business needs. Specifically, they suggested that we allow some HIPAA covered entities to use FHIR standards while others could use the extant X12N transaction standard, as doing so would allow various standards to be tested and used for specific business needs. Notably, we agree only in part with that recommendation. We understand that the same standards may not meet the needs of every use case and segment of the health care industry, which, for example, is why we have adopted different standards, developed by NCPDP, for retail pharmacies across many of the standard transactions. Similarly, for the “health claims or equivalent encounter information” transaction, we have adopted, in 45 CFR 162.1102, different standards for four types of claims: retail pharmacy drugs, dental health care, professional health care, and institutional health care. With these proposals, we continue to make those distinctions, as section 1173(a)(3) of the Act requires the Secretary to accommodate the needs of different types of health care providers.
However, we disagree that the industry would benefit from our indefinitely adopting multiple standards for the same types of transactions. Section 1172(b) of the Act requires that any standard adopted by the Secretary be consistent with HIPAA Administrative Simplification's objective of reducing the administrative costs of providing and paying for health care. We have incorporated reasonable transition periods into certain HIPAA rulemaking,
Furthermore, the NCVHS sent its recommendation letter before the HL7 Da Vinci Project's exceptions testing concluded and its report was published. The NCVHS' July 28, 2022 letter to HHS included a recommendation to allow
After the April 20, 2021, HIPAA exceptions approval, but before the June 25, 2024 testing report, and in accordance with separate rulemaking and legal authority, CMS proposed and later finalized its 2024 CMS Interoperability and Prior Authorization final rule (87 FR 76238, 89 FR 8869). There, CMS finalized a requirement that “impacted payers” implement and maintain a Prior Authorization API, requiring impacted payers to use a version of the base FHIR standard adopted in 45 CFR 170.215(a)(1), a version of the US Core IG adopted in 45 CFR 170.215(b)(1)(i), and a version of the SMART App Launch IG adopted in 45 CFR 170.215(c)(1) (89 FR 8945). CMS also recommended that impacted payers use the CRD, DTR, and PAS IGs that were at the time being tested by the HL7 Da Vinci Project under the approved exceptions (89 FR 8945).
In response to public comments received on multiple notices of proposed rulemaking and extensive stakeholder outreach to HHS, including regular interim discussions with the HL7 Da Vinci Project about the status of its exceptions testing, we issued a notice of enforcement discretion on February 28, 2024.
The adopted X12N 278 transaction standard has a low implementation rate among health plans. According to the Council for Affordable Quality Healthcare (CAQH), as of 2024 just 35 percent of medical plans have adopted the electronic standard, while 43 percent use a payer-specific portal and 22 percent rely on manual processes, such as phone, email, or fax.
Multiple sources report that health care providers find prior authorization to be their most burdensome administrative transaction. The AMA reports that physicians and their staff spend an average of 13 hours each week completing prior authorization requests and 40 percent have staff who work exclusively on prior authorizations.
Unlike other existing standards that utilize point-to-point EDI, such as X12N transaction standards, the Prior Authorization API's real-time and interactive nature would allow health care providers to use their EHRs or other health IT to automate processes such as documentation collection and to receive real-time feedback on missing information or errors. Historically, EDI, like the X12N 278 transaction standard, has generally relied on batch-processing using standardized document formats to asynchronously exchange data; by contrast, APIs' web-based technology enables real-time synchronous data exchange using flexible formats that can offer faster implementation, near-instantaneous results, and lower costs.
While EDI remains the standard for many established administrative transactions, HHS believes that APIs such as the FHIR API may represent the future direction of health data exchange. Unlike EDI and most of the current adopted HIPAA standards that rely on narrow and granularly specified transmissions, transactions using APIs may consist of many interactions and data exchanges between the server and client systems. Regardless of the inner workings of the API and data exchange, for the purposes of HIPAA rulemaking,
The 2024 AMA Prior Authorization Physician Survey revealed that 61 percent of physicians reported that it was difficult to determine whether prior authorization was required for medical services, and thirty percent of physicians reported that prior authorization information in their EHR was rarely or never accurate.
By contrast, the current X12N 278 transaction standard generally is not executed in real time. Though it is capable of being exchanged in real time as CAQH Core operating rules do allow that, our understanding, informed by industry and SSO feedback, is that those real-time operating rules, which have not been adopted under HIPAA, are rarely if ever implemented and used.
Similarly, we believe that HIPAA covered entities' use of FHIR, and specifically the CRD IG for the “eligibility for health plan” transaction, could decrease the number of requests for prior authorization that a health plan would have to process, only to determine that prior authorization was not required. We believe that dynamic was, for example, reflected in a comparison, during the exceptions testing, of the number of prior authorization requests that were voided by the health plan or health care provider because they were duplicates, were cancelled, or had data issues. The HL7 Da Vinci Project reported that 20 percent of requests were voided using the FHIR standards while 45 percent of requests were voided using a payer's portal with the integrated X12N 278 transaction standard.
The HL7 Da Vinci Project's testing also showed that the Prior Authorization API significantly reduced the time it took for health plans to communicate prior authorization decisions, which difference was demonstrated both with respect to decisions that could be automated and those that required human review. For example, 75 percent of prior authorization requests for Endometrial Ablation using a health plan's portal and the X12N 278 transaction standard were approved within 5 days; that time decreased to just 5 minutes when using FHIR.
Therefore, we believe that adopting the FHIR standard and certain FHIR IGs as the HIPAA standards for “referral certification and authorization” transactions and prior authorization-related “eligibility for health plan” transactions could significantly reduce costs and burden on patients, health care providers, health plans, and, more generally, any HIPAA covered entity involved in the prior authorization process. Reducing burden and costs would directly effectuate HIPAA Administrative Simplification's explicit aims: improving Medicare, Medicaid, and the efficiency and effectiveness of the health care system and reducing clinical burden on patients, health care providers, and health plans by establishing uniform standards for the electronic transmission of certain health information.
In summary, HHS requests comment on its proposals summarized in section II.H.10. of this proposed rule, which includes the proposals discussed above, and the CFR citations listed in Table 11.
Each proposed specification constantly evolves as new technologies and use cases emerge, enhancements are requested by industry, and errors are corrected. We specifically propose to adopt for dental, professional, and institutional “referral certification and authorization” transactions related to
• The HL7 FHIR Standard, Release 4.0.1;
• US Core IG, Standard for Trial Use (STU) 6.1.0;
• SMART App Launch IG, Release 2.0.0;
• CRD IG, Version 2.2.1—STU 2.2;
• DTR IG, Version 2.2.0—STU 2.2; and
• PAS IG, Version 2.2.1—STU 2.2.
In addition, in a new 45 CFR 162.1202(f)(2)(i), we propose to adopt the following specification versions as the standards for “eligibility for a health plan” transactions for dental, professional, and institutional health care eligibility inquiry and response, when used to determine whether prior authorization is required:
• The HL7 FHIR Standard, Release 4.0.1;
• US Core IG, STU 6.1.0;
• SMART App Launch IG, Release 2.0.0; and
• CRD IG, Version 2.2.1—STU 2.2.
We encourage all interested parties to engage with the standards development process to best ensure the standards reflect input from across the health care industry, and acknowledge that the versions of the proposed standards may be updated in the period between publication of this proposed rule and any final rulemaking (should we finalize this rule) pursuant to updates in the normal course as a result of the SSO's consensus-based process. We request public comment on whether we should adopt an updated version of any proposed standard, should such become available by the time of final rulemaking. Doing so would allow us to adopt, and HIPAA covered entities to use, the latest and most up-to-date versions of the standards available at the time of a final rule rather than locking in versions specified in this proposed rule. Newer versions would include consensus-based updates made through the SSO's development and maintenance process. That could better align the HIPAA transaction standards with other HHS initiatives that encourage interoperability and efficient information exchange in the health care industry.
While we propose to adopt specific versions of the proposed standards, we also look to balance industry desire to be able to use later versions of adopted standards once they are finalized by the SSO without additional rulemaking. The HIPAA regulatory paradigm envisions ongoing maintenance to the adopted standards, as described in 45 CFR 162.910(b). As defined at 45 CFR 162.103, “maintenance” refers to activities necessary to support the use of a standard adopted by the Secretary, including technical corrections to an implementation specification that could be non-substantive or error correction. To enable that maintenance, as described in 45 CFR 162.910(a), the Secretary may designate an organization that agrees to maintain adopted standards. Maintenance, as described in 45 CFR 162.910(b), is a process performed by the appropriate DSMO, if done in accordance with the processes the Secretary may require. Even with respect to maintenance changes, the normal ANSI-accredited standards development process still would require public notification and comment, but regulatory action is not required. We further describe the standards development and maintenance process in the 2022 HIPAA Standards for Health Care Attachments proposed rule (87 FR 78440 and 78441).
The term “maintenance” excludes the activities related to the adoption of a new standard or implementation specification, or modification to an adopted standard or implementation specification. As discussed in the “Health Insurance Reform; Announcement of Maintenance Changes to Electronic Data Transaction Standards Adopted Under the Health Insurance Portability and Accountability Act” final rule (65 FR 50322), which appeared in the
HL7 uses semantic versioning, a standardized numbering system that indicates the type and scope of changes made to software specifications, with a “Major.Minor.Patch” version format where each term is represented by an integer (for example, 1.2.3). The “Major” number is incremented when HL7 publishes a significant new release of the FHIR specification. The “Minor” number is incremented for updates that introduce minor substantive changes, potentially including “limited breaking changes,” which are changes that may affect specific optional features or add new required fields while maintaining compatibility with previous versions. The “Patch” number is incremented to indicate an update including only technical corrections to a prior release. Patches, we believe, are equivalent to the errata to the current adopted standards that, pursuant to maintenance updates, are effectuated without rulemaking, and we would consider patches to be maintenance updates rather than modifications to the adopted standard. The same schema would be applied, as applicable, for all FHIR specifications and IGs. For example, the PAS IG has, between 2020 and 2026, advanced as follows: 2020—version 1.0.0; 2021—version 1.1.0; 2022—version 1.2.0; 2023—version 2.0.0; 2024—version 2.0.1; 2025—version 2.1.0; and 2026—version 2.2.1.
Specifically, that means that if HL7 publishes a version with the same major and minor versions as the adopted standard, but indicates that technical corrections are included by using a patch version, HIPAA covered entities would be permitted to use that updated version as it would be considered a maintenance update. Such a framework would allow HIPAA covered entities to update their Prior Authorization APIs or health IT systems to address identified issues without waiting for additional rulemaking. The Secretary would rely on HL7, as the DSMO, and its existing versioning system, as an indicator of whether scope changes to the adopted standard would be “technical corrections” as described in the definition of “maintenance” in 45 CFR 162.103, or would be more substantive modifications requiring rulemaking to adopt. For example, this means that if our proposal to adopt the PAS IG, Version 2.2.1 were finalized, and HL7 were to subsequently publish PAS IG, Version 2.2.2, that later version would be considered a maintenance update to the adopted standard, as described in Section 1174 of the Act and 45 CFR 162.910. Therefore, HIPAA covered entities would be permitted to use the PAS IG, Version 2.2.2 without additional rulemaking. However, if a subsequent version of the PAS IG were to be published, for example PAS IG, Version 2.3.0, that would indicate to us that the changes were substantive enough to require modification via rulemaking.
We believe such a framework would be consistent with the discussion of maintenance in 45 CFR 162.910 and, should this proposed rule be finalized as proposed, we anticipate relying upon it. However, we also request comment on whether versioning is the appropriate indicator on which we should rely, or whether we should require other considerations or processes.
In summary, HHS requests comment on its proposals summarized in section II.H.10. of this proposed rule, which includes the proposals discussed above, and the CFR citations listed in Table 11.
In the 2022 HIPAA Standards for Health Care Attachments proposed rule, we proposed the X12N 275 transaction standard for “health care attachments” for certain HIPAA Administrative Simplification transactions. Specifically, we proposed the X12N 275—Additional Information to Support a Health Care Services Review (06020X316) standard to support “referral certification and authorization” transactions and the X12N 275—Additional Information to Support a Health Care Claim or Encounter (06020X314) standard to support “health care claims or equivalent encounter” transactions (87 FR 78447).
In response to that proposed rule, many commenters urged us instead to adopt the CDex IG,
Commenters raised numerous points, including that: (1) the CDex IG allows health plans to be explicit about the data they are requesting, which would prevent health care providers from having to spend time gathering and sending more information than necessary; (2) the CDex IG would complement the FHIR standards finalized in the 2024 CMS Interoperability and Prior Authorization final rule, and harmonizing standards would promote consistent, scalable, and flexible data exchange (89 FR 8864 and 8941); (3) adopting the CDex IG would enable faster, automated determinations of medical necessity, and could eliminate redundant manual steps by allowing health plans to request and receive clinical data directly; (4) this approach would integrate with existing prior authorization workflows and would support information exchanges needed to make coverage determinations; and (5) many prior authorizations require additional documentation, and that even with the X12N 275 attachment standard, obtaining this information would be burdensome for health care providers and health plans.
Similarly, in response to the 2024 CMS Interoperability and Prior Authorization final rule, which did not propose to require impacted payers to implement an attachment standard, multiple commenters urged CMS to formally recommend the CDex IG (as it did with other IGs) in the final rule and stated that it is a critical part of burden reduction and plays an important role in supporting FHIR prior authorization transactions (89 FR 8864). CMS declined to do so, but encouraged impacted payers to participate in ongoing testing and stated that it would consider requiring or recommending CDex IG in future rulemaking (89 FR 8941).
After considering the significant and persuasive public comments in opposition, we did not finalize the proposed attachment standard for “referral certification and authorization” transactions in the 2026 HIPAA Standards for Health Care Attachments final rule. We declined to finalize those provisions in part because the proposed X12N 275 attachment standard would not align with the 2024 CMS Interoperability and Prior Authorization final rule published in the
Because the Da Vinci Project did not include the CDex IG in its testing exception, we continue to evaluate the CDex IG's maturity for adoption in HIPAA Administrative Simplification standard for attachments to prior authorization transactions. In its July 28, 2022 recommendation letter, NCVHS noted HL7 FHIR could be more effective and efficient for certain HIPAA transactions. NCVHS recommended that HHS not disrupt HIPAA transactions that are working well using the current adopted standards, but that standards that are not well adopted or utilized by industry—namely prior authorization or attachments—could be instances where FHIR “provides an on-ramp for a new generation of standards.”
In summary, HHS requests comment on its proposals summarized in section II.H.10. of this proposed rule, which includes the proposals discussed above, and the CFR citations listed in Table 11.
HHS proposes, in 45 CFR 162.1202(e) and 45 CFR 162.1302(f), that HIPAA covered entities would be required to comply with the proposed modified standard no later than 24 months from the effective date of a final rule, except for small health plans,
Section 1175(b)(2) of the Act specifies that the compliance date for a modification to a standard or implementation specification cannot be sooner than 180 days after the date the modification is adopted. A modification is “adopted” on the date it becomes effective, which here would be 60 days after its publication in the
In addition to the Prior Authorization API, CMS finalized in the 2024 CMS Interoperability and Prior Authorization final rule requirements for impacted payers to implement and maintain Provider Access and Payer-to-Payer APIs, as well as requirements to modify their Patient Access APIs. Thus, the compliance dates proposed in the 2022 CMS Interoperability and Prior Authorization proposed rule were made with consideration of commenters' responses for implementing requirements for API development and enhancement. Because the HIPAA proposals we make here only include the technical standards that support one of the APIs CMS finalized in that rule, we believe it is appropriate to propose a shorter compliance timeframe.
Therefore, we believe it is reasonable to follow the statutory timeline for new standards in section 1175(b)(1) of the Act. We propose a compliance date 24 months after the modified standard is adopted, which would be 60 days after a final rule appears in the
Therefore, we anticipate that health IT vendors that offer implementation support to health care providers and other HIPAA covered entities would be familiar with the proposed HIPAA transaction standards by 2027. In addition to CMS requirements, ONC has finalized certification criteria for electronic prior authorization through the ONC Health IT Certification Program in 45 CFR 170.315(g)(31) through (33). Those certification criteria are based on the implementation of the CRD, DTR, and PAS IGs. While those are criteria aimed at certifying health IT used by health care providers, we expect that other developers and vendors of systems supporting health plans may gain familiarity with the proposed FHIR standards through the requirements and resources available through the ONC Health IT Certification Program.
As discussed elsewhere in this proposed rule, pursuant to CMS rulemaking, impacted payers are already required to implement and maintain a Prior Authorization API using the same standards as proposed here, under HIPAA.
We believe that many HIPAA covered entities would not want to maintain both methods of electronic prior authorization, using the X12N transaction standards and the FHIR standards, until the compliance date. We anticipate that the enforcement discretion we announced on February 28, 2024, would be effective through the proposed compliance dates,
In summary, HHS requests comment on its proposals summarized in section II.H.10. of this proposed rule, which includes the proposals discussed above, and the CFR citations listed in Table 11.
These proposals are made under the authority of Title XI, Part C—Administrative Simplification, of the Act. Section 1172(b) of the Act requires that any standard adopted be consistent with the objective of reducing the administrative costs of providing and paying for health care. As discussed previously, we analyzed costs for the current X12N 270/271 and X12N 278 transaction standards, as well as the proposed FHIR standards. While the present X12N transaction standards provide significant savings versus manual or partially electronic methods of exchanging prior authorization information, evidence shows that the proposed FHIR standards would further reduce administrative costs for health care plans and health care providers. We do not meaningfully address clearinghouses in this proposed rule because we do not believe they play a significant role in prior authorization transactions, that we understand are typically made directly between health care providers and health plans, and as contrasted with clearinghouses' significant roles with many other
Using the proposed FHIR standards could significantly reduce health care providers' burden and costs by allowing them to streamline the prior authorization processes within their clinical workflow. Health care providers might require fewer administrative staff and be able to devote more time and resources to patient care. Similarly, by receiving requests in the comprehensive and flexible FHIR format, we believe that health plans could find efficiencies in their prior authorization processes, including that by receiving fewer unnecessary requests, more complete documentation, and real-time transactions health plans likely could reduce administrative costs. In addition, because CMS's interoperability rulemaking already requires impacted payers to implement and maintain a Prior Authorization API that meets the proposed HIPAA transaction standards, moving away from the present X12N transaction standards would allow them to reduce duplicative systems.
Section 1172(c)(1) of the Act requires adopted standards to be developed, adopted, or modified by an SSO. Section 1171(8) of the Act and 45 CFR 160.103 define an SSO as an organization that is accredited by ANSI that develops standards for information transactions, data elements, or any other standard that is necessary to, or will facilitate, the implementation of Part C (Administrative Simplification) of Title XI of the Act. HL7 is an ANSI-accredited SSO that meets these requirements, as demonstrated when HHS named it a DSMO as described in 45 CFR 162.910 (65 FR 50373).
On December 10, 2025, HHS organized a listening session with the four organizations named in section 1172(c)(3)(B) of the Act and the six DSMOs (some of which are both) regarding the use of a FHIR standard for prior authorization transactions.
Section 1172(d) of the Act requires the Secretary to establish specifications for implementing each of the adopted standards. As discussed previously, the proposed specifications are: (1) the base FHIR standard; (2) US Core IG, (3) SMART App Launch IG; (4) CRD IG; (5) DTR IG; and (6) PAS IG. Section 1172(e) of the Act requires that a standard adopted under this part shall not require disclosure of trade secrets or confidential commercial information by a person required to comply with this part. We do not believe anything in this proposed rule would require parties to disclose trade secrets or confidential commercial information.
Section 1172(f) of the Act requires the Secretary to rely on the recommendations of the NCVHS, appropriate federal and state agencies, and private organizations, and provides that the Secretary shall publish in the
Section 1173(a)(4)(A) of the Act requires that the standards: (1) to the extent feasible and appropriate, enable determination of an individual's eligibility and financial responsibility for specific services prior to or at the point of care; (2) be comprehensive, requiring minimal augmentation by paper or other communications; (3) provide for timely acknowledgment, response, and status reporting that supports a transparent claims and denial management process; and (4) describe all data elements in unambiguous terms, require that such data elements be required or conditioned upon set terms in other fields, and generally prohibit additional conditions (except where necessary to implement state or federal law, or to protect against fraud and abuse). In addition, section 1173(a)(4)(B) of the Act requires that, in adopting standards and operating rules for transactions referred to under paragraph (1), the Secretary seeks to reduce the number and complexity of forms (including paper and electronic forms) and data entry required by patients and providers.
Our proposals to adopt the FHIR standards would directly and specifically address and satisfy these requirements. Specifically, the CRD IG, which we propose to adopt for “eligibility for a health plan” transactions related to prior authorizations, could be used at the point-of-care to determine an individual's eligibility, coverage, and benefits for health care services, which could affect the patient's financial responsibility. The real-time nature of these transactions could increase the frequency that this information could be determined before or at the point-of-care, so that providers could discuss options with patients based on their individual coverage and prior authorization requirements. The FHIR standards that we propose to adopt for “referral certification and authorization” transactions would be more comprehensive than the current X12N transaction standards adopted in 45 CFR 162.1302, and could provide more timely acknowledgment, response, and status reporting for prior authorizations which could support a more transparent claims and denial management process. In addition, as discussed previously, based on the HIPAA exceptions testing, the FHIR standards have demonstrated that they require minimal augmentation by paper or other communications and reduce
Section 1175(b)(2) of the Act requires the Secretary, when adopting a modification to a standard, to set an appropriate compliance date, considering the time needed to comply due to the nature and extent of the modification. That compliance date may not be less than 180 days from the date the modification is adopted. In addition, the Secretary may extend the time for compliance for small health plans, if appropriate. As discussed previously, we propose a 24-month interval between adoption and compliance, which we believe is an appropriate period for HIPAA covered entities to implement the proposed standards. In addition, we propose to provide small health plans with an additional 12 months.
In summary, we request comment on our proposals related to prior authorization transactions and on the CFR citations listed in Table 11, and specifically on the following:
• The proposal to define prior authorization to mean transmissions described in 45 CFR 162.1301(a) used by health care providers to obtain authorization for health care, and transmissions described in 45 CFR 162.1301(c) used by health plans to respond to such requests (
• The alternative proposal to adopt the FHIR standards of this proposed rule for all “referral certification and authorization transactions” described in 45 CFR 162.1301 (see section II.H.2. of this proposed rule).
• The proposal to modify the current operating rules that are associated with the “eligibility for a health plan” transaction to exclude prior authorization-related transmissions (
• The proposal to adopt the following FHIR specifications as the standard for dental, professional, and institutional “eligibility for a health plan” transactions for health care eligibility inquiry and response, when used to determine whether prior authorization is required: HL7 FHIR, Release 4.0.1. US Core IG, STU 6.1.0; SMART App Launch IG, Release 2.0.0; CRD IG, Version 2.2.1—STU 2.2 (
• The proposal to adopt the following FHIR specifications as the standard for dental, professional, and institutional “referral certification and authorization” transactions, within the proposed definition of prior authorization: HL7 FHIR, Release 4.0.1; US Core IG, STU 6.1.0; SMART App Launch IG, Release 2.0.0; and CRD IG, Version 2.2.1—STU 2.2; DTR IG, Version 2.2.0—STU 2.2; and the PAS IG, Version 2.2.1—STU 2.2 (
• The proposal to adopt the CDex IG, Version 2.1.0—STU 2.1 as the attachments standard for prior authorization transactions (
• The proposal to adopt modified standards for dental, professional, and institutional health care eligibility transactions when used to determine whether prior authorization is required with a compliance date 24 months from the effective date of a final rule, except for small health plans, for which the compliance date would be 36 months from the effective date of a final rule (
• The proposal to adopt modified standards for dental, professional, and institutional prior authorization transactions in 45 CFR 162.1302(f) with a compliance date 24 months from the effective date of a final rule, except for small health plans, for which the compliance date would be 36 months from the effective date of a final rule (
• The proposal to adopt the proposed standard for attachments to prior authorization transactions in 45 CFR 162.1303 with a compliance date 24 months from the effective date of a final rule, except for small health plans, for which the compliance date would be 36 months from the effective date of a final rule (
In addition, HHS requests comment on the following:
• Whether adopting the FHIR standards for prior authorization transmissions and retaining the currently adopted X12N transaction standards for other referral certification transmission use cases would increase burden on HIPAA covered entities to maintain the ability to conduct electronic transactions using two different standards (
• Whether there are benefits to maintaining the existing X12N 278 transaction standard, currently adopted in 45 CFR 162.1302, for referral certification transmissions (
• Should HHS adopt any later versions of the proposed standards, including more recent versions that are currently available and versions that may become available between the publication of the proposed and final rules (
• Should HHS rely on the HL7's Major.Minor.Patch approach to reflect that updates from the adopted version are maintenance changes that do not require additional rulemaking (
• Rather than adopting the CDex IG, would it be appropriate to recommend it at this time to give the industry an opportunity to test the CDex IG in real-world applications (
• Would adopting the CDex IG affect HIPAA covered entities' ability to implement the other proposed FHIR standards (without attachments) for prior authorization transactions before the proposed compliance date, discussed later in this section? Should HHS finalize a later compliance date for CDex to phase implementation of these proposals (
• Conversely, would it be economical for HIPAA covered entities to implement the CDex IG at the same time as the proposed prior authorization transaction standards (
In the 2000 Standards for Electronic Transactions final rule, we finalized an exception, in 45 CFR 162.923(b), that “direct data entry” methods of transmitting data need only conform to the data content, not the format portion, of the standard. Direct data entry is the process by which data are directly keyed by a health care provider into a health plan's computer. While the 2000 Standards for Electronic Transactions final rule refers to a variety of technologies, we understand that the vast majority of direct data entry transactions take place through health plan portals. As discussed previously, the CAQH Index reveals that prior authorization has the lowest adoption of fully electronic transactions among health care administrative transactions, at 35 percent. Relatedly, prior authorization has the highest usage of “partially electronic” transactions, which includes web portals and interactive voice response systems, in use by 43 percent of health plans. Because many health plans are not required to offer electronic prior authorization, even as manual processes have decreased, the usage of partially electronic prior authorization transactions has increased at a greater rate than fully electronic transactions.
Direct data entry portals create a significantly higher burden on health care providers than fully electronic transactions. CAQH survey data show that providers spend an average of 16 minutes requesting prior authorization using a health plan's portal,
Provisions for direct data entry were appropriate based on the technology available at the time of the 2000 Standards for Electronic Transactions final rule, but subsequent technological advancements may now make it ripe to revisit that exception. We are not making any proposals in this proposed rule, but, instead, seek comment about whether and how the exception should be revisited for possible future rulemaking. While portal usage is most prevalent for prior authorization transactions, the subject of this proposed rule, the direct data entry exception applies to all HIPAA Administrative Simplification transactions.
HHS requests comment on the following:
• Should we revisit the direct data entry exception in 45 CFR 162.923(b) in order to incentivize or require HIPAA covered entities to move from portal-based transactions to fully electronic transactions using the adopted standards? If so, how should we amend or remove the direct data entry exception to achieve that goal?
• Were we to amend or remove the direct data entry exception, how would that affect standard transactions other than prior authorization?
• Are there benefits to health plan web portals for HIPAA covered entities that we have not considered? Specifically, which types of HIPAA covered entities? Which types of transactions?
• What would be the burden to HIPAA covered entities of amending or removing the direct data entry exception? Specifically, which types of HIPAA covered entities? With respect to which types of transactions?
• Would amending or removing the direct data entry exception lead to greater adoption of electronic transaction standards or would it perversely incentivize HIPAA covered entities to move to fully manual transactions?
• Are there particular types of HIPAA covered entities that would be especially affected, such as small or rural health care practices?
In this section, ONC proposes to adopt standards and implementation specifications in 45 CFR 170.215 for interoperability APIs and related activities on behalf of HHS under the authority in section 3004 of the PHSA (42 U.S.C. 300jj-14). ONC proposes these standards for adoption by HHS as part of a nationwide health IT infrastructure that supports reducing burden and health care costs and improving patient care. ONC proposes to adopt these standards on behalf of HHS in one location within the CFR for use within other HHS programs. These proposals reflect a unified approach across HHS to adopt standards for interoperability API activities. This approach is intended to increase alignment across HHS and reduce regulatory burden for interested parties subject to program requirements that incorporate these standards.
In this proposed rule, ONC is proposing to adopt updated versions of certain standards that the Secretary adopted in the HTI-4 final rule for HHS use (90 FR 37162 and 37181). ONC is proposing to adopt these updated versions (listed in section II.J.6. of this proposed rule) in 45 CFR 170.215. If the adoption of these proposed standards is finalized, they would be indicated for use by CMS subject to any other requirements that are finalized from this proposed rule. In addition to these updated versions, ONC is proposing to adopt an additional standard in 45 CFR 170.215(k)(3) that supports the exchange of attachment information for prior authorization transactions. Summaries of the standards that ONC proposes to adopt and subsequently incorporate by reference can be found below in section II.J.8. of this proposed rule.
The Health Information Technology for Economic and Clinical Health Act (hereinafter referred to as the “HITECH Act”), Title XIII of Division A and Title IV of Division B of the “American Recovery and Reinvestment Act of 2009” (Pub. L. 111-5), was enacted on February 17, 2009. The HITECH Act amended the PHSA and created “Title XXX—Health Information Technology and Quality” to improve health care quality, safety, and efficiency through the promotion of health IT and exchange of EHI. Subsequently, Title IV of the Cures Act amended portions of the HITECH Act by modifying or adding certain provisions to the PHSA relating to health IT.
Section 3001 of the PHSA directs the National Coordinator to perform duties in a manner consistent with the development of a nationwide health IT infrastructure that allows for electronic use and exchange of information.
Section 3004 of the PHSA identifies a process for the adoption of health IT standards, implementation specifications, and certification criteria, and authorizes the Secretary to adopt such standards, implementation specifications, and certification criteria. As specified in section 3004(a)(1) of the PHSA, the Secretary is required, in consultation with representatives of other relevant federal agencies, to jointly review standards, implementation specifications, and certification criteria endorsed by the National Coordinator under section 3001(c) of the PHSA and subsequently determine whether to propose the adoption of any grouping of such standards, implementation specifications, or certification criteria. The Secretary is required to publish all determinations in the
Section 3004(b)(3) of the PHSA, which is entitled “Subsequent Standards Activity,” provides that the Secretary shall adopt additional standards, implementation specifications, and certification criteria as necessary and consistent with the schedule published by HITAC. As noted in the “2015 Edition Health Information Technology (Health IT) Certification Criteria, 2015 Edition Base Electronic Health Record (EHR) Definition, and ONC Health IT Certification Program Modifications” final rule (80 FR 62602), which appeared in the
Under the authority outlined in section 3004(b)(3) of the PHSA, the Secretary may adopt standards, implementation specifications, and certification criteria as necessary even if those standards have not been recommended and endorsed through the process established for the HITAC under section 3002(b)(2) and (3) of the PHSA. Moreover, while HHS has traditionally adopted standards and implementation specifications at the same time as adopting certification criteria that reference those standards, the Secretary's authority under section 3004(b)(3) of the PHSA is not limited to adopting standards or implementation specifications at the same time certification criteria are adopted.
Finally, the Cures Act amended the PHSA by adding section 3004(c), which specifies that in adopting and implementing standards under section 3004, the Secretary shall give deference to standards published by SDOs and voluntary consensus-based standards bodies.
The HITECH Act established two federal advisory committees, the Health IT Policy Committee (hereinafter referred to as the “HITPC”) and the Health IT Standards Committee (hereinafter referred to as the “HITSC”). Each committee was responsible for advising the National Coordinator on different aspects of health IT policy, standards, implementation specifications, and certification criteria.
Section 4003(e) of the Cures Act amended section 3002 of the PHSA and replaced the HITPC and HITSC with one committee, the HITAC. After that change, section 3002(a) of the PHSA now establishes that the HITAC advises and recommends to the National Coordinator standards, implementation specifications, and certification criteria relating to the implementation of a health IT infrastructure, nationally and locally, that advances the electronic access, exchange, and use of health information. The Cures Act specifically directs the HITAC to advise on two areas: (1) a policy framework to advance an interoperable health IT infrastructure (section 3002(b)(1) of the PHSA); and (2) priority target areas for standards, implementation specifications, and certification criteria (section 3002(b)(2) of the PHSA).
For the policy framework, as described in section 3002(b)(1)(A) of the PHSA, the Cures Act tasks the HITAC with providing recommendations to the National Coordinator on a policy framework for adoption by the Secretary consistent with the Federal Health IT Strategic Plan under section 3001(c)(3) of the PHSA. In February of 2018, the HITAC made recommendations to the National Coordinator for the initial policy framework and subsequently published a schedule in the
ONC's ISA supports the identification, assessment, and public awareness of interoperability standards and implementation specifications that can be used by the health care industry to address specific interoperability needs.
The ISA currently includes the implementation specifications proposed in section II.J.6. of this proposed rule. ONC encourages interested parties to review the ISA to better understand key applications for the implementation specifications it is proposing for adoption in this rule.
The National Technology Transfer and Advancement Act of 1995 (hereinafter referred to as the “NTTAA”) (Pub. L. 104-113, enacted March 07, 1996; 15 U.S.C. 3701
Consistent with sections 3004(b)(3), 3001(b), and 3001(c) of the PHSA, ONC proposes to adopt standards in 45 CFR 170.215(j), (k), (m), and (n) on behalf of the Secretary to support the continued development of a nationwide health IT infrastructure and support ongoing federal alignment of standards for interoperability and health information exchange. ONC previously adopted versions of these standards in the HTI-4 final rule (90 FR 37130). In addition, ONC is proposing to adopt an additional standard in this proposed rule, the HL7 Da Vinci Clinical Data Exchange (CDex) Implementation Guide (IG) in 45 CFR 170.215(k)(3). Specifically, ONC proposes to adopt the following versions of the standards and incorporate them by reference in 45 CFR 170.299(g).
• HL7 FHIR® Da Vinci Coverage Requirements Discovery (CRD) Implementation Guide, Version 2.2.1—STU 2.2 (proposed in 45 CFR 170.215(j)(1)(ii)).
ONC previously adopted version 2.0.1—STU 2 of the CRD IG in 45 CFR 170.215(j)(1)(i) in the HTI-4 final rule (90 FR 37167). This updated version of the CRD IG includes improvements such as setting clearer expectations for handling failure states, correcting contexts for order-dispatch, clarifying expectations for mandatory hook support, and setting expectations for endpoints and endpoint discovery. This version also includes substantive clarifications, corrections, and enhancements for the Coverage Information FHIR extension, which is a core profile in the IG by which payer systems communicate coverage and prior authorization requirements to provider systems.
• HL7 FHIR® Da Vinci Documentation Templates and Rules (DTR) Implementation Guide, Version 2.2.0—STU 2.2 (proposed in 45 CFR 170.215(j)(2)(ii)).
ONC previously adopted version 2.0.1—STU 2 of the DTR IG in 45 CFR 170.215(j)(2)(i) in the HTI-4 final rule (90 FR 37167). This updated version of the DTR IG includes improvements such as aligning endpoint discovery language with CRD IG requirements, addressing CMS enforcement discretion regarding the use of X12N 278 transaction standard, requiring DTR clients to appropriately manage access to data that is sensitive per policy and regulatory requirements when responding to queries from a DTR application, and streamlining questionnaire retrieval if the CRD workflow is used in combination with the DTR workflow.
• HL7 FHIR® Da Vinci Prior Authorization Support (PAS) FHIR Implementation Guide, Version 2.2.1—STU 2.2 (proposed in 45 CFR 170.215(j)(3)(ii)).
ONC previously adopted version 2.0.1—STU 2 of the PAS IG in 45 CFR 170.215(j)(3)(i) in the HTI-4 final rule (90 FR 37167). This updated version of the PAS IG includes improvements such as clarifying how to
• HL7 FHIR® CARIN Consumer Directed Payer Data Exchange (CARIN IG for Blue Button®) Implementation Guide, Version 2.2.0—STU 2.2 (proposed in 45 CFR 170.215(k)(1)(ii)).
ONC previously adopted version 2.0.0—STU 2 of the CARIN IG for Blue Button in 45 CFR 170.215(k)(1)(i) in the HTI-4 final rule (90 FR 37182). This updated version of the CARIN IG for Blue Button includes improvements such as additional updates to ensure alignment with US Core IG STU 7.0.0 and 6.1.0, updates to certain profiles, updates and refinements to codes identified in the IG, and updates to search parameters.
• HL7 FHIR® Da Vinci Payer Data Exchange (PDex) US Drug Formulary Implementation Guide, Version 2.1.0—STU 2.1 (proposed in 45 CFR 170.215(m)(2)).
ONC previously adopted version 2.0.1—STU 2 of the PDex US Drug Formulary IG in 45 CFR 170.215(m)(1) in the HTI-4 final rule (90 FR 37182). This updated version of the PDex US Drug Formulary IG includes improvements such as updated references to multiple versions of US Core IG, guidance for more granular pharmacy benefits, updates to search parameters, and guidance regarding authentication.
• HL7 FHIR® Da Vinci Payer Data Exchange (PDex) Plan Net Implementation Guide, Version 1.2.0—STU 1.2 (proposed in 45 CFR 170.215(n)(2)).
ONC previously adopted the version 1.1.0—STU 1.1 US of the PDex Plan Net IG in 45 CFR 170.215(n)(1) in the HTI-4 final rule (90 FR 37182). This updated version of the PDex Plan Net IG includes improvements such as updates to dependencies to reference multiple versions of the US Core IG, updates to dependencies to reference the HL7 FHIR Da Vinci—Health Record Exchange (HRex) IG, Version 1.1.0—STU 1.1, updates to search parameters, and the addition of a bulk export operation.
• HL7 FHIR® Da Vinci Clinical Data Exchange (CDex) Implementation Guide, Version 2.1.0—STU 2.1 (proposed in 45 CFR 170.215(k)(3)).
ONC proposes to adopt version 2.1.0—STU 2.1 of the CDex IG in this proposed rule. In section II.H.7. of this proposed rule, HHS is proposing to adopt the CDex IG as the attachment standard for prior authorization transactions under the required HIPAA Administrative Simplification provisions. ONC is separately proposing to adopt this standard in 45 CFR 170.215(k)(3) to make it available for use by other programs; for instance, programs that may wish to incorporate this standard into regulations to align with the HIPAA Administrative Simplification requirements, if the proposals in section II.H.7. of this proposed rule are finalized.
In summary, ONC requests comment on our proposals in the CFR citations listed in Table 12, and specifically on the proposal to adopt standards in 45 CFR 170.215(j), (k), (m), and (n) on behalf of the Secretary.
Finally, ONC proposes to add an expiration date of January 1, 2028, to corresponding versions of standards currently in 45 CFR 170.215(j), (k), (m), and (n) if our proposals to adopt newer versions of adopted standards and specifications in 45 CFR 170.215(j), (k), (m), and (n) are finalized. ONC proposes this expiration date to provide certified health IT developers and other entities required to use these standards with a transition period during which they may update and deploy health IT conformant with either the existing or updated versions of these standards. After the expiration date, only non-expired versions of the relevant standards in 45 CFR 170.215(j), (k), (m), and (n) would be available for use. ONC believes that a coordinated transition period that establishes a single expiration date across the relevant IGs in 45 CFR 170.215(j), (k), (m), and (n) would create consistency for industry and facilitate interoperability by ensuring that health IT systems leveraging these standards under different HHS programs use the same baseline standards for the same use cases. In addition, ONC believes a transition period would allow those health IT developers and other entities required to use these standards flexibility to complete development towards the existing standards in 45 CFR 170.215(j), (k), (m), and (n), and to iterate to newer standards.
However, ONC also believes that this flexibility may lead to more heterogeneity where some deployed health IT uses one standard and other deployed health IT uses newer versions of those standards, thus complicating shared goals with CMS to facilitate a FHIR-based ecosystem for prior authorization, payer to payer exchange, and patient access to coverage information. Therefore, ONC is proposing an alternative approach to updating these standards. Specifically, as an alternative to the proposal above, ONC proposes to remove and replace standards in 45 CFR 170.215(j), (k), (m), and (n) with the standards it has proposed upon the effective date of a final rule, without providing for a transition period during which multiple versions of each standard would be available for HHS use.
ONC understands that both certified health IT developers and other health IT developers wish to have a single, baseline standard across use cases as quickly as practicable for purposes of consistency and interoperability. We believe this alternative proposal could help advance this goal, particularly in areas such as electronic prior authorization. For instance, under this alternative proposal, a certified health IT developer with a Health IT Module certified to the “provider prior authorization API—documentation templates and rules” criterion for electronic prior authorization in 45 CFR 170.315(g)(32), and currently using the standard in 45 CFR 170.215(j)(2)(i) (which is the DTR IG, Version 2.0.1—STU 2), would need to use the newer version of the standard to remain certified to the criterion in 45 CFR 170.315(g)(32) as of the effective date of a final rule, which ONC proposes in this rule to be the DTR IG, Version 2.2.0—STU 2.2.
In summary, ONC requests comment on our proposals in the CFR citations listed in Table 12, and specifically on the following:
• The proposal to add an expiration date of January 1, 2028, to corresponding standards currently in 45 CFR 170.215(j), (k), (m), and (n) if our proposals to adopt newer versions of these standards are finalized.
• The alternative proposal to remove and replace the standards in 45 CFR 170.215(j), (k), (m), and (n) with the newer versions of the standards, without a transition period for use of multiple versions.
The Office of the Federal Register has established requirements for materials (for example, standards and implementation specifications) that agencies propose to incorporate by reference in the CFR (79 FR 66267, 1 CFR 51.5(b)). Specifically, 1 CFR 51.5(b)(2) requires agencies to discuss, in the preamble of a proposed rule, the ways that the materials they incorporate by reference are reasonably available to interested parties and how interested parties can obtain the materials; and summarize, in the preamble of the proposed rule, the material it proposes to incorporate by reference.
To make the materials ONC intends to incorporate by reference reasonably available, it provides a URL for the standards and implementation specifications. In many cases, these standards and implementation specifications are directly accessible through the URLs provided. In most of these instances, access to the standard or implementation specification can be gained through no-cost (monetary) participation, subscription, or membership with the applicable SDO or custodial organization. Alternatively, a copy of the standards may be viewed for free at the U.S. Department of Health and Human Services, Office of the National Coordinator for Health Information Technology, 330 C Street SW, Washington, DC 20201. Please call (202) 690-7171 in advance to arrange inspection.
The NTTAA and the OMB Circular A-119 require the use of, wherever practical, technical standards that are developed or adopted by voluntary consensus standards bodies to carry out policy objectives or activities, with certain exceptions. The NTTAA and OMB Circular A-119 provide exceptions to selecting only standards developed or adopted by voluntary consensus standards bodies, namely when doing so would be inconsistent with applicable law or otherwise impractical. As discussed in section II.J.5. of this preamble, ONC has followed the NTTAA and OMB Circular A-119 in proposing standards and implementation specifications for adoption, including describing any exceptions in the proposed adoption of standards and implementation specifications. Over the years of adopting standards and implementation specifications for certification, ONC has worked with SDOs, such as HL7, to make the standards it proposes to adopt, and subsequently adopt and incorporate by reference in the
As required by 1 CFR 51.5(a), ONC provides summaries of the standards it proposes to adopt in 45 CFR 170.215(j), (k), (m), and (n), and subsequently incorporate by reference in 45 CFR 170.299(g). ONC and CMS also provide relevant information about these standards and implementation specifications throughout the preamble.
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This section contains RFIs only. In accordance with the implementing regulations of the “Paperwork Reduction Act of 1995” (hereinafter referred to as “PRA”), specifically 5 CFR 1320.3(h)(4), this general solicitation is exempt from the PRA. Facts or opinions submitted in response to general solicitations of comments from the public that appear in the
Respondents are encouraged to provide complete but concise responses. These RFIs are issued solely for information and planning purposes; they do not constitute a Request for Proposal (RFP), applications, proposal abstracts, or quotations. These RFIs do not commit the U.S. Government to contract for any supplies or services or make a grant award. Further, CMS is not seeking proposals through these RFIs and will not accept unsolicited proposals. Responders are advised that the U.S. Government will not pay for any information or administrative costs incurred in response to these RFIs; all costs associated with responding to these RFIs will be solely at the interested party's expense. Not responding to these RFIs does not preclude participation in any future procurement, if conducted. It is the responsibility of the potential responders to monitor these RFI announcements for additional information pertaining to this request. Please note that CMS will not respond to questions about the policy issues raised in these RFIs. CMS may or may not choose to contact individual responders. Such communications would only serve to further clarify written responses. Contractor support personnel may be used to review RFI responses. Responses to this notice are not offers and cannot be accepted by the U.S. Government to form a binding contract or issue a grant. Information
In the 2020 Centers for Medicare & Medicaid Services (CMS) Interoperability and Patient Access final rule (85 FR 25510), CMS finalized changes to the condition of participation (CoP) regulation in 42 CFR 482.24(d) to require hospitals—including psychiatric hospitals (42 CFR 482.61(f)), Critical Access Hospitals (CAHs) (42 CFR 485.638(d)), and Rural Emergency Hospitals (REHs) (42 CFR 485.540(d))—that utilize a health information technology (health IT) system conforming to the Health Level Seven (HL7®) v2.5.1 standard in 45 CFR 170.205(d)(2) to make a reasonable effort to send electronic event notifications to all applicable post-acute care (PAC) services providers and suppliers, as well as to any of the following practitioners and entities, which need to receive notification of the patient's status for treatment, care coordination, or quality improvement purposes: (1) the patient's established primary care practitioner; (2) the patient's established primary care practice group or entity; or (3) other practitioner, or other practice group or entity, identified by the patient as the practitioner, or practice group or entity, primarily responsible for his or her care. Facilities must send real-time electronic notifications to the designated practitioners or entities when a patient is admitted to, transferred to, or discharged from the facility, including emergency department visits. For purposes of this Request for Information (RFI), applicable PAC services providers and suppliers would be those PAC services providers and suppliers with whom the patient has an established care relationship with prior to admission. Additionally, a relationship is established when a patient is being transferred or referred for additional care for purposes of treatment and/or care coordination post-discharge from the hospital.
In the years since the finalization of these requirements, we have received feedback from interested parties about hospitals' success implementing electronic event notifications and the degree to which these notifications are effectively reaching the recipients intended under the regulation. Survey data show that in 2022, three out of four non-federal acute care hospitals routinely electronically notified a patient's primary care provider upon his or her entry to the hospital's emergency department—a percentage that has nearly doubled since 2012.
In addition, we recognize that there are entities other than those specified in 42 CFR 482.24(d) whose involvement in a patient's care may support improved care coordination when they receive electronic notifications from hospitals. While current requirements do not explicitly state accountable care organizations (ACOs) as required recipients of electronic event notifications, many patients are under the care of a primary care practitioner or primary care practice group that is part of an ACO or other value-based care entity, and the regulation does not prohibit hospitals from sending notifications to these entities. Additionally, the CMS State Operations Manual hospital interpretive guidance (QSO-21-18)
Since CMS finalized these requirements in 42 CFR 482.24(d), technical standards and solutions that support electronic event notifications when a patient is admitted to, transferred to, or discharged from a care facility, have continued to advance. For example, health information exchanges (HIEs) and other data exchange networks continue to facilitate exchange of HL7 v2 admission, discharge, and transfer (ADT) data between hospitals, physician groups, and other clinicians by automatically routing electronic event notification information to organizations that belong to the HIE or network.
Nationwide connectivity facilitated through the Trusted Exchange Framework and Common Agreement
++ In the 2020 CMS Interoperability and Patient Access final rule, we finalized a minimum set of information that must be shared as part of a patient electronic event notification but encouraged hospitals to send more information, if possible (85 FR 25587). To what degree are hospitals sending additional information with patient electronic event notifications and what additional information is being sent?
++ What data standards, if any, are hospitals using to send that additional information with patient electronic event notifications? What standards could be used to improve the minimum set of information that currently must be shared?
++ What can CMS do to expand the use of patient event notifications and provider engagement with those notifications to improve patient care?
++ What additional information should be included in patient event notifications, beyond the minimum set of information that hospitals are currently required to send (patient name, treating practitioner name, and sending institution name), for more effective and useful patient event notifications to better support transitions of care?
++ What are the challenges with standardizing patient event notifications?
++ What operational or technical challenges could hospitals, CAHs, and REHs face if CMS were to require additional standardized data elements related to patient care to be included with the patient event notifications?
++ If additional data elements are included in patient event notifications, how can technology mitigate any additional clinician burden?
++ Are there privacy or data governance considerations if hospitals include additional information in patient electronic event notifications?
++ Could additional process requirements or guidance (for example, minimums for directory entry updates/corrections/removals or outreach/verification efforts) improve the quality of notifications or the likelihood that notifications are delivered to intended recipients?
++ How are ACOs or payers that are currently receiving patient event notifications receiving them? What innovative strategies have ACOs or payers employed to receive patient event notifications? Do ACOs or payers that receive patient event notifications use the information in a meaningful way?
++ What actions should CMS consider, such as updating the hospital CoP, that would encourage or require hospitals to exchange alerts with any ACO and other PAC provider and supplier types or payers to which a patient is attributed or assigned?
++ What challenges prevent hospitals from sharing electronic event notifications with ACOs and other PAC provider and supplier types today?
++ How do hospitals receive authorization to send an electronic event notification to an ACO? What are the challenges for hospitals to receive that authorization?
++ Should CMS encourage or require hospitals to send alerts to emergency medical services (EMS)? Behavioral health providers? Pharmacies? Social service providers? Other provider types?
++ What challenges do long-term care or PAC providers face in receiving patient event notifications? What steps could CMS take to help address these challenges?
++ To what extent do PAC providers currently receive patient electronic event notifications in a timely manner to support safe admission, transfer, or follow-up care? How have hospitals integrated electronic event notification requirements with discharge planning requirements to enhance post-discharge continuity of care?
++ What processes are in place for attribution and patient matching between hospitals and ACOs or other value-based care arrangements, payers, PAC facilities, long-term care facilities, social service providers, EMS providers, behavioral health providers, etc.? Are these adequate? What is missing from these processes?
++ How can improved standardization, sharing, and use of provider directories contribute to better electronic event notifications?
++ In what ways could CMS leverage other programs, such as the Medicare Promoting Interoperability Program to advance the use of patient event notifications? For instance, what measures could CMS add to the Medicare Promoting Interoperability Program for eligible hospitals and CAHs that assess the degree to which notifications are sent to recipients?
++ What are other ways that CMS could incentivize improved delivery and use of patient event notifications?
++ In what ways could CMS coordinate with the Office of the National Coordinator for Health Information Technology (ONC) to establish certification criteria for health IT that would enable authorized users, including authorized ACOs or other value-based care providers, to be able to subscribe to patient event notification alerts?
++ How could CMS leverage the TEFCA
++ Under current CoP requirements, hospitals have significant flexibility in the technical approaches they use to implement patient electronic event notifications. What technical approaches are most widespread among hospitals to send patient electronic event notifications? What are the key benefits and challenges hospitals face with current technical approaches used?
++ What technical approach(es) would provide additional functionality/
++ How can CMS incentivize or require hospitals to adopt more advanced approaches to electronic event notifications? Are the CoPs the most appropriate policy vehicle to define technical requirements for notifications? What other policy levers should CMS consider besides the CoPs to more effectively implement new technical approaches to electronic event notifications?
++ What standards-based mechanisms exist or could be improved to support authorized ACOs or other value-based care entities, payers, and other provider types to be able to subscribe to patient event notification alerts? For example, could certain standards or requirements for patient matching improve event notifications?
++ To what degree have existing enforcement mechanisms for the CoPs helped to advance compliance with patient event notification requirements?
++ What additional steps, if any, should CMS take to strengthen existing enforcement mechanisms and address concerns about some hospitals not adhering to the patient event notification requirements?
++ What additional guidance, technical assistance, or other supports could CMS provide to help hospitals improve compliance and effective use of patient event notifications?
The health care system is increasingly reliant on a digital infrastructure to store and transmit sensitive health care data, and more organizations are consolidating their resources and technology to improve efficiency. The reliance on digital infrastructure and large information technology (IT) systems, run by industry players that span the nation and interact with a high volume of large payers, may create vulnerabilities that could be exploited by cybercriminals. Recent security breaches, ransomware attacks, and other incidents have disrupted health care operations, put patient safety and privacy at risk, and potentially undermined public and private sector initiatives to move towards new standards and technologies. The Centers for Medicare & Medicaid Services (CMS) is committed to enhancing the resilience of the health care system against cyber threats.
Statistics show a disturbing trend in the vulnerability of health care organizations to cyber threats. As noted in the “HIPAA Security Rule To Strengthen the Cybersecurity of Electronic Protected Health Information” proposed rule (90 FR 898) (hereinafter referred to as the “HIPAA Cybersecurity proposed rule”), which appeared in the
According to a 2025 report, health care has remained the most expensive industry for electronic data breaches since 2011, with the average data breach costing $7.42 million.
There are several statutes and regulations promulgated to prevent and mitigate data breaches within the health care sector. First, as part of HIPAA, Congress authorized the Secretary to promulgate standards for protecting the privacy and security of certain health information.
Second, the Federal Information Security Management Act of 2002 (hereinafter referred to as “FISMA”)
Third, the HITECH Act was enacted to promote nationwide adoption and standardization of health IT to support electronically sharing clinical data.
The White House's 2024 National Security Memorandum on Critical Infrastructure Security and Resilience reaffirmed “Healthcare and Public Health” as a critical infrastructure sector, underscoring the ongoing federal focus on cybersecurity protection for health care systems.
In addition, since 2016, OCR has published cybersecurity newsletters and videos to help HIPAA covered entities and business associates respond to cybersecurity incidents to safeguard ePHI to prevent, detect, contain, mitigate, and recover from cybersecurity threats, and improve compliance with the HIPAA Security Rule.
In 2023, the Health Sector Coordinating Council (HSCC), the Cybersecurity and Infrastructure Security Agency (CISA), and HHS began working together to produce a toolkit with resources, training, information, and tools to support efforts to improve health care cybersecurity. Among the
Additionally, the Administration for Strategic Preparedness and Response (ASPR) and the National Institute of Standards and Technology (NIST) collaborated to produce the “Health Care and Public Health Sector Cybersecurity Framework Implementation Guide” in 2023.
Despite these efforts, the health care sector remains a prime target for cyberattacks, and these attacks have a significant impact on stakeholders. Cyberattacks can lead to data breaches, loss of privacy, and potentially life-threatening disruptions in care. For example, ransomware attacks can lock health care providers out of critical IT systems, delaying surgeries, patient care, and access to medication.
The evolving nature and sophistication of cyber threats necessitate continual reassessment and strengthening of existing regulations.
This Request for Information (RFI) is intended to delve into the vulnerabilities exposed by health care cyberattacks and to explore strategies to make the health care system more resilient. Additionally, CMS seeks public input and perspectives about how it can leverage its authorities to supplement regulations and guidance from other agencies, such as OCR and FTC, to improve the health care system's preparedness, response, recovery, and resiliency capabilities for addressing cyber threats, which have increased, and are likely to continue to increase. Comments submitted in response to this RFI regarding the HIPAA Cybersecurity proposed rule will not be considered as part of that separate rulemaking, but only in the context of this RFI.
• Cybersecurity
++ How have existing statutes and regulations, within CMS's purview, shaped your cybersecurity strategies, and what changes or additions by CMS
++ What are the most significant cybersecurity challenges faced by health care organizations, providers, and entities—including hospitals, clinics, state Medicaid and Children's Health Insurance Program (CHIP) agencies, commercial plans, and other health care stakeholders—in securing patient data and preventing and recovering from cyberattacks?
++ What are the most effective current practices, technologies, and innovative strategies for preventing, detecting, and responding to cyberattacks in the health care sector? Should CMS propose any of these practices or strategies as regulatory requirements within its purview?
++ What are the major challenges and barriers that health care organizations face in implementing robust cybersecurity measures? How have health care organizations overcome these challenges and barriers?
++ What are some best practices for cybersecurity training? How can CMS promote best practices in cybersecurity?
++ In the broader context of ransomware attacks, how do offsite backups, redundant systems, and security protocols enhance health care resiliency? Are there other approaches, tools, or policies, within CMS's purview, that would enhance resiliency following an attack?
++ How do the enrollment and implementation processes for health care clearinghouses affect the health care industry's ability to remain resilient? How could this be improved?
++ What perspectives, needs, barriers, and challenges specifically affect the ability of health care providers in small and rural practices, who participate in health care programs within CMS's authority, to improve their cybersecurity preparedness, response, recovery, and resiliency?
++ What standards and technologies, within CMS's purview, should CMS re-evaluate to support a more resilient health care system?
++ How do the standards for interoperability, including those required in previous interoperability rules or proposed to be required in this proposed rule, interact with the requirements of the HIPAA Security Rule to promote health care resiliency, and how can CMS use its authority: (1) to fill regulatory gaps, if any, to improve the resilience of the health care industry; or (2) to reduce duplicative requirements in a way that does not threaten the security of patient data?
++ How could the Trusted Exchange Framework and Common Agreement (TEFCA) be used to support health care resiliency goals?
++ How can interoperability be improved in a manner that enhances, rather than compromises, security?
++ What are the potential benefits and challenges of a health care system with more point-to-point connections?
++ What role do health care clearinghouses play in supporting point-to-point connections, and what role do they play in supporting the exchange of health care data?
++ What options are available or recommended for streamlining transition processes, including moving from one health care clearinghouse to another, when one is impacted by a cyber attack?
As the U.S. health care system increasingly adopts digital solutions to enhance care delivery, the interoperability of these systems becomes crucial. Interoperability, facilitated by application programming interfaces (APIs), allows different health information technology (health IT) systems and software apps to communicate, exchange data, and effectively use the information that has been exchanged.
The Centers for Medicare & Medicaid (CMS) interoperability initiative has a mission to “promote the secure exchange, access, and use of electronic health information (EHI) to better support informed decision making and a more efficient health care system.”
Even as standardized API usage increases throughout the health care system, CMS continues to receive stakeholder reports of incomplete or broken API implementations, which have the potential to impede interoperability, patient safety, and the security of EHI. In response to the 2022 CMS Interoperability and Prior Authorization proposed rule, commenters emphasized the importance of making available test data, staging environments, sandboxes, and other mechanisms to help developers test their software and prevent non-standard implementation of APIs across the industry. For example, missing or incorrect data due to non-conformant implementation could result in incomplete health information being exchanged. CMS seeks to reduce these risks and to improve health care interoperability by exploring opportunities to ensure that required APIs are effectively implemented. While CMS is proposing to require certain IGs in this rule to improve API interoperability, strengthening oversight mechanisms could further enhance standardization and ensure APIs are implemented correctly. We emphasize that we are not proposing a requirement for certification in this proposed rule; rather, CMS seeks to establish a roadmap to promote consistent implementation among payers.
As discussed in section II.A.4.b. of this proposed rule, the technical requirements for the FHIR APIs we finalized in the 2020 CMS Interoperability and Patient Access and 2024 CMS Interoperability and Prior Authorization final rules include general requirements for impacted payers to test their interoperability APIs (see, for instance, requirements for Medicare Advantage (MA) plans in 42 CFR 422.119(c)(2)). We are considering how we can build on those testing requirements. For instance, the open-source Inferno testing tool is available for developers to create, execute, and share conformance tests for numerous FHIR-based standards and IGs. The Office of the National Coordinator for Health Information Technology (ONC)
CMS strongly encourages payers to utilize available testing tools, such as Inferno, to meet the existing testing requirements. We also encourage payers to publish their test results to demonstrate conformance with the technical requirements. We are further considering additional requirements that would increase transparency as to whether an API has been tested for conformance through such tools. For instance, we could consider requiring impacted payers to publish testing results or report them to CMS, for CMS to potentially publish. Doing so could increase transparency and trust that API technology deployed by payers has been properly implemented to facilitate interoperability. While such a requirement may initially focus on testing with the existing Inferno tools, we are also interested in how such a requirement could incorporate other testing tools that may be developed in the future to meet payers' needs. For instance, the National Coordinator has historically approved alternative test methods under the ONC Health IT Certification Program.
We have also received feedback from the public that, in addition to demonstrating API conformance with the required standards, the availability of a “sandbox environment” is an important approach to ensuring that systems seeking to access an API can test and develop robust connections. We believe that such environments could accelerate durable connections between third-party apps and payers' APIs, and we are considering whether to propose to require impacted payers implement and maintain a sandbox environment for testing.
While the ideas we have described previously could be proposed as discrete provisions for each API, we also request public comment on an overarching certification approach to the interoperability APIs. For instance, the ONC Health IT Certification Program's testing and certification infrastructure could provide a streamlined approach to demonstrate conformance with technical requirements. The ONC Health IT Certification Program, established under section 3001(c)(5) of the PHSA, is a voluntary program for health IT developers and is designed to ensure the availability and functionality of certified health IT (referred to as Health IT Modules) using adopted health IT standards. In the program, developers certify their Health IT Modules by demonstrating conformance to standards adopted by the Department of Health and Human Services (HHS) through specific certification criteria and using test procedures (that may have associated test tools and/or test data) approved by the Secretary. Certification criteria are established via notice-and-comment rulemaking, updated, and maintained by ONC. While the ONC Health IT Certification Program has predominantly focused on electronic health records (EHRs) and other health IT systems used by providers, certification criteria under the program may also be developed for health IT intended for other types of users.
Such an approach was explored as part of the HTI-2 proposed rule, in which ONC proposed certification criteria in 45 CFR 170.315(g)(30), (32), (33), (35), and (36) intended for health IT used by payers. These certification criteria corresponded to each of the interoperability APIs finalized in the 2020 CMS Interoperability and Patient Access and 2024 CMS Interoperability and Prior Authorization final rules (89 FR 63498 and 63582-63590) and were designed to complement and support CMS's interoperability efforts to improve access to EHI for patients, providers, and payers through FHIR APIs. The proposed certification criteria would have allowed health IT developers to voluntarily certify their products to standards and specifications in 45 CFR 170.213 and 45 CFR 170.215 (89 FR 63580). In the HTI-4 final rule, ONC finalized three new Prior Authorization API certification criteria in 45 CFR 170.315 (g)(31), (32), and (33) (90 FR 37175). ONC subsequently withdrew the remaining HTI-2 proposed rule proposals that had not yet been finalized as part of a notice which appeared in the
• Roadmap for Consistent Implementation of Payer API Technology
++ What program components are most important to establishing robust oversight mechanisms for payers' APIs? How can CMS balance testing requirements to ensure interoperability while minimizing burden on payers and health IT developers delivering technology to payers?
++ What aspects of API implementation pose the most significant implementation difficulties, and where do commenters perceive the potential for lack of conformance with the API technical requirements?
++ What aspects of API implementation should be prioritized for testing? Where would testing requirements have the greatest impact and benefit?
++ What are current best practices for testing conformance with API technical requirements?
++ What should testing platforms and processes look like?
++ What existing API testing tools (besides the Inferno tool discussed above) could be employed as part of the testing for payer APIs?
++ What criteria could or should be used to identify new API testing tools?
++ In addition to initial conformance testing, should CMS establish requirements for interoperability testing between and among multiple systems, that are conformant to identified IGs, to facilitate real-world deployments of such systems?
++ What value would the certification of payer API technology provide to payers, providers, and patients? What would be the benefits and burdens of requiring certification of payer API technology for payers, providers, and patients?
++ If ONC were to establish criteria for payer API technology, should CMS require certification to meet payer API requirements, or should such certification be made available solely on a voluntary basis? Would payers or developers of API technology providing solutions to payers be likely to obtain certification on a voluntary basis?
++ What could a roadmap to certifying payer API technology look like? What are the intermediate steps that may be taken toward payer API technology certification?
++ If payer API technology certification is not appropriate at this time, how would CMS and ONC know when conditions exist to propose certification criteria and requirements?
Step therapy is a form of utilization management used by some payers to control costs.
When developed and implemented appropriately, step therapy can use evidence-based criteria along with clinically-reasonable provisions for exceptions to encourage more rational prescribing in an effort to control drug costs and ensure that patients are receiving clinically based data-driven drug regimens.
While payers should be allowed to implement reasonable evidence-based policies to avoid unnecessary expenses incurred by suboptimal prescribing practices, CMS is soliciting public comment on whether increased interoperability of information technology (IT) systems across payers could be used to make utilization management policies, such as step therapy, more transparent.
CMS is interested in how technology and data sharing, such as via the Payer-to-Payer application programming interface (API), might streamline the step therapy process by giving payers access to historical drug therapies that a patient may have already tried and automating the utilization management process rather than requiring providers to submit historical records or attest to prior drug regimens. CMS seeks comment on how technology may facilitate step therapy determinations and improve current step therapy processes.
++ How could increased interoperability make the criteria for covering a given drug clear to patients and providers; allow providers to obtain permission to override the step therapy protocol for clinically appropriate documented reasons (for example, a patient's intolerance of or poor response to first step treatments); and increase the efficiency of the process for submitting information, ideally as part of electronic prescribing systems?
++ How could technology and data sharing, such as via the Payer-to-Payer API, support streamlined step therapy solutions? For example, if a patient changes plans, how could technology facilitate honoring step therapy determinations that a prior payer completed? Additionally, how could data sharing between payers provide automated solutions to evaluating step therapy requirements?
++ What other technical solutions, in addition to or in lieu of, a Payer-to-Payer API, could facilitate fast, efficient, accurate, and streamlined step therapy determinations?
++ What are the standard practices for payers applying step therapy criteria to a new patient who is currently stable on a medication? How does the payer obtain documentation to support that a patient has satisfied a previous payer's step therapy requirements or is currently stable on the drug(s)?
++ Given that payers may have different formularies and step therapy requirements, how can payers evaluate step therapy requirements and formulary options from a previous payer to apply their step therapy requirements to the same medication?
++ If a previous payer has already required step therapy and made a determination, what obligation should a new payer have to recognize and apply the previous payer's determination, if any, and how could this reduce burden on providers and payers?
++ If a new payer requires step therapy after a patient has satisfied a previous payer's step therapy requirements, what is the value of requiring the patient to meet step therapy requirements again for the new
++ What information is necessary or beneficial for a new payer to receive to make decisions about accepting a prior payer's step therapy decisions? Additionally, what challenges could payers face to implement systems to support this transaction, and would there be a cost impact to payers?
Prior authorization requirements from health insurers for laboratory tests and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) items have emerged, in some instances, as a potential barrier to care and coverage, impacting both patients and health care providers. While prior authorization has a role to play for program integrity purposes, such as preventing fraud and reducing waste on unnecessary medical resources, it may also prevent or delay appropriate care with improper denials and extended decision periods.
CMS has taken meaningful steps to reduce the burden associated with prior authorization processes across the health care industry. For instance, the 2024 CMS Interoperability and Prior Authorization final rule included requirements for impacted payers to improve prior authorization processes through policies and technology (89 FR 8758). Beginning in 2027, impacted payers will be required to implement and maintain a Prior Authorization application programming interface (API) to improve the electronic exchange of health care data related to the prior authorization processes (89 FR 8897). Once operational, impacted payers' Prior Authorization APIs will be populated with a list of non-drug items and services requiring prior authorization, as well as documentation requirements, which should facilitate the assembly of necessary information for health care providers to submit a complete prior authorization request. In addition, through the Wasteful and Inappropriate Service Reduction (WISeR) model, CMS is aiming to leverage advanced technology plus clinician review to assure that Medicare payments for certain high-risk items/services are timely and appropriate.
While CMS has made strides towards streamlining prior authorization processes, such as in the 2024 CMS Interoperability and Prior Authorization final rule, current prior authorization processes in the private health insurance industry may lead to unintended negative impacts. While Medicare fee-for-service (FFS) does not require prior authorization for laboratory tests, recent publications have raised concerns that the length of time it takes for prior authorization requests to be approved for laboratory tests from private payers may cause delays in care.
Additionally, a review of currently published literature indicates that some Medicare Advantage (MA) plans may be misusing prior authorizations to inappropriately delay or deny services or payment.
Further, CMS is aware that differences between medical documentation requirements for Medicare Administrative Contractors (MACs), MA plans, and other payers may lead to health care provider confusion and burden. Specifically, some MACs and MA plans may not accept a test requisition form (TRF) or a physician attestation as valid medical documentation to establish the medical necessity of a laboratory test, which can contribute to administrative burden and consume valuable time from health care providers that could otherwise be spent with patients.
Similar issues may arise with certain prior authorization requests related to DMEPOS items since prior authorization is required for many types of DMEPOS items. Beginning January 1, 2026, MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities are required to provide notification of prior authorization decisions within 7 calendar days after receiving a standard prior authorization request and 72 hours after receiving an expedited prior authorization request.
Similar to prior authorizations generally, varying payer prior authorization requirements can add complexity and burden for health care providers and patients to receive prior authorization for DMEPOS items and laboratory tests. In addition, DMEPOS items face additional coordination challenges, as laboratories and the DMEPOS suppliers are often reliant on the ordering health care provider to submit a prior authorization request on behalf of the patient; however, because the medical item or service is not being furnished by the health care provider, communication gaps may occur if not all parties understand the responsibilities and requirements of the prior authorization process. Moreover, differing prior authorization requirements across payers may result in confusion and errors in submissions. This could disrupt health care provider workflows and increase administrative costs, which can lead to denials for procedural reasons and appeals that may take months of additional administrative costs and efforts.
For example, in a recent scenario provided by a wheelchair supplier to CMS, a health care provider may order a wheelchair to help a patient regain mobility. In many instances, the DMEPOS supplier is reliant on the health care provider to submit a prior authorization request on behalf of the patient, including the supporting documentation. If prior authorization was not submitted by the health care provider or was inadequately supported, then the payer may deny the claim, which could lead to the wheelchair being taken from the patient, the patient being billed for the DMEPOS item, the DMEPOS supplier not receiving payment for the wheelchair, or appeals that take time from the payer and health care provider. Similarly, DMEPOS suppliers have noted that wheelchair repairs sometimes require prior authorization. While waiting for a prior authorization decision, the patient's mobility may be affected, which can impact their health and quality of life.
In summary, the issues associated with prior authorization for laboratory tests and DMEPOS items are multifaceted, encompassing potential delays in patient care, administrative burden on health care professionals, and differing requirements across payers. Addressing prior authorization issues is essential to enhance the efficiency of health care delivery and improve patient outcomes.
CMS is soliciting public comment on how prior authorization for laboratory tests and DMEPOS items impacts patient care and health care provider burden, and if there are opportunities to mitigate burden. CMS is interested in how automation of the prior authorization process for DMEPOS items and laboratory services could benefit health care providers, payers, and patients, as well as other opportunities for improving these processes.
• How do prior authorization requirements for laboratory tests and DMEPOS items currently impact patient care and health care provider burden?
• What are possible outcomes of more MACs, MA plans, or non-Medicare payers allowing a TRF to be valid medical documentation to show that a laboratory test is reasonable and necessary?
• How frequently are prior authorizations denied because the request was submitted after the specimen was collected?
• What impacts have laboratory benefit managers (LBMs) had in facilitating prior authorization processes, regulating access, and controlling payment for laboratory services?
• What opportunities for process improvement exist for prior authorization requirements? Are changes needed to make requirements even more effective at containing costs, reducing burden, and improving patient outcomes?
• How could automation of the prior authorization process for laboratory tests and DMEPOS items positively affect patient outcomes and potentially reduce both payer and health care provider burden?
• What other issues exist regarding prior authorization processes for laboratory tests and DMEPOS items that technology is not currently addressing?
• How do the issues associated with prior authorization impact the health care workforce and retention of skilled health care professionals?
Under the Paperwork Reduction Act of 1995 (hereinafter referred to as “PRA”) (Pub. L. 104-13, enacted May 22, 1995), 44 U.S.C. 3501-3520, we are required to provide notice in the
• The need for the information collection and its usefulness in carrying out the proper functions of our agency.
• The accuracy of our estimate of the information collection burden.
• The quality, utility, and clarity of the information to be collected.
• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
We request public comment on areas of this document that contain information collection requirements (ICRs).
In the 2024 CMS Interoperability and Prior Authorization final rule, we included provisions which streamline the prior authorization process to improve patient care while increasing efficiency (89 FR 8858). In the final rule, CMS characterized the burden associated with implementing the finalized APIs to support interoperability and prior authorization as collections of information. To more accurately calculate the burden in this proposed rule, the proposed policies included in this ICR section exclusively describe the required COI, while the burden and costs associated with implementation of the proposed policies are described in the Regulatory Impact Analysis (RIA) section under the Detailed Economic Analysis in section V.C. of this proposed rule. If finalized, the following burden estimates would be described in an updated version of the existing PRA package OMB control number 0938-1437 and submitted to OMB for approval. Further, CMS is pursuing additional revisions to OMB control number 0938-1437 to remove API implementation burden erroneously included in the original OMB control number 0938-1437 package. These revisions will align the approach for calculating ICR burden across existing interoperability focused PRA packages and streamline the content of the package for increased accuracy and fidelity to the requirements of the PRA. These revisions are described in section IV.D. of this proposed rule and will be submitted for OMB approval along with this proposed rule.
To derive average costs for this proposed rule, we used data from the U.S. Bureau of Labor Statistics (BLS) National Occupational Employment and Wage Estimates and aligned our analysis with other CMS regulatory actions.
Additionally, per OMB's recent recommendation, we utilize the median hourly wages rather than mean hourly wages in our calculations of labor burden.
We adjusted the employee hourly wage estimates by 100 percent, doubling the BLS wage estimates, to estimate fringe benefit costs. This calculation is a rough adjustment because fringe benefits and overhead costs vary significantly across employers based on the age of employees, location, years of employment, education, vocations, and other factors.
Consistent with our approach in the 2020 CMS Interoperability and Patient Access and 2024 CMS Interoperability and Prior Authorization final rules, we determine ICRs by evaluating cost and
Table 14 shows the number of parent organizations offering each type of health plan, including different combinations of health plans.
The numbers in Table 14 are used to calculate the cost of compliance across all impacted payers. The estimated burden and costs for each ICR are included at the end of this section in Table 20.
We have estimated that the total number of burden hours across impacted payers is 218,922 hours. The estimated total cost associated with information collection burden is $17.25 million in the second year following finalization and $4.32 million in subsequent years. All estimates will be described in the revised PRA package, OMB control number 0938-1437, which encompasses the information collections for all CMS interoperability rules—including the proposals outlined in this proposed rule, the 2020 CMS Interoperability and Patient Access final rule, and the 2024 CMS Interoperability and Prior Authorization final rule (85 FR 25510 and 89 FR 8758).
To increase transparency into payer prior authorization processes and to assist patients in choosing health coverage and evaluating payer networks, we propose to require MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to publicly report specific prior authorization metrics for drugs on their websites. We propose that MA organizations would report at the contract level (applicable integrated plans would also report drugs covered by MA organizations at the MA contract level), state Medicaid and CHIP FFS programs would report at the state level, Medicaid managed care plans and CHIP managed care entities would report at the plan and program level (if drug coverage is included in their contract), and QHP issuers on the FFEs would report at the issuer level. We propose that MA organizations, state Medicaid and CHIP FFS programs, and QHP issuers on the FFEs would be required to report data annually for the previous calendar year no later than March 31, following any calendar year that the payer offers that type of plan. For MA organizations, reporting would include prior authorizations for all
To comply with reporting requirements, we estimate that impacted payers would conduct two major work phases: (1) development, which includes defining requirements; and (2) maintenance, including an annual compilation of reports and public reporting of metrics on a website. In the first phase, impacted payers would need to define requirements concerning the types and sources of data that must be compiled regarding prior authorization activities for drugs and then compile the database to capture this information. In the second phase, impacted payers must create and post the reports to a public website annually.
Table 15 itemizes the estimated activities, hours, and dollar burdens for the first-year implementation and estimated annual maintenance costs. We assume relevant staff would include a software and web developer with a business operations specialist.
• First-year implementation would impose a total burden of 320 hours for the first year and 120 hours for subsequent years, at a per-entity cost of $33,300 and $9,400 (rounded) for the first and subsequent years, respectively.
• The aggregate burden of the first-year implementation across all 341 impacted payers included in this proposal is 109,000 hours and 41,000 hours (rounded) for the first and subsequent years, respectively, at a cost of $11.36 million and $3.20 million (rounded).
Beginning in 2026, CMS will begin collecting data from impacted payers on Patient Access API usage. As well as the finalized Patient Access API usage metrics, we are proposing to require, beginning in 2028, impacted payers to report metrics to CMS in the form of aggregated, de-identified data about Provider Access, Payer-to-Payer, and Prior Authorization API usage. We propose that impacted payers would be required to annually report these data to CMS on dates appropriate to each payer's regular reporting, contracting, or certification periods, as described earlier in this proposed rule.
We believe these data could provide insight into provider and payer use of the new APIs, the effectiveness of the CMS policies, and any additional education and outreach in which CMS may need to engage. The annual reports would be submitted to CMS by impacted payers. Specifically, we propose collecting the metrics outlined in section II.F.2. of this proposed rule for the Provider Access, Payer-to-Payer, and Prior Authorization APIs. For such reporting efforts, we estimate that the impacted payers would conduct a gap analysis of existing reports they may have already prepared, followed by appropriate tasks to develop, produce, and submit such reports to CMS for the metrics outlined in section II.F.2. of this proposed rule.
Table 16 includes our estimates for first-year implementation and ongoing reporting tasks. Total staffing hours would be 160 and 40 hours for the first and subsequent years, respectively, at a total cost per impacted payer of $17,000 and $3,000 (rounded). The aggregate burden for 341 parent organizations would be 55,000 hours and 14,000 hours (rounded) for the first and subsequent years at a cost of $5.84 million and $1.07 million (rounded), respectively.
No later than 60 days after the effective date of the final rule, CMS would require impacted payers to report API endpoints to CMS for publication in the form of an Endpoint Resource, as defined by an unexpired version of the FHIR® standard adopted in 45 CFR 170.215(a). New impacted payers would be required to report this information no later than 60 days before they begin covering patients under the applicable CMS program. Further, CMS proposes to require impacted payers to report to CMS the direct URL for their interoperability API's FHIR capability statements and one or more URLs with the required documentation regarding authorization and authentication protocol and implementation details and API registration information. CMS would require impacted payers to report updated information within 1 week of any changes to the reported information and verify the reported information at least every 12 months. The proposed policy would require 2 hours of labor by a Business Operations Specialist at an hourly rate of $78.14 or $156.28 annually. For all impacted payers, this reporting burden would be $53,291 annually, rounded ($156.28 × 341 respondents = $53,291.48).
The existing OMB control number 0938-1437 describes the burden associated with the policies finalized in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8758). As mentioned previously in this section, CMS seeks to streamline PRA packages corresponding to the CMS interoperability rules.
OMB control number 0938-1437 currently includes the burden associated with API implementation requirements finalized in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8858). CMS intends to modify the PRA package to remove the implementation burden of the API policies, as they do not reflect information collection burden as defined by the PRA and falsely inflate the information collection burden associated with the PRA package and the 2024 CMS Interoperability and Prior Authorization final rule. Specifically, we are removing the burden estimates associated with developing, implementing, and maintaining the APIs finalized in the 2024 CMS Interoperability and Prior Authorization final rule and usual and customary business costs related to prior authorization process requirements, while retaining the following burden estimates: (1) reporting Patient Access API metrics to CMS (42 CFR 422.119, 42 CFR 431.60, 42 CFR 438.242, 42 CFR 457.730, and 42 CFR 457.1233 and 45 CFR 156.221); and (2) publicly reporting prior authorization metrics (42 CFR 422.122, 42 CFR 438.210, 42 CFR 440.230, 42 CFR 457.732, and 42 CFR 457.1230 and 45 CFR 156.223).
CMS originally calculated the PRA burden by including the cost of finalized requirements to implement and maintain the Provider Access, Payer-to-Payer, and Prior Authorization APIs. We assumed that to implement these APIs, impacted payers would conduct three major work phases: initial design, development and testing, and long-term support and maintenance and accounted for these costs in the PRA package, thus inflating the estimated burden with costs not associated with COI. When updating OMB control number 0938-1437 to reflect the burden associated with this proposed rule, CMS will remove the following costs as outlined in Table 18.
This modification would reduce the calculated information collection cost burden by $684 million and by 6,659,425 burden hours.
In the 2024 CMS Interoperability and Prior Authorization final rule, CMS established timeframe requirements for impacted payers to provide prior authorization decisions (89 FR 8897). In the ICR section of the 2024 CMS Interoperability and Prior Authorization final rule, CMS described the final policy as imposing information collection burden on the impacted payers in the form of up-front costs for impacted payers to update their policies and procedures (89 FR 8952). We estimated that this policy would result in 8 hours of work by a general and operations manager to update the policies and procedures, reflecting 2 half-days of work at a per-entity cost of $967. Therefore, the total burden for all 365 impacted payers is 2,920 hours of work at a cost of $0.35 million. However, the cost of updating internal policies and procedures by a payer is considered by CMS to be usual and customary and does not necessitate an ICR or corresponding burden in a PRA package. CMS intended to characterize this burden as usual and customary, which is reflected in the supporting statement for the currently approved PRA package, but due to a technical error the burden was included in the total cost of the rule and in the burden total of the PRA package. To correct this oversight and to avoid falsely inflating the estimated burden with costs not associated with COI, CMS would remove these costs when updating OMB control number 0938-1437, as outlined in Table 19.
This modification would reduce the calculated burden by $0.35 million. In combination, the revisions described in Tables 18 and 19 would reduce the calculated burden from the PRA package approved under OMB control number 0938-1437 by $684.35 million.
In this section we have explained the estimated costs of individual proposals for purposes of the ICRs. Table 20 summarizes costs for the first and subsequent years of these proposals and is based on the following assumptions:
• Certain proposals would be effective beginning 2028. However, we assume impacted payers would conduct certain activities before the compliance date to make appropriate operational, procedural, or system changes.
• We are basing our calculations on a 1 year estimate to accommodate all system, process, and reporting activities. The 1 year reflects the period from the expected publication of a proposed rule in [Placeholder Date] until the associated compliance dates.
• Labor costs in the COI are either BLS wages when a single staff member is involved or a weighted average representing a team effort, obtained by dividing the aggregate cost by the aggregate hours.
• Note that while the ICR burden calculations in Table H8 reflect differing amounts of burden in the first and subsequent implementation years, CMS will submit the revised OMB control number 0938-1437 to reflect the average annual burden amount across the first, second, and third implementation year, to align with the 3-year PRA package expiration timeframe. Table 20 provides the 3-year averages in columns “Average Annual Hours” and “Average Annual Cost.”
The proposals in this proposed rule, if finalized, should lead to phased improvements of sharing data across impacted payers and providers by requiring systems that facilitate patient data access, receipt, and exchange. We request comments on our approaches for estimating cost burden.
We have submitted a copy of this proposed rule to OMB for its review of the rule's information and recordkeeping requirements. These requirements are not effective until they have been approved by OMB. To obtain copies of the supporting statement and any related forms for the proposed collections discussed previously, please visit CMS's website at
If finalized, the proposals in this proposed rule would place new requirements on MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs (collectively referred to as “impacted payers”)
We are required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), Executive Order 14192 on Unleashing Prosperity Through Deregulation (January 31, 2025), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), Executive Order 13272 on Proper Consideration of Small Entities in Agency Rulemaking (August 13, 2002), section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104-4), and Executive Order 13132 on Federalism (August 4, 1999) to examine the impacts of a proposed rule.
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health, safety effects, and distributive impacts). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as any regulatory action that is likely to result in a rule that may: (1) have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, or the President's priorities.
Based on our estimates, the Office of Information and Regulatory Affairs (OIRA) has determined this proposed rulemaking to be significant per section 3(f)(1) of Executive Order 12866, as the initial economic impact estimates presented in this proposed rule approach the $100 million threshold. We have prepared a RIA that presents the estimated costs, benefits, and transfers of this proposed rule. We note that the proposed rule impacts two overlapping but regulatorily distinct groups of entities: impacted payers (MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs) which are health plans regulated by CMS; and HIPAA covered entities, which are regulated by HHS, and defined as “a health plan, health care clearing house, a health care provider who transmits any health information in electronic form in connection with a transaction covered by this subchapter.”
Anticipated non-quantified benefits of this proposed rule relate to improving continuity of care and patient outcomes. Prescription and other drug information is part of a patient's record and giving patients, providers, and payers access to claims data for prescription and other drugs can offer valuable insights into a patient's health care, provide benefits for care coordination, and avoid potentially harmful drug interactions. The proposal to incorporate drugs into the existing prior authorization API requirements has the potential to improve the timeliness of prior authorization decisions for drugs and minimize prior authorization denials, which could reduce delays in patient access to medication and limit the associated medical risk. The proposal to align state CHIP FFS programs' and QHP issuers on the FFEs' deadlines for responses to prior authorization requests with other impacted payers would likely result in operational efficiencies across a health plan's multiple lines of business, as there would be a consistent expectation and policy across the different products offered by that plan. Further, the proposals to report prior authorization metrics could benefit patients by allowing them to make better informed decisions regarding their plan selection.
We believe that many stakeholders could benefit from the proposals in this proposed rule, but do not provide an analysis of expected savings to impacted payers and HIPAA covered entities arising from proposed prior authorization process improvements, use of NCPDP standards, or updates to replace current X12N transaction standards with the FHIR standard and applicable IGs for electronic prior authorization transactions. The estimated savings associated with utilizing APIs to exchange EHI is already described in detail in the 2024 CMS Interoperability and Prior Authorization final rule. The proposals in this proposed rule build upon those finalized requirements by expanding the type of information exchanged, but they do not produce the same level of quantifiable efficiencies as those created by the requirements to transition from manual prior authorization processes to electronic prior authorization via an API. While we do not make specific assumptions about savings, we believe there could be cost-reducing benefits associated with these provisions including reduced paperwork, faster response times, and other efficiencies.
Surveys by the AMA cited in section II.C. of this proposed rule describe negative consequences of delayed prior authorizations, including those for drugs, and stakeholders wrote about the challenges of complicated payer requirements for prior authorization of drugs and delayed decision-making. However, we have not received specific financial information from commenters or industry surveys. Nonetheless, we believe savings would accrue due to fewer denials and fewer appeals that would need to be processed by impacted payers because of these proposals. Denials and appeals sometimes result from errors, missing information, lack of specificity or clarity in guidelines or instructions. We believe that by requiring impacted payers to incorporate coverage and documentation requirements for drugs covered under a medical benefit into the Prior Authorization API, as well as to support the proposed NCPDP standards for electronic prior authorization of drugs covered under a pharmacy benefit, providers would be better able to collect and submit all necessary information to conduct a prior authorization, which could reduce processing challenges and increase efficiencies, resulting in cost savings. Further, HHS expects that the proposal to adopt FHIR standards for HIPAA covered entities (health care providers, health plans, and health care clearinghouses) to conduct electronic prior authorization transactions could reduce processing challenges, produce administrative efficiencies, and create savings long-term.
HHS is proposing a modification to two HIPAA Administrative Simplification transactions, the “referral certification and authorization” transaction in 45 CFR part 162, subpart M, and the “eligibility for a health plan” transaction in 45 CFR part 162, subpart L. Specifically, HHS proposes adding a new paragraph in 45 CFR 162.1302(g) to adopt the FHIR standard and the US Core, SMART App Launch, CRD, DTR, PAS, and CDex IGs as the specifications that compose the proposed transaction standard for dental, professional, and institutional “referral certifications and authorization” transactions. In addition, in a new paragraph in 45 CFR 162.1202(f)(2), HHS is proposing to adopt the FHIR standard, the US Core, SMART App Launch, and CRD IGs as the specifications that compose the proposed transaction standard for dental, professional, and institutional “eligibility for a health plan” transactions, when used to determine whether prior authorization is required. If finalized as proposed, HIPAA covered entities would be required to comply with these transaction standards no later than 24 months from the effective date of a final rule, except for small health plans, for which the compliance date would be 36 months from the effective date of a final rule.
The costs associated with the proposal to adopt FHIR standards differ from the other costs described in this proposed rule because the number of HIPAA covered entities is much larger than the number of impacted payers regulated by CMS and includes various types of business entities across the health care industry. For the purposes of this impact analysis, HHS assumes that only the HIPAA covered entities that have not yet implemented FHIR standards or do not use certified health IT that includes FHIR would incur cost for the technical work of updating systems from the current X12N 278 transaction standard to implement the proposed FHIR standards for electronic prior authorization. Though the data are severely limited, HHS attempts to provide reasonable estimates of the number of HIPAA covered entities that already utilize FHIR APIs, or that are already required to implement FHIR
For these estimates, HHS uses the adoption of certified EHR technology as a proxy for FHIR API adoption. The ONC Cures Act final rule adopted an API certification criterion which requires the use of the HL7 FHIR standard and incorporated this criterion into the 2015 Edition Base EHR definition (85 FR 25646). Therefore, HHS assumes that the use of certified health IT among certain HIPAA covered entities corresponds to the use of and access to FHIR standards and relies on industry data and research into the use of certified EHR technology. HHS concludes that if a HIPAA covered entity, such as a hospital, relies on the X12N transaction standards for prior authorization, but is already using FHIR-enabled certified EHR technology in their workflow, then they would incur negligible cost in complying with the proposed requirements to transition to the FHIR standard since they already have technology with the technical capability in place.
HHS uses many of the assumptions and data sources leveraged in the 2022 HIPAA Standards for Health Care Attachments proposed rule to estimate the number of HIPAA covered entities that would be impacted by the proposed requirements (87 FR 78438). As in the 2022 HIPAA Standards for Health Care Attachments proposed rule, HHS used the Census Bureau 2022 Statistics of U.S. Businesses (SUSB) dataset (which is based on the 2017 North American Industry Classification System [NAICS] codes) to identify NAICS codes corresponding to hospitals, health care providers (using physician NAICS code), and health plans to determine the total count of firms within each category of impacted HIPAA covered entities, which are listed in Table 21.
The Census Bureau 2022 SUSB dataset reflects 3,319 hospital firms nationwide. Of these 3,319 firms, approximately 2,573 are general hospitals, 419 are psychiatric hospitals, and 327 are specialty hospitals. According to an analysis on the adoption of EHRs by hospital service type from 2019 through 2021 published by ONC, approximately 96 percent of all non-federal acute care hospitals adopted a certified EHR, while 40 percent of rehabilitation hospitals and 23 percent of specialty hospitals adopted a 2015 Edition certified EHR technology.
Analysis conducted by ONC suggests that, as of 2021, approximately 78 percent of physicians adopted and utilize certified EHR technology in their practice.
The Census Bureau 2022 SUSB dataset reflects 1,071 health plan firms nationwide.
HHS does not anticipate a one hundred percent transition to the proposed FHIR standards for electronic prior authorization transactions among the remaining 730 health plan firms. Since the adoption of X12N transaction standards among health plans for prior authorizations remains low (approximately 35 percent), HHS expects that some health plans which have not yet adopted the X12N transaction standards for prior authorizations will forego the investment in a FHIR API and instead continue to use manual prior authorization methods or proprietary portals.
HHS estimates that the cost of implementing and maintaining a FHIR API using the proposed FHIR standards would largely align with the cost to implement and maintain the Prior Authorization APIs described in the 2024 CMS Interoperability and Prior Authorization final rule. Health plans would conduct three work phases: (1) design; (2) development and testing; and (3) support and maintenance (85 FR 25605 and 25623, and 89 FR 8948, 8950, and 8953). In the initial design phase, tasks include determining available resources (for example, personnel, hardware, cloud storage space, etc.); assessing whether to use in-house or contracted resources to facilitate an API connection; convening a team to scope, build, test, and maintain the API; gap analysis; and gap mitigation. During the development and testing phase, health plans would map existing data to the FHIR standards, determine hardware allocation for the necessary environments (development, testing, and production), build a new FHIR server, determine the frequency and method by which internal data are populated on the FHIR server, build connections between the databases and the FHIR server, perform capability and security testing, and vet provider requests.
HHS further refines these technical builds and implementation estimates by considering the results of industry exceptions testing requested by the HL7® Da Vinci Project (HL7 FHIR Exception #202103100) to test FHIR standards.
For the estimated 256 health plans, HHS assumes that the one-time cost to develop and implement the FHIR API will require approximately 2,790 hours of labor for each entity over 2 years, at a total cost of approximately $327,000 dollars. See Table 22 for a breakdown of the total costs. HHS estimates an annual maintenance cost averaging approximately 25 percent of the estimated one-time API development costs. Total annual maintenance cost for a single health plan would be approximately $78,000 dollars and this cost is included in the 10-year projections in Table 33.
HHS requests public comments on our approach and assumptions for the aggregate maintenance cost of the APIs, including whether HHS's estimate is reasonable or should be modified.
While HHS is of the view that the use and accessibility of FHIR-enabled certified EHR technology in the health care industry is increasing, business practice uncertainties and a paucity of baseline data make it difficult to estimate the cost of adopting FHIR among certain HIPAA covered entities. In particular, the potential cost incurred by health care clearinghouses and EHR vendors that supply technologies to health care providers to adopt the proposed FHIR standards for prior authorization-related transactions into their products and contract offerings is unclear.
EHR vendors provide the technology that many hospitals and physicians use to transmit EHI to and from payers. For the purposes of this impact analysis, HHS uses “EHR vendor” as a catch-all to represent plan management system vendors and EHR technology system vendors. Counting the affected entities separately is complicated, in part because they are increasingly integrated. A health care provider entity's plan management system and EHR systems may be bundled in one product offering, semi-integrated affiliated systems, or entirely independent systems offered by separate vendors. The 2022 Census Bureau SUSB dataset does not provide firm-level counts for health care industry-specific technology vendors.
Health care clearinghouses present another set of uncertainties. Clearinghouses provide transaction processing and data translation services to both providers and health plans. The applicable NAICS category (NAICS 524114) includes many types of financial transaction processing firms other than those affected by this rule, so the Census business data cannot be used to identify a nationwide count. Based on the counts used in the 2022 HIPAA Standards for Health Care Attachments proposed rule, HHS assumes that there are approximately 162 clearinghouse entities nationwide (87 FR 78455). According to industry research, most health care clearinghouse vendors integrate with or offer features that can be part of health IT systems, including EHR or other health IT products.
ONC proposes to adopt new standard versions of a series of IGs which were adopted by the Secretary in the HTI-4 final rule (90 FR 37130), which appeared in the
• HL7 FHIR® Da Vinci—Coverage Requirements Discovery (CRD) Implementation Guide, Version 2.2.1—STU 2.2 (proposed in 45 CFR 170.215(j)(1)(ii))
• HL7 FHIR® Da Vinci—Documentation Templates and Rules (DTR) Implementation Guide, Version 2.2.0—STU 2.2 (proposed in 45 CFR 170.215(j)(2)(ii))
• HL7 FHIR® Da Vinci Prior Authorization Support (PAS) FHIR Implementation Guide, Version 2.2.1—STU 2.2 (proposed in 45 CFR 170.215(j)(3)(ii))
• HL7 FHIR® CARIN Consumer Directed Payer Data Exchange (CARIN IG for Blue Button®) Implementation Guide, Version 2.2.0—STU 2.2 (proposed in 45 CFR 170.215(k)(1)(ii))
• HL7 FHIR® Da Vinci Payer Data Exchange (PDex) US Drug Formulary Implementation Guide, Version 2.1.0—STU 2.1 (proposed in 45 CFR 170.215(m)(2))
• HL7 FHIR® Da Vinci Payer Data Exchange (PDex) Plan Net Implementation Guide, Version 1.2.0—STU 1.2 US (proposed in 45 CFR 170.215(n)(2))
• HL7 FHIR® Da Vinci—Clinical Data Exchange (CDex) Implementation Guide, Version 2.1.0—STU 2.1 (proposed in 45 CFR 170.215(k)(3))
As part of the HTI-4 final rule, ONC finalized certification criteria for electronic prior authorization in the ONC Health IT Certification Program that incorporated the CRD, DTR, and PAS IGs. As part of this proposed rulemaking, CMS is proposing to incorporate cross-references to 45 CFR 170.215 where these standards would be adopted as part of proposed technical requirements for payer APIs CMS previously established in the 2020 CMS Interoperability and Patient Access and the 2024 CMS Interoperability and Prior Authorization final rules.
ONC analysis of these new standard versions finds that the changes between currently adopted standard versions and these new standard versions are small in scope and would not require significant effort to adopt. Furthermore, ONC adopted the current standard versions in regulation as part of the HTI-4 final rule, with no required date to adopt the new certification criteria and the associated standards, lowering any duplication of effort to first adopt the current standard version and the proposed new standard version (90 FR 36536 through 37308). ONC also finds—aligning with the impact analysis for this proposed CMS rulemaking—that the proposed updates would not require new adoption of technology by health IT users or adoption of new certification criteria by developers of certified health
To analyze the cost of the proposals related to prior authorization of drugs, we allocate costs by the three federally funded programs that would be impacted by this provision—MA; Medicaid and CHIP (including state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities); and QHPs on the FFEs. As the cost is shared by the 341 parent organizations offering impacted health plans, including state Medicaid and CHIP agencies, there is no readily available way to allocate costs per parent organization across programs as the percentage of each parent organization's expenditure on the different programs is not publicly available.
To address this, we use the CMS Medical Loss Ratio (MLR), acknowledging its data limitations as we did in the 2020 CMS Interoperability and Patient Access and 2024 CMS Interoperability and Prior Authorization final rules (85 FR 25612 through 25616 and 89 FR 8969). Our actuaries use the public CMS MLR files, which break out total premiums among the various programs.
While most of the CMS proposals in this proposed rule apply to all impacted payers, there are two proposals that do not. For these proposals, Table 24 shows premium allocation by program.
First, as shown in Tables 14 and 20 in sections IV.C. and IV.E. of this proposed rule, the prior authorization decision timeframes for drugs proposal only applies to the 66 parent organizations offering QHPs on the FFEs. For this proposal, 100 percent of the cost is allocated to QHPs on the FFEs. Second, as shown in Table 24, the proposed NCPDP SCRIPT standard for prior authorization of drugs covered under a pharmacy benefit only applies to two programs, those being: (1) Medicaid and CHIP; and (2) QHPs on the FFEs. For this provision, we allocated 68.91 percent of the total cost to Medicaid and CHIP ($209 ÷ $303 = 68.91%) and 31.09 percent of the total cost to QHP on the FFEs ($94 ÷ $303 = 31.09%). Note, $303 billion is the aggregate amount of premium costs associated with these two programs: (1) Medicaid and CHIP at $209 billion; and (2) QHPs on the FFEs at $94 billion. Therefore, 68.91 percent equals the estimated $209 billion in premiums that would be spent by Medicaid and CHIP and 31.09 percent equals the $94 billion in premiums that would be spent by QHPs on the FFEs.
Table 25 reflects the total cost to impacted payers resulting from CMS proposals in this section. This cost is attributed among: MA organizations; Medicaid and CHIP (including state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities); and QHP issuers on the FFEs using the methodology discussed in section V.C.2.b.(1). of this proposed rule. In total, the three programs would incur an estimated $141.26 million over 10 years to implement these CMS proposals described in sections V.C.2.b.(1).(a). through V.C.2.b.(1).(g). of this proposed rule.
In this proposed rule, we would expand upon the Prior Authorization API provisions finalized in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8897) by requiring impacted payers to incorporate prior authorization coverage and documentation requirements for drugs covered under a medical benefit into the Prior Authorization API beginning in 2027. If finalized as proposed, CMS anticipates that there would be a 2027 compliance date for this proposal. This should allow for approximately 1 year of lead time between publication and the compliance date.
To incorporate drug coverage and documentation requirements into the existing Prior Authorization API, we estimate that all impacted payers would need to conduct similar work phases as for implementation of the API such as design, development testing, and long-term support and maintenance. For prior authorization of drugs, some, but not all, tasks would be necessary for the initial development work, such as identifying the relevant drugs, system connections to formularies or PBMs, and programming the Prior Authorization API to include drugs covered under a medical benefit. Some of the same expertise would be required to develop and implement prior authorization policies and systems processes for drugs covered under a medical benefit as were needed to develop a Prior Authorization API for non-drug items and services. Still, it would not require the same level of effort as for the development of the API itself.
Acknowledging that impacted payers would have the technical infrastructure in place, the deployment of these proposals is estimated at 127,670 burden hours to calculate the estimated cost, which results in $15,348,797 for all 341 impacted payers (see costs determination in Table 26). We distributed the cost over approximately 1 calendar year to ensure impacted payers can identify, analyze, and program their systems to include drugs covered under a medical benefit. Since this rule proposes a compliance date of October 1, 2027 for this proposal, CMS acknowledges that the development timeframe would likely overlap with impacted payers' development efforts related to the API requirements finalized in the 2024 CMS Interoperability and Prior Authorization final rule. Due to this overlap in development activity, we anticipate that the one-time costs incurred in 2026 would double due to the increase in developer labor hours needed to progress both technological builds simultaneously. To provide an approximate adjustment accounting for this burden, we double the amount of cost estimated to fall in the year 2026 (approximately 25 percent of the total development burden) which results in an additional $3,837,199 across all 341 impacted payers ($15,348,797.38 × 0.25 = $3,837,199.35) which is reflected in the annual cost associated with each proposal in Table 33. The resulting total is $19,185,997 in one-time implementation cost across all impacted payers. We request comment on these estimates.
We are proposing that the same policies that require impacted payers to make available—via the Access APIs—information about prior authorization requests and decisions for non-drug items and services for which an impacted payer has data in the patient's record would now apply to drugs as well, as described in section II.F.1. of this proposed rule. If finalized as proposed, CMS anticipates that there will be a 2027 compliance date for this proposal. This should allow for approximately 1 year of lead time between publication and the compliance date.
As in the 2020 CMS Interoperability and Patient Access and 2024 CMS Interoperability and Prior Authorization final rules, we assume that for the technical work, impacted payers would conduct three work phases: (1) design; (2) development and testing; and (3) support and maintenance (85 FR 25605 and 25623 and 89 FR 8948, 8950, and 8953). In this proposed rule, we assume the same phases of work would take place for the tasks related to the new proposals related to the APIs, with a different level of effort during each work phase. In the initial design phase, tasks include determining available resources (for instance, personnel, hardware, cloud storage space, etc.); assessing whether to use in-house or contracted resources to conduct the programming; and convening a team to scope, build, test, and maintain work.
Adding prior authorization information to the existing Access APIs upon request should not require substantive technological changes but could require programming and impact data storage. Additional programing and data storage reflects only a small part of the total cost of API implementation and, while cost may vary depending on health plan, we chose to use 15 percent of full API implementation cost to reasonably approximate the burden associated with these activities. We estimate the effect to be 15 percent of the prior cost for the Access APIs' implementation as a baseline and invite stakeholders to comment on this 15 percent estimate. We estimate that a parent organization adding this prior authorization information to the Access APIs would require on average 278 hours, with the corresponding cost obtained by multiplying the estimated hours by the median wage per hour. Since this rule proposes a compliance date of October 1, 2027 for this proposal, CMS acknowledges that the development timeframe would likely overlap with impacted payers' development efforts related to the API requirements finalized in the 2024 CMS Interoperability and Prior Authorization final rule. Due to this overlap in development activity, we anticipate that the one-time costs incurred in 2026 would double due to the increase in developer labor hours needed to progress both technological builds simultaneously. To provide an approximate adjustment accounting for this burden, we double the amount of cost estimated to fall in the year 2026 (approximately 25 percent of the total development burden) which results in an additional $2,775,755 across all 341 impacted payers ($11,021,098.18 × 0.25 = $ 2,755,274.55) which is reflected in the annual cost associated with each proposal in Table 33. The resulting total is $13,776,373 in one-time implementation cost across all impacted payers. We request comment on these estimates.
We are proposing to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support a version of the NCPDP SCRIPT standard adopted by the Secretary in 45 CFR 170.205(b) when performing electronic prior authorization for drugs covered under a pharmacy benefit. If finalized as proposed, CMS anticipates that there will be a 2027 compliance date for this proposal. This should allow for approximately 1 year of lead time between publication and the compliance date.
This proposed rule does not intend to address the prior authorization criteria these impacted payers use to make decisions about coverage. However, supporting the proposed NCPDP SCRIPT standard should make the prior authorization process less burdensome for payers and providers and could improve timeliness to approved prescriptions for patients. Specifically, based on stakeholder feedback, we believe providers already using electronic prescribing software have access to the NCPDP SCRIPT standard for electronic prior authorization.
We reviewed the 2024 Part D and Health IT Standards final rule (89 FR 51238) and the 2020 Medicare Part D ePA final rule (85 FR 86824) to obtain cost estimates for this proposal. In these rules, CMS indicates that the technical tasks (for instance, building the infrastructure and logic) to support the proposed NCPDP SCRIPT standard can vary based on how the impacted payer documents the prior authorization criteria. The average cost per impacted payer is estimated at $6,500, regardless of the size and expertise of the payer. In the 2020 Medicare Part D ePA final rule, the $6,500 figure included the payer's internal costs, including labor, initial development and programming, and systems support to transform each of its CMS-approved prior authorization criteria from a manual process suitable for telephonic or manual efforts. Since the publication of the 2020 Medicare Part D ePA final rule, CMS has not collected new data related to the cost of supporting the NCPDP SCRIPT standard among impacted payers. In the absence of updated data, we have adjusted the estimated $6,500 for inflation using the BLS Consumer Price Index Inflation Calculator to obtain a more reasonable estimate of the potential cost. The resulting cost is approximately $12,500 in inflation-adjusted dollars. Similar to the other proposals implicating systems build for the prior authorization of drugs, this rule proposes a compliance date of October 1, 2027 for the adoption of the NCPDP SCRIPT standard. CMS acknowledges that the development timeframe would likely overlap with impacted payers' development efforts related to the API requirements finalized in the 2024 CMS Interoperability and Prior Authorization final rule. Due to this overlap in development activity, we anticipate that the one-time costs incurred in 2026 would double due to the increase in developer labor hours needed to progress both technological builds simultaneously. To provide an approximate adjustment accounting for this burden, we double the amount of cost estimated to fall in the year 2026 (approximately 25 percent of the total development burden) which results in an additional $743,750 across all 341 impacted payers ($2,975,000 × 0.25 =$ 743,750) which is reflected in the annual cost associated with each proposal in Table 33. The resulting total is $3,718,750 in one-time implementation cost across all impacted payers. We request public comment on these estimates. We solicit comments from impacted payers on this approach and other sources of data we could use to determine this cost estimate.
We are proposing to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support the NCPDP F&B standard version 60 adopted by the Secretary in 45 CFR 170.205(u), for transmitting formulary and benefit information between providers and impacted payers, and NCPDP RTPB standard version 13 adopted by the Secretary in 45 CFR 170.205(c), to enable real-time, patient-specific prescription benefit information to be delivered to providers at the point of prescribing. If finalized as proposed, CMS anticipates that there will be a 2027 compliance date for this proposal. This should allow for approximately a year of lead time between publication and the compliance date. Consistent with the initial adoption of these standards in the 2020 Medicare Part D ePA final rule, we are advancing these proposals with unclear costs for these impacted payers, but a clear vision that it is important to invest in these programs due to the increasing costs of drugs and potential savings that could be realized through the proposed NCPDP F&B and NCPDP RTPB standards. Cost associated with the adoption of these standards remain unclear due to a lack of robust public data on the implementation of the proposed NCPDP F&B and NCPDP RTPB standards among Medicare PDPs. An understanding of the adoption rate in Medicare Part D and the cost of implementation among those plans could support the development of a cost analysis in this proposed rule. CMS solicits comment on the cost of the proposed NCPDP F&B and NCPDP RTPB standards among impacted payers who have already implemented them in their Medicare Part D lines of business and specifically requests comment on the type of implementation activities associated with cost, such as software development and testing. Further, CMS solicits comments from impacted payers who would be adopting these standards for the first time with respect to their anticipated implementation activities and anticipated costs for expenses such as software licensing, system integration, API development, and testing. CMS requests comment comparing the cost of implementing these standards for the first time with the estimated one-time cost of implementing the NCPDP SCRIPT standard of $12,500 per entity, plus the additional markup for the cost of labor in the year 2026.
In this proposed rule we are proposing to apply existing requirements to small group market QHP issuers on the FF-SHOPs as described in section II.D. of this proposed rule. Consistent with the provisions of the 2020 CMS Interoperability and Patient Access final rule (85 FR 25522), we are proposing the development and implementation of a standards-based Patient Access API that permits third-party apps to retrieve standardized data for adjudicated claims, encounters with capitated providers, provider remittances, enrollee cost sharing, reports of lab test results, and preferred drug lists at the request of the patient. We are proposing to apply this requirement to small group market QHP issuers on the FF-SHOPs for plan years beginning on or after January 1, 2028.
We are also proposing that small group market QHP issuers on the FF-SHOPs implement and maintain standards-based Provider Access, Payer-to-Payer, and Prior Authorization APIs, consistent with requirements in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8817, 8855, and 8897). We are proposing compliance dates for the Provider Access and Payer-to-Payer API requirements of plan years beginning on or after January 1, 2028, and an October 1, 2027 compliance date for the Prior Authorization API requirements. In that final rule, we finalized another set of requirements for impacted payers (excluding small group market QHP issuers on the FF-SHOPs) to report on the Patient Access API and publicly report prior authorization metrics (89 FR 8784 and 8897). We do not anticipate that there would be added burden for the parent organizations that offer individual market QHPs on the FFEs to implement these proposals for their small group market QHPs on the FF-SHOPs, because the parent organizations are already required to implement these same policies for their individual market QHPs on the FFEs.
CMS proposes to require impacted payers to report metrics about the usage of the Provider Access, Payer-to-Payer, and Prior Authorization APIs in the form of aggregated, de-identified data. We estimate that this proposal will require 100 hours of labor by a Software
CMS proposes to require impacted payers to report all API endpoints in the form of an Endpoint Resource, a direct URL for their API's FHIR capability statements, and required documentation such as authorization and authentication protocols, implementation details, and API registration information to CMS within 1 week of any changes and to verify this every 12 months. We estimate that this proposal would require 2 hours of labor by a Business Operations Specialist at $78.14 ($156.28 annually) per impacted payer and for all impacted payers we estimate that the reporting burden would be $53,291 annually. For additional information on this burden estimate, see section IV.C.3. of this proposed rule.
We propose in section II.G. of this proposed rule to create a new definition of “failure to report” that includes the failure to provide requested documentation during an audit. CMS has both CMP authority in 42 CFR 403.912(a) and audit authority in 42 CFR 403.912(e)(2). CMS began implementing the Open Payments audit program in 2022 and conducted the first full audit during the 2023 cycle. Over this 2-year period CMS audited 16 total entities. Due to the relatively short implementation period of the Open Payments audit program, we have limited historical data to use in estimating the amount of CMPs that would be imposed as a result of the proposed “failure to report” definition as it relates to audit findings. In the absence of robust audit data, we are relying on information from the 2022 to 2023 audits and the statutorily mandated knowing “failure to report” CMP methodology (section 1128G(b)(2) of the Act) to calculate the estimated cost associated with this proposal.
Based on previous audit sample sizes, CMS estimates an average of 10 reporting entities will be audited (out of approximately 1,700 reporting entities) annually. During the 2022 to 2023 audit cycles, approximately 25 percent of sampled entities failed to fully or partially comply with audit requests. CMS anticipates that the proposed definition of “failure to report” would compel entities to fully comply with audit requests. Without implementation experience to draw from, CMS can only estimate how the change in definition would impact compliance with audit requirements. CMS assumes that the non-compliance rate would drop to approximately 10 percent of sampled entities if the definition is finalized. CMS invites comment on this assumption. Based on an expected sample size of 10 entities, CMS anticipates imposing CMPs for one reporting entity per year (10 × 10 percent). As knowing “failure to report” CMP amounts are determined by the Act on a per-record basis between $10,000 and $100,000 for each failure, with a program year ceiling of $1,000,000 (adjusted annually in 45 CFR part 102), the amount of CMPs imposed on a single entity could vary depending on how many instances of non-compliance CMS identifies and the duration of the non-compliance. CMS uses the median per-record knowing “failure to report” CMP amount of $77,371 (considering a range of $14,067 and $140,674 for 2024, per 45 CFR part 102) to calculate the total amount of anticipated CMPs for a non-compliant entity. Based on the results of previous audits, we assume a non-compliant entity would fail to report a total of five records per program year, but we invite comment on this assumption.
Therefore, CMS estimates that on average one entity per audit cycle would be found non-compliant in the reporting of approximately five records per program year, at an average rate of $77,371 per record, or $386,855 ($77,371 × 5). Open Payments program audits evaluate a 3-year lookback period, which would result in a total of $1,160,565 ($386,855 × 3 years) in estimated CMPs during the annual audit cycle. This information can be seen in Table 29. CMS invites comments on these assumptions and calculations.
CMS estimates that the federal government would incur transfer costs from the three federally funded programs that would be impacted by the proposed requirements to expand the prior authorization provisions finalized in the 2024 CMS Interoperability and Prior Authorization final rule to include drugs and the proposed requirements associated with reporting API metrics, those being MA; Medicaid and CHIP (including state Medicaid and CHIP FFS programs, Medicaid managed care plans, and CHIP managed care entities); and QHPs on the FFEs. We use the CMS internal data from the CMS Trustees' Report and the “Fiscal Year 2025 Budget in Brief” to calculate federal costs for MA organizations.
Similarly, we calculate the federal Medicaid payments using the Medicaid managed care plan share of benefits and Federal Medical Assistance Percentages (FMAPs) in Table 31. Refer to section IV.I. in the 2024 CMS Interoperability and Prior Authorization final rule for further information on how this table is applied to calculations (89 FR 8970).
Tables 25, 30, and 31 form a basis for Table 32, the Cost of the Proposed Rule to the Federal Government by Year and Program, which presents the costs of this proposed rule by year and by federal government payments to each program. The total cost in Table 32 is $74.21 million.
For Table 32, the 10-year total cost to the government assumptions include the following:
• The three columns in Table 32 list the cost incurred by the federal government as a result of the proposals in this rule. We applied the proportions of Tables 31 and 30 for MA and Medicaid. For the cost associated with QHPs on the FFEs, although the federal government does not subsidize QHPs on the FFEs it does provide PTC subsidies to eligible enrollees. We provide a PTC cost estimate that reflects a global premium increase across all QHPs on the FFEs of the projected expense burden.
• PTC Payments: The government offers QHP eligible enrollees PTCs to help cover the enrollees' plan premiums. The PTCs are only available
The PTC estimate reflects a global premium increase across all QHPs on the FFEs of the projected expense burden. The methodology to estimate the PTC impact of the projected expense burden is consistent with that used to estimate the PTC impact in the 2020 CMS Interoperability and Patient Access and the 2024 CMS Interoperability and Prior Authorization final rules (85 FR 25612 and 89 FR 8972). Within the FFE states, the estimated expense burden would impact premium rates in the individual and small group markets. PTCs are only available for the individual plans sold on the Marketplace and are calculated as a function of the second lowest-cost silver plan and the eligible individual's household income. The estimate of these impacts uses the global assumption that the industry would increase the second lowest-cost silver plan premium rate in the same amount as the overall projected premium rate increase as a result of the RIA cost estimate. The overall rate increase, determined by internal estimates produced by the CMS Office of the Actuary (OACT), is applied to the projected PTC payments in the FFE states to estimate the proposed rule's impact on PTC payments.
Table 33 provides the total cost of the rule over 10 years, broken out by proposal. This table only reflects proposed policies determined to have a non-negligible cost impact. Tables 21 through 30 form a basis for Table 33, the Total Cost of Proposed Policies by Year, which presents the costs of this proposed rule by year, in the aggregate, by program, and with allocations to plans and the government. The total 10-year cost in Table 33 (excluding PTC payments and savings from prior authorization) is $396.91 million.
Due to the uncertainty involved with accurately quantifying the number of entities that will review the rule, we assume that the total number of unique commenters on the 2022 CMS Interoperability and Prior Authorization proposed rule will be the number of reviewers of this proposed rule. We acknowledge that this assumption may understate or overstate the costs of reviewing this rule. It is possible that not all commenters reviewed the 2022 CMS Interoperability and Prior Authorization proposed rule in detail, and it is also possible that some reviewers chose not to comment on the proposed rule. For these reasons we thought that the number of past commenters (900) would be a fair estimate of the number of reviewers of this rule. We welcome any comments on the approach in estimating the number of entities which will review this proposed rule. We also recognize that different types of entities are in many cases affected by mutually exclusive sections of this proposed rule; therefore, for the purposes of our estimate we assume that each reviewer reads approximately 50 percent of the rule. We seek comments on this assumption.
Using the wage information from the BLS for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing this rule is $113.42 per hour, including overhead and fringe benefits.
After considering the alternatives to the proposals in this rule, we concluded that the proposed policies in this rulemaking represent the best options to mitigate ongoing burdens identified in public comments about prior authorization of drugs. Those public comments and engagements with industry experts over the past 2 years support our conclusions that none of the alternatives would address remaining critical issues related to patient, provider, or payer burden and interoperability. A key alternative across all policies in this proposed rule is the proposed compliance timeline. We considered proposing earlier compliance deadlines in 2027, which would accelerate the important outcomes we aim to achieve by improving the transfer of electronic health data for patients, providers, and plans. For example, we considered providing less time, such as 6 months, for impacted payers to implement the proposed technical standards. However, CMS believes that an implementation timeline of less than one year would be more likely to result in inoperative or deficient technical builds. If developers have inadequate development and testing time, we risk dysfunctional systems that do not achieve the policy goals stated in this proposed rule. Based on anecdotal industry feedback, we estimate that the additional labor needed to accelerate technical development timelines to less than a year could double the costs estimated in this rule. For example, the one-time implementation cost of incorporating information on drugs into the Prior Authorization API would increase for a single entity to approximately $90,000 (45,000 × 2 = $90,000).
We considered encouraging impacted payers to voluntarily update their prior authorization processes for drugs under a medical benefit, rather than proposing it as a requirement. A voluntary approach could allow plans the flexibility to tailor their incorporation of drugs covered under a medical benefit to their specific systems. Encouraging voluntary incorporation might create space for industry leaders to coalesce around best practices and develop consensus. We also considered proposing to expand the Prior Authorization API provisions to drugs covered under a medical benefit at a later date to allow impacted payers additional time to comply with the requirements finalized in the 2024 CMS Interoperability and Prior Authorization final rule. However, this would cause a delay in addressing a well-known
We considered an alternative standard to the NCPDP SCRIPT standard, such as the NCPDP Telecommunication Standard, Version D, Release 0 (Version D.0), used by pharmacies as mandated under HIPAA. The cost to implement the Telecommunications Standard, which is already mandated for use under HIPAA and has been widely adopted, would likely be negligible, since impacted payers already use this standard in pharmacy claims billing. However, this standard does not support data exchange between payers and providers, nor does it support access to formulary or medication history. Despite this alternative's low-cost burden, this standard would not achieve the desired electronic data exchange and CMS concluded that it would not be effective for the prior authorization of drugs. Additionally, this standard cannot be used with the widely used NCPDP SCRIPT standard. We also considered the X12N 278 Health Care Services Review—Request for Review and Response transaction standard. This standard is currently used by providers to submit prior authorization, referral, and certification requests to payers. The cost of requiring this X12N 278 standard would likely be minimal considering it is already an established HIPAA standard and would be considered an usual and customary business expense. However, this standard is not intended or designed to be used for drugs covered under a pharmacy benefit. Furthermore, these standards were evaluated by the Medicare Part D program and NCPDP, and they determined that the NCPDP SCRIPT standard better supports electronic prior authorization of drugs covered under a pharmacy benefit than the alternatives (85 FR 86827 through 86830). When considering the functionalities of these standards and Medicare Part D and NCPDP's evaluations, we determined that the NCPDP Telecommunication and X12N 278 transaction standards do not support the intent of this proposal. This led us to conclude that the NCPDP SCRIPT standard's technical advantages, combined with the supporting NCPDP F&B and NCPDP RTPB standards, could maximize benefits to patients, providers, and payers, and align with other regulatory requirements. These factors made these three proposed NCPDP standards the most appropriate option for this proposed rule and justify the estimated cost of implementation. Therefore, we are proposing to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to support the proposed NCPDP standards for electronic prior authorization of drugs covered under a pharmacy benefit.
For the prior authorization decision timeframes for non-drug items and services, we considered retaining the current prior authorization decision timeframe of 15 days for standard requests for QHP issuers on the FFEs. However, we believe that aligning the standard prior authorization request decision timeframe across all impacted payers is essential in achieving the agency's goal of patient-centered care and ensuring continuity of care for patients transitioning between payers. While we do not estimate a cost associated with the time to respond to prior authorization requests since they are considered usual and customary business practices, CMS believes that the alignment of these timeframes could ultimately result in operational efficiencies across a health plan's multiple lines of business, as there would be a consistent expectation and policy across the different products offered by that plan. Therefore, we are proposing to require QHP issuers on the FFEs to make prior authorization decisions for non-drug items and services as expeditiously as the enrollee's health condition requires, but no later than 7 calendar days after receiving a standard request and no later than 72 hours after receiving an expedited request.
For the prior authorization timeframes for drugs, we considered not taking any action. However, MA organizations require payers to respond to a prior authorization request no later than 72 hours for Part B drugs, and state Medicaid FFS programs are required to respond to prior authorization requests for covered outpatient drugs no later than 24 hours. Therefore, we are proposing to require QHP issuers on the FFEs to make prior authorization decisions no later than 72 hours for standard requests and 24 hours for expedited requests for all drugs. We are proposing to require state Medicaid FFS programs, Medicaid managed care plans, and CHIP managed care entities to make prior authorization decisions for drugs within a timeframe that aligns with applicable existing decision timeframe requirements. We are also proposing to require state CHIP FFS programs to make prior authorization decisions no later than 24 hours for
As an alternative to this proposal, HHS considered not taking any action and maintaining the X12N 270/271 and 278 transaction standards, respectively “eligibility for a health plan” transactions (when used to determine whether prior authorization is required) and “referral certification and authorization” transactions, currently required in regulation. Maintaining the status quo would avoid placing a new burden on sectors of the health care industry such as hospitals and physicians who have not yet implemented a FHIR API in their practice. These HIPAA covered entities would avoid the direct cost associated with adopting new health IT standards and implementing a FHIR API or upgrading their EHR or other health IT to support FHIR, which we describe in the cost section of this preamble. Maintaining the use of X12N 279/271 and 278 transaction standards for prior authorization would also ensure continued alignment with other core operational uses of X12N standards, like eligibility verification and claims submission. While X12N standards are widely used across the industry, we note that there is a very low adoption rate of these X12N 278 transaction standards specifically for electronic prior authorization transactions, and this indicates to HHS that the standards are not serving the payers or providers as intended. Industry feedback indicates that the bi-directional and real-time responses enabled by FHIR would reduce administrative burden associated with the batch-oriented X12N transaction standards, particularly in the “back and forth” communication between providers and payers. Based on the overwhelming movement of the health care industry towards FHIR standards, HHS concludes that proposing the adoption of the FHIR standard and applicable IGs for electronic prior authorization-related HIPAA transactions is the best option to support the long-term goal of interoperability.
Consistent with OMB Circular A-4, we have prepared an accounting statement in Table 24 showing the classification of the impact associated with the provisions of this rule.
Note, as described in Table 33, the undiscounted cost estimated in the first year is $16,260,000, in the second year $75,070,000, in the third year $64,030,000, in the fourth year $49,350,000, and the 5th through 10th years are $32,030,000.
The IRFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the IRFA, HHS estimates that many impacted payers and HIPAA covered entities are small entities, as that term is used in the IRFA, either by being nonprofit organizations or by meeting the Small Business Administration (SBA) definition of a small business. Small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Individuals and states are not included in the definition of a small entity. Executive Order 13272 requires that HHS thoroughly review rules to assess and take account of their potential impact on small businesses, small governmental jurisdictions, and small organizations (as mandated by the IRFA). If a proposed rule may have a significant economic impact on a substantial number of small entities, then the proposed rule must discuss steps taken, including alternatives considered, to minimize the burden on small entities. The IRFA does not define the terms “significant economic impact” or “substantial number.” The SBA advises that this absence of statutory specificity
In the 2024 CMS Interoperability and Prior Authorization final rule, we did not propose or finalize policies that apply to drugs of any type because, as we discussed in the 2022 CMS Interoperability and Prior Authorization proposed rule and in the final rule, the processes and electronic standards for prior authorization of drugs differ from those for non-drug items and services. We also acknowledged that there are existing laws and regulations about prior authorization of certain drugs that may apply to impacted payers (such as the existing electronic prescribing requirements for covered Part D drugs in 42 CFR 423.160) (87 FR 76240-76241 and 89 FR 8762). However, we received many public comments in response to the 2022 CMS Interoperability and Prior Authorization proposed rule, as well as additional feedback from providers, payers, and SDOs, indicating that while some prior authorization processes and standards for drugs currently exist, the health care industry would benefit from consistent requirements to ensure patients' timely access to drugs and a streamlined electronic prior authorization process that alleviates burden for providers and payers.
We are proposing to require that impacted payers support electronic prior authorization for all drugs that require prior authorization. We are proposing two separate sets of standards to facilitate electronic prior authorization for all drugs: the HL7 FHIR standard (including associated FHIR IGs) as one set and three NCPDP standards (the NCPDP SCRIPT, NCPDP F&B, and NCPDP RTPB standards) as the other set. We are proposing to require impacted payers to expand their Prior Authorization API, finalized in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8897), to incorporate drugs covered under a medical benefit. We are also proposing to require impacted payers (other than MA organizations) to support the proposed NCPDP standards for the electronic prior authorization of drugs covered under a pharmacy benefit.
To fully incorporate drug coverage into the prior authorization policies finalized in the 2024 CMS Interoperability and Prior Authorization final rule, we are proposing to require state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs to respond to the provider with a specific reason for denying a prior authorization request for all drugs, regardless of whether they are covered under a medical or pharmacy benefit. We propose several timeframe modifications to align across programs. We are proposing to require state CHIP FFS programs to make decisions on prior authorization requests for prescription drugs for which the state receives FFP no later than 24 hours after receiving a prior authorization request. We propose to require QHP issuers on the FFEs to make decisions on prior authorization requests for non-drug items and services no later than 7 calendar days for standard requests and 72 hours for expedited requests. We are also proposing to require QHP issuers on the FFEs to make decisions on prior authorization requests for drugs no later than 72 hours for standard requests and no later than 24 hours for expedited requests. These proposed timeframes generally align with existing requirements for Part D sponsors in 42 CFR 423.568(b) and in 42 CFR 423.572(a).
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements for impacted payers to report on their websites certain prior authorization metrics for non-drug items and services (89 FR 8889 and 8890). We are now proposing six new metrics: four new metrics about prior authorization denials after an extended timeframe and appeals for non-drug items and services and two new metrics about prior authorization approvals after an extended timeframe and appeals for non-drug items and services for expedited prior authorization requests only. Similarly, we are proposing to require impacted payers to publicly post on their websites a set of metrics on prior authorizations for all drugs (excluding covered Part D drugs for MA-PD plans).
To support implementation of the policies we propose to require impacted payers to report their API endpoints for each of the required APIs to CMS. In response to the 2022 CMS Interoperability and Prior Authorization proposed rule, we received numerous comments from the public indicating that a centralized directory of API endpoints would be necessary to unlock the full potential of our electronic data exchange policies and reduce administrative burden (89 FR 8932).
Under the Administrative Simplification provisions of HIPAA, in Title XI, Part C of the Act, HHS is proposing to adopt the FHIR standard and certain associated IGs as the standards for dental, professional, and institutional “referral certification and authorization” transactions and “eligibility for a health plan” transactions associated with prior authorization for all HIPAA covered entities. Specifically, in addition to the FHIR standard, HHS is proposing to adopt the US Core, SMART App Launch, CRD, DTR, and PAS IGs in place of the adopted versions of the X12N 278 transaction standard in 45 CFR 162.1302 and the existing X12N 270/271 transaction standard in 45 CFR 162.1202 for transactions related to prior authorization. Additionally, HHS is proposing to adopt the CDex IG in 45 CFR 162.1302(g)(2)(vii) as the attachment standard for prior authorization transactions. We seek comment on these proposals and their impact on small entities.
We refer to MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs as “impacted payers,” as we did in the 2024 CMS Interoperability and Prior Authorization final rule (89 FR 8758). In this proposed rule, the 341 impacted payers (also referred to as parent organizations offering impacted health plans when discussing calculations) would perform system updates to expand the capability of the required APIs.
Each year, MA organizations estimate costs for the upcoming plan year and then submit bids and proposed PBPs to CMS. These bids project payments to hospitals, providers, and staff for covered benefits, as well as the cost of plan administration and profits. Because the API requirements proposed in this rule would apply to every MA plan and each MA plan must furnish at least the Medicare Part A and Part B benefits, we assume that the cost of the API would be built into the administrative component of the basic benefit bid. These bids in turn determine one component of the payments of the Medicare Trust Fund to the MA organizations who reimburse providers and subcontractors for their services. A second component of the Trust Fund payment to MA organizations are the rebates, which are a portion of the difference between the basic benefit bid compared to an administratively-set benchmark for the MA plan's service area (currently, based on our past and projected experience, rebates vary by plan and are approximately 66 percent). If the bid is below the benchmark, CMS pays an amount equal to the standard bid of the MA organization. However, if the bid is above the benchmark, CMS pays the portion of the cost up to the benchmark and the MA organization bears the extra cost and must charge enrollees a premium for the remaining amount, as set forth in section 1854 of the Act. As the cost of providing services by these payers is covered by a combination of government funding and in some cases by enrollee premiums, MA and PDPs are not expected to incur burdens or losses because the private companies' costs are being supported by the government and enrolled beneficiaries. This lack of expected burden applies to both large and small MA health plans. Any MA health plans that are considered “small” would be expected to include the costs of compliance with the proposed regulations in their bids, thus avoiding additional burden, since the cost of complying with any regulation is funded by payments from the government and, if applicable, enrollee premiums. Historically, at most 2 percent of plans bid above the benchmark, and they contain roughly 1 percent of all plan enrollees.
Table 35 reports the percentage of MA organizations bidding above the benchmark and the percentage of affected enrollees in recent years. This table reports aggregates of proprietary bid data collected by OACT. As shown in Table 35, the percentage of plans incurring additional costs by bidding above the benchmark is 0.11 percent in 2024 and 0.07 percent in 2025, while the CMS threshold for what constitutes a significant impact for purposes of the IRFA is 3 to 5 percent. Since at least 99 percent of MA organizations bid below the benchmark in recent years, we estimate that the federal government fully pays these MA organizations their projected costs for providing services to enrollees for the coming year. The preceding analysis shows that MA plans, whether small or large entities, are not significantly affected by this proposed rule since the vast majority (all but at most 1 percent) will have their costs subsidized by the federal government and would not be materially impacted. Consequently, we conclude that, among MA plans, the impact of the cost of these proposals would not be significant for the purposes of the IRFA.
Title XIX of the Act established the Medicaid program as a federal-state partnership to provide and finance medical assistance to specified groups of eligible individuals. States claim federal matching funds quarterly based on their program expenditures. Medicaid managed care plans and CHIP managed care entities reflect a somewhat consolidated market with a mix of for-profit, non-profit, and government plans. 2022 survey data suggest that 16 managed care firms (including Aetna, Centene, United Health Care, and others) were responsible for approximately 63 percent of the market. The remaining 36 percent of managed care enrollment reflects local/regional managed care companies,
For the purposes of this IRFA, CMS evaluated health insurance issuers categorized under NAICs code 524114 (Direct Health and Medical Insurance Carriers). Based on the latest available SUSB data, 1,071 total firms fall under code 524114. According to SBA size standards, entities with average annual receipts of $47 million or less would be considered small entities in this category.
In addition to proposed requirements for “impacted payers,” which largely comprise of government health plans within NAICS category 524114, this proposed rule would also impose direct requirements on HIPAA covered entities to replace their existing X12N 278 transaction standard with FHIR standards to build a FHIR API. Such covered entities include health care providers (including individual providers and clinics who transmit information in an electronic form), hospitals, all health plans, and health care clearinghouses. NAICS is used in the United States, Canada, and Mexico to classify businesses by industry. While there is no distinction between small and large businesses among the NAICS categories, the SBA develops size standards for each NAICS category. For the purposes of HHS's analysis, HHS relies on a combination of NAICS codes (hospitals NAICS code 622 and physicians NAICS code 6211) to approximate data on the health care providers that are small entities. HHS used the methodology described in the 2022 HIPAA Standards for Health Care Attachments proposed rule RIA to evaluate the impact on hospitals (NAICS code 622), clearinghouses (NAICS code 522320), physicians (NAICS code 6211), health plans (NAICS code 524114), and all other support services (NAICS code 561990) which encompasses EHR vendors. The SBA Standard size entity threshold for each category is described in Table 36. We used the most recent revenue data available from the 2022 SUSB from the Census Bureau to determine the number of small entities and their revenue. HHS considered including the 2023 Nonemployer Statistics (NES) data from the Census Bureau to supplement the SUSB data on small providers in particular. However, considering the industries impacted by this proposal and the nature of the health care services which most frequently require prior authorization, HHS is hesitant to include data on provider businesses with no employees in the total count of small provider entities. It is unclear to HHS what proportion of providers (Physicians) have no employees and would also provide items and services subject to prior authorization and manage those prior authorization requests themselves. HHS requests comment from providers on the inclusion of NES data in this IRFA analysis and if self-employed providers with no employees could be expected to be impacted by the proposed policy. As noted in the cost analysis section of this preamble, HHS is hesitant to project that all small providers would make the business and financial decision to upgrade their EHR product to support the FHIR standards for prior authorization. The decision to adopt FHIR would vary depending on the volume of prior authorization each business requests among other factors.
HHS also encountered uncertainties in measuring the potential impact of this proposal on clearinghouses (NAICS code 522320) and all other support services (NAICS code 561990), which encompasses EHR vendors, that could fall under the small entity threshold. HHS notes that in 2020, the national clearinghouse association, Cooperative Exchange, indicated its 23 member companies represent over 90 percent of the clearinghouse industry.
Based on the SBA size threshold described in Table 36, HHS analyzed the revenue for hospitals, physicians, and direct health insurance plans which met the SBA criteria for small entities and their anticipated change in revenue, illustrated in Table 37. To conduct this revenue test, HHS used the total count of firms considered small based on the latest 2022 SUSB data (143,743). Then, HHS calculated the percentage of these small firms that fall into size ranges by receipt (“% of Small Firms” column in Table 37). These percentages are applied to the average revenue for all small entities, which yields the average revenue for each firm size. The average revenue for each firm size is then divided by the annualized cost of the proposed rule per firm and reflected as a percentage. When the annualized net primary cost estimates were determined, there were $40.88 million net annualized costs for the industries overall.
HHS calculated the percentage of revenue represented by the primary estimates of small entities earning less than $50,000,000 in receipts annually. None of the included buckets exceeded the 3 percent of the revenue threshold, and all of the revenue test results reflect less than 1 percent revenue impact.
In an effort to anticipate the needs of small entities, CMS considered options for viable alternatives that adapt the proposed policies in this proposed rule and tailor them to small businesses. These alternatives attempt to balance the need for broad adoption of the proposals to achieve improved interoperability and an acknowledgement that small businesses are typically less resourced. The alternative options fall into two main categories: delayed compliance and exemption criteria. Some of these alternatives are already incorporated into the proposals of this rule but could be expanded to other provisions to better accommodate small businesses, while others are novel and have not yet been introduced.
HHS is proposing to adopt a modified standard for two HIPAA Administrative Simplification transactions, the “referral certification and authorization” transaction in 45 CFR part 162, subpart M and the “eligibility for a health plan” transaction in 45 CFR part 162, subpart L. HHS proposes to adopt, in 45 CFR 162.1302(g), the FHIR standard, US Core IG, SMART App Launch IG, CRD, DTR, PAS, and CDex IGs as the specifications that compose the proposed transaction standard. In addition, in 45 CFR 162.1202(f)(2), HHS is proposing to adopt the FHIR standard, the US Core IG, SMART App Launch IG, and CRD IG as the specifications that compose the proposed transaction standard for “eligibility for a health plan” transactions, when used to determine whether prior authorization is required. If finalized as proposed, HIPAA covered entities would be required to comply with these transaction standards no later than 24 months from the effective date of a final rule, except for small health plans, defined in 45 CFR 160.103 as those with annual receipts of $5 million or less, for which the compliance date would be 36 months from the effective date of a final rule. The proposed delayed compliance date for small health plans would allow these health plans an additional year to prepare to use the FHIR standards for those transactions. This same principle could be applied to entities considered “small” for other provisions in this proposed rule, including the proposal for impacted payers to expand their Prior Authorization API to incorporate drugs covered under a medical benefit and that impacted payers (other than MA organizations) support the NCPDP standards for the electronic prior authorization of drugs covered under a pharmacy benefit. An additional 12 months of implementation time could support small entities in preparing for the technical requirements of these proposals and distribute the estimated per-entity cost of $12,500 associated with adopting the standard over 1 year. This redistribution of cost over 2 years could result in small entities saving approximately $6,250 in the first year of implementation. However, as discussed in section V.F.2. of this proposed rule, the majority of impacted payers likely do not qualify as small, so the impact of this alternative is uncertain.
CMS is proposing a process for state Medicaid and CHIP FFS programs to request from CMS extensions to allow additional time to implement the Prior Authorization API, meet the proposed requirement to incorporate drugs covered under a medical benefit into the Prior Authorization API, and/or to support the NCPDP standards for electronic prior authorization of drugs covered under a pharmacy benefit. The updated proposals would replace the existing process by which states can request an exemption from the requirement to implement the Prior Authorization API finalized in the 2024 CMS Interoperability and Prior
In the 2024 CMS Interoperability and Prior Authorization final rule, we finalized requirements for impacted payers to improve the electronic exchange of health care information, not just with patients, but also with their providers and other payers. We finalized requirements for impacted payers to implement and maintain a Prior Authorization API that streamlines the prior authorization process between providers and payers.
In addition, HHS reiterates that there is no redundancy in these proposals and the provisions finalized in the HIPAA Standards for Health Care Attachments final rule (91 FR 14350). In the HIPAA Standards for Health Care Attachments proposed rule, HHS proposed standards for “health care attachments” transactions, which would support both health care claims and prior authorization transactions, and a standard for electronic signatures to be used in conjunction with health care attachments transactions. However, in the HIPAA Standards for Health Care Attachments final rule, HHS adopted an attachment standard only for claims transactions and did not finalize an attachment standard for prior authorization transactions. Specifically, the HIPAA Standards for Health Care Attachments final rule does not adopt any modifications to prior authorization transactions or finalize any conflicting prior authorization transaction requirements that would overlap with this proposed rule. HHS concludes that there is no duplication or conflict of the requirements in this proposed rule and other recent rulemakings impacting similar populations and sectors of the industry.
CMS concludes that the proposals relevant to impacted payers do not produce a significant economic impact on a substantial number of impacted payers that are small entities. CMS seeks comment on the assumptions related to the number of MA organizations, state Medicaid and CHIP FFS programs, Medicaid managed care plans, CHIP managed care entities, and QHP issuers on the FFEs that could be considered small businesses, small governmental jurisdictions, or small organizations. HHS assumes that only a subset of small HIPAA covered entities would be economically impacted by the proposed policy and assumes that only those represented in the SUSB dataset, that is, those with employees, would be impacted by these proposals. CMS and HHS solicit comment specifically from HIPAA covered entities and small businesses associates in the health care and health technology industries on the impacts of the various proposals in this proposed rule. We request comment specifically on how the proposals increase or decrease administrative burden for small HIPAA covered entities and business associates, as well as feedback on mitigation strategies.
For the purposes of the IRFA analysis, HHS concludes that there is not a significant impact on small entities. As a measure of significant economic impact on a substantial number of small entities, HHS uses a change in revenue of more than 3 percent. As illustrated by the revenue test in Table 37, none of the small firm sizes approached the 3 percent threshold.
In addition, section 1102(b) of the Act requires HHS to prepare an RIA if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the IRFA for proposed rules. For purposes of section 1102(b) of the Act, HHS defines a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. HHS is not preparing an analysis for section 1102(b) of the Act because HHS has determined that the Secretary may certify that this proposed rule would not have a significant impact on the operations of a substantial number of small rural hospitals.
Section 202 of UMRA also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates will require spending more in any one year than threshold amounts in 1995 dollars, updated annually for inflation. In 2026, this threshold is approximately $193 million. This proposed rule will not impose mandates that will result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of more than $193 million in any one year.
Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has federalism implications. This proposed rule will not have a substantial direct effect on state or local governments, preempt state law, or otherwise have a federalism implication.
Executive Order 14192, entitled “Unleashing Prosperity Through Deregulation,” was issued on January 31, 2025 and requires that “any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least 10 prior regulations.” This proposed rule, if finalized as proposed, is expected to be considered an Executive Order 14192 regulatory action. We estimate that this final rule will generate $31.78 million in annualized cost at a 7 percent discount rate, over a perpetual time horizon.
By the provisions of Executive Order 12866, this proposed rule has been reviewed by OMB.
Because of the large number of public comments we usually receive on
Dr. Mehmet Oz, Administrator of the Centers for Medicare & Medicaid Services, approved this document on April 3, 2026.
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For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services proposes to amend 42 CFR chapter IV and the Department of Health and Human Services proposes to amend 45 CFR subtitle A, subchapters B, C, and D as set forth below:
42 U.S.C. 1302, and 1395hh.
(1) A failure, including a knowing failure, to timely, accurately, and completely provide to HHS, CMS, OIG, or their designees the information pertaining to the requirements outlined in this subpart.
(2) A failure to timely, accurately, and completely provide to HHS, CMS, OIG, or their designees any books, contracts, records, documents, and other evidence sufficient to enable the audit, evaluation, and inspection of the records maintained by the applicable manufacturer or applicable group purchasing organization as required in § 403.912(e)(2). An untimely failure under this paragraph is defined as beginning 30 calendar days after notification of the information request and ending upon provision of the requested information to HHS, CMS, OIG, or the designee.
42 U.S.C. 1302 and 1395hh.
The revisions and addition read as follows:
(a)
(b) * * *
(1) An MA organization must make all of the following information maintained by the MA organization with a date of service on or after January 1, 2016 accessible to its current enrollees or their personal representatives through
(iv) Beginning January 1, 2027, information about prior authorizations for items and services (excluding drugs), including the items and services approved and the information in paragraph (b)(1)(iv)(A) of this section, according to the timelines in paragraph (b)(1)(iv)(B) of this section.
(v) Beginning October 1, 2027, information about prior authorizations for drugs, including the drugs and dosage approved and the information in paragraph (b)(1)(iv)(A) of this section, according to the timelines in paragraph (b)(1)(iv)(B) of this section.
(c) * * *
(1) Must implement and maintain API technology conformant with the standards in 45 CFR 170.215(a), (b)(1), (c), and (e);
(2) Beginning October 1, 2027, must implement and maintain API technology conformant with the standards in 45 CFR 170.215(k)(1), (k)(2), and (m);
(5) An MA organization may use an updated version of any standard or all standards required under paragraph (c)(1), (c)(2) or (c)(4) of this section, where—
(h)
(1) All API endpoints in the form of an Endpoint Resource, as defined by a version of the FHIR standard adopted in 45 CFR 170.215(a), including, if multiple, appropriate use cases for each.
(2) URLs with the documentation required in paragraph (d) of this section, including all of the following, if applicable:
(i) A direct URL to the API FHIR capability statement.
(ii) Authorization and authentication protocols and implementation details.
(iii) API registration information.
(a) Beginning January 1, 2021, unless otherwise specified, an MA organization must implement and maintain a publicly accessible, standards-based Application Programming Interface (API) that meets all the following:
(1) Is conformant with the standards in 45 CFR 170.215(a), (b)(1), and (n)(1) or an updated version of any such standards in conformance with § 422.119(c)(5).
(2) Beginning October 1, 2027, is conformant with the standards in 45 CFR 170.215(n)(2), or an updated version of any such standards in conformance with § 422.119(c)(5).
(3) Does not restrict the availability of this information to particular persons or organizations.
(4) Is conformant with the documentation requirements in § 422.119(d).
(5) Is conformant with the denial and discontinuation policies in § 422.119(e).
(6) Is accessible via a public-facing digital endpoint.
(c)
The revisions and additions read as follows:
(a)
(1) * * *
(i) The requirements in § 422.119(c)(3), (c)(4), (d), and (e).
(ii) The standards in 45 CFR 170.215(a), (b)(1), (c), and (d), or an updated version of any such standards in conformance with § 422.119(c)(5).
(iii) Beginning October 1, 2027, the standards in 45 CFR 170.215(k)(1) and (k)(2), or an updated version of any such standards in conformance with § 422.119(c)(5).
(2)
(6)
(i) The total number of unique providers who requested patient data via the MA organization's Provider Access API.
(ii) The total number of unique patients whose data were transferred via the MA organization's Provider Access API to a provider's health IT system.
(iii) The total number of patient data transfers via the MA organization's Provider Access API.
(7)
(b)
(1) * * *
(i) The requirements in § 422.119(c)(3), (c)(4), (d), and (e).
(ii) The standards in 45 CFR 170.215(a), (b)(1), and (d), or an updated
(iii) Beginning October 1, 2027, the standards in 45 CFR 170.215(k)(1), and (k)(2), or an updated version of any such standards in conformance with § 422.119(c)(5).
(4) * * *
(ii) * * *
(A) * * *
(
(8)
(i) The percent of patients who have opted in to the payer to payer data exchange.
(ii) The total number of unique patients whose data have been sent to other payers via the MA plan's Payer-to-Payer API.
(iii) The total number of unique patients whose data have been received from other payers via the MA plan's Payer-to-Payer API.
(9)
The revisions and additions read as follows:
(b)
(1) Is conformant with all the following:
(i) The requirements in § 422.119(c)(3), (c)(4), (d), and (e).
(ii) The standards in 45 CFR 170.215(a), (b)(1), and (c), or an updated version of any such standards in conformance with § 422.119(c)(5).
(iii) Beginning October 1, 2027, the standards in 45 CFR 170.215(j)(1), (j)(2), and (j)(3), or an updated version of any such standards in conformance with § 422.119(c)(5).
(2) Is populated with the following:
(i) Beginning January 1, 2027, the MA organization's list of covered items and services (excluding drugs) that require prior authorization.
(ii) Beginning October 1, 2027, the MA organization's list of drugs payable under Part B that require prior authorization.
(c)
(1) A list of all items and services that require prior authorization.
(2) For standard prior authorization requests for items and services, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage that were approved after appeal.
(iv) The total number and percentage that remain denied after appeal.
(v) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(vi) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(vii) The average and median time that elapsed between the submission of a request and a decision by the MA plan.
(3) For expedited prior authorization requests for items and services, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage that were approved after appeal.
(iv) The total number and percentage that remain denied after appeal.
(v) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(vi) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(vii) The average and median time that elapsed between the submission of a request and a decision by the MA plan.
(d)
(1) A list of all drugs payable under Part B that require prior authorization.
(2) For standard prior authorization requests for all drugs payable under Part B, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(iv) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(v) The total number and percentage approved after appeal.
(vi) The total number and percentage that remain denied after appeal.
(vii) The average and median time that elapsed between the submission of requests and decisions.
(3) For expedited prior authorization requests for all drugs payable under Part B, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(iv) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(v) The total number and percentage approved after appeal.
(vi) The total number and percentage that remain denied after appeal.
(vii) The average and median time that elapsed between the submission of requests and decisions.
(e)
(1) The total number of unique providers who requested a prior authorization for items, services, or drugs through the MA organization's Prior Authorization API.
(2) The number of unique prior authorization requests for items, services, or drugs received through the MA organization's Prior Authorization API.
(3) The percentage of all prior authorization requests that were received through the MA organization's Prior Authorization API.
(f)
42 U.S.C. 1302.
(a)
(b)
(5) Beginning January 1, 2027, information about prior authorizations for items and services (excluding covered outpatient drugs defined in section 1927(k)(2) of the Act), including the items and services approved and the information in paragraph (b)(5)(i) of this section, according to the timelines in paragraph (b)(5)(ii) of this section.
(6) Beginning October 1, 2027, information about prior authorizations for covered outpatient drugs defined in section 1927(k)(2) of the Act, including the drugs and dosage approved and the information in paragraph (b)(5)(i) of this section, according to the timelines in paragraph (b)(5)(ii) of this section.
(c) * * *
(1) Beginning January 1, 2021, must implement and maintain API technology conformant with the standards in 45 CFR 170.215(a), (b)(1), (c), and (e);
(2) Beginning October 1, 2027, must implement and maintain API technology conformant with the standards in 45 CFR 170.215(k)(1), (k)(2), and (m);
(5) A State may use an updated version of any standard or all standards required under paragraph (c)(1), (c)(2), or (c)(4) of this section where:
(h)
(1) All API endpoints in the form of an Endpoint Resource, as defined by a version of the FHIR standard adopted in 45 CFR 170.215(a), including, if multiple, appropriate use cases for each.
(2) URLs with the documentation required in paragraph (d) of this section, including all of the following, if applicable:
(i) A direct URL to the API FHIR capability statement.
(ii) Authorization and authentication protocols and implementation details.
(iii) API registration information.
The revisions and additions read as follows:
(a)
(1) * * *
(i) The requirements in § 431.60(c)(3), (c)(4), (d), and (e).
(ii) The standards in 45 CFR 170.215(a), (b)(1), (c), and (d), or an updated version of any such standards in conformance with § 431.60(c)(5).
(iii) Beginning October 1, 2027, the standards in 45 CFR 170.215(k)(1), and (k)(2), or an updated version of any such standards in conformance with § 431.60(c)(5).
(2)
(6)
(i) The total number of unique providers who requested patient data via the State's Provider Access API.
(ii) The total number of unique patients whose data were transferred via the State's Provider Access API to a provider's health IT system.
(iii) The total number of patient data transfers via the State's Provider Access API.
(7)
(b)
(1) * * *
(i) The requirements in § 431.60(c)(3), (c)(4), (d), and (e).
(ii) The standards in 45 CFR 170.215(a), (b)(1), and (d), or an updated version of any such standards in conformance with § 431.60(c)(5).
(iii) Beginning October 1, 2027, the standards in 45 CFR 170.215(k)(1) and (k)(2), or an updated version of any such standards in conformance with § 431.60(c)(5).
(4) * * *
(ii) * * *
(A) * * *
(
(8)
(i) The percent of patients who have opted in to the payer to payer data exchange.
(ii) The total number of unique patients whose data have been sent to other payers via the State's Payer-to-Payer API.
(iii) The total number of unique patients whose data have been received from other payers via the State's Payer-to-Payer API.
(9)
(a) Beginning January 1, 2021, unless otherwise specified, the State must implement and maintain a publicly accessible, standards-based Application Programming Interface (API) that meets all the following:
(1) Is conformant with the standards in 45 CFR 170.215(a), (b)(1), and (n)(1) or an updated version of any such standards in conformance with § 431.60(c)(5).
(2) Beginning October 1, 2027, is conformant with the standards in 45 CFR 170.215(n)(2), or an updated version of any such standards in conformance with § 431.60(c)(5).
(3) Does not restrict the availability of this information to particular persons or organizations.
(4) Is conformant with the documentation requirements in § 431.60(d).
(5) Is conformant with the denial and discontinuation policies in § 431.60(e).
(6) Is accessible via a public-facing digital endpoint.
(c)
(a)
(1) Beginning January 1, 2026, if the State denies a prior authorization request (excluding a request for coverage of covered outpatient drugs defined in section 1927(k)(2) of the Act), the response to the provider must be sent in accordance with the timeframes established in § 440.230(e)(1) of this chapter, and must include a specific reason for the denial, regardless of the method used to communicate that information.
(2) Beginning October 1, 2027, if the State denies a prior authorization request for any covered outpatient drugs defined in section 1927(k)(2) of the Act, the response to the provider must be sent in accordance with the timeframes established in section 1927(d)(5)(A) of the Act, and must include a specific reason for the denial, regardless of the method used to communicate that information.
(b)
(1) Is conformant with all of the following:
(i) The requirements in § 431.60(c)(3), (c)(4), (d), and (e).
(ii) The standards in 45 CFR 170.215(a), (b)(1), and (c), or an updated
(iii) Beginning October 1, 2027, the standards in 45 CFR 170.215(j)(1), (j)(2), and (j)(3), or an updated version of any such standards in conformance with § 431.60(c)(5).
(2) Is populated with the following:
(i) Beginning January 1, 2027, the State's list of covered items and services (excluding prescribed drugs described in section 1905(a)(12) of the Act) that require prior authorization.
(ii) Beginning October 1, 2027, the State's list of prescribed drugs described in section 1905(a)(12) of the Act processed in a claims adjudication system that is not at the point of sale that require prior authorization.
(c)
(1) The total number of unique providers who requested a prior authorization for items, services, or drugs through the State's Prior Authorization API.
(2) The number of unique prior authorization requests for items, services, or drugs received through the State's Prior Authorization API.
(3) The percentage of all prior authorization requests that were received through the State's Prior Authorization API.
(d)
(e)
(1) An unexpired version of the NCPDP SCRIPT Standard adopted in 45 CFR 170.205(b) to communicate drug-related information between providers and the State with the following transactions:
(i) PAInitiationRequest and PAInitiationResponse.
(ii) PARequest and PAResponse.
(iii) PAAppealRequest and PAAppealResponse.
(iv) PACancelRequest and PACancelResponse.
(v) PA Notification.
(2) An unexpired version of the NCPDP Real-Time Prescription Benefit Standard adopted in 45 CFR 170.205(c).
(3) An unexpired version of the NCPDP Formulary and Benefit Standard adopted in 45 CFR 170.205(u).
(f) Extensions
(1) A State may submit a request for an extension to the compliance date for the requirements in paragraphs (b) and (e), of this section for its Medicaid FFS program. The request(s) must be submitted as part of an APD described in part 433, subpart C, of this chapter; and approved before the compliance date. It must include all the following:
(i) A narrative justification describing the specific reasons why the State cannot satisfy the requirement(s) by the compliance date and why those reasons result from circumstances that are unique to the agency operating the Medicaid FFS program.
(ii) A report on completed and ongoing State activities that evidence a good faith effort towards compliance.
(iii) A comprehensive plan to meet the requirements.
(2) CMS would grant the State's request if it determines, based on the information provided, that—
(i) The request adequately establishes a need to delay implementation; and
(ii) The State has a comprehensive plan to meet the requirements.
42 U.S.C. 1302.
(c)
(1) The enrollee's notice must meet the requirements of § 438.404.
(2) For rating periods beginning on or after January 1, 2026, the provider's notice for any items and services must include a specific reason for the denial, regardless of the method used to communicate that information.
(3) Beginning October 1, 2027, the provider's notice for any drugs must include a specific reason for the denial, regardless of the method used to communicate that information.
(4) For contracts with an applicable integrated plan, as defined in § 422.561 of this chapter, in lieu of the provisions in this paragraph governing notices of adverse benefit determinations, the provisions set forth in §§ 422.629 through 422.634 of this chapter apply to determinations affecting dually eligible individuals who are also enrolled in a dual eligible special needs plan with exclusively aligned enrollment, as defined in § 422.2 of this chapter.
(f)
(1) * * *
(2) For standard prior authorization requests for items and services, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage that were approved after appeal.
(iv) The total number and percentage that remain denied after appeal.
(v) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(vi) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(vii) The average and median time that elapsed between the submission of a request and a decision by the MCO, PIHP, or PAHP.
(3) For expedited prior authorization requests for items and services and services, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage that were approved after appeal.
(iv) The total number and percentage that remain denied after appeal.
(v) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(vi) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(vii) The average and median time that elapsed between the submission of a request and a decision by the MCO, PIHP, or PAHP.
(g)
(1) A list of all drugs that require prior authorization.
(2) The total number and percentage of prior authorization requests that were approved.
(3) The total number and percentage of prior authorization requests that were denied.
(4) The total number and percentage of prior authorization requests approved after appeal.
(5) The total number and percentage of prior authorization requests that remain denied after appeal.
(6) The average and median time that elapsed between the submission of requests and decisions for prior authorizations.
(b) * * *
(5) Implement and maintain a Patient Access Application Programming Interface (API) described in § 431.60 of this chapter as if such requirements applied directly to the MCO, PIHP, or PAHP and:
(i) Include all encounter data, including encounter data from any network providers the MCO, PIHP, or PAHP is compensating based on capitation payments and adjudicated claims and encounter data from any subcontractors.
(ii) Comply with the requirements of § 431.60 of this chapter by January 1, 2021, except as follows:
(A) Comply with the content requirements in § 431.60(b)(5) of this chapter for rating periods beginning on or after January 1, 2027.
(B) Comply with the content requirements in § 431.60(b)(6) and the API standards requirements in § 431.60(c)(2) of this chapter beginning October 1, 2027.
(C) Comply with the API usage metrics reporting requirements in § 431.60(f) of this chapter for rating periods beginning January 1, 2026 by reporting data to the State, in the form of aggregated, de-identified metrics, from the previous rating period, at the plan and program level, no later than 90 days after the end of each rating period.
(D) Comply with the API endpoint reporting requirements in § 431.60(h) of this chapter no later than [60 days after the effective date of a final rule in the
(6) Implement and maintain a Provider Directory API described in § 431.70, except § 431.70(a)(2), as if such requirements applied directly to the MCO, PIHP, or PAHP, by January 1, 2021, that includes all information specified in § 438.10(h)(1) and (2) of this chapter. The MCO, PIHP, or PAHP must comply with the API standards requirements in § 431.70(a)(2) by October 1, 2027.
(7) Implement and maintain a Provider Access API as described in § 431.61(a) and Payer-to-Payer API as described in § 431.61(b) of this chapter as if such requirements applied directly to the MCO, PIHP, or PAHP, and include all encounter data, including encounter data from any network providers the MCO, PIHP, or PAHP is compensating based on capitation payments and adjudicated claims and encounter data from any subcontractors by the following dates:
(i) For the requirements in § 431.61(a)(1) through (5) except § 431.61(a)(1)(iii); 431.61(b)(1) except § 431.61(b)(1)(iii); § 431.61(a)(2) and (b)(4) through (6) except § 431.61(b)(4)(ii); and (b)(7)(ii) and (iii), of this chapter, for rating periods beginning on or after January 1, 2027. The MCO, PIHP, or PAHP must comply with the requirements in § 431.61(a)(1)(iii), § 431.61(b)(1)(iii), and § 431.61(b)(4)(ii) of this chapter beginning October 1, 2027.
(ii) For the API usage metrics reporting requirements in § 431.61(a)(6) and (b)(8) of this chapter, for rating periods beginning on or after January 1, 2027, by reporting data to the State, no later than 90 days after the end of each rating period, for the previous rating period, in the form of aggregated, de-identified metrics, at the plan and program level.
(iii) For the API endpoint reporting requirements in §§ 431.61(a)(7) and (b)(9) of this chapter, no later than [60 days after the effective date of a final rule in the
(8)
(i) For the Prior Authorization API items and services requirements in § 431.80(b)(1)(i) and (ii) and (b)(2)(i) of this chapter, for rating periods beginning on or after January 1, 2027.
(ii) For the API standards requirement in § 431.80(b)(1)(iii) of this chapter, beginning October 1, 2027.
(iii) For the Prior Authorization API drug requirements in § 431.80(b)(2)(ii) of this chapter, beginning October 1, 2027.
(iv) For the API usage metrics reporting requirements in § 431.80(c) of this chapter, for rating periods beginning on or after January 1, 2027, by reporting data to the State, no later 90 days after the end of each rating period, in the form of aggregated, de-identified metrics, at the plan and program level.
(v) For the API endpoints reporting requirement in § 431.80(d) of this chapter, no later than [60 days after the effective date of a final rule in the
(vi) For the electronic prior authorization for drugs requirements at § 431.80(e) of this chapter, beginning October 1, 2027.
42 U.S.C. 1302.
The revisions and addition read as follows:
(e) For prior authorization requests for items and services (excluding prescribed drugs described in section 1905(a)(12) of the Act), the State Medicaid agency must—
(1) * * *
(i) For a standard determination, as expeditiously as a beneficiary's health
(ii) For an expedited determination, as expeditiously as a beneficiary's health condition requires, but no later than 72 hours after receiving the request, unless a shorter timeframe is established by the State.
(3)
(i) * * *
(ii) For standard prior authorization requests for items and services, all of the following:
(A) The total number and percentage that were approved.
(B) The total number and percentage that were denied.
(C) The total number and percentage that were approved after appeal.
(D) The total number and percentage that remain denied after appeal.
(E) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(F) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(G) The average and median time that elapsed between the submission of a request and a decision by the State.
(iii) For expedited prior authorization requests for items and services, all of the following:
(A) The total number and percentage that were approved.
(B) The total number and percentage that were denied.
(C) The total number and percentage that were approved after appeal.
(D) The total number and percentage that remain denied after appeal.
(E) The average and median time that elapsed between the submission of a request and a decision by the State.
(f)
(i) A list of all drugs that require prior authorization.
(ii) The total number and percentage of prior authorization requests that were approved.
(iii) The total number and percentage of prior authorization requests that were denied.
(iv) The total number and percentage of prior authorization requests approved after appeal.
(v) The total number and percentage of prior authorization requests that remain denied after appeal.
(vi) The average and median time that elapsed between the submission of requests and decisions for prior authorizations.
42 U.S.C. 1302.
(d) * * *
(2) * * *
(ii) In accordance with a shorter prior authorization timeframe established by the State.
(f) Beginning October 1, 2027, compliance with the requirements as described in section 1927(d)(5)(A) of the Act, as if such requirements applied to all prescription drugs described in section 2110(a)(6) of the Act.
The revisions and addition read as follows:
(a)
(b)
(5) Beginning January 1, 2027, information about prior authorizations for items and services (excluding prescription drugs described in section 2110(a)(6) of the Act), including the items and services approved and the information in paragraph (b)(5)(i) of this section, according to the timelines in paragraph (b)(5)(ii) of this section.
(6) Beginning October 1, 2027, information about prior authorizations for prescription drugs described in section 2110(a)(6) of the Act, including the drugs and dosage approved and the information in paragraph (b)(5)(i) of this section, according to the timelines in paragraph (b)(5)(ii) of this section.
(c) * * *
(1) Beginning January 1, 2021, must implement and maintain API technology conformant with the standards in 45 CFR 170.215(a), (b)(1), (c), and (e);
(2) Beginning October 1, 2027, must implement and maintain API technology conformant with the standards in 45 CFR 170.215 (k)(1), (k)(2), and (m);
(5) A State may use an updated version of any standard or all standards required under paragraphs (c)(1), (c)(2), or (c)(4) of this section, where:
(h)
(1) All API endpoints in the form of an Endpoint Resource, as defined by aversion of the FHIR standard adopted in 45 CFR 170.215(a), including, if multiple, appropriate use cases for each.
(2) URLs with the documentation required in paragraph (d) of this section, including all of the following, if applicable:
(i) A direct URL to the API FHIR capability statement.
(ii) Authorization and authentication protocols and implementation details.
(iii) API registration information.
The revisions and additions read as follows:
(a)
(1) * * *
(i) The requirements in § 457.730(c)(3), (c)(4), (d), and (e).
(ii) The standards in 45 CFR 170.215(a), (b)(1), (c), and (d), or an updated version of any such standards in conformance with § 457.730(c)(5);
(iii) Beginning October 1, 2027, the standards in 45 CFR 170.215(k)(1), and (k)(2), or an updated version of any such standards in conformance with § 457.730(c)(5).
(2)
(6)
(i) The total number of unique providers who requested patient data via the State's Provider Access API.
(ii) The total number of unique patients whose data were transferred via the State's Provider Access API to a provider's health IT system.
(iii) The total number of patient data transfers via the State's Provider Access API.
(7)
(b)
(1) * * *
(i) The requirements in § 457.730(c)(3), (c)(4), (d), and (e).
(ii) The standards in 45 CFR 170.215(a), (b)(1), and (d), or an updated version of any such standards in conformance with § 457.730(c)(5);
(iii) Beginning October 1, 2027, the standards in 45 CFR 170.215(k)(1), and (k)(2), or an updated version of any such standards in conformance with § 457.730(c)(5).
(4) * * *
(ii) * * *
(A) * * *
(
(8)
(i) The percent of patients who have opted in to the payer to payer data exchange.
(ii) The total number of unique patients whose data have been sent to other payers via the State's Payer-to-Payer API.
(iii) The total number of unique patients whose data have been received from other payers via the State's Payer-to-Payer API.
(9)
The revisions and additions read as follows:
(a)
(1) Beginning January 1, 2026, if the State denies a prior authorization request (excluding a request for coverage of prescription drugs described in section 2110(a)(6) of the Act), the response to the provider must be sent in accordance with the timeframes established in § 457.495(d) of this chapter, and must include a specific reason for the denial, regardless of the method used to communicate that information.
(2) Beginning October 1, 2027, if the State denies a prior authorization request for any prescription drugs described in section 2110(a)(6) of the Act, the response to the provider must
(b)
(1) Is conformant with all the following:
(i) The requirements in § 457.730(c)(3) (4), (d), and (e).
(ii) The standards in 45 CFR 170.215(a), (b)(1), and (c), or an updated version of any such standards in conformance with § 457.730(c)(5).
(iii) Beginning October 1, 2027, the standards in 45 CFR 170.215(j)(1), (j)(2), and (j)(3). or an updated version of any such standards in conformance with § 457.730(c)(5).
(2) Is populated with the following:
(i) Beginning January 1, 2027, the State's list of covered items and services (excluding prescription drugs described in section 2110(a)(6) of the Act) that require prior authorization.
(ii) Beginning October 1, 2027, the State's list of prescription drugs described in section 2110(a)(6) of the Act processed in a claims adjudication system that is not at the point of sale that require prior authorization.
(c)
(1) * * *
(2) For standard prior authorization requests for items and services, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage that were approved after appeal.
(iv) The total number and percentage that remain denied after appeal.
(v) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(vi) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(vii) The average and median time that elapsed between the submission of a request and a decision by the State.
(3) For expedited prior authorization requests for items and services, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage that were approved after appeal.
(iv) The total number and percentage that remain denied after appeal.
(v) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(vi) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(vii) The average and median time that elapsed between the submission of a request and a decision by the State.
(d)
(1) A list of all drugs that require prior authorization.
(2) The total number and percentage of prior authorization requests that were approved.
(3) The total number and percentage of prior authorization requests that were denied.
(4) The total number and percentage of prior authorization requests approved after appeal.
(5) The total number and percentage of prior authorization requests that remain denied after appeal.
(6) The average and median time that elapsed between the submission of requests and decisions for prior authorizations.
(e)
(1) The total number of unique providers who requested a prior authorization for items, services, or drugs through the State's Prior Authorization API.
(2) The number of unique prior authorization requests for items, services, or drugs received through the State's Prior Authorization API.
(3) The percentage of all prior authorization requests that were received through the State's Prior Authorization API.
(f)
(g)
(1) An unexpired version of the NCPDP SCRIPT Standard adopted in 45 CFR 170.205(b) to communicate drug-related information between providers and the State with the following transactions:
(i) PAInitiationRequest and PAInitiationResponse.
(ii) PARequest and PAResponse.
(iii) PAAppealRequest and PAAppealResponse.
(iv) PACancelRequest and PACancelResponse.
(v) PA Notification.
(2) An unexpired version of the NCPDP Real-Time Prescription Benefit Standard adopted in 45 CFR 170.205(c).
(3) An unexpired version of the NCPDP Formulary and Benefit Standard adopted in 45 CFR 170.205(u).
(h) Extensions.
(1) A State may submit a request for an extension to the compliance date for the requirements in paragraphs (b) and (g) of this section for its CHIP fee-for-service program. The request(s) must be submitted and approved as part of the State's Advance Planning Document (APD) described in part 433, subpart C, of this chapter, and approved before the applicable compliance date. It must include all the following:
(i) A narrative justification describing the specific reasons why the State cannot satisfy the requirement(s) by the compliance date and why those reasons result from circumstances that are unique to the agency operating the CHIP fee-for service program;
(ii) A report on completed and ongoing State activities that evidence a good faith effort toward compliance.
(iii) A comprehensive plan to meet the requirements.
(2) CMS would grant the State's request if it determines, based on the information provided, that—
(i) The request adequately establishes a need to delay implementation; and
(ii) The State has a comprehensive plan to meet the requirements.
(a) Beginning January 1, 2021, unless otherwise specified, the State must implement and maintain a publicly accessible, standards-based Application Programming Interface (API) that meets all the following:
(1) Is conformant with the standards in 45 CFR 170.215(a), (b)(1), and (n)(1) or an updated version of any such standards in conformance with § 457.730(c)(5).
(2) Beginning October 1, 2027, is conformant with the standards in 45 CFR 170.215(n)(2), or an updated version of any such standards in conformance with § 457.730(c)(5).
(3) Does not restrict the availability of this information to particular persons or organizations.
(4) Is conformant with the documentation requirements in § 457.730(d).
(5) Is conformant with the denial and discontinuation policies in § 457.730(e).
(6) Is accessible via a public-facing digital endpoint.
(d)
42 U.S.C. 18021-18024, 18031-18032, 18041-18042, 18044, 18054, 18061, 18063, 18071, 18082, and 26 U.S.C. 36B.
The revisions and additions read as follows:
(a)
(b) * * *
(1) A QHP issuer on a Federally-facilitated Exchange must make all of the following information maintained by the QHP issuer with a date of service during a plan year beginning on or after January 1, 2016 accessible to its current enrollees or their personal representatives through the API described in paragraph (a) of this section:
(iv) For plan years beginning on or after January 1, 2027, information about prior authorizations for items and services (excluding drugs), including the items and services approved and the information in paragraph (b)(1)(iv)(A) of this section, according to the timelines in paragraph (b)(1)(iv)(B) of this section.
(v) Beginning October 1, 2027, information about prior authorizations for drugs, including the drugs and dosage approved and the information in paragraph (b)(1)(iv)(A) of this section, according to the timelines in paragraph (b)(1)(iv)(B) of this section.
(c) * * *
(1) Must implement and maintain API technology conformant with the standards in § 170.215(a), (b)(1), (c), and (e);
(2) Beginning October 1, 2027, must implement and maintain API technology conformant with the standards at § 170.215(k)(1), (k)(2), and (m);
(5) A QHP issuer on a Federally-facilitated Exchange may use an updated version of any standard or all standards required under paragraphs (c)(1), (c)(2), or (c)(4) of this section, where:
(f)
(1) QHP issuers on a Federally-facilitated Exchange, not including QHPs on a Federally-facilitated SHOP, must report data from plan years beginning on or after January 1, 2025. QHP issuers on a Federally-facilitated SHOP must report data from plan years beginning on or after January 1, 2028.
(2) The metrics that must be reported are the following:
(i) The total number of unique enrollees whose data are transferred via the Patient Access API to a health app designated by the enrollee.
(ii) The total number of unique enrollees whose data are transferred more than once via the Patient Access API to a health app designated by the enrollee.
(h)
(1) All API endpoints in the form of an Endpoint Resource, as defined by aversion of the FHIR standard adopted in § 170.215(a), including, if multiple, appropriate use cases for each.
(2) URLs with the documentation required in paragraph (d) of this section, including all of the following, if applicable:
(i) A direct URL to the API FHIR capability statement.
(ii) Authorization and authentication protocols and implementation details.
(iii) API registration information.
(i)
(1) If a plan applying for QHP certification to be offered through a Federally-facilitated Exchange believes it cannot satisfy the requirements in paragraphs (a) through (h) of this section, the issuer must include as part of its QHP certification application a narrative justification describing the reasons why the plan cannot reasonably satisfy the requirements for the applicable plan year, the impact of non-compliance upon enrollees, the current or proposed means of providing health information to enrollees, and solutions and a timeline to achieve compliance with the requirements of this section.
(2) The Federally-facilitated Exchange may grant an exception to the requirements in this section if the Exchange determines that making such health plan available through such Exchange is in the interests of qualified individuals and qualified employers in the State or States in which such Exchange operates.
The revisions and additions read as follows:
(a)
(1) * * *
(i) The requirements in § 156.221(c)(3), (c)(4), (d), and (e).
(ii) The standards in § 170.215(a), (b)(1), (c), and (d), or an updated version of any such standards in conformance with § 156.221(c)(5).
(iii) Beginning October 1, 2027, the standards in § 170.215(k)(1) and (k)(2), or an updated version of any such standards in conformance with § 156.221(c)(5).
(6)
(i) The total number of unique providers who requested patient data via the QHP issuer's Provider Access API.
(ii) The total number of unique patients whose data were transferred via the QHP issuer's Provider Access API to a provider's health IT system.
(iii) The total number of patient data transfers via the QHP issuer's Provider Access API.
(7)
(b)
(1) * * *
(i) The requirements in § 156.221(c)(3), (c)(4), (d), and (e).
(ii) The standards in § 170.215(a), (b)(1), and (d), or an updated version of any such standards in conformance with § 156.221(c)(5).
(iii) Beginning October 1, 2027, the standards in § 170.215(k)(1), and (k)(2), or an updated version of any such standards in conformance with § 156.221(c)(5).
(8)
(i) The percent of patients who have opted in to the payer to payer data exchange.
(ii) The total number of unique patients whose data have been sent to other payers via the QHP issuer's Payer-to-Payer API.
(iii) The total number of unique patients whose data have been received from other payers via the QHP issuer's Payer-to-Payer API.
(9)
(c) * * *
(1) * * *
(ii) The impact of non-compliance upon enrollees and providers if the
(iii) The current or proposed means of providing health information to providers if the exception pertains to the requirements in paragraph (a) of this section or to payers if the exception pertains to the requirements in paragraph (b) of this section.
(2) The Federally-facilitated Exchange may grant an exception to the requirements in paragraph (a) or (b) (or paragraphs (a) and (b)) of this section if the Exchange determines that making QHPs of such issuer available through such Exchange is in the interests of qualified individuals and qualified employers in the State or States in which such Exchange operates and an exception is warranted to permit the issuer to offer QHPs through the FFE.
The revisions and additions read as follows:
(a)
(1) For plan years beginning on or after January 1, 2026, if a QHP issuer on a Federally-facilitated Exchange, not including a Federally-facilitated SHOP, denies a prior authorization request (excluding a request for coverage of drugs), the response to the provider must include a specific reason for the denial, regardless of the method used to communicate that information.
(2) Beginning on October 1, 2027, if a QHP issuer on a Federally-facilitated Exchange, not including a Federally-facilitated SHOP, denies a prior authorization, including a request for coverage of drugs, the response to the provider must include a specific reason for the denial, regardless of the method used to communicate that information.
(3) For plan years beginning on or after January 1, 2028, QHP issuers on a Federally-facilitated SHOP must meet the requirements in paragraphs (a)(1) and (2) of this section.
(b)
(1) The API must be conformant with all the following:
(i) The requirements in § 156.221(c)(3), (4), (d), and (e).
(ii) The standards in § 170.215(a), (b)(1), and (c), or an updated version of any such standard in conformance with § 156.221(c)(5).
(iii) Beginning October 1, 2027, the standards in § 170.215(j)(1), (j)(2), and (j)(3), or an updated version of any such standard in conformance with § 156.221(c)(5).
(2) The API must be populated with all of the following:
(i) For plan years beginning on or after January 1, 2027, the issuer's list of covered items and services (excluding drugs) that require prior authorization.
(ii) Beginning October 1, 2027, the issuer's list of drugs covered under a medical benefit, as described by the applicable standards, that require prior authorization.
(c)
(1) * * *
(2) For standard prior authorization requests for items and services, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage that were approved after appeal.
(iv) The total number and percentage that remain denied after appeal.
(v) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(vi) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(vii) The average and median time that elapsed between the submission of a request and a decision by the QHP issuer.
(3) For expedited prior authorization requests for items and services, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage that were approved after appeal.
(iv) The total number and percentage that remain denied after appeal.
(v) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(vi) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(vii) The average and median time that elapsed between the submission of a request and a decision by the QHP issuer.
(d)
(1) A list of all drugs that require prior authorization.
(2) For standard prior authorization requests for all drugs, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(iv) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(v) The total number and percentage approved after appeal.
(vi) The total number and percentage that remain denied after appeal.
(vii) The average and median time that elapsed between the submission of requests and decisions.
(2) For expedited prior authorization requests for all drugs, all of the following:
(i) The total number and percentage that were approved.
(ii) The total number and percentage that were denied.
(iii) The total number and percentage for which the timeframe for review was extended, and the request was approved.
(iv) The total number and percentage for which the timeframe for review was extended, and the request was denied.
(v) The total number and percentage approved after appeal.
(vi) The total number and percentage that remain denied after appeal.
(vii) The average and median time that elapsed between the submission of requests and decisions.
(e)
(1) The total number of unique providers who requested a prior authorization for items, services, or drugs through the QHP issuer's Prior Authorization API.
(2) The number of unique prior authorization requests for items, services, or drugs received through the QHP issuer's Prior Authorization API.
(3) The percentage of all prior authorization requests that were received through the QHP issuer's Prior Authorization API.
(f)
(g)
(1) An unexpired version of the NCPDP SCRIPT Standard adopted in § 170.205(b) to communicate drug-related information between providers and the QHP issuer with the following transactions:
(i) PAInitiationRequest and PAInitiationResponse.
(ii) PARequest and PAResponse.
(iii) PAAppealRequest and PAAppealResponse.
(iv) PACancelRequest and PACancelResponse.
(v) PA Notification.
(2) An unexpired version of the NCPDP Real-Time Prescription Benefit Standard adopted in § 170.205(c).
(3) An unexpired version of the NCPDP Formulary and Benefit Standard adopted in § 170.205(u).
(h) Exception
(1) If a plan applying for QHP certification to be offered through a Federally-facilitated Exchange believes it cannot satisfy the requirements in paragraph (b), (e), (f), and/or (g) of this section, the issuer must include a narrative justification in its QHP application that describes all of the following:
(i) The reasons why the issuer cannot reasonably satisfy the requirements for the applicable plan year.
(ii) The impact of non-compliance upon providers and enrollees.
(iii) Their current or proposed means of providing prior authorization coverage and documentation requirements and facilitating prior authorization requests and decisions.
(iv) Solutions and a timeline to achieve compliance with the requirements in paragraphs (b), (e), and (f), or (g) of this section.
(2) The Federally-facilitated Exchange may grant an exception to the requirements in paragraphs (b), (e), and (f), or (g) of this section if the Exchange determines that making QHPs of such issuer available through such Exchange is in the interests of qualified individuals and qualified employers in the State or States in which such Exchange operates and an exception is warranted to permit the issuer to offer QHPs through the FFE.
(i)
(1) In response to a request for prior authorization, a QHP issuer must notify the requesting provider of its determination as expeditiously as the enrollee's health condition requires but no later than the following:
(i) For all items and services, other than drugs—
(A) No later than 7 calendar days after receiving a standard prior authorization request; or
(B) No later than 72 hours after receiving an expedited prior authorization request.
(ii) For all drugs—
(A) No later than 72 hours after receiving a standard prior authorization request; or
(B) No later than 24 hours after receiving an expedited prior authorization request.
(2) For purposes of this paragraph (i)(1)—
(i) A standard prior authorization request has the meaning given to a “pre-service claim” in 29 CFR 2560.503-1(m)(2); and
(ii) An expedited prior authorization request has the meaning given to a “claim involving urgent care” in 29 CFR 2560.503-1(m)(1).
(3) Extensions on requests for items or services—
(i) The issuer may extend the timeframes in paragraphs (i)(1) by up to 14 calendar days under any of the following circumstances:
(A) The provider requests the extension.
(B) The extension is justified and in the provider's or enrollee's interest because the QHP issuer needs additional medical evidence from another provider or from the enrollee in order to issue a decision.
(C) The extension is justified due to extraordinary, exigent, or other non-routine circumstances and is in the provider's or enrollee's interest.
(ii)
(A) When the QHP issuer extends a timeframe as described in paragraph (i)(3)(i), it must—
(
(
(B) The issuer must notify the provider of its determination as expeditiously as the enrollee's health condition requires, but no later than upon expiration of the extension.
42 U.S.C. 1320d-1320d-9 and secs. 1104 and 10109 of Pub. L. 111-148, 124 Stat. 146-154 and 915-917.
The revisions and addition read as follows:
(b) * * *
(2) The following standards:
(e) For the period from April 14, 2028 through [24 months after the effective date of the final rule in the
(f) Beginning [24 months after the effective date of the final rule in the
(1) Retail pharmacy drugs. The NCPDP Telecommunication Standard Implementation Guide Version F6, January 2020 and equivalent NCPDP Batch Standard Implementation Guide, Version 15, October 2017 (both incorporated by reference in § 162.920).
(2) Dental, professional, and institutional health care eligibility benefit inquiry and response.
(i) For transactions used to determine whether prior authorization, as defined in § 162.103, is required, all of the following:
(A) HL7® Fast Healthcare Interoperability Resources (FHIR®) Release 4.0.1 (incorporated by reference, see § 170.299).
(B) The HL7® FHIR® US Core Implementation Guide STU 6.1.0 (incorporated by reference, see § 170.299).
(C) The HL7® SMART App Launch Implementation Guide Release 2.0.0 (incorporated by reference, see § 170.299).
(D) HL7® FHIR® Da Vinci Coverage Requirements Discovery (CRD) Implementation Guide, Version 2.2.1—STU 2.2 (incorporated by reference in § 170.299).
(ii) For all other transactions, the ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Eligibility Benefit Inquiry and Response (270/271), April 2008, ASC X12N/005010X279 (incorporated by reference in § 162.920).
The revision and addition read as follows:
(a) Except as specified in paragraphs (b) and (c) of this section, the following CAQH CORE Phase I and Phase II operating rules (updated for Version 5010) for the eligibility for a health plan transaction:
(c) Excluding transactions where an adopted Fast Healthcare Interoperability Resources (FHIR®)-based standard transaction is used to determine whether prior authorization, as defined in § 162.103, is required.
The revisions and additions read as follows:
(b) * * *
(2) The following standards:
(f) For the period from April 14, 2028 through [24 months after the effective date of the final rule in the
(g) Beginning [24 months after the effective date of the final rule in the
(1) Retail pharmacy drugs. The NCPDP Telecommunication Standard Implementation Guide Version F6, January 2020 and equivalent NCPDP Batch Standard Implementation Guide, Version 15, October 2017 (both incorporated by reference in § 162.920).
(2) Dental, professional, and institutional request for review and response. For prior authorization transactions, as defined at 162.103, all of the following:
(i) HL7® Fast Healthcare Interoperability Resources (FHIR®) Release 4.0.1 (incorporated by reference, see § 170.299).
(ii) HL7® FHIR® US Core Implementation Guide STU 6.1.0 (incorporated by reference, see § 170.299).
(iii) HL7® SMART App Launch Implementation Guide Release 2.0.0 (incorporated by reference, see § 170.299).
(iv) HL7 FHIR® Da Vinci—Coverage Requirements Discovery (CRD) Implementation Guide, Version 2.2.1—STU 2.2 (incorporated by reference in § 170.299).
(v) HL7 FHIR® Da Vinci—Documentation Templates and Rules (DTR) Implementation Guide, Version 2.2.0—STU 2.2 (incorporated by reference in § 170.299).
(vi) HL7 FHIR® Da Vinci Prior Authorization Support (PAS) Implementation Guide, Version 2.2.1—STU 2.2 (incorporated by reference in § 170.299).
(vii) HL7 FHIR® Da Vinci—Clinical Data Exchange (CDex) Implementation Guide, Version 2.1.0—STU 2.1 (incorporated by reference in § 170.299).
42 U.S.C. 300jj-11; 42 U.S.C. 300jj-14; 5 U.S.C. 552.
(j) * * *
(1) * * *
(i)
(ii)
(iii) [Reserved]
(2) * * *
(i)
(ii)
(iii) [Reserved]
(3) * * *
(i)
(ii)
(iii) [Reserved]
(k) * * *
(1) * * *
(i)
(ii)
(iii) [Reserved]
(3)
(i)
(m) * * *
(1)
(2)
(3) [Reserved]
(n) * * *
(1)
(2)
(3) [Reserved]
(g) * * *
(50) HL7 FHIR® Da Vinci Coverage Requirements Discovery (CRD) Implementation Guide, Version 2.2.1—STU 2.2, March 27, 2026, IBR approved for § 170.215(j).
(51) HL7 FHIR® Da Vinci Documentation Templates and Rules (DTR) Implementation Guide, Version 2.2.0—STU 2.2, March 27 2026, IBR approved for § 170.215(j).
(52) HL7 FHIR® Da Vinci Prior Authorization Support (PAS) FHIR Implementation Guide, Version 2.2.1—STU 2.2, March 27, 2026, IBR approved for § 170.215(j).
(53) HL7 FHIR® CARIN Consumer Directed Payer Data Exchange (CARIN IG for Blue Button®) Implementation Guide, Version 2.2.0—STU 2.2, March 27, 2026, IBR approved for § 170.215(k).
(54) HL7 FHIR® Da Vinci Payer Data Exchange (PDex) US Drug Formulary Implementation Guide, Version 2.1.0—STU 2.1, February 26, 2025, IBR approved for § 170.215(m).
(55) HL7 FHIR® Da Vinci Payer Data Exchange (PDex) Plan Net Implementation Guide, Version 1.2.0—STU 1.2, February 5, 2025, IBR approved for § 170.215(n).
(56) HL7 FHIR® Da Vinci Clinical Data Exchange (CDex) Implementation Guide, Version 2.1.0—STU 2.1, February 11, 2025, IBR approved for § 170.215(k).