[Federal Register Volume 91, Number 128 (Tuesday, July 7, 2026)]
[Proposed Rules]
[Pages 41734-42032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-13656]
[[Page 41733]]
Vol. 91
Tuesday,
No. 128
July 7, 2026
Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 413, 416, 419, et al.
Medicare Program: Hospital Outpatient Prospective Payment and
Ambulatory Surgical Center Payment Systems; and Quality Reporting
Programs; Including the Hospital Outpatient Quality Reporting Program
and Ambulatory Surgical Center Quality Program; Request for Information
on Strengthening the Standardization and Comparability of Hospital
Price Transparency (HPT) Data; Prior Authorization; Accrediting
Organization (AO) Deeming for Emergency Medical Treatment and Labor Act
(EMTALA); and Notices of Closure of Teaching Hospitals and
Opportunities To Apply for Available Slots; Proposed Rule
Federal Register / Vol. 91 , No. 128 / Tuesday, July 7, 2026 /
Proposed Rules
[[Page 41734]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 413, 416, 419, 427, and 488
[CMS-1850-P]
RIN 0938-AV83
Medicare Program: Hospital Outpatient Prospective Payment and
Ambulatory Surgical Center Payment Systems; and Quality Reporting
Programs; Including the Hospital Outpatient Quality Reporting Program
and Ambulatory Surgical Center Quality Program; Request for Information
on Strengthening the Standardization and Comparability of Hospital
Price Transparency (HPT) Data; Prior Authorization; Accrediting
Organization (AO) Deeming for Emergency Medical Treatment and Labor Act
(EMTALA); and Notices of Closure of Teaching Hospitals and
Opportunities To Apply for Available Slots
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise the Medicare Hospital
Outpatient Prospective Payment System (OPPS) and the Medicare
Ambulatory Surgical Center (ASC) payment system for calendar year 2027
based on our continuing experience with these systems. We also describe
the changes to the amounts and factors used to determine the payment
rates for Medicare services paid under the OPPS and those paid under
the ASC payment systems. In addition, this proposed rule would update
and refine the requirements for the Hospital Outpatient Quality
Reporting Program and the Ambulatory Surgical Center Quality Reporting
Program. There are no changes to the Rural Emergency Hospital Quality
Reporting Program. We propose to expand the prior authorization
requirement to include additional Botulinum Toxin Injection services.
We also propose to implement certain provisions of the Consolidated
Appropriations Act, 2026, for off-campus outpatient departments of a
provider. In addition, this proposed rule announces notices of closure
of teaching hospitals and opportunities to apply for available slots.
This rule also requests information regarding potential approaches to
improve comparability and standardization, particularly for complex
contracting methodologies, of the HPT information reported in machine-
readable files and consumer-friendly displays. We propose hospital AOs
with deeming authority to assess compliance with certain Emergency
Medical Treatment and Labor Act (EMTALA) administrative requirements
during accreditation and reaccreditation surveys. Finally, we are
soliciting comments on a potential separate payment under the Inpatient
Prospective Payment System (IPPS) for domestic procurement of personal
protective equipment and essential medicines.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, by August 31, 2026.
ADDRESSES: In commenting, please refer to file code CMS-1850-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to https://www.regulations.gov/docket/CMS-2026-2344. Follow
the ``Submit a comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1850-P, P.O. Box 8010,
Baltimore, MD 21244-8010.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1850-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Regulation coordination questions, contact Gina Aughenbaugh via
email at [email protected].
Accrediting Organization (AO) Deeming for Emergency Medical
Treatment and Labor Act (EMTALA), contact Melissa Daly via email at
[email protected].
Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact
the HOP Panel mailbox at [email protected].
Ambulatory Surgical Center Covered Procedures List (ASC CPL),
contact Abigail Cesnik via email at [email protected].
Ambulatory Surgical Center Quality Reporting Program measures,
contact Marsha Hertzberg via email at [email protected].
Ambulatory Surgical Center Quality Reporting Program policies,
contact Anita Bhatia via email at [email protected].
All-Inclusive Rate (AIR) Add-On Payment for High-Cost Drugs
Provided by Indian Health Service (IHS) and Tribal Facilities, contact
Nate Vercauteren via email at [email protected].
Blood and Blood Products, contact Gil Ngan via email at
[email protected].
Cancer Hospital Payments, contact Scott Talaga via email at
[email protected].
CMS Web Posting of the OPPS and ASC Payment Files, contact Gil Ngan
via email at [email protected].
Composite APCs (Multiple Imaging and Mental Health) and
Comprehensive APCs (C-APCs), contact Elise Barringer via email at
[email protected].
Device-Intensive Status and No Cost/Full Credit and Partial Credit
Devices, contact Scott Talaga via email at [email protected].
Hospital Outpatient Quality Reporting Program measures, contact
Kristina Rabarison via email at [email protected].
Hospital Outpatient Quality Reporting Program policies, contact
Kimberly Go via email at [email protected].
Hospital Outpatient Visits (Emergency Department Visits and
Critical Care Visits), contact Elise Barringer via email at
[email protected].
Hospital Price Transparency, contact Sarah Wheat via email at
[email protected].
Inpatient Only (IPO) Procedures List, contact Abigail Cesnik via
email at [email protected].
Medicare OPPS Drug Acquisition Cost Survey, contact Cory Duke via
email at [email protected] or Gil Ngan at [email protected] or
Nate Vercauteren at [email protected].
Method to Control Unnecessary Increases in the Volume of Outpatient
Services, contact Elise Barringer via email at
[email protected].
New Technology Intraocular Lenses (NTIOLs), contact Scott Talaga
via email at [email protected].
Non-Opioid Policy or Implementation of Section 4135 of the
Consolidated Appropriations Act (CAA), 2023, contact Cory Duke via
email at
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[email protected] or Nicole Marcos via email at
[email protected].
OPPS Brachytherapy, contact Scott Talaga via email at
[email protected].
OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-
Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier
Payments, and Wage Index), contact Erick Chuang via email at
[email protected] or Scott Talaga via email at
[email protected].
OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar
Products, contact Gil Ngan via email at [email protected], Cory Duke
via email at [email protected], or Nate Vercauteren via email at
[email protected].
OPPS New Technology Procedures/Services, contact the New Technology
APC mailbox at [email protected].
OPPS Packaged Items/Services, contact Cory Duke via email at
[email protected].
OPPS Pass-Through Devices, contact the Device Pass-Through mailbox
at [email protected].
OPPS Status Indicators (SI) and Comment Indicators (CI), contact
Marina Kushnirova via email at [email protected] or Tonya
Gierke at [email protected].
Outpatient Department Prior Authorization Requirements, contact
Yuliya Cook via email at [email protected].
Partial Hospitalization Program (PHP), Intensive Outpatient (IOP),
and Community Mental Health Center (CMHC) Issues, contact the PHP
Payment Policy Mailbox at [email protected].
Potential Separate IPPS Payment for Domestic Procurement of
Personal Protective Equipment and Essential Medicines Issues, please
contact [email protected].
Provider-Based Attestation Requirements, please contact
[email protected].
Rural Emergency Hospital Quality Reporting Program policies,
contact Anita Bhatia via email at [email protected].
Rural Emergency Hospital Quality Reporting Program measures,
contact Melissa Hager via email at [email protected].
Skin Substitute Products, contact Nicole Marcos via email at
[email protected].
Software as a Medical Service, contact Nicole Marcos via email at
[email protected].
All Other Issues Related to Hospital Outpatient Payments Not
Previously Identified, contact the OPPS mailbox at
[email protected].
All Other Issues Related to the Ambulatory Surgical Center Payments
Not Previously Identified, contact the ASC mailbox at
[email protected].
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that website to
view public comments. CMS will not post on Regulations.gov public
comments that make threats to individuals or institutions or suggest
that the individual will take actions to harm the individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
plain language summary of this rule may be found at https://www.regulations.gov/.
Addenda Available Only Through the Internet on the CMS Website
In the past, a majority of the addenda referred to in our OPPS/ASC
proposed and final rules were published in the Federal Register as part
of the annual rulemakings. However, beginning with the calendar year
(CY) 2012 OPPS/ASC proposed rule, the addenda no longer appear in the
Federal Register as part of the annual OPPS/ASC proposed and final
rules to decrease administrative burden and reduce costs associated
with publishing lengthy tables. Instead, these addenda are published
and available only on the CMS website. The addenda relating to the OPPS
are available at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices. The addenda
relating to the ASC payment system are available at https://www.cms.gov/medicare/payment/prospective-payment-systems/ambulatory-surgical-center-asc/asc-regulations-and-notices.
Current Procedural Terminology (CPT) Copyright Notice
Throughout this final rule with comment period, we use CPT codes
and descriptions to refer to a variety of services. We note that CPT
codes and descriptions are copyright 2026 American Medical Association
(AMA). All Rights Reserved. CPT is a registered trademark of the AMA.
Applicable Federal Acquisition Regulations and Defense Federal
Acquisition Regulations apply.
I. Summary and Background
A. Executive Summary of this Document
1. Purpose
In this proposed rule, we propose to update the payment policies
and payment rates for services furnished to Medicare beneficiaries in
hospital outpatient departments (HOPDs) and ambulatory surgical centers
(ASCs), beginning January 1, 2027. Section 1833(t) of the Social
Security Act (the Act) requires us to annually review and update the
payment rates for services payable under the Hospital Outpatient
Prospective Payment System (OPPS). Specifically, section 1833(t)(9)(A)
of the Act requires the Secretary of the Department of Health and Human
Services (the Secretary) to review certain components of the OPPS not
less often than annually, and to revise the groups, the relative
payment weights, and the wage and other adjustments to take into
account changes in medical practice, changes in technology, and the
addition of new services, new cost data, and other relevant information
and factors. In addition, under section 1833(i)(D)(v) of the Act, we
annually review and update the ASC payment rates. This proposed rule
also includes additional policy changes made in accordance with our
experience with the OPPS and the ASC payment system and recent changes
in our statutory authority. We describe these and various other
statutory authorities in the relevant sections of this proposed rule.
In addition, this proposed rule announces the closure of a teaching
hospital and the opportunity to apply for available slots. In addition,
this proposed rule updates and refines requirements for the Hospital
Outpatient Quality Reporting Program and the Ambulatory Surgical Center
Quality Reporting Program. There are no changes to the Rural Emergency
Hospital Quality Reporting Program. We propose to expand the prior
authorization requirement to include additional Botulinum Toxin
Injection services. This proposed rule also
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includes proposals to implement certain provisions of the Consolidated
Appropriations Act, 2026, for off-campus outpatient departments of a
provider. This rule also requests information regarding potential
approaches to improve comparability and standardization, particularly
for complex contracting methodologies, of the information reported in
machine-readable files and consumer-friendly displays. Additionally, we
propose hospital AOs with deeming authority to assess compliance with
certain EMTALA administrative requirements under 42 CFR 489.20 during
accreditation and reaccreditation surveys. Finally, we are soliciting
comments on a potential separate payment under the Inpatient
Prospective Payment System (IPPS) for domestic procurement of personal
protective equipment and essential medicines.
2. Summary of the Major Provisions
OPPS Update: For CY 2027, we propose to increase the
payment rates under the OPPS by an outpatient department (OPD) fee
schedule increase factor of 2.4 percent. This increase factor is based
on the proposed inpatient hospital market basket percentage increase of
3.2 percent for inpatient services paid under the hospital inpatient
prospective payment system (IPPS), reduced by a proposed productivity
adjustment of 0.8 percentage point. Based on this update, we estimate
that total payments to OPPS providers (including beneficiary cost
sharing and estimated changes in enrollment, utilization, and case mix)
for calendar year (CY) 2027 will be approximately $110.9 billion, an
increase of approximately $9.5 billion compared to estimated CY 2026
OPPS payments.
We are continuing to implement the statutory 2.0 percentage point
reduction in payments for hospitals that fail to meet the hospital
outpatient quality reporting requirements by applying a reporting
factor of 0.9805 to the OPPS payments and copayments for all applicable
services. Under the proposed 340B remedy offset, payments for services
at hospitals subject to the 340B remedy offset will be reduced by 3
percentage points.
ASC Payment Update: For CYs 2019 through 2023, we adopted
a policy to update the ASC payment system using the hospital market
basket update. In light of the impact of the COVID-19 public health
emergency (PHE) on healthcare utilization, we extended our policy to
update the ASC payment system using the hospital market basket update
an additional 2 years--through CYs 2024 and 2025. For CY 2026, we
extended this interim period an additional year--through CY 2026. In
this proposed rule, we are extending our utilization of the hospital
market basket update as the update factor for the ASC payment system
for one additional year (through CY 2027). Using the hospital market
basket update, for CY 2027, we are increasing payment rates under the
ASC payment system by 2.4 percent for ASCs that meet the quality
reporting requirements under the ASCQR Program. This increase is based
on a proposed hospital market basket percentage increase of 3.2 percent
reduced by a final productivity adjustment of 0.8 percentage point.
Based on this proposed update, we estimate that total payments to ASCs
(including beneficiary cost sharing and estimated changes in
enrollment, utilization, and case-mix) for CY 2027 will be
approximately $9.9 billion, an increase of approximately $520 million
compared to estimated CY 2026 Medicare payments.
Adjustment for Cost-of-Living in Alaska and Hawaii: For CY
2027, we propose to establish a cost-of-living adjustment (COLA) for
outpatient hospital services provided in Alaska and Hawaii that mirrors
the COLA provided for inpatient hospital services provided in these
States, including any changes finalized in the IPPS for FY 2027.
Device Pass-Through Payment Applications: For CY 2027, we
received 19 complete applications for device pass-through payments. We
seek public comment on 13 applications (six applicants withdrew). We
propose to approve device pass-through payment status for seven
applications and deny device pass-through payment status for six
applications. We will make final determinations on these applications
in this final rule with comment period.
Changes to the List of ASC Covered Surgical Procedures and
Ancillary Services Lists: For CY 2027, we propose to continue to expand
the ASC covered procedures list (CPL) by adding 618 codes to the ASC
CPL that were recommended by stakeholders or are proposed for removal
from the IPO list for CY 2027.
Changes to the Inpatient Only (IPO) List: We are
continuing to phase out the IPO list by proposing to remove 637
services from the auditory, digestive, endocrine, female genital, hemic
and lymphatic systems, integumentary, male genital, maternity care and
delivery, mediastinum and diaphragm, respiratory and urinary clinical
families from the IPO list for CY 2027.
Cross-Program Updates for the Hospital Outpatient Quality
Reporting and Ambulatory Surgical Center Quality Reporting Programs: We
propose to remove the Appropriate Follow-Up Interval for Normal
Colonoscopy in Average Risk Patients measure from the Hospital
Outpatient Quality Reporting and Ambulatory Surgical Center Quality
Reporting Programs.
Hospital Outpatient Quality Reporting Program: In addition
to the cross-program proposal to remove the Appropriate Follow-Up
Interval for Normal Colonoscopy in Average Risk Patients measure, we
propose updates and refinements to validation and validation
reconsideration procedures, including policies applicable to electronic
clinical quality measures (eCQMs). We are also issuing a Request for
Information on potentially including an Advance Care Planning measure
specified for the Hospital Outpatient Department setting.
Rural Emergency Hospital Quality Reporting Program: We are
not proposing any updates to the Rural Emergency Hospital Quality
Reporting Program in this proposed rule.
Ambulatory Surgical Center Quality Reporting Program: In
addition to the cross-program measure proposal to remove the
Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk
Patients measure, we are soliciting information on potential
stratification of the All-cause Transfer/Admission measure.
Expansion of Category for Hospital Outpatient Department
Prior Authorization Process: We are adding Botulinum Toxin Injection
codes to the existing category of services subject to the Hospital
Outpatient Department prior authorization process for dates of service
on or after July 1, 2027.
Partial Hospitalization and Intensive Outpatient
Programs: We propose to update the Partial Hospitalization Program
(PHP) and Intensive Outpatient Program (IOP) payment rates for CY 2027
using the methodology we finalized in CY 2026.
Payment Adjustment for 340B-Acquired Drugs Based
on Results of the Medicare OPPS Drug Acquisition Cost Survey: Section
1833(t)(14)(D)(ii) of the Act requires the Secretary to periodically
conduct surveys of hospital acquisition costs for each specified
covered outpatient drug for use in setting the payment rates for such
drugs. Additionally, on April 18, 2025, President Trump signed
Executive Order (E.O.) 14273, ``Lowering Drug Prices by Once Again
Putting Americans First''. Section 5 of the E.O., ``Appropriately
Accounting for
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Acquisition Costs of Drugs in Medicare'', which directs the Secretary
of HHS to publish in the Federal Register a plan to conduct a survey
under section 1833(t)(14)(D)(ii) of the Act so he can determine the
hospital acquisition cost for covered outpatient drugs at hospital
outpatient departments. Accordingly, from January 1, 2026 through April
7, 2026, we conducted a survey of the acquisition costs for each
separately payable drug acquired by all hospitals paid under the OPPS.
Taking the survey results into account, we propose for CY 2027 to pay
ASP minus 33.4 percent for 340B acquired drugs. Statute requires that
this policy be implemented in a budget neutral manner, so this proposal
would increase OPPS payments for non-drug services by an equivalent
amount, which is estimated to be an 8.44 percent increase to non-drug
service payments for this proposed rule.
Prospective Adjustment to Payments for Non-Drug
Items and Services to Offset the Increased Payments for Non-Drug Items
and Services Made in CY 2018 Through CY 2022 as a Result of the 340B
Payment Policy. The Remedy for the 340B-Acquired Drug Payment Policy
for Calendar Years 2018-2022 (88 FR 77150) codified an annual 0.5
percent reduction in the OPPS conversion factor applicable to non-drug
items and services, excluding hospitals that enrolled in Medicare after
January 1, 2018, until we estimated that the reduction had fully offset
the additional $7.8 billion in non-drug services payments made as part
of the prior 340B drug payment policy. This reduction was effective
January 1, 2026. For CY 2027, we propose to increase the annual percent
reduction to the OPPS conversion factor used to determine the payment
amounts for non-drug items and services for hospitals for whom this
adjustment applies from 0.5 percent to 3 percent.
Request for Information (RFI) on Strengthening the
Standardization and Comparability of Hospital Price Transparency Data:
We are requesting information regarding potential approaches to improve
comparability and standardization of the HPT information reported in
machine-readable files (MRFs) and consumer-friendly displays. We are
particularly interested in comments regarding the reporting of contract
mechanisms such as outlier payments, stop-loss provisions, rate
tiering, and carve-outs. The RFI also seeks public comment on potential
approaches to enhance the comparability and usefulness of the consumer-
friendly display requirements, including feedback on whether to modify
or eliminate the current deemed compliance policy for internet-based
price estimator tools, update the required list of shoppable services,
and provide additional clarification regarding the items and services
included in displayed prices, such as ancillary and bundled services.
Method to Control Unnecessary Increases in the
Volume of Outpatient Services Furnished in Excepted Off-Campus
Provider-Based Departments (PBDs): For CY 2027, we propose to use our
authority under section 1833(t)(2)(F) of the Act to apply the Physician
Fee Schedule equivalent rate for any Healthcare Common Procedure Coding
System (HCPCS) codes assigned to the imaging without contrast APCs when
provided at an off-campus PBD excepted from section 1833(t)(21) of the
Act. We propose to exempt rural Sole Community Hospitals from this
method to control the unnecessary volume of imaging without contrast
services.
3. Summary of Costs and Benefits
In section XXVI. of this proposed rule, we set forth a detailed
analysis of the regulatory and Federalism impacts that the proposed
changes will have on affected entities and beneficiaries. Key estimated
impacts are described below.
a. Impacts of All OPPS Changes
Table 88 in section XXVI.C. of this proposed rule displays the
distributional impact of all the OPPS changes on various groups of
hospitals and CMHCs for CY 2027 compared to all estimated OPPS payments
in CY 2026. We estimate that the proposed policies in this proposed
rule will result in a 1.9 percent increase in OPPS payments to
providers for services. We estimate that total OPPS payments for CY
2027, including beneficiary cost-sharing, to the approximately 3,500
facilities paid under the OPPS (including general acute care hospitals,
children's hospitals, cancer hospitals, and CMHCs) will increase by
approximately $1.82 billion compared to CY 2026 payments due to the OPD
update, excluding changes in enrollment, utilization, and case-mix.
However, for providers subject to the 340B remedy offset, the 340B
remedy offset is estimated to reduce payments by $2.3 billion in CY
2027.
We estimated the isolated impact of our OPPS policies on CMHCs
because CMHCs have historically only been paid for partial
hospitalization services under the OPPS. Beginning CY 2024, they are
also paid for IOP services under the OPPS. Based on our policy to
calculate CMHC PHP and IOP costs based on 40 percent of the
corresponding proposed hospital-based PHP and IOP costs, we estimate an
8.4 percent increase in CY 2027 payments to CMHCs relative to their CY
2026 payments.
b. Impacts of the Updated Wage Index
We estimate that our update of the wage indexes based on the fiscal
year (FY) 2027 IPPS final rule wage indexes will result in no change
for urban hospitals under the OPPS and a 0.5 percent increase for rural
hospitals. These wage indexes include continued utilization of the
Office of Management and Budget (OMB) labor market area delineations
based on 2020 Decennial Census data, with updates, as discussed in
section II.C. of this proposed rule.
c. Impacts of the Rural Adjustment and the Cancer Hospital Payment
Adjustment
For CY 2027, we propose to continue to provide additional payments
to cancer hospitals so that a cancer hospital's payment-to-cost ratio
(PCR) after the additional payments is equal to the weighted average
PCR for the other OPPS hospitals using the most recently submitted or
settled cost report data. Section 16002(b) of the 21st Century Cures
Act requires that this weighted average PCR be reduced by 1.0
percentage point. For CY 2027, we propose a target PCR of 0.88 to
determine the CY 2027 cancer hospital payment adjustment to be paid at
cost report settlement. That is, the payment adjustments would be the
additional payments needed to result in a PCR equal to 0.88 for each
cancer hospital.
There are no significant impacts of our CY 2027 payment policies
for hospitals that are eligible for the rural sole community hospital
adjustment, as we propose to maintain the policy in the CY 2027 OPPS.
d. Impacts of the OPD Fee Schedule Increase Factor
For the CY 2027 OPPS/ASC, we are establishing an OPD fee schedule
increase factor of 2.4 percent and applying that increase factor to the
conversion factor for CY 2026. As a result of the OPD fee schedule
increase factor and other budget neutrality adjustments, we estimate
that urban hospitals will experience an increase in payments of
approximately 1.9 percent and that rural hospitals will experience an
increase in payments of 6.4 percent. Classifying hospitals by teaching
status, we estimate non-teaching hospitals will experience an increase
in payments of 6.4 percent, minor teaching hospitals will experience an
increase in payments of 3.9 percent, and major teaching
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hospitals will experience a decrease in payments of 2.4 percent. We
also classified hospitals by the type of ownership. We estimate that
hospitals with voluntary ownership will experience an increase of 2.0
percent in payments, while hospitals with government ownership will
experience a decrease of 0.8 percent in payments. We estimate that
hospitals with proprietary ownership will experience an increase of
10.6 percent in payments.
e. Impacts of the ASC Payment Update
For impact purposes, the surgical procedures on the ASC covered
surgical procedure list are aggregated into surgical specialty groups
using CPT and HCPCS code range definitions. The percentage change in
estimated total payments by specialty groups under the proposed CY 2027
payment rates, compared to estimated CY 2026 payment rates, ranges
between an increase of 35 percent and a decrease of 4 percent.
f. Impact of the Changes to the Hospital Outpatient Quality Reporting
Program
Across 3,000 hospitals participating in the Hospital Outpatient
Quality Reporting Program, we estimate that our proposed changes, if
finalized, would result in a total information collection burden
decrease of 16,985 hours at a cost savings of $971,221 beginning with
the CY 2029 reporting period/CY 2031 payment determination.
g. Impact of the Changes to the Ambulatory Surgical Center Quality
Reporting Program
Across 5,149 ASCs participating in the Ambulatory Surgical Center
Quality Reporting Program, we estimate that our proposed changes, if
finalized, would result in a total information collection burden
decrease of 16,753 hours at a cost savings of $957,937 beginning with
the CY 2027 reporting period/CY 2029 payment determination.
B. Legislative and Regulatory Authority for the Hospital OPPS
When Title XVIII of the Act was enacted, Medicare payment for
hospital outpatient services was based on hospital-specific costs. In
an effort to ensure that Medicare and its beneficiaries pay
appropriately for services and to encourage more efficient delivery of
care, the Congress mandated replacement of the reasonable cost-based
payment methodology with a prospective payment system (PPS). The
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section
1833(t) to the Act, authorizing implementation of a PPS for hospital
outpatient services. The OPPS was first implemented for services
furnished on or after August 1, 2000. Implementing regulations for the
OPPS are located at 42 CFR parts 410 and 419.
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS.
The following Acts made additional changes to the OPPS: the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit
Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8,
2006; the Medicare Improvements and Extension Act under Division B of
Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA)
(Pub. L. 109-432), enacted on December 20, 2006; the Medicare,
Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173),
enacted on December 29, 2007; the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July
15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-
148), enacted on March 23, 2010, as amended by the Health Care and
Education Reconciliation Act of 2010 (HCERA, Pub. L. 111-152), enacted
on March 30, 2010 (these two public laws are collectively known as the
Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010
(MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act
of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; the
Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L.
112-96), enacted on February 22, 2012; the American Taxpayer Relief Act
of 2012 (Pub. L. 112-240), enacted January 2, 2013; the Pathway for SGR
Reform Act of 2013 (Pub. L. 113-67) enacted on December 26, 2013; the
Protecting Access to Medicare Act of 2014 (PAMA, Pub. L. 113-93),
enacted on March 27, 2014; the Medicare Access and CHIP Reauthorization
Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015; the
Bipartisan Budget Act of 2015 (Pub. L. 114-74), enacted November 2,
2015; the Consolidated Appropriations Act, 2016 (Pub. L. 114-113),
enacted on December 18, 2015, the 21st Century Cures Act (Pub. L. 114-
255), enacted on December 13, 2016; the Consolidated Appropriations
Act, 2018 (Pub. L. 115-141), enacted on March 23, 2018; the Substance
Use Disorder- Prevention that Promotes Opioid Recovery and Treatment
for Patients and Communities Act (Pub. L. 115-271), enacted on October
24, 2018; the Further Consolidated Appropriations Act, 2020 (Pub. L.
116-94), enacted on December 20, 2019; the Coronavirus Aid, Relief, and
Economic Security Act (Pub. L. 116-136), enacted on March 27, 2020; the
Consolidated Appropriations Act, 2021 (Pub. L. 116-260), enacted on
December 27, 2020; the Inflation Reduction Act, 2022 (Pub. L. 117-169),
enacted on August 16, 2022; the Consolidated Appropriations Act (CAA),
2023 (Pub. L. 117-328), enacted December 29, 2022; and the Consolidated
Appropriations Act, 2026 (CAA, 2026; Pub. L. 119-75), enacted on
February 3, 2026.
Under the OPPS, we generally pay for hospital Part B services on a
rate-per-service basis that varies according to the APC group to which
the service is assigned. We use the Healthcare Common Procedure Coding
System (HCPCS) (which includes certain Current Procedural Terminology
(CPT) codes) to identify and group the services within each APC. The
OPPS includes payment for most hospital outpatient services, except
those identified in section I.C of this proposed rule. Section
1833(t)(1)(B) of the Act provides for payment under the OPPS for
hospital outpatient services designated by the Secretary (which
includes partial hospitalization services furnished by CMHCs), and
certain inpatient hospital services that are paid under Medicare Part
B.
The OPPS rate is an unadjusted national payment amount that
includes the Medicare payment and the beneficiary copayment. This rate
is divided into a labor-related amount and a nonlabor-related amount.
The labor-related amount is adjusted for area wage differences using
the hospital inpatient wage index value for the locality in which the
hospital or CMHC is located.
All services and items within an APC group are comparable
clinically and with respect to resource use, as required by section
1833(t)(2)(B) of the Act. In accordance with section 1833(t)(2)(B) of
the Act, subject to certain exceptions, items and services within an
APC group cannot be considered comparable with respect to the use of
resources if the highest median cost (or mean cost, if elected by the
Secretary) for an item or service in the APC group is more than 2 times
greater than the lowest median cost (or mean cost, if elected by the
Secretary) for an item or service within the same APC group (referred
to as the ``2 times rule''). In implementing this provision, we
generally use the cost of
[[Page 41739]]
the item or service assigned to an APC group.
For new technology items and services, special payments under the
OPPS may be made in one of two ways. section 1833(t)(6) of the Act
provides for temporary additional payments, which we refer to as
``transitional pass-through payments'', for at least 2 but not more
than 3 years for certain drugs, biological agents, brachytherapy
devices used for the treatment of cancer, and categories of other
medical devices. For new technology services that are not eligible for
transitional pass-through payments, and for which we lack sufficient
clinical information and cost data to appropriately assign them to a
clinical APC group, we have established special APC groups based on
costs, which we refer to as New Technology APCs. These New Technology
APCs are designated by cost bands which allow us to provide appropriate
and consistent payment for designated new procedures that are not yet
reflected in our claims data. Similar to pass-through payments, an
assignment to a New Technology APC is generally temporary; that is, we
retain a service within a New Technology APC until we acquire
sufficient data to assign it to a clinically appropriate APC group.
C. Excluded OPPS Services and Hospitals
Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to
designate the hospital outpatient services that are paid under the
OPPS. While most hospital outpatient services are payable under the
OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for
ambulance, physical and occupational therapy, and speech-language
pathology services, for which payment is made under a fee schedule. It
also excludes screening mammography, diagnostic mammography, and
effective January 1, 2011, an annual wellness visit providing
personalized prevention plan services. The Secretary exercises the
authority granted under the statute to also exclude from the OPPS
certain services that are paid under fee schedules or other payment
systems. Such excluded services include, for example, the professional
services of physicians and nonphysician practitioners paid under the
Medicare Physician Fee Schedule (MPFS); certain laboratory services
paid under the Clinical Laboratory Fee Schedule (CLFS); services for
beneficiaries with end-stage renal disease (ESRD) that are paid under
the ESRD prospective payment system; and services and procedures that
require an inpatient stay that are paid under the hospital IPPS. In
addition, section 1833(t)(1)(B)(v) of the Act does not include
applicable items and services (as defined in subparagraph (A) of
paragraph (21)) that are furnished on or after January 1, 2017, by an
off-campus outpatient department of a provider (as defined in
subparagraph (B) of paragraph (21)). We set forth the services that are
excluded from payment under the OPPS in regulations at 42 CFR 419.22.
Under Sec. 419.20(b) of the regulations, we specify the types of
hospitals that are excluded from payment under the OPPS. These excluded
hospitals are:
Critical access hospitals (CAHs);
Hospitals located in Maryland and paid under Maryland's
All-Payer or Total Cost of Care Model;
Hospitals located outside of the 50 States, the District
of Columbia, and Puerto Rico;
Indian Health Service (IHS) hospitals; and
Rural emergency hospitals (REHs).
D. Prior Rulemaking
On April 7, 2000, we published in the Federal Register a final rule
with comment period (65 FR 18434) to implement a prospective payment
system for hospital outpatient services. The hospital OPPS was first
implemented for services furnished on or after August 1, 2000. Section
1833(t)(9)(A) of the Act requires the Secretary to review certain
components of the OPPS, not less often than annually, and to revise the
groups, the relative payment weights, and the wage and other
adjustments to take into account changes in medical practices, changes
in technology, the addition of new services, new cost data, and other
relevant information and factors.
Since initially implementing the OPPS, we have published final
rules in the Federal Register annually to implement statutory
requirements and changes arising from our continuing experience with
this system. These rules can be viewed on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices.
E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the
Panel)
1. Authority of the Panel
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law
106-113, requires that we consult with an expert outside advisory panel
composed of an appropriate selection of representatives of providers to
annually review (and advise the Secretary concerning) the clinical
integrity of the payment groups and their weights under the OPPS. In CY
2000, based on section 1833(t)(9)(A) of the Act, the Secretary
established the Advisory Panel on Ambulatory Payment Classification
Groups (APC Panel) to fulfill this requirement. In CY 2011, based on
section 222 of the Public Health Service Act (the PHS Act), which gives
discretionary authority to the Secretary to convene advisory councils
and committees, the Secretary expanded the panel's scope to include the
supervision of hospital outpatient therapeutic services in addition to
the APC groups and weights. To reflect this new role of the panel, the
Secretary changed the panel's name to the Advisory Panel on Hospital
Outpatient Payment (the HOP Panel). The HOP Panel is not restricted to
using data compiled by CMS, and in conducting its review, it may use
data collected or developed by organizations outside the Department.
2. Establishment of the Panel
On November 21, 2000, the Secretary signed the initial charter
establishing the Panel, and, at that time, named the APC Panel. This
expert panel is composed of appropriate representatives of providers
(currently employed full-time, not as consultants, in their respective
areas of expertise) who review clinical data and advise CMS about the
clinical integrity of the APC groups and their payment weights. Since
CY 2012, the Panel also is charged with advising the Secretary on the
appropriate level of supervision for individual hospital outpatient
therapeutic services. The Panel is technical in nature, and it is
governed by the provisions of the Federal Advisory Committee Act
(FACA). The current charter specifies, among other requirements, that
the Panel--
May advise on the clinical integrity of Ambulatory Payment
Classification (APC) groups and their associated weights;
May advise on the appropriate supervision level for
hospital outpatient services;
May advise on OPPS APC rates for ASC covered surgical
procedures;
Continues to be technical in nature;
Is governed by the provisions of the FACA;
Has a Designated Federal Official (DFO); and
Is chaired by a Federal Official designated by the
Secretary.
The Panel's charter was amended on November 15, 2011, renaming the
Panel and expanding the Panel's authority to include supervision of
hospital
[[Page 41740]]
outpatient therapeutic services and to add critical access hospital
(CAH) representation to its membership. The Panel's charter was also
amended on November 6, 2014 (80 FR 23009), and the number of members
was revised from up to 19 to up to 15 members. The Panel's current
charter was approved on November 21, 2024, for a 2-year period.
The current Panel membership and other information pertaining to
the Panel, including its charter, Federal Register notices, membership,
meeting dates, agenda topics, and meeting reports, can be viewed on the
CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.
3. Panel Meetings and Organizational Structure
The Panel has held many meetings, with the last meeting taking
place on August 25, 2025. The recommendations of the Panel for the most
recent meeting are available on the CMS website at https://www.cms.gov/medicare/regulations-guidance/advisory-committees/hospital-outpatient-payment. Prior to each meeting, we publish a notice in the Federal
Register to announce the meeting, new members, and any other changes of
which the public should be aware. Beginning in CY 2017, we have
transitioned to one meeting per year (81 FR 31941). In CY 2022, we
published a Federal Register notice requesting nominations to fill
vacancies on the Panel (87 FR 68499). We are currently accepting
nominations at https://mearis.cms.gov.
In addition, the Panel has established an administrative structure
that, in part, currently includes the use of two subcommittee
workgroups to provide preparatory meeting and subject support to the
larger panel. The two current subcommittees include the following:
APC Groups and Status Indicator Assignments Subcommittee,
which advises and provides recommendations to the Panel on the
appropriate status indicators to be assigned to HCPCS codes, including
but not limited to whether a HCPCS code or a category of codes should
be packaged or separately paid, as well as the appropriate APC
assignment of HCPCS codes regarding services for which separate payment
is made; and
Data Subcommittee, which is responsible for studying the
data issues confronting the Panel and for recommending options for
resolving them.
Each of these workgroup subcommittees was established by a majority
vote from the full Panel during a scheduled Panel meeting, and the
Panel recommended at the August 25, 2025, meeting that these
subcommittees continue. We accepted this recommendation.
For discussions of earlier Panel meetings and recommendations, we
refer readers to previously published OPPS/ASC proposed and final
rules, the CMS website mentioned earlier in this section, and the FACA
database at https://facadatabase.gov.
F. Public Comments Received on the CY 2026 OPPS/ASC Final Rule With
Comment Period
We received approximately 48 timely pieces of correspondence on the
CY 2026 OPPS/ASC final rule with comment period that appeared in the
Federal Register on November 25, 2025 (90 FR 53448).
II. Proposed Updates Affecting OPPS Payments
A. Recalibration of APC Relative Payment Weights
1. Database Construction
a. Database Source and Methodology
Section 1833(t)(9)(A) of the Act requires that the Secretary review
not less often than annually and revise the relative payment weights
for Ambulatory Payment Classifications (APCs). In the April 7, 2000
OPPS final rule with comment period (65 FR 18482), we explained in
detail how we calculated the relative payment weights that were
implemented on August 1, 2000, for each APC group.
For the CY 2027 OPPS, we propose to recalibrate the APC relative
payment weights for services furnished on or after January 1, 2027, and
before January 1, 2028 (CY 2027), using the same basic methodology that
we described in the CY 2026 OPPS/ASC final rule with comment period (90
FR 53455 through 53457), using CY 2025 claims data. That is, we propose
to recalibrate the relative payment weights for each APC based on
claims and cost report data for hospital outpatient department (HOPD)
services to construct a database for calculating APC group weights.
For the purpose of recalibrating the proposed APC relative payment
weights for CY 2027, we began with approximately 147 million final
action claims (claims for which all disputes and adjustments have been
resolved and payment has been made) for HOPD services furnished on or
after January 1, 2025 and before January 1, 2026, before applying our
exclusionary criteria and other methodological adjustments. After the
application of those data processing changes, we used approximately 74
million final action claims to develop the proposed CY 2027 OPPS
payment weights. For exact numbers of claims used and additional
details on the claims accounting process, we refer readers to the
claims accounting narrative under ``Downloads'' for the CY 2027 OPPS/
ASC proposed rule on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices.
Addendum N to this proposed rule (which is available via the
internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices),
includes the proposed list of bypass codes for CY 2027. The proposed
list of bypass codes contains codes that are reported on claims for
services in CY 2025 and, therefore, includes codes that were in effect
in CY 2025 and used for billing. We propose to retain these deleted
bypass codes on the proposed CY 2027 bypass list because these codes
existed in CY 2025 and were covered HOPD services in that period, and
CY 2025 claims data were used to calculate proposed CY 2027 payment
rates. Keeping these deleted bypass codes on the bypass list
potentially allows us to create more ``pseudo'' single procedure claims
for ratesetting purposes. ``Overlap bypass codes'' that are members of
the proposed multiple imaging composite APCs are identified by
asterisks (*) in the third column of Addendum N to this proposed rule.
HCPCS codes that we propose to add for CY 2027 are identified by
asterisks (*) in the fourth column of Addendum N.
b. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
For CY 2027, we propose to continue to use the hospital-specific
overall ancillary and departmental cost-to-charge ratios (CCRs) to
convert charges to estimated costs through application of a revenue
code-to-cost center crosswalk. To calculate the APC costs on which the
proposed CY 2027 APC payment rates are based, we calculated hospital-
specific departmental CCRs for each hospital for which we had CY 2025
claims data by comparing these claims data to the most recently
available hospital cost reports, which, in most cases, are from CY
2024. For the proposed CY 2027 OPPS payment rates, we used the set of
claims processed during CY 2025. We applied the hospital-specific CCR
to the hospital's charges at the most detailed level possible, based on
a revenue code-to-cost center crosswalk that contains a
[[Page 41741]]
hierarchy of CCRs used to estimate costs from charges for each revenue
code. To ensure the completeness of the revenue code-to-cost center
crosswalk, we reviewed changes to the list of revenue codes for CY 2025
(the year of claims data we used to calculate the proposed CY 2027 OPPS
payment rates) and updates to the National Uniform Billing Committee
(NUBC) 2025 Data specifications Manual. That crosswalk is available for
review and continuous comment on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices and included with every proposed and
final OPPS rule.
In accordance with our longstanding policy, similar to our
finalized policy for CY 2026 OPPS ratesetting, we propose to calculate
CCRs for the standard cost centers--cost centers with a predefined
label--and nonstandard cost centers--cost centers defined by a
hospital--accepted by the electronic cost report database. In general,
the most detailed level at which we calculate CCRs is the hospital-
specific departmental level.
While we generally view the use of additional cost data as
improving our OPPS ratesetting process, we have historically not
included cost report lines for certain nonstandard cost centers in the
OPPS ratesetting database construction when hospitals have reported
these nonstandard cost centers on cost report lines that do not
correspond to the cost center number. We believe it is important to
further investigate the accuracy of these cost report data before
including such data in the ratesetting process. Further, we believe it
is appropriate to gather additional information from the public as well
before including the data in OPPS ratesetting. For CY 2027 and future
years, we propose not to include the nonstandard cost centers reported
in this way in the OPPS ratesetting database construction.
2. Proposed Data Development and Calculation of Costs Used for
Ratesetting
In this section of this proposed rule, we discuss the use of claims
to calculate the OPPS payment rates for CY 2027. The Hospital OPPS page
on the CMS website on which this proposed rule is posted (https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient) provides an accounting of claims used in the development of
the proposed payment rates. That accounting provides additional detail
regarding the number of claims derived at each stage of the process. In
addition, later in this section we discuss the file of claims that
comprises the data set that is available upon payment of an
administrative fee under a CMS data use agreement. The CMS website
https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient, includes information about obtaining the ``OPPS
Limited Data Set,'' which now includes the additional variables
previously available only in the OPPS Identifiable Data Set, including
International Classification of Diseases, Tenth Revision, Clinical
Modification (ICD-10-CM) diagnosis codes and revenue code payment
amounts. This file is derived from the CY 2025 claims that are used to
calculate the proposed payment rates for the CY 2027 OPPS/ASC proposed
rule.
Previously, the OPPS established the scaled relative weights on
which payments are based using APC median costs, a process described in
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188).
However, as discussed in more detail in section II.A.2.f. of the CY
2013 OPPS/ASC final rule with comment period (77 FR 68259 through
68271), we finalized the use of geometric mean costs to calculate the
relative weights on which the CY 2013 OPPS payment rates were based.
While this policy changed the cost metric on which the relative
payments are based, the data process in general remained the same under
the methodologies that we used to obtain appropriate claims data and
accurate cost information in determining estimated service cost.
We used the methodology described in sections II.A.2.a. through
II.A.2.c. of this proposed rule to calculate the costs we used to
establish the proposed relative payment weights used in calculating the
OPPS payment rates for CY 2027 shown in Addenda A and B to this
proposed rule (which are available via the internet on the CMS website
at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices). We refer readers to section
II.A.4. of this proposed rule for a discussion of the conversion of APC
costs to scaled payment weights.
We note that under the OPPS, CY 2019 was the first year in which
the claims data used for setting payment rates (CY 2017 data) contained
lines with the modifier ``PN,'' which indicates nonexcepted items and
services furnished and billed by off-campus provider-based departments
(PBDs) of hospitals. Because nonexcepted items and services are not
paid under the OPPS, in the CY 2019 OPPS/ASC final rule with comment
period (83 FR 58832), we finalized a policy to remove those claim lines
reported with modifier ``PN'' from the claims data used in ratesetting
for the CY 2019 OPPS and subsequent years. For the CY 2027 OPPS, we
propose to continue to remove claim lines with modifier ``PN'' from the
ratesetting process.
a. Calculation of Single Procedure APC Criteria-Based Costs
(1) Blood and Blood Products
Since the implementation of the OPPS in August 2000, we have made
separate payments for blood and blood products through APCs rather than
packaging payment for them into payments for the procedures with which
they are administered. Hospital payments for the costs of blood and
blood products, as well as for the costs of collecting, processing, and
storing blood and blood products, are made through the OPPS payments
for specific blood product APCs.
We propose to continue to establish payment rates for blood and
blood products using our blood-specific CCR methodology (90 FR 53457),
which utilizes actual or simulated CCRs from the most recently
available hospital cost reports to convert hospital charges for blood
and blood products to costs. This methodology has been our standard
ratesetting methodology for blood and blood products since CY 2005. It
was developed in response to data analysis indicating that there was a
significant difference in CCRs for those hospitals with and without
blood-specific cost centers and past public comments indicating that
the former OPPS policy of defaulting to the overall hospital CCR for
hospitals not reporting a blood-specific cost center often resulted in
an underestimation of the true hospital costs for blood and blood
products. To address the differences in CCRs and to better reflect
hospitals' costs, our methodology simulates blood CCRs for each
hospital that does not report a blood cost center by calculating the
ratio of the blood-specific CCRs to hospitals' overall CCRs for those
hospitals that do report costs and charges for blood cost centers and
applies this mean ratio to the overall CCRs of hospitals not reporting
costs and charges for blood cost centers on their cost reports. We
propose to calculate the costs upon which the proposed payment rates
for blood and blood products are based using the actual blood-specific
CCR for hospitals that reported costs and charges for a blood cost
center and a hospital-specific, simulated, blood-specific CCR
[[Page 41742]]
for hospitals that did not report costs and charges for a blood cost
center.
We continue to believe that the hospital-specific, simulated,
blood-specific CCR methodology takes into account the unique charging
and cost accounting structure of each hospital, as it better responds
to the absence of a blood-specific CCR for a hospital than alternative
methodologies, such as defaulting to the overall hospital CCR or
applying an average blood-specific CCR across hospitals. This
methodology also yields more accurate estimated costs for these
products and results in payment rates for blood and blood products that
appropriately reflect the relative estimated costs of these products
for hospitals without blood cost centers and for these blood products
in general.
We refer readers to Addendum B to this proposed rule (which is
available via the internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices) for the proposed CY 2027 payment rates for blood
and blood products (which are generally identified with status
indicator ``R'').
For a more detailed discussion of payments for blood and blood
products through APCs, we refer readers to:
The CY 2005 OPPS proposed rule (69 FR 50524 and 50525) for
a more comprehensive discussion of the blood-specific CCR methodology;
The CY 2008 OPPS/ASC final rule with comment period (72 FR
66807 through 66810) for a detailed history of the OPPS payment for
blood and blood products; and
The CY 2015 OPPS/ASC final rule with comment period (79 FR
66795 and 66796) for additional discussion of our policy not to make
separate payments for blood and blood products when they appear on the
same claims as services assigned to a C-APC.
(2) Brachytherapy Sources
Section 1833(t)(2)(H) of the Act mandates the creation of
additional groups of covered OPD services that classify devices of
brachytherapy--cancer treatment through solid source radioactive
implants--consisting of a seed or seeds (or radioactive source)
(``brachytherapy sources'') separately from other services or groups of
services. The statute provides certain criteria for the additional
groups. For the history of OPPS payment for brachytherapy sources, we
refer readers to prior OPPS final rules, such as the CY 2013 OPPS/ASC
final rule with comment period (77 FR 68240 and 68241). As we have
stated in prior OPPS updates, we believe that adopting the general OPPS
prospective payment methodology for brachytherapy sources is
appropriate for several reasons (77 FR 68240). The general OPPS
methodology uses costs based on claims data to set the relative payment
weights for hospital outpatient services. This payment methodology
results in more consistent, predictable, and equitable payment amounts
per source across hospitals by averaging the extremely high and low
values, in contrast to payment based on hospitals' charges adjusted to
costs. We believe that the OPPS methodology, as opposed to payment
based on hospitals' charges adjusted to cost, also would provide
hospitals with incentives for efficiency in the provision of
brachytherapy services to Medicare beneficiaries. Moreover, this
approach is consistent with our payment methodology for most items and
services paid under the OPPS. We refer readers to the CY 2016 OPPS/ASC
final rule with comment period (80 FR 70323 through 70325) for further
discussion of the history of OPPS payment for brachytherapy sources.
For CY 2027, except where otherwise indicated, we propose to
continue our policy and use the costs derived from CY 2025 claims data
to set the proposed CY 2027 payment rates for brachytherapy sources
because we propose to use CY 2025 data to set the proposed payment
rates for most other items and services that would be paid under the CY
2027 OPPS. With the exception of the proposed payment rates for
brachytherapy sources A9527 (Iodine i-125, sodium iodide solution,
therapeutic, per millicurie), C2636 (Brachytherapy linear source, non-
stranded, palladium-103, per 1 mm), C2645 (Brachytherapy planar source,
palladium-103, per square millimeter) and the proposed payment rates
for low-volume brachytherapy APCs discussed in section III.D. of this
proposed rule, we propose to base the payment rates for brachytherapy
sources on the geometric mean unit costs for each source, consistent
with the methodology that we propose for other items and services paid
under the OPPS, as discussed in section II.A.2. of this proposed rule.
We also propose for CY 2027 and subsequent years to continue the other
payment policies for brachytherapy sources that we finalized and first
implemented in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60537). For CY 2027 and subsequent years, we propose to pay for the
stranded and nonstranded not otherwise specified (NOS) codes, HCPCS
codes C2698 (Brachytherapy source, stranded, not otherwise specified,
per source) and C2699 (Brachytherapy source, nonstranded, not otherwise
specified, per source), at a rate equal to the lowest stranded or
nonstranded prospective payment rate for such sources, respectively, on
a per-source basis (as opposed to, for example, per mCi), which is
based on the policy we established in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66785). For CY 2027 and subsequent years, we
also propose to continue the policy we implemented in the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60537) regarding payment for
new brachytherapy sources for which we have no claims data, for the
same reasons we discussed in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66786; which was delayed until January 1, 2010,
by section 142 of Pub. L. 110-275). Specifically, this policy is
intended to enable us to assign new HCPCS codes for new brachytherapy
sources to their own APCs, with prospective payment rates set based on
our consideration of external data and other relevant information
regarding the expected costs of the sources to hospitals. The proposed
CY 2027 payment rates for brachytherapy sources are included in
Addendum B to this proposed rule (which is available via the internet
on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices) and identified
with status indicator ``U (Brachytherapy Sources, Paid under OPPS;
separate APC payment).''
For CY 2018, we assigned status indicator ``U'' to HCPCS code C2645
(Brachytherapy planar source, palladium-103, per square millimeter) in
the absence of claims data and established a payment rate using
external data (invoice price) at $4.69 per mm\2\ for the brachytherapy
source's APC--APC 2648 (Brachytx planar, p-103) (82 FR 59233 through
59234). For CY 2019, in the absence of sufficient claims data, we
continued to establish a payment rate for C2645 at $4.69 per mm\2\ for
APC 2648 (Brachytx planar, p-103) (83 FR 58834 through 58836). Our CY
2018 claims data available for the CY 2020 OPPS/ASC final rule with
comment period (84 FR 61142) included two claims with a geometric mean
cost for HCPCS code C2645 of $1.02 per mm\2\. In response to comments
from interested parties, we agreed that, given the limited claims data
available and a new outpatient indication for C2645, a payment rate for
HCPCS code C2645 based on the geometric mean cost of
[[Page 41743]]
$1.02 per mm\2\ may not adequately reflect the cost of HCPCS code
C2645. In the CY 2020 OPPS/ASC final rule with comment period, we
finalized our policy to use our equitable adjustment authority under
section 1833(t)(2)(E) of the Act, which states that the Secretary shall
establish, in a budget neutral manner, other adjustments as determined
to be necessary to ensure equitable payments, to maintain the CY 2019
payment rate of $4.69 per mm\2\ for HCPCS code C2645 for CY 2020 (84 FR
61157 and 61158). Similarly, in the absence of sufficient claims data
to establish an APC payment rate, in the CY 2021, CY 2022, CY 2023, CY
2024, CY 2025, and CY 2026 OPPS/ASC final rules with comment period (85
FR 85879 through 85880, 86 FR 63469, 87 FR 71760 and 71761, 88 FR
81553, 89 FR 93925, and 90 FR 53458), we finalized our policy to use
our equitable adjustment authority under section 1833(t)(2)(E) of the
Act to maintain the CY 2019 payment rate of $4.69 per mm\2\ for HCPCS
code C2645 for CYs 2021 through 2026.
There were no CY 2025 claims available that reported HCPCS code
C2645 for the CY 2027 OPPS/ASC proposed rule. Therefore, in the absence
of claims data, we propose to continue to use our equitable adjustment
authority under section 1833(t)(2)(E) of the Act to maintain the CY
2026 payment rate of $4.69 per mm\2\ for HCPCS code C2645, which we
propose be assigned to APC 2648 (Brachytx planar, p-103) for CY 2027.
Similarly, there were no CY 2025 claims available for this proposed
rule that reported HCPCS A9527 (Iodine i-125, sodium iodide solution,
therapeutic, per millicurie), which is assigned to APC 2632, or HCPCS
code C2636 (Brachytherapy linear source, non-stranded, palladium-103,
per 1 mm), which is assigned to APC 2636. While both APC 2632 and 2636
have historically been designated as Low Volume APCs, which uses up to
4 years of claims data, we are concerned that 4 years of historical
claims data would only yield 2 claims for each APC and that may not be
reliable for ratesetting for these APCs for CY 2027. Therefore, we
propose to use our equitable adjustment authority under section
1833(t)(2)(E) of the Act, which states in part that the Secretary shall
establish, in a budget neutral manner, other adjustments as determined
to be necessary to ensure equitable payments, to maintain the CY 2026
payment rates for APC 2632 and APC 2636 for CY 2027. Specifically, for
CY 2027, we propose a payment rate of $396.32 per millicurie for APC
2632 and a payment rate of $89.40 per 1 mm for APC 2636.
Additionally, for CY 2022 and subsequent calendar years, we adopted
a Universal Low Volume APC policy for clinical and brachytherapy APCs.
As discussed in further detail in section X.C. of the CY 2022 OPPS/ASC
final rule with comment period (86 FR 63743 through 63747), we adopted
this policy to mitigate wide variation in payment rates that occur from
year to year for APCs with low utilization. Such volatility in payment
rates from year to year can result in even lower utilization and
potential barriers to access. Brachytherapy APCs that have fewer than
100 single claims used for ratesetting purposes are designated as Low
Volume APCs unless an alternative payment rate is applied, such as the
use of our equitable adjustment authority under section 1833(t)(2)(E)
of the Act in the case of APCs 2632, 2636, and 2648 as detailed above.
For CY 2027, we propose to designate five brachytherapy APCs as Low
Volume APCs as these APCs met our criteria to be designated as Low
Volume APCs.
We continue to invite interested parties to submit recommendations
for new codes to describe new brachytherapy sources. Such
recommendations should be directed via email to
[email protected].
b. Comprehensive APCs (C-APCs) for CY 2027
(1) Background
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861
through 74910), we finalized a comprehensive payment policy that
packages payment for adjunctive and secondary items, services, and
procedures into the costliest primary procedure under the OPPS at the
claim level. The policy was finalized in CY 2014, but the effective
date was delayed until January 1, 2015, to allow additional time for
further analysis, opportunity for public comment, and systems
preparation. The comprehensive APC (C-APC) policy was implemented
effective January 1, 2015, with modifications and clarifications in
response to public comments received regarding specific provisions of
the C-APC policy (79 FR 66798 through 66810).
A C-APC is defined as a classification for the provision of a
primary service and all adjunctive services provided to support the
delivery of the primary service. We established C-APCs as a category
broadly for OPPS payment and implemented 25 C-APCs beginning in CY 2015
(79 FR 66809 and 66810). We have gradually added new C-APCs since the
policy was implemented beginning in CY 2015, with the number of C-APCs
now totaling 74 (80 FR 70332; 81 FR 79584 and 79585; 83 FR 58844
through 58846; 84 FR 61158 through 61166; 85 FR 85885; 86 FR 63474; 87
FR 71769; 88 FR 81562; 89 FR 93926; and 90 FR 53448).
Under our C-APC policy, we designate a service described by a HCPCS
code assigned to a C-APC as the primary service when the service is
identified by OPPS status indicator ``J1''. When such a primary service
is reported on a hospital outpatient claim, taking into consideration
the few exceptions that are discussed below, we make payment for all
other items and services reported on the hospital outpatient claim as
being integral, ancillary, supportive, dependent, and adjunctive to the
primary service (hereinafter collectively referred to as ``adjunctive
services'') and representing components of a complete comprehensive
service (78 FR 74865 and 79 FR 66799). Payments for adjunctive services
are packaged into the payments for the primary services. This results
in a single prospective payment for each of the primary, comprehensive
services based on the costs of all reported services at the claim
level. One example of a primary service would be a partial mastectomy,
and an example of a secondary service packaged into that primary
service would be a radiation therapy procedure.
Services excluded from the C-APC policy under the OPPS include
services that are not covered OPD services, services that cannot, by
statute, be paid for under the OPPS, and services that are required by
statute to be separately paid. This includes certain mammography and
ambulance services that are not covered OPD services in accordance with
section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which also
are required by statute to receive separate payment under section
1833(t)(2)(H) of the Act; pass-through payment drugs and devices, which
also require separate payment under section 1833(t)(6) of the Act;
self-administered drugs (SADs) that are not otherwise packaged as
supplies because they are not covered under Medicare Part B under
section 1861(s)(2)(B) of the Act; and certain preventive services (78
FR 74865 and 79 FR 66800 and 66801). A list of services excluded from
the C--APC policy is included in Addendum J to this proposed rule
(which is available via the internet on the CMS website at
[[Page 41744]]
https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices). If a service does not appear
on this list of excluded services, payment for it will be packaged into
the payment for the primary C-APC service when it appears on an
outpatient claim with a primary C-APC service.
The C-APC policy payment methodology set forth in the CY 2014 OPPS/
ASC final rule with comment period and modified and implemented
beginning in CY 2015 is summarized as follows (78 FR 74887 and 79 FR
66800):
Basic Methodology. As stated in the CY 2015 OPPS/ASC final rule
with comment period, we define the C-APC payment policy as including
all covered OPD services on a hospital outpatient claim reporting a
primary service that is assigned to status indicator ``J1,'' \1\
excluding services that are not covered OPD services or that cannot by
statute be paid for under the OPPS. Services and procedures described
by HCPCS codes assigned to status indicator ``J1'' are assigned to C-
APCs based on our usual APC assignment methodology by evaluating the
geometric mean costs of the primary service claims to establish
resource similarity and the clinical characteristics of each procedure
to establish clinical similarity within each APC.
---------------------------------------------------------------------------
\1\ Status indicator ``J1'' denotes Hospital Part B Services
Paid Through a Comprehensive APC. Further information can be found
in CY 2027 Addendum D1 to this proposed rule.
---------------------------------------------------------------------------
In the CY 2016 OPPS/ASC final rule with comment period, we expanded
the C-APC payment methodology to qualifying extended assessment and
management encounters through the ``Comprehensive Observation
Services'' C-APC (C-APC 8011). Services within this APC are assigned
status indicator ``J2.'' \2\ Specifically, we make a payment through C-
APC 8011 for a claim that:
---------------------------------------------------------------------------
\2\ Status indicator ``J2'' denotes Hospital Part B Services
That May Be Paid Through a Comprehensive APC. Further information
can be found in CY 2027 Addendum D1 to this proposed rule.
---------------------------------------------------------------------------
Does not contain a procedure described by a HCPCS code to
which we have assigned status indicator ``T \3\;''
---------------------------------------------------------------------------
\3\ Status Indicator ``T'' is defined as a ``Procedure or
Service, Multiple Procedure Reduction Applies'' the OPPS payment
status is ``Paid under OPPS; separate APC payment.'' Definitions to
all OPPS payment status indicators are available in Addenda D1 to
this proposed rule.
---------------------------------------------------------------------------
Contains 8 or more units of services described by HCPCS
code G0378 (Hospital observation services, per hour);
Contains services provided on the same date of service or
1 day before the date of service for HCPCS code G0378 that are
described by one of the following codes: HCPCS code G0379 (Direct
admission of patient for hospital observation care) on the same date of
service as HCPCS code G0378; CPT code 99281 (Emergency department visit
for the evaluation and management of a patient (Level 1)); CPT code
99282 (Emergency department visit for the evaluation and management of
a patient (Level 2)); CPT code 99283 (Emergency department visit for
the evaluation and management of a patient (Level 3)); CPT code 99284
(Emergency department visit for the evaluation and management of a
patient (Level 4)); CPT code 99285 (Emergency department visit for the
evaluation and management of a patient (Level 5)) or HCPCS code G0380
(Type B emergency department visit (Level 1)); HCPCS code G0381 (Type B
emergency department visit (Level 2)); HCPCS code G0382 (Type B
emergency department visit (Level 3)); HCPCS code G0383 (Type B
emergency department visit (Level 4)); HCPCS code G0384 (Type B
emergency department visit (Level 5)); CPT code 99291 (Critical care,
evaluation and management of the critically ill or critically injured
patient; first 30-74 minutes); or HCPCS code G0463 (Hospital outpatient
clinic visit for assessment and management of a patient); and
Does not contain services described by a HCPCS code to
which we have assigned status indicator ``J1.''
The assignment of status indicator ``J2'' to a specific set of
services performed in combination with each other allows for all other
OPPS payable services and items reported on the claim (excluding
services that are not covered OPD services or that cannot by statute be
paid for under the OPPS) to be deemed adjunctive services representing
components of a comprehensive service and resulting in a single
prospective payment for the comprehensive service based on the costs of
all reported services on the claim (80 FR 70333 through 70336).
Services included under the C-APC payment packaging policy, that
is, services that are typically adjunctive to the primary service and
provided during the delivery of the comprehensive service, include
diagnostic procedures, laboratory tests, and other diagnostic tests and
treatments that assist in the delivery of the primary procedure; visits
and evaluations performed in association with the procedure; uncoded
services and supplies used during the service; durable medical
equipment as well as prosthetic and orthotic items and supplies when
provided as part of the outpatient service; and any other components
reported by HCPCS codes that represent services that are provided
during the complete comprehensive service (78 FR 74865 and 79 FR
66800).
In addition, payment for hospital outpatient department services
that are similar to therapy services, such as speech language
pathology, and delivered either by therapists or nontherapists is
included as part of the payment for the packaged complete comprehensive
service. These services that are provided during the perioperative
period are adjunctive services and are deemed not to be therapy
services as described in section 1834(k) of the Act, regardless of
whether the services are delivered by therapists or other nontherapist
health care workers. We have previously noted that therapy services are
those provided by therapists under a plan of care in accordance with
section 1835(a)(2)(C) and section 1835(a)(2)(D) of the Act and are paid
for under section 1834(k) of the Act, subject to annual therapy caps as
applicable (78 FR 74867 and 79 FR 66800). However, certain other
services similar to therapy services are considered and paid for as
hospital outpatient department services. Payment for these nontherapy
outpatient department services that are reported with therapy codes and
provided with a comprehensive service is included in the payment for
the packaged complete comprehensive service. We note that these
services, even though they are reported with therapy codes, are
hospital outpatient department services and not therapy services. We
refer readers to the July 2016 OPPS Change Request 9658 (Transmittal
3523) \4\ for further instructions on reporting these services in the
context of a C-APC service.
---------------------------------------------------------------------------
\4\ https://www.cms.gov/regulations-and-guidance/guidance/transmittals/downloads/r3523cp.pdf.
---------------------------------------------------------------------------
Items included in the packaged payment provided in conjunction with
the primary service also include all drugs, biologicals, and
radiopharmaceuticals, regardless of cost, except those drugs with pass-
through payment status and self-administered drugs (SADs), unless they
function as packaged supplies (78 FR 74868, 74869, and 74909 and 79 FR
66800). We refer readers to Section 50.2M, Chapter 15 of the Medicare
Benefit Policy Manual for a description of our policy on SADs treated
as hospital outpatient supplies, including lists of SADs that function
as supplies and those that do not function as supplies.\5\
---------------------------------------------------------------------------
\5\ https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c15.pdf.
---------------------------------------------------------------------------
[[Page 41745]]
We define each hospital outpatient claim reporting a single unit of
a single primary service assigned to status indicator ``J1'' as a
single ``J1'' unit procedure claim (78 FR 74871 and 79 FR 66801). Line-
item charges for services included on the C-APC claim are converted to
line-item costs, which are then summed to develop the estimated APC
costs. These claims are then assigned one unit of the service with
status indicator ``J1'' and later used to develop the geometric mean
costs for the C-APC relative payment weights. (We note that we use the
term ``comprehensive'' to describe the geometric mean cost of a claim
reporting ``J1'' service(s) or the geometric mean cost of a C-APC,
inclusive of all the items and services included in the C-APC service
payment bundle.) Charges for services that would otherwise be
separately payable are added to the charges for the primary service.
This process differs from our traditional cost accounting methodology
only in that all such services on the claim are packaged (except
certain services as described above). -We apply our standard data
trims, which exclude claims with extremely high primary units or
extreme costs.
The comprehensive geometric mean costs are used to establish
resource similarity and, along with clinical similarity, dictate the
assignment of the primary services to the C-APCs. We establish a
ranking of each primary service (single unit only) to be assigned to
status indicator ``J1'' according to its comprehensive geometric mean
costs. For the minority of claims reporting more than one primary
service assigned to status indicator ``J1'' or units thereof, we
identify one ``J1'' service as the primary service for the claim based
on our cost-based ranking of primary services. We then assign these
multiple ``J1'' procedure claims to the C-APC to which the service
designated as the primary service is assigned. If the reported ``J1''
services on a claim map to different C-APCs, we designate the ``J1''
service assigned to the C-APC with the highest comprehensive geometric
mean cost as the primary service for that claim. If the reported
multiple ``J1'' services on a claim map to the same C-APC, we designate
the most costly service (at the HCPCS code level) as the primary
service for that claim. This process results in initial assignments of
claims for the primary services assigned to status indicator ``J1'' to
the most appropriate C-APCs based on both single and multiple procedure
claims reporting these services and clinical and resource homogeneity.
Complexity Adjustments. We use complexity adjustments to provide
increased payment for certain comprehensive services. We apply a
complexity adjustment by promoting qualifying paired ``J1'' service
code combinations or paired code combinations of ``J1'' services and
certain add-on codes (as described further below) from the originating
C-APC (the C-APC to which the designated primary service is first
assigned) to the next higher paying C-APC in the same clinical family
of C-APCs. We apply this type of complexity adjustment when the paired
code combination represents a complex, costly form- or version of the
primary service according to the following criteria:
Frequency of 25 or more claims reporting the code
combination (frequency threshold); and
Violation of the 2 times rule, as stated in section
1833(t)(2) of the Act and section III.B.2. of this proposed rule, in
the originating C-APC (cost threshold).
These criteria identify paired code combinations that occur
commonly and exhibit materially greater resource requirements than the
primary service. The CY 2017 OPPS/ASC final rule with comment period
(81 FR 79582) included a revision to the complexity adjustment
eligibility criteria. Specifically, we finalized a policy to
discontinue the requirement that a code combination (that qualifies for
a complexity adjustment by satisfying the frequency and cost criteria
thresholds described above) also not create a 2 times rule violation in
the higher level or receiving APC.
After designating a single primary service for a claim, we evaluate
that service in combination with each of the other procedure codes
reported on the claim assigned to status indicator ``J1'' (or certain
add-on codes) to determine if there are paired code combinations that
meet the complexity adjustment criteria. For a new HCPCS code, we
determine initial C-APC assignment and qualification for a complexity
adjustment using the best available information, crosswalking the new
HCPCS code to a predecessor code(s) when appropriate.
Once we have determined that a particular code combination of
``J1'' services (or combinations of ``J1'' services reported in
conjunction with certain add-on codes) represents a complex version of
the primary service because it is sufficiently costly, frequent, and a
subset of the primary comprehensive service overall according to the
criteria described above, we promote the claim including the complex
version of the primary service as described by the code combination to
the next higher cost C-APC within the clinical family, unless the
primary service is already assigned to the highest cost APC within the
C-APC clinical family or assigned to the only C-APC in a clinical
family. We do not create new APCs with a comprehensive geometric mean
cost that is higher than the highest geometric mean cost (or only) C-
APC in a clinical family just to accommodate potential complexity
adjustments. Therefore, the highest payment for any claim including a
code combination for services assigned to a C-APC would be the highest
paying C-APC in the clinical family (79 FR 66802).
We package payment for all add-on codes into the payment for the C-
APC. However, certain primary service add-on combinations may qualify
for a complexity adjustment. As noted in the CY 2016 OPPS/ASC final
rule with comment period (80 FR 70331), all add-on codes that can be
appropriately reported in combination with a base code that describes a
primary ``J1'' service are evaluated for a complexity adjustment.
To determine which combinations of primary service codes reported
in conjunction with an add-on code may qualify for a complexity
adjustment for CY 2027, we apply the frequency and cost criteria
thresholds discussed above, testing claims reporting one unit of a
single primary service assigned to status indicator ``J1'' and any
number of units of a single add-on code for the primary ``J1'' service.
If the frequency and cost criteria thresholds for a complexity
adjustment are met and reassignment to the next higher cost APC in the
clinical family is appropriate (based on meeting the criteria outlined
above), we make a complexity adjustment for the code combination; that
is, we reassign the primary service code reported in conjunction with
the add-on code to the next higher cost C-APC within the same clinical
family of C-APCs. As previously stated, we package payment for add-on
codes into the C-APC payment rate. If any add-on code reported in
conjunction with the ``J1'' primary service code does not qualify for a
complexity adjustment, payment for the add-on service continues to be
packaged into the payment for the primary service and is not reassigned
to the next higher cost C-APC. We list the proposed complexity
adjustments for ``J1'' and add-on code combinations for CY 2027, along
with all the other proposed complexity adjustments, in Addendum J to
this proposed rule
[[Page 41746]]
(which is available via the internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices).
Addendum J to this proposed rule includes the cost statistics for
each code combination that would qualify for a complexity adjustment
(including primary code and add-on code combinations). Addendum J to
this proposed rule also contains summary cost statistics for each of
the paired code combinations that describe a complex code combination
that would qualify for a complexity adjustment and be reassigned to the
next higher cost C-APC within the clinical family. The combined
statistics for all proposed reassigned complex code combinations are
represented by an alphanumeric code with the first four digits of the
designated primary service followed by a letter. For example, the final
geometric mean cost listed in Addendum J for the code combination
described by complexity adjustment assignment 3320R, which is assigned
to C-APC 5224 (Level 4 Pacemaker and Similar Procedures), includes all
paired code combinations that will be reassigned to C-APC 5224 when CPT
code 33208 is the primary code. Providing the information contained in
Addendum J to this proposed rule allows interested parties the
opportunity to better assess the impact associated with the assignment
of claims with each of the paired code combinations eligible for a
complexity adjustment.
(2) Exclusion of Procedures Assigned to New Technology APCs From the C-
APC Policy
Services that are assigned to New Technology APCs are typically new
procedures that do not have sufficient claims history to establish an
accurate payment for them. Beginning in CY 2002, we retain services
within New Technology APC groups until we gather sufficient claims data
to enable us to assign the service to an appropriate clinical APC. This
policy allows us to move a service from a New Technology APC in less
than 2 years if sufficient data are available. It also allows us to
retain a service in a New Technology APC for more than 2 years if
sufficient data upon which to base a decision for reassignment have not
been collected (82 FR 59277).
The C-APC payment policy packages payment for adjunctive and
secondary items, services, and procedures into the most costly primary
procedure under the OPPS at the claim level. Prior to CY 2019, when a
procedure assigned to a New Technology APC was included on the claim
with a primary procedure, identified by OPPS status indicator ``J1,''
payment for the new technology service was typically packaged into the
payment for the primary procedure. Because the new technology service
was not separately paid in this scenario, the overall number of single
claims available to determine an appropriate clinical APC for the new
service was reduced. This was contrary to the objective of the New
Technology APC payment policy, which is to gather sufficient claims
data to enable us to assign the service to an appropriate clinical APC.
To address this issue and ensure that there are sufficient claims
data for services assigned to New Technology APCs, in the CY 2019 OPPS/
ASC final rule with comment period (83 FR 58847), we finalized
excluding payment for any procedure that is assigned to a New
Technology APC (APCs 1491 through 1599 and APCs 1901 through 1908) from
being packaged when included on a claim with a ``J1'' service assigned
to a C-APC. In the CY 2020 OPPS/ASC final rule with comment period, we
finalized that beginning in CY 2020, payment for services assigned to a
New Technology APC would be excluded from being packaged into the
payment for comprehensive observation services assigned status
indicator ``J2'' when they are included on a claim with a ``J2''
service (84 FR 61167).
(3) Exclusion of Drugs and Biologicals Described by HCPCS Code C9399
(Unclassified Drugs or Biologicals) From the C-APC Policy
Section 1833(t)(15) of the Act, as added by section 621(a)(1) of
the Medicare Prescription Drug, Improvement, and Modernization Act of
2003 (Pub. L. 108-173), provides for payment under the OPPS for new
drugs and biologicals until HCPCS codes are assigned. Under this
provision, we are required to make payment for a covered outpatient
drug or biological that is furnished as part of covered outpatient
department services but for which a HCPCS code has not yet been
assigned in an amount equal to 95 percent of average wholesale price
(AWP) for the drug or biological.
In the CY 2005 OPPS/ASC final rule with comment period (69 FR
65805), we implemented section 1833(t)(15) of the Act by instructing
hospitals to bill for a drug or biological that is newly approved by
the Food and Drug Administration (FDA) and that does not yet have a
HCPCS code by reporting the National Drug Code (NDC) for the product
along with the newly created HCPCS code C9399 (Unclassified drugs or
biologicals). We explained that when HCPCS code C9399 appears on a
claim, the Outpatient Code Editor (OCE) suspends the claim for manual
pricing by the Medicare Administrative Contractor (MAC). The MAC prices
the claim at 95 percent of the drug or biological's AWP, using Red Book
or an equivalent recognized compendium, and processes the claim for
payment. We emphasized that this approach enables hospitals to bill and
receive payment for a new drug or biological concurrent with its
approval by the FDA. The hospital does not have to wait for the next
quarterly release or for approval of a product specific HCPCS code to
receive payment for a newly approved drug or biological or to resubmit
claims for adjustment. We instructed that hospitals would discontinue
billing HCPCS code C9399 and the NDC upon implementation of a product
specific HCPCS code, status indicator, and appropriate payment amount
with the next quarterly update. We also note that HCPCS code C9399 is
paid in a similar manner in the ASC setting, as 42 CFR 416.171(b)
outlines that certain drugs and biologicals for which separate payment
is allowed under the OPPS are considered covered ancillary services for
which the OPPS payment rate, which is 95 percent of AWP for HCPCS code
C9399, applies.
Since the implementation of the C-APC policy in 2015, payment for
drugs and biologicals described by HCPCS code C9399 had been included
in the C-APC payment when these products appear on a claim with a
primary C-APC service. Packaging payment for these drugs and
biologicals that appear on a hospital outpatient claim with a primary
C-APC service is consistent with our C-APC packaging policy under which
we make payment for all items and services, including all non-pass-
through drugs, reported on the hospital outpatient claim as being
integral, ancillary, supportive, dependent, and adjunctive to the
primary service and representing components of a complete comprehensive
service, with certain limited exceptions (78 FR 74869). It was our
position that the total payment for the C-APC with which payment for a
drug or biological described by HCPCS code C9399 is packaged includes
payment for the drug or biological at 95 percent of its AWP.
However, we determined that in certain instances, drugs and
biologicals described by HCPCS code C9399 are not being paid at 95
percent of their AWPs when payment for them is packaged with payment
for a primary C-APC service. In order to ensure payment for new drugs
and biologicals described by
[[Page 41747]]
HCPCS code C9399 at 95 percent of their AWP, for CY 2023 and subsequent
years, we finalized our proposal to exclude any drug or biological
described by HCPCS code C9399 from packaging when the drug or
biological is included on a claim with a ``J1'' service, which is the
status indicator assigned to a C-APC, and a claim with a ``J2''
service, which is the status indicator assigned to comprehensive
observation services. See Addendum J for the proposed CY 2027 C-APC
payment policy exclusions.
In the CY 2023 OPPS/ASC final rule with comment period, we
finalized the proposal in section XI., ``CY 2023 OPPS Payment Status
and Comment Indicators'', to add a new definition to status indicator
``A'' to include unclassified drugs and biologicals that are reportable
with HCPCS code C9399 (87 FR 72051). The current definition of status
indicator ``A'', as finalized in the CY 2023 OPPS/ASC final rule with
comment period, can be found in Addendum D1. This change ensures the
MAC prices claims for drugs or biologicals billed with HCPCS code C9399
at 95 percent of the drug or biological's AWP and pays separately for
the drug or biological under the OPPS when it appears on the same claim
as a primary C-APC service.
(4) Exclusion of Cell and Gene Therapies From the C-APC Policy
As previously discussed in this section, and in the CY 2014 OPPS/
ASC final rule with comment period (78 FR 74865), the C-APC policy
packages payment for items and services that are typically integral,
ancillary, supportive, dependent, or adjunctive to the primary service
and provided during the delivery of the comprehensive service,
including diagnostic procedures, laboratory tests and other diagnostic
tests and treatments that assist in the delivery of the primary
procedure. In the CY 2014 OPPS/ASC final rule with comment period (78
FR 74861), we finalized defining a comprehensive APC as a
classification for the provision of a primary service and all
adjunctive services provided to support the delivery of the primary
service. Because a comprehensive APC treats all individually reported
codes as representing components of the comprehensive service, we make
a single prospective payment based on the cost of all individually
reported codes that represent the provision of a primary service and
all adjunctive services provided to support that delivery of the
primary service.
As discussed in the CY 2025 OPPS/ASC proposed rule (89 FR 59201
through 59204), we generally treat all items and services reported on a
C-APC claim as integral, ancillary, supportive, dependent, and
adjunctive to the primary service and representing components of a
comprehensive service. Historically, items packaged for payment
provided in conjunction with the primary C-APC service also include all
drugs, biologicals, and radiopharmaceuticals, regardless of cost,
except those drugs with pass-through payment status and those drugs
that are usually SADs, unless they function as supplies (78 FR 74868
through 74869 and 74909).
However, we recognized in the CY 2025 OPPS/ASC proposed rule (89 FR
59201 through 59204) that there are rare instances in which cell and
gene therapies appear on the same claim as a primary C-APC service and
therefore, have their payment packaged with payment for the primary C-
APC service. As stated in the CY 2025 OPPS/ASC final rule with comment
period (89 FR 93932 through 93938), given the unique nature of these
therapies, we do not believe they function as integral, ancillary,
supportive, dependent, or adjunctive to any of the current primary C-
APC services. Additionally, we stated that when these products are
administered, they are the primary treatment being administered to a
patient and thus, are not integral, ancillary, supportive, dependent,
or adjunctive to any primary C-APC services.
Therefore, we finalized a policy for CY 2025 and subsequent years
(89 FR 93932 through 93938), to not package payment for cell and gene
therapies into C-APCs, when those cell and gene therapies are not
functioning as integral, ancillary, supportive, dependent, or
adjunctive to the primary C-APC service. For new cell and gene therapy
products that are not integral, ancillary, supportive, dependent, or
adjunctive to any C-APC primary service, we will continue to add their
product specific HCPCS codes, when created, to the C-APC exclusion
list. The proposed list of qualifying products can be found in Table 1.
BILLING CODE 4169-69-P
[[Page 41748]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.012
BILLING CODE 4169-69-C
We list all proposed C-APC exclusion categories for CY 2027 in
Addendum J to this proposed rule (which is available via the internet
on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices).
(5) Exclusion of Non-Opioid Products for Pain Relief Under Section 4135
of the Consolidated Appropriations Act, 2023 From the C-APC Policy
The Consolidated Appropriations Act (CAA), 2023 (Pub. L. 117-328),
was signed into law on December 29, 2022. Section 4135(a) and (b) of
the CAA, 2023, titled ``Access to Non-Opioid Treatments for Pain
Relief,'' amended section 1833(t)(16) and section 1833(i) of the Act,
respectively, to provide for temporary additional payments for non-
opioid treatments for pain relief (as that term is defined in section
1833(t)(16)(G)(iv) of the Act). In
[[Page 41749]]
particular, section 1833(t)(16)(G) of the Act provides that with
respect to a non-opioid treatment for pain relief furnished on or after
January 1, 2025, and before January 1, 2028, the Secretary shall not
package payment for the non-opioid treatment for pain relief into
payment for a covered OPD service (or group of services) and shall make
an additional payment for the non-opioid treatment for pain relief as
specified in clause (ii) of that section. Clauses (ii) and (iii) of
section 1833(t)(16)(G) of the Act provide for the amount of additional
payment and set a limitation on that amount. As stated earlier in this
section, our current policy is to exclude from the packaged C-APC
payment those items and services that are required by statute to be
separately paid.
Accordingly, in the CY 2025 OPPS/ASC final rule with comment
period, we finalized a policy to exclude the non-opioid treatments for
pain relief identified as satisfying the required criteria for payment
under section 4135 of the CAA, 2023 from the C-APC policy to ensure
payment is not packaged into any C-APC and that separate payment is
made in accordance with the statute (89 FR 93938 through 93939).
(6) C-APCs for CY 2027
For CY 2027 and subsequent years, we propose to continue to apply
the C-APC payment policy methodology. We refer readers to the CY 2017
OPPS/ASC final rule with comment period (81 FR 79583) for a discussion
of the C-APC payment policy methodology- and revisions.
Each year, in accordance with section 1833(t)(9)(A) of the Act, we
review and revise the services within each APC group and the APC
assignments under the OPPS. As a result of our annual review of the
services and the APC assignments under the OPPS, we are not proposing
to convert any standard APCs to C-APCs in CY 2027; thus, we propose
that the number of C-APCs for CY 2027 (see Table 2) would be the same
as the number for CY 2026, which is 74 C-APCs (91 FR 8384).
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c. Calculation of Composite APC Criteria-Based Costs
As discussed in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66613), we believe it is important that the OPPS enhance
incentives for hospitals to provide necessary, high-quality care as
efficiently as possible. For CY 2008, we developed composite APCs to
provide a single payment for groups of services that are typically
performed together during a single clinical encounter and that result
in the provision of a complete service. Combining payment for multiple,
independent services into a single OPPS payment in this way enables
hospitals to manage their resources with maximum flexibility by
monitoring and adjusting the volume and efficiency of services
themselves. An additional advantage to the composite APC model is that
we can use data from correctly coded multiple procedure claims to
calculate payment rates for the specified combinations of services,
rather than relying upon single procedure claims which may be low in
volume and/or incorrectly coded. Under the OPPS, we currently have
composite policies for mental health services and multiple imaging
services. We refer readers to the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66611 through 66614 and 66650 through 66652) for
a full discussion of the development of the composite APC methodology,
and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163)
and the CY 2018 OPPS/ASC final rule with comment period (82 FR 59241,
59242, and 59246 through 52950) for further background.
(1) Mental Health Services Composite APC
For CY 2027, we propose to continue our longstanding policy of
limiting the aggregate payment for specified less resource intensive
mental health services furnished on the same date to the payment for a
day of partial hospitalization services provided by a hospital, which
we consider to be the most resource-intensive- of all outpatient mental
health services (88 FR 49572). We refer readers to the April 7, 2000,
OPPS final rule with comment period (65 FR 18452 through 18455) for the
initial discussion of this longstanding policy and the CY 2012 OPPS/ASC
final rule with comment period (76 FR 74168) for further background.
In the CY 2018 OPPS/ASC proposed rule and final rule with comment
period (82 FR 33580 and 33581 and 82 FR 59246 and 59247), we proposed
and finalized the policy for CY 2018 and subsequent years that, when
the aggregate payment for specified mental health services provided by
one hospital to a single beneficiary on a single date of service, based
on the payment rates associated with the APCs for the individual
services, exceeds the maximum per diem payment rate for partial
hospitalization services provided by a hospital, those specified mental
health services will be paid through composite APC 8010 (Mental Health
Services Composite). In addition, we set the payment rate for composite
APC 8010 for CY 2018 at the same payment rate for APC 5863, which was
the maximum partial hospitalization per diem payment rate for a
hospital, and finalized a policy that the hospital would continue to be
paid the payment rate for composite APC 8010. This policy applied in
CYs 2018 through 2023.
In the CY 2024 OPPS/ASC proposed rule, we stated that APC 5863 was
no longer the maximum partial hospitalization per diem payment rate for
a hospital due to the creation of APC 5864, which is four or more
hospital-based PHP services per day (88 FR 49572). We solicited comment
on whether APC 5864 would be appropriate to use as the daily mental
health cap, as we have historically set the daily mental health cap for
composite APC 8010 at the maximum partial hospitalization per diem
payment rate for a hospital (88 FR 49572). Based on public comments
received and our longstanding policy, in the CY 2024 OPPS/ASC final
rule with comment period, we finalized APC 5864, four hospital-based
PHP services per day, as the daily mental health cap (88 FR 81566).
We continue to believe that the costs associated with administering
a partial hospitalization program represent the most resource intensive
of all outpatient mental health services. For CY 2027 and subsequent
years, we propose to continue this policy that when the aggregate
payment for specified mental health services provided by one hospital
to a single beneficiary on a single date of service, based on the
payment rates associated with the APCs for the individual services,
exceeds the per diem payment rate for four partial hospitalization
services provided in a day by a hospital (the payment amount for APC
5864), those specified mental health services would be paid through
composite APC 8010. In addition, we propose to continue to set the
payment rate for composite APC 8010 at the same payment rate that we
propose for APC 5864, which is a partial hospitalization per diem
payment rate for four partial hospitalization services furnished in a
day by a hospital.
Under the proposed policy, the Integrated OCE (I/OCE) would
continue to determine whether to pay for these specified mental health
services individually, or to make a single payment at the same payment
rate established for APC 5864 for all the specified mental health
services furnished by the hospital on that single date of service by
paying for the services through composite APC 5863.
(2) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and
8008)
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68559
through 68569) we finalized a policy that effective January 1, 2009, we
provide a single payment each time a hospital submits a claim for more
than one imaging procedure within an imaging family on the same date of
service, to reflect and promote the efficiencies hospitals can achieve
when performing multiple imaging procedures during a single session. We
utilize three imaging families based on imaging modality for purposes
of this methodology: (1) ultrasound; (2) computed tomography (CT) and
computed tomographic angiography (CTA); and (3) magnetic resonance
imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes
subject to the multiple imaging composite policy and their respective
families are listed in Table 3.
While there are three imaging families, there are five multiple
imaging composite APCs due to the statutory requirement under section
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging
services provided with and without contrast. While the ultrasound
procedures included under the policy do not involve contrast, both CT/
CTA and MRI/MRA scans can be provided either with or without contrast.
The five multiple imaging composite APCs established in CY 2009 are:
APC 8004 (Ultrasound Composite);
APC 8005 (CT and CTA without Contrast Composite);
APC 8006 (CT and CTA with Contrast Composite);
APC 8007 (MRI and MRA without Contrast Composite); and
APC 8008 (MRI and MRA with Contrast Composite).
We define the single imaging session for the ``with contrast''
composite APCs as having at least one or more imaging procedures from
the same family
[[Page 41753]]
performed with contrast on the same date of service. For example, if
the hospital performs an MRI without contrast during the same session
as at least one other MRI with contrast, the hospital will receive
payment based on the payment rate for APC 8008, the ``with contrast''
composite APC.
We make a single payment for those imaging procedures that qualify
for payment based on the composite APC payment rate, which includes any
packaged services furnished on the same date of service. The standard
(noncomposite) APC assignments continue to apply for single imaging
procedures and multiple imaging procedures performed across families.
For a full discussion of the development of the multiple imaging
composite APC methodology, we refer readers to the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68559 through 68569).
For CY 2027, we propose to continue to pay for all multiple imaging
procedures within an imaging family performed on the same date of
service using the multiple imaging composite APC payment methodology.
We continue to believe that this policy would reflect and promote the
efficiencies hospitals can achieve when performing multiple imaging
procedures during a single session.
For CY 2027, except where otherwise indicated, we propose to use
the costs derived from CY 2025 claims data to set the proposed CY 2027
payment rates. Therefore, for CY 2027, the proposed payment rates for
the five multiple imaging composite APCs (APCs 8004, 8005, 8006, 8007,
and 8008) were based on proposed geometric mean costs calculated from
CY 2025 claims available for the CY 2027 OPPS/ASC proposed rule that
qualify for composite payment under the current policy (that is, those
claims reporting more than one procedure within the same family on a
single date of service). To calculate the proposed geometric mean
costs, we used the same methodology that we used to calculate the
geometric mean costs for these composite APCs since CY 2014, as
described in the CY 2014 OPPS/ASC final rule with comment period (78 FR
74918). The imaging HCPCS codes referred to as ``overlap bypass codes''
that we removed from the bypass list for purposes of calculating the
proposed multiple imaging composite APC geometric mean costs, in
accordance with our established methodology as stated in the CY 2014
OPPS/ASC final rule with comment period (78 FR 74918), are identified
by asterisks in Addendum N to this proposed rule (which is available
via the internet on the CMS website https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices) and are discussed in more detail in section II.A.1.a. of this
proposed rule.
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3. Proposed Changes to Packaged Items and Services
a. Background and Rationale for Packaging in the OPPS
Like other prospective payment systems, the OPPS relies on the
concept of averaging to establish a payment rate for services. The
payment may be more or less than the estimated cost of providing a
specific service or a bundle of specific services for a particular
beneficiary. The OPPS packages payments for multiple interrelated items
and services into a single payment to create incentives for hospitals
to furnish services most efficiently and to manage their resources with
maximum flexibility. Our packaging policies support our strategic goal
of using larger payment bundles in the OPPS to maximize hospitals'
incentives to provide care in the most efficient manner. For example,
where there are a variety of devices, drugs, items, and supplies that
could be used to furnish a service, some of which are more costly than
others, packaging encourages hospitals to use the most cost-efficient
item that meets the patient's needs, rather than to routinely use a
more expensive item, which may occur if separate payment is provided
for the item.
Packaging also encourages hospitals to effectively negotiate with
manufacturers and suppliers to reduce the purchase price of items and
services or to explore alternative group purchasing arrangements,
thereby encouraging the most economical health care delivery.
Similarly, packaging encourages hospitals to establish protocols that
ensure that necessary
[[Page 41758]]
services are furnished, while scrutinizing the services ordered by
practitioners to maximize the efficient use of hospital resources.
Packaging payments into larger payment bundles promotes the
predictability and accuracy of payment for services over time. Finally,
packaging may reduce the importance of refining service-specific
payments because packaged payments include costs associated with higher
cost cases requiring many ancillary items and services and lower cost
cases requiring fewer ancillary items and services. Packaging
encourages efficiency and is an essential component of a prospective
payment system; therefore, packaging payments for items and services
that are typically integral, ancillary, supportive, dependent, or
adjunctive to a primary service has been a fundamental part of the OPPS
since its implementation in August 2000. As we continue to develop
larger payment groups that more broadly reflect services provided in an
encounter or episode of care, we have expanded the OPPS packaging
policies. Most, but not necessarily all, categories of items and
services currently packaged in the OPPS are listed in 42 CFR 419.2(b).
Our overarching goal is to make payments for all services under the
OPPS more consistent with those of a prospective payment system and
less like those of a per-service fee schedule, which pays separately
for each coded item. As a part of this effort, we have continued to
examine the payment for items and services provided under the OPPS to
determine which OPPS services can be packaged to further achieve the
objective of advancing the OPPS toward a more prospective payment
system.
b. Proposed CY 2027 Policy on Packaged Items and Services
For CY 2027, we examined the items and services currently provided
under the OPPS, reviewing categories of integral, ancillary,
supportive, dependent, or adjunctive items and services for which we
believe payment would be appropriately packaged into payment for the
primary service that they support. Specifically, we examined the HCPCS
code definitions (including CPT code descriptors) and hospital
outpatient department billing patterns to determine whether there were
categories of codes for which packaging would be appropriate according
to existing OPPS packaging policies or a logical expansion of those
existing OPPS packaging policies.
For CY 2027, we are not proposing any changes to the current
overall packaging policy discussed in II.A.3.a. We propose to continue
to conditionally package the costs of selected newly identified
ancillary services into payment for a primary service where we believe
that the packaged item or service is integral, ancillary, supportive,
dependent, or adjunctive to the provision of care that was reported by
the primary service HCPCS code.
c. Proposed Payment for Diagnostic Radiopharmaceuticals
(1) Background on OPPS Packaging Policy for Diagnostic
Radiopharmaceuticals
Under the OPPS, we package several categories of nonpass-through
drugs, biologicals, and radiopharmaceuticals, regardless of the cost of
the products. Because the products are packaged according to the
policies in Sec. 419.2(b), we refer to them as ``policy-packaged''
drugs, biologicals, and radiopharmaceuticals. In particular, under
Sec. 419.2(b)(15), payment for drugs, biologicals, and, prior to CY
2025, all radiopharmaceuticals that function as supplies when used in a
diagnostic test or procedure are packaged with the payment for the
related procedure or service. Packaging costs into a single aggregate
payment for a service, encounter, or episode of care is a fundamental
principle that distinguishes a prospective payment system from a fee
schedule. In general, packaging the costs of supportive items and
services into the payment for the primary procedure or service with
which they are associated encourages hospital efficiencies and enables
hospitals to manage their resources with maximum flexibility.
In the CY 2008 OPPS/ASC final rule with comment period, we
finalized the packaging status of diagnostic radiopharmaceuticals as
part of our overall enhanced packaging approach for the CY 2008 OPPS
and subsequent years (72 FR 66635 through 66641). Importantly, we noted
that we believe diagnostic radiopharmaceuticals are always intended to
be used with a diagnostic nuclear medicine procedure and function as
supplies when used in a diagnostic test or procedure, making it
appropriate to package the payment for the diagnostic
radiopharmaceutical into the payment for the related nuclear medicine
procedure. Higher cost diagnostic radiopharmaceuticals were one
specific type of product that, prior to CY 2025, was policy packaged
under the category described by Sec. 419.2(b)(15). Since we
implemented this policy in CY 2008, interested parties raised concerns
regarding policy packaging of diagnostic radiopharmaceuticals.
In the CY 2025 OPPS/ASC proposed rule (89 FR 59213 through 59222)
and CY 2025 OPPS/ASC final rule with comment period (89 FR 93950), we
stated that we continue to believe diagnostic radiopharmaceuticals are
always intended to be used with a diagnostic nuclear medicine procedure
and function as supplies when used in a diagnostic test or procedure,
generally making it appropriate to package payment for them with
payment for the related nuclear medicine procedure. However, we stated
there are certain situations in which the packaged payment amount
attributed to the diagnostic radiopharmaceutical used in an imaging
procedure assigned to a nuclear medicine APC may not adequately account
for the cost of a diagnostic radiopharmaceutical that has a
significantly higher cost, but lower utilization relative to the other
diagnostic radiopharmaceuticals that may be used with the procedure.
In the CY 2025 OPPS/ASC final rule with comment period (89 FR 93948
through 93963) we finalized a policy to pay separately for any
diagnostic radiopharmaceutical with a per day cost greater than $630
for CY 2025. We also finalized a policy of applying similar methodology
to that finalized in the CY 2025 OPPS/ASC final rule with comment
period for determining the per day costs of drugs and biologicals in
order to calculate the per day costs for diagnostic
radiopharmaceuticals for CY 2026 and future years (89 FR 93953 through
93955). We noted that any diagnostic radiopharmaceutical with a per day
cost at or below that threshold will continue to be policy packaged
under our longstanding policy at Sec. 419.2(b)(15) (89 FR 93962 to
93963). Additionally, we finalized the policy that starting in CY 2026
and for subsequent years, we will update the threshold amount of $630
by a forecast of the Producer Price Index (PPI) for Pharmaceuticals for
Human Use, Prescription (Bureau of Labor Statistics (BLS) series code
WPUSI07003) from IHS Global, Inc (IGI) (89 FR 93955).
In the CY 2025 OPPS/ASC final rule with comment period, we also
finalized a policy to pay for nonpass-through, separately payable
diagnostic radiopharmaceuticals with per day costs above the designated
threshold based on our authority under section 1833(t)(14)(A)(iii)(II)
of the Act. As we found that the ASP data we had was not usable for the
purpose of paying for diagnostic radiopharmaceuticals, we finalized a
policy to pay for qualifying nonpass-through diagnostic
radiopharmaceuticals with claims data based on mean unit cost data
derived
[[Page 41759]]
from hospital claims. Additionally, we finalized corresponding
modifications to the regulation text at Sec. 419.2(b)(15) and Sec.
419.41 to codify our finalized payment policy for diagnostic
radiopharmaceuticals and our existing policy for therapeutic
radiopharmaceuticals. In the CY 2026 OPPS/ASC final rule with comment
period, we finalized a technical refinement to the diagnostic
radiopharmaceutical packaging threshold methodology and finalized the
CY 2026 diagnostic radiopharmaceutical packaging threshold of $655. For
additional information regarding the policy finalized, please reference
the CY 2025 OPPS/ASC final rule with comment period (89 FR 93948
through 93963) and the CY 2026 OPPS/ASC final rule with comment period
(90 FR 53482 through 53488).
(2) Proposed Diagnostic Radiopharmaceutical Packaging Threshold
For CY 2027, we propose to continue the policy finalized in CY 2025
OPPS/ASC final rule with comment period (89 FR 93948 through 93963).
Specifically, we propose to continue to calculate the per day cost of
diagnostic radiopharmaceuticals based on the methodology described in
section V.B.1.b. of this proposed rule, which relies on the methodology
finalized in the CY 2006 OPPS final rule with comment period (70 FR
68636 through 68638).
As finalized in the CY 2025 OPPS/ASC final rule with comment period
(89 FR 93955), starting in the OPPS/ASC rulemaking for CY 2026 and for
subsequent years, we stated we would update the proposed threshold
amount of $630 by a forecast of the PPI for Pharmaceuticals for Human
Use, Prescription (BLS series code WPUSI07003) from IHS Global, Inc
(IGI) by using most recently available four-quarter moving average PPI
levels to trend from the third quarter of the year 2 years prior to the
applicable calendar year to the third quarter of the year prior to the
applicable calendar year (for example, from the third quarter of 2024
to the third quarter of 2025 for CY 2026). In the CY 2026 OPPS/ASC
final rule with comment period, we finalized a technical refinement to
this policy to use the most recently available four-quarter moving
average PPI levels to trend the CY 2025 final threshold forward from
the third quarter of the CY 2025 to the third quarter of the payment
year (CY 2026) and round the resulting dollar amount to the nearest $5
increment (90 FR 53482 through 53483). We believed using the most
recently available four-quarter moving average PPI levels more
appropriately updated the packaging threshold from CY 2025 for payment
in CY 2026. For CY 2026 and subsequent updates, we finalized to trend
the CY 2025 threshold of $630 forward using the four-quarter moving
average PPI levels for Pharmaceuticals for Human Use, Prescription for
CY 2025 (third quarter) forward using the PPI for Pharmaceuticals for
Human Use, Prescription for the applicable payment year (third quarter)
(90 FR 53482 through 53488). This is the same as the update factor used
for the OPPS drug packaging threshold, where we originally used the
four-quarter moving average PPI levels for Pharmaceutical Preparations,
Prescription (BLS series code WPUSI07003, formerly BLS series code
32541DRX) to trend the $50 threshold forward from the third quarter of
CY 2005 (when the Pub. L. 108-173 mandated threshold became effective)
to the third quarter of the applicable payment year (71 FR 68085 and
68086).
Therefore, for CY 2027, we propose to update the CY 2025 $630
threshold amount by the four-quarter moving average PPI levels for
Pharmaceuticals for Human Use, Prescription to trend the $630 threshold
forward. Specifically, we propose to use the most recently available
forecast of the four-quarter moving average PPI levels for
Pharmaceutical for Human Use, Prescription from the third quarter of
2025 to the third -quarter of 2027, and to round the resulting dollar
amount to the nearest $5 increment. Based on this methodology, we
trended the $630 threshold forward and rounded the resulting dollar
amount ($667.44) to the nearest $5 increment, which yields a proposed
figure of $665 per day for CY 2027. Consistent with our methodology and
practices listed in section V.B.1.b. of this proposed rule, we also
propose that if more recent data are subsequently available (for
example, a more recent estimate of the PPI for Pharmaceuticals for
Human Use, Prescription), we would use such data, if appropriate, to
determine the CY 2027 diagnostic radiopharmaceutical packaging
threshold in the final rule.
(3) Amount of Separate Payment for Diagnostic Radiopharmaceuticals
Exceeding the Threshold
As discussed in the CY 2025 OPPS/ASC final rule with comment period
(89 FR 93955 through 93959), once we determine that the per day cost of
a nonpass-through diagnostic radiopharmaceutical exceeds the cost
threshold, proposed to be $665 per day for CY 2027, we will then assign
that radiopharmaceutical to an APC, making it a specified covered
outpatient drug (SCOD) per section 1833(t)(14)(B) of the Act. We
propose to continue our current policy for CY 2027, and propose to pay
for those nonpass-through, separately payable diagnostic
radiopharmaceuticals based on our authority under section
1833(t)(14)(A)(iii)(II) of the Act. While, under this authority, we
would ordinarily use the ASP methodology under section 1847A of the
Act, we continue to find that the ASP data we had was not usable for
payment purposes. We continue to believe that arithmetic mean unit cost
(MUC) would be an appropriate proxy for the average price for a
diagnostic radiopharmaceutical for a given year, as it is calculated
based on the average costs for a particular year and is directly
reflective of the actual cost data that hospitals submit to CMS.
Therefore, we propose to continue our current policy and propose for CY
2027 to pay for qualifying diagnostic radiopharmaceuticals with per day
costs above the diagnostic radiopharmaceutical packaging threshold
based on their arithmetic MUC, which would be derived from calendar
year 2025 claims data.
Although we propose to base payment for qualifying
radiopharmaceuticals on their arithmetic MUC for CY 2027, we continue
to encourage manufacturers to submit ASP information for diagnostic
radiopharmaceuticals, if possible. While we propose to continue to use
MUC to pay for separately payable diagnostic radiopharmaceuticals in CY
2027, we note that manufacturers can begin, or continue, to report ASP
data for potential future use in paying for diagnostic
radiopharmaceuticals. For CY 2027, ASP reporting is voluntary for
diagnostic radiopharmaceuticals paid under the OPPS. We encourage
interested parties to submit comments regarding potential issues that
may arise that prevent appropriate ASP reporting for diagnostic
radiopharmaceuticals. We refer readers to the CY 2025 OPPS/ASC final
rule with comment period as it discusses some of the known concerns
regarding ASP reporting for diagnostic radiopharmaceuticals (89 FR
93948 through 93963) as well as the CY 2026 OPPS/ASC final rule with
comment period (90 FR 53482 through 53488). We reiterate our stance
from the CY 2025 OPPS/ASC final rule with comment period, that if we
were to use average sales price as the basis of calculating a payment,
we believe there must be more consistent, validated, and universal
[[Page 41760]]
reporting in order for ASP to be a viable payment methodology (89 FR
93961).
We also reiterate, as we stated in the CY 2025 and CY 2026 OPPS/ASC
final rules with comment period (89 FR 93957 and 90 FR 53484), that
there could be potential value in the use of ASP data for payment
purposes for diagnostic radiopharmaceuticals when reported correctly
and by all manufacturers who manufacture a product that is described by
a given HCPCS code. We continue to believe that the use of ASP
information for OPPS payment could provide an opportunity to improve
payment accuracy for separately payable diagnostic radiopharmaceuticals
by applying an established methodology that has already been
successfully implemented under the OPPS for other separately payable
drugs and biologicals, as well as for therapeutic radiopharmaceuticals.
Previously, to facilitate potential future payment for diagnostic
radiopharmaceuticals based on ASP, we sought comment from interested
parties on how CMS could ensure more consistent, validated, and
universal reporting in order for ASP to be a viable payment methodology
utilized in future rulemaking. For example, we sought comment on how
CMS could update its past guidance, Submission of OPPS ASP Data for
Nonpass-Through Separately Payable Therapeutic Radiopharmaceuticals and
Radiopharmaceuticals with Pass-Through Status,\6\ to reflect current
clinical practices and to reflect ASP reporting for diagnostic
radiopharmaceuticals. Based on our analysis, and input from interested
parties, we will be publishing an ASP reporting Framework for
Diagnostic Radiopharmaceuticals on the Medicare Hospital Outpatient PPS
website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.
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\6\ https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps/downloads/opps_asp_radiopharm_guidance10302009.pdf.
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Additionally, as discussed in section V.B.5. of this proposed rule
(Proposed Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals with HCPCS Codes but Without OPPS Hospital Claims
Data), we propose to set the payment rate for new diagnostic
radiopharmaceuticals that exceed the diagnostic radiopharmaceutical
packaging threshold and with HCPCS codes, but which do not have pass-
through status and are without claims data, at ASP plus 6 percent. If
ASP data for these diagnostic radiopharmaceuticals are not available,
we propose to pay WAC plus 3 percent during the product's initial sales
period, consistent with our policy described in section V.B.2. of this
proposed rule. If the WAC also is unavailable, we propose to make
payment for new diagnostic radiopharmaceuticals at 95 percent of the
products' most recent AWP. Following the initial sales period, a
payment rate of WAC plus 6 percent would apply, if ASP data for these
diagnostic radiopharmaceuticals remained unavailable. We continue to
believe the volume of products in this category would typically be very
low; however, in these rare situations, we continue to believe it would
continue to be appropriate to use ASP plus 6 percent, WAC plus 3 or 6
percent, or 95 percent of AWP until a MUC is available. As we stated in
the CY 2025 OPPS/ASC final rule with comment period (89 FR 93955
through 93962), it is appropriate to use this payment hierarchy until a
MUC is available. There is typically only one manufacturer for a
diagnostic radiopharmaceutical that is new and described by a HCPCS
code, but without claims data, so CMS does not have to ensure all
manufacturers are reporting ASP for that particular HCPCS code prior to
establishing a separate payment amount based on ASP. Additionally,
although reporting of ASP is not a condition of CMS approving a HCPCS
application, CMS has the opportunity to actively engage with the
manufacturer, or sponsor of a HCPCS application, during the HCPCS
application process. This allows for ongoing dialogue and education
regarding the unique ASP reporting requirements that may be associated
with a particular product, including how to ensure the reported ASP
aligns with the dose descriptor for the newly assigned HCPCS code (89
FR 93958). We continue to believe the hierarchy previously specified is
appropriate to determine the payment for a diagnostic
radiopharmaceutical that is new and described by a HCPCS code, but
without claims data, as it is consistent with the typical hierarchy
associated with payment for drugs and biologicals paid under the OPPS
as discussed in sections V.A. and V.B. of this proposed rule.
(4) Qualifying Diagnostic Radiopharmaceuticals Above the Diagnostic
Radiopharmaceutical Packaging Threshold
The HCPCS codes that describe diagnostic radiopharmaceuticals with
per day costs that exceed the proposed diagnostic radiopharmaceutical
packaging threshold are proposed to be assigned to a status indicator
of ``K'', indicating separate payment to be paid based on that HCPCS
code's arithmetic MUC. A proposed APC and a proposed payment rate are
assigned as shown in Addendum B to this proposed rule. HCPCS codes that
describe diagnostic radiopharmaceuticals with per day costs that are at
or below the proposed diagnostic radiopharmaceutical packaging
threshold are proposed to continue to be assigned to a status indicator
of ``N'', indicating packaged payment.
The proposed list of diagnostic radiopharmaceuticals that we
calculate as having per day costs that exceeded $665 and their proposed
status indicators can be found in Table 4.
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Proposed definitions of status indicators can be found in Addendum
D1 to this proposed rule. Addenda to this proposed rule can be found on
the CMS OPPS web page.
4. Implementation of Section 4135 of the Consolidated Appropriations
Act (CAA), 2023
The Consolidated Appropriations Act (CAA), 2023 (Pub. L. 117-328),
was signed into law on December 29, 2022. Section 4135(a) and (b) of
the CAA, 2023, titled Access to Non Opioid Treatments for Pain Relief,
amended sections 1833(t)(16) and 1833(i) of the Act, respectively, to
provide for temporary additional payments for non-opioid treatments for
pain relief (as that term is defined in section 1833(t)(16)(G)(iv) of
the Act). In particular, section 1833(t)(16)(G) of the Act provides
that with respect to a non-opioid treatment for pain relief furnished
on or after January 1, 2025, and before January 1, 2028, the Secretary
shall not package payment for the non-opioid treatment for pain relief
into payment for a covered OPD service (or group of services) and shall
make an additional payment for the non-opioid treatment for pain relief
as specified in clause (ii) of that section. Clauses (ii) and (iii) of
section 1833(t)(16)(G) of the Act provide for the amount of additional
payment and set a limitation on that amount, respectively.
The additional payments required under section 1833(t)(16)(G) of
the Act began on January 1, 2025, based on the policy finalized in the
CY 2025 OPPS/ASC final rule with comment period (89 FR 94343 through
94361). In section XIII.E. of this proposed rule, we propose to
continue the policy finalized in the CY 2025 OPPS/ASC final rule with
comment period for CY 2027. We also propose non-opioid treatments for
pain relief that would qualify under this policy for CY 2027 and seek
public comment on those product evaluations.
We refer readers to section XIII.E. of this proposed rule-for a
summary of this proposal.
[[Page 41762]]
5. Calculation of OPPS Scaled Payment Weights
We established a policy in the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68283) using geometric mean-based APC costs to
calculate relative payment weights under the OPPS. In the CY 2026 OPPS/
ASC final rule with comment period (90 FR 53489 through 53490), we
applied this policy and calculated the relative payment weights for
each APC for CY 2026 that were shown in Addenda A and B of the CY 2026
OPPS/ASC final rule with comment period (which were made available via
the internet on the CMS website) using the APC costs discussed in
sections II.A.1. and II.A.2. of the CY 2026 OPPS/ASC final rule with
comment period (90 FR 53455 through 53480). For CY 2027, as we did for
CY 2026, we propose to continue to apply the policy established in CY
2013 and calculate relative payment weights for each APC for CY 2027
using geometric mean-based APC costs.
For CY 2012 and CY 2013, outpatient clinic visits were assigned to
one of five levels of clinic visit APCs, with APC 0606 representing a
mid-level clinic visit. In the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75036 through 75043), we finalized a policy that created
alphanumeric HCPCS code G0463 (Hospital outpatient clinic visit for
assessment and management of a patient), representing all clinic visits
under the OPPS. HCPCS code G0463 was assigned to APC 0634 (Hospital
Clinic Visits). We also finalized a policy to use CY 2012 claims data
to develop the CY 2014 OPPS payment rates for HCPCS code G0463 based on
the total geometric mean cost of the levels one through five CPT
Evaluation or Assessment and Management (E/M) codes for clinic visits
previously recognized under the OPPS (CPT codes 99201 through 99205 and
99211 through 99215). In addition, we finalized a policy to no longer
recognize a distinction between new and established patient clinic
visits.
For CY 2016, we deleted APC 0634 and reassigned the outpatient
clinic visit HCPCS code G0463 to APC 5012 (Level 2 Examinations and
Related Services) (80 FR 70372). For CY 2027, as we did for CY 2026, we
propose to continue to standardize all the relative payment weights to
APC 5012. We believe that standardizing relative payment weights to the
geometric mean of the APC to which HCPCS code G0463 is assigned
maintains consistency in calculating unscaled weights that represent
the cost of some of the most frequently provided OPPS services. For CY
2027, as we did for CY 2026, we propose to assign APC 5012 a relative
payment weight of 1.00 and to divide the geometric mean cost of each
APC by the geometric mean cost for APC 5012 to derive the unscaled
relative payment weight for each APC. The choice of the APC on which to
standardize the relative payment weights does not affect payments made
under the OPPS because we scale the weights for budget neutrality.
Section 1833(t)(9)(B) of the Act requires that APC reclassification
and recalibration changes, wage index changes, and other adjustments be
made in a budget neutral manner. Budget neutrality ensures that the
estimated aggregate weight under the OPPS for CY 2027 is neither
greater than nor less than the estimated aggregate weight that would
have been calculated without the changes. To comply with this
requirement concerning the APC changes, we propose to compare the
estimated aggregate weight using the CY 2026 scaled relative payment
weights to the estimated aggregate weight using the proposed CY 2027
unscaled relative payment weights.
For CY 2026, we multiplied the CY 2026 scaled APC relative payment
weight applicable to a service paid under the OPPS by the volume of
that service from CY 2025 claims to calculate the total relative
payment weight for each service (90 FR 53489). We then added together
the total relative payment weight for each of these services to
calculate an estimated aggregate weight for the year. For CY 2027, we
propose to apply the same process using the estimated CY 2027 unscaled
relative payment weights rather than scaled relative payment weights.
We propose to calculate the weight scalar by dividing the CY 2026
estimated aggregate weight by the unscaled CY 2027 estimated aggregate
weight.
For a detailed discussion of the weight scalar calculation, we
refer readers to the OPPS claims accounting document available on the
CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices. Click on the
link labeled ``Hospital Outpatient Prospective Payment--Notice of
Proposed Rulemaking'' for 2027, which can be found under the heading
``Hospital Outpatient Regulations and Notices'' and open the claims
accounting document link, which is labeled ``2027 Proposed Rule OPPS
Claims Accounting.''
We propose to compare the estimated unscaled relative payment
weights in CY 2027 to the estimated total relative payment weights in
CY 2026 using CY 2025 claims data, holding all other components of the
payment system constant to isolate changes in total weight. Based on
this comparison, we propose to adjust the calculated CY 2027 unscaled
relative payment weights for purposes of budget neutrality. We propose
to adjust the estimated CY 2027 unscaled relative payment weights by
multiplying them by a proposed weight scalar of 1.4582 to ensure that
the proposed CY 2027 relative payment weights are scaled to be budget
neutral. The proposed CY 2027 relative payment weights listed in
Addenda A and B to this proposed rule (which are available via the
internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices)
are scaled and incorporate the recalibration adjustments discussed in
sections II.A.1. and II.A.2. of this proposed rule.
Section 1833(t)(14) of the Act provides the methodology for payment
rates for certain specified covered outpatient drugs (SCODs). Section
1833(t)(14)(H) of the Act provides that additional expenditures
resulting from this paragraph shall not be taken into account in
establishing the conversion factor, weighting, and other adjustment
factors for 2004 and 2005 under section 1833(t)(9) of the Act but shall
be taken into account for subsequent years. Therefore, the cost of
those SCODs (as discussed in section V.B.2. of this proposed rule) is
included in the budget neutrality calculations for the CY 2027 OPPS.
B. Proposed Conversion Factor Update
1. OPD Fee Schedule Increase Factor
Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to
update the conversion factor used to determine the payment rates under
the OPPS on an annual basis by applying the OPD fee schedule increase
factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject
to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee
schedule increase factor is equal to the hospital inpatient market
basket percentage increase applicable to hospital discharges of the Act
(or an amount that is computed and applied with respect to covered OPD
services). In the FY 2027 IPPS/Long Term Care Hospital (LTCH) proposed
rule (91 FR 19496), consistent with current law, based on IHS Global,
Inc.'s (IGI's) fourth quarter 2025 forecast, the proposed FY 2027 IPPS
market basket percentage increase was 3.2 percent. We noted that under
our regular process for the CY
[[Page 41763]]
2027 OPPS/ASC final rule with comment period, we would use the market
basket update for the FY 2027 IPPS/LTCH PPS final rule. If that
forecast is different than the IPPS market basket percentage increase
used for this proposed rule, the CY 2027 OPPS/ASC final rule with
comment period OPD fee schedule increase factor would reflect that
updated forecast of the market basket percentage increase.
For CY 2027, we propose to use the estimate of the hospital
inpatient market basket percentage increase of 3.2 percent as one
component to calculate the OPD fee schedule increase factor.
2. Productivity Adjustment
Section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and
subsequent years, the OPD fee schedule increase factor under
subparagraph (C)(iv) be reduced 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 defines the productivity adjustment as
equal to the 10-year moving average of changes in annual economy-wide,
private nonfarm business multifactor productivity (MFP) (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 private nonfarm business productivity for the
U.S. economy. The productivity measure referenced in section
1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as private
nonfarm business total factor productivity ((TFP) previously referred
to as multifactor productivity).\7\ Please see https://www.bls.gov/productivity/ for the BLS historical published TFP data. A complete
description of IGI's TFP projection methodology is available on the CMS
website at https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information. In the FY 2027 IPPS/LTCH PPS proposed rule (91 FR 19496),
the proposed productivity adjustment for FY 2027 was 0.8 percentage
point.
---------------------------------------------------------------------------
\7\ https://www.bls.gov/productivity/notices/2021/mfp-to-tfp-term-change.htm.
---------------------------------------------------------------------------
Therefore, we propose that the productivity adjustment for the CY
2027 OPPS/ASC proposed rule would be a reduction of 0.8 percentage
point. We also propose that if more recent data subsequently become
available after the publication of the CY 2027 OPPS/ASC proposed rule
(for example, a more recent estimate of the market basket percentage
increase and/or the productivity adjustment), we would use such data,
if appropriate, to determine the CY 2027 hospital inpatient market
basket update and the productivity adjustment for the final rule with
comment period, which are components in calculating the OPD fee
schedule increase factor under sections 1833(t)(3)(C)(iv) and
1833(t)(3)(F) of the Act.
We note that section 1833(t)(3)(F) of the Act provides that
application of this subparagraph may result in the OPD fee schedule
increase factor under section 1833(t)(3)(C)(iv) of the Act being less
than 0.0 percent for a year and may result in OPPS payment rates being
less than rates for the preceding year. As described in further detail
below, we propose for CY 2027 an OPD fee schedule increase factor of
2.4 percent for the CY 2027 OPPS/ASC proposed rule (which is the
proposed estimate of the hospital inpatient market basket percentage
increase of 3.2 percent, less the proposed 0.8 percentage point
productivity adjustment).
3. Other Conversion Factor Adjustments
To set the OPPS conversion factor for 2027, we propose to increase
the CY 2026 conversion factor of $91.415 by 2.4 percent. In accordance
with section 1833(t)(9)(B) of the Act, we propose to further adjust the
conversion factor for CY 2027 to ensure that any revisions made to the
wage index and rural adjustment are made on a budget neutral basis. We
propose to apply an overall budget neutrality factor of 1.0098 for wage
index changes by comparing propose total estimated payments from our
simulation model using the proposed FY 2027 IPPS wage indexes to those
payments using the CY 2026 OPPS wage indexes. We further propose to
calculate an additional budget neutrality factor of 0.9951 to account
for our proposed policy to cap wage index reductions for hospitals at 5
percent on an annual basis and the CY 2027 proposed transitional
exception for low wage index hospitals.
For CY 2027, we propose to maintain the current rural adjustment
policy, as discussed in section II.E. of this proposed rule with
comment period. Therefore, the proposed budget neutrality factor for
the rural adjustment is 1.0000.
We propose to calculate a CY 2027 budget neutrality adjustment
factor for the cancer hospital payment adjustment. We previously
finalized transitioning from the target PCR of 0.89 for CYs 2020
through 2023 (which included the 1.0 percentage point reduction as
required by section 16002(b) of the 21st Century Cures Act) and
incrementally reducing the target PCR by an additional 1.0 percentage
point for each calendar year, beginning with CY 2024, until the target
PCR equals the PCR of non-cancer hospitals calculated using the most
recent data minus 1.0 percentage point as required by section 16002(b)
of the 21st Century Cures Act. We propose a CY 2027 target PCR equal to
0.88 for the cancer hospital payment adjustment, which includes the 1.0
percentage point reduction as required by section 16002(b) of the 21st
Century Cures Act. The proposed CY 2027 estimated payments applying the
proposed CY 2027 cancer hospital payment adjustment are greater than
the estimated payments applying the CY 2026 final cancer hospital
payment adjustment. Therefore, we propose to apply a budget neutrality
adjustment factor of 0.9994 to the conversion factor for the cancer
hospital payment adjustment.
We propose to establish a cost-of-living adjustment (COLA) for
hospitals in Alaska and Hawaii in the CY 2027 OPPS. We propose a budget
neutrality factor of 0.9993 to account for the CY 2027 proposed COLA by
comparing proposed total estimated payments from our simulation model
without a COLA policy to those with the proposed CY 2027 COLA.
For the CY 2027 OPPS/ASC proposed rule, we estimate that proposed
pass-through spending for drugs, biologicals, and devices for CY 2027
will equal approximately $195.3 million, which represents 0.18 percent
of total projected CY 2027 OPPS spending. Therefore, we state that the
proposed conversion factor would be adjusted by the difference between
the 0.30 percent estimate of pass-through spending for CY 2026 and the
0.18 percent estimate of proposed pass-through spending for CY 2027,
resulting in a proposed increase to the conversion factor for CY 2027
of 0.12 percentage point.
We propose that estimated payments for outliers would be 1.0
percent of total OPPS payments for CY 2027. We estimate for this
proposed rule that outlier payments would be approximately 1.19 percent
of total OPPS payments in CY 2026; the 1.00 percent for proposed
outlier payments in CY 2027 would constitute a 0.19 percentage point
decrease in payment in CY 2027 relative to CY 2026.
In this proposed rule with comment period, we estimate an 8.44
percent increase to nondrug OPPS payment rates as a budget neutral
adjustment for the $4.85 billion reduction in OPPS drug payment as a
result of the proposed 340B drug payment policy. As part of that
proposed policy, we note
[[Page 41764]]
that our adjustment in the final rule could potentially change as a
result of changes such as updated data, modifications to the estimate
methodology, and other factors. For additional discussion of the
proposed 340B drug payment policy, please see section V.B.7 of this
proposed rule.
For CY 2027, we propose to use a conversion factor of $102.004 in
the calculation of the national unadjusted payment rates for those
items and services for which payment rates are calculated using
geometric mean costs; that is, the proposed OPD fee schedule increase
factor of 1.024 (2.4 percent for CY 2027), the required proposed wage
index budget neutrality adjustment of approximately 1.0098, the
proposed 5 percent annual cap for individual hospital wage index
reductions adjustment and the proposed transitional exception of
approximately 0.9951, the proposed cost-of-living adjustment of 0.9993,
the proposed cancer hospital payment adjustment of 0.9994, the
adjustment for drugs purchased under the 340B Program of 1.0844, and
the proposed adjustment factor of 1.0012 (an increase of 0.12
percentage point) for the difference in pass-through spending, which
results in a proposed conversion factor for CY 2027 of $102.004.
For CY 2027, we also propose that hospitals that fail to meet the
reporting requirements of the Hospital OQR Program would continue to be
subject to a further reduction of 2.0 percentage points to the OPD fee
schedule increase factor. For hospitals that fail to meet the
requirements of the Hospital OQR Program, we propose to make all other
adjustments discussed above and apply an adjustment factor of 0.9805 to
the proposed CY 2027 conversion factor of $102.004. We propose that the
hospitals that fail to meet the requirements of the Hospital OQR
Program will use a reduced OPD fee schedule update factor of 0.4
percent (that is, the proposed OPD fee schedule increase factor of 2.4
percent further reduced by 2.0 percentage points).
For CY 2027, as previously discussed in section V.B.7, we propose
to reduce payments for non-drug items and services for hospitals for
whom the annual reduction to payment amounts under Sec.
419.32(b)(1)(iv)(B)(12) applies with a 3 percentage point reduction to
the OPD fee schedule increase factor. This would result in a proposed
reduced conversion factor for CY 2027 of approximately $99.015 for this
group of hospitals. The calculations we performed to determine the CY
2027 proposed conversion factor are shown in Table 5.
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C. Proposed Wage Index Changes
Section 1833(t)(2)(D) of the Act requires the Secretary to
determine a wage adjustment factor to adjust the portion of payment and
coinsurance attributable to labor-related costs for relative
differences in labor and labor-related costs across geographic regions
in a budget neutral manner (codified in regulation at 42 CFR
419.43(a)). This portion of the OPPS payment rate is called the OPPS
labor-related portion or OPPS labor-related share. The scaled weight
budget neutrality calculation methodology is discussed in section
II.A.5. of this proposed rule.
The OPPS labor-related share is 60 percent of the national OPPS
payment. This labor-related share is based on a regression analysis
that determined that, for all hospitals, approximately 60 percent of
the costs of services paid under the OPPS were attributable to wage
costs. We confirmed that this labor-related share for outpatient
services is appropriate during our regression analysis for the payment
adjustment for rural hospitals in the CY 2006 OPPS final rule with
comment period (70 FR 68553). We propose to continue this policy for CY
2027. We refer readers to section II.C. of this proposed rule for a
description and an example of how the wage index for a particular
hospital is used to determine payment for the hospital.
As discussed in the claims accounting narrative included with the
supporting documentation under ``Downloads'' for this proposed rule
(which is available via the internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices), for estimating APC costs, we would
standardize 60 percent of estimated claims costs for geographic area
wage variation using the same FY 2027 pre-reclassified wage index that
we use under the IPPS to standardize costs. This standardization
process removes the effects of differences in area wage levels from the
determination of a national unadjusted OPPS payment rate and copayment
amount. Under Sec. Sec. 419.41(c)(1) and 419.43(c) (published in the
OPPS April 7, 2000, final rule with comment period (65 FR 18495 and
18545)), the OPPS adopted the final fiscal year IPPS post-reclassified
wage index as the calendar year wage index for adjusting the OPPS
standard payment amounts for labor market differences. Therefore, the
wage index that applies to a particular acute care, short-stay hospital
under the IPPS also applies to that hospital under the OPPS. As
initially explained in the September 8, 1998, OPPS proposed rule (63 FR
47576), we believe that using the IPPS wage index as the source of an
adjustment factor for the OPPS is reasonable and logical, given the
inseparable, subordinate status of the HOPD within the hospital
overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS
wage index is updated annually.
The Affordable Care Act contained several provisions affecting the
wage index. These provisions were discussed in the CY 2012 OPPS/ASC
final rule with comment period (76 FR 74191). Section 10324 of the
Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act,
which defines a frontier State, and amended section 1833(t) of the Act
to add paragraph (19), which requires a frontier State wage index floor
of 1.00 in certain cases, and states that the frontier State floor
shall not be applied in a budget neutral manner. We codified these
requirements at Sec. 419.43(c)(2) and (3) of our regulations. For CY
2027, we propose to implement this provision in the same manner as we
have since CY 2011. Under this policy, the frontier State hospitals
would receive a wage index of 1.00 if the otherwise applicable wage
index (including reclassification, the rural floor, and rural floor
budget neutrality) is less than 1.00. Because the HOPD receives a wage
index based on the geographic location of the specific inpatient
hospital with which it is associated, the frontier State wage index
adjustment applicable for the inpatient hospital also would apply for
any associated HOPD. We refer readers to the FY 2011 through FY 2026
IPPS/LTCH PPS final rules for discussions regarding this provision,
including our methodology for identifying which areas meet the
definition of ``frontier States''
[[Page 41767]]
as provided for in section 1886(d)(3)(E)(iii)(II) of the Act: for FY
2011, 75 FR 50160 through 50161; for FY 2012, 76 FR 51793, 51795, and
51825; for FY 2013, 77 FR 53369 and 53370; for FY 2014, 78 FR 50590 to
50591; for FY 2015, 79 FR 49971; for FY 2016, 80 FR 49498; for FY 2017,
81 FR 56922; for FY 2018, 82 FR 38142; for FY 2019, 83 FR 41380; for FY
2020, 84 FR 42312; for FY 2021, 85 FR 58765; for FY 2022, 86 FR 45178;
FY 2023, 87 FR 49006; FY 2024, 88 FR 58977; for FY 2025, 89 FR 69300;
and for FY 2026, 90 FR 36851.
In addition to the changes required by the Affordable Care Act, we
note that the proposed FY 2027 IPPS wage indexes continue to reflect a
number of adjustments implemented in past years, including, but not
limited to, an adjustment for occupational mix, reclassification of
hospitals to different geographic areas, the rural floor provisions,
the imputed floor wage index adjustment in all-urban States, an
adjustment to the wage index based on commuting patterns of hospital
employees (the out-migration adjustment), the 5 percent cap on any
decrease to a hospital's wage index from its wage index in a prior FY,
and the transitional payment exception for hospitals significantly
impacted by the discontinuation of the low wage index hospital policy.
Beginning with FY 2024, we include hospitals with Sec. 412.103
reclassification along with geographically rural hospitals in all rural
wage index calculations, and we exclude ``dual reclass'' hospitals
(hospitals with simultaneous Sec. 412.103 and Medicare Geographic
Classification Review Board (MGCRB) reclassifications) implicated by
the hold harmless provision at section 1886(d)(8)(C)(ii) of the Act (88
FR 58971 through 58973). We refer readers to the FY 2027 IPPS/LTCH PPS
proposed rule (91 FR 19459 through 19479) for a detailed discussion of
all proposed changes to the FY 2027 IPPS wage indexes.
We note that in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018
through 49021), we finalized a permanent approach to smooth year-to-
year decreases in hospitals' wage indexes. Specifically, for FY 2023
and subsequent years, 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. That is, a hospital's wage
index for FY 2027 would not be less than 95 percent of its final wage
index for FY 2026. 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 would
be paid the wage index for the area in which it is geographically
located for its first full or partial fiscal year (subject to any
reclassification), and it would not receive a cap for that first year,
because it would not have been assigned a wage index in the prior year
(in accordance with 42 CFR 419.41(c)(1) and 419.43(c), as noted
previously).
Consistent with the FY 2026 IPPS/LTCH PPS final rule (90 FR 36852
through 36854), we discontinued for CY 2026 and subsequent years the
low wage index hospital policy under the OPPS (90 FR 53495 through
53496). Under the low wage index hospital policy that we previously
adopted for the OPPS (84 FR 61186 through 61188), we increased the wage
index for hospitals with a wage index value below the 25th percentile
wage index value for a calendar year by half the difference between the
otherwise applicable final wage index value for a year for that
hospital and the 25th percentile wage index value for that year across
all hospitals. We refer readers to the FY 2025 IFC (89 FR 80405 through
80421), FY 2026 IPPS/LTCH PPS final rule (90 FR 36852 through 36854)
and CY 2026 OPPS/ASC final rule with comment period (90 FR 53495
through 53496) for a detailed discussion regarding the removal of the
low wage index hospital policy from the IPPS for FYs 2025 and 2026 and
the OPPS for CY 2026.
In the FY 2026 IPPS final rule (90 FR 36855 through 36857), using
our authority under section 1886(d)(5)(I)(i) of the Act, we adopted a
narrow transitional exception to the calculation of FY 2026 IPPS
payments for low wage index hospitals significantly impacted by the
discontinuation of the low wage index hospital policy. As indicated in
that rule, we adopted this temporary payment exception ``to mitigate
short-term instability and payment fluctuations that can negatively
impact hospitals consistent with principles of certainty and
predictability under prospective payment systems.'' To address these
same concerns under the OPPS, we correspondingly adopted a transitional
payment exception for CY 2026 under the OPPS using our equitable
adjustment authority under section 1833(t)(2)(E) of the Act (90 FR
53496 through 53497). This authority allows the Secretary to establish,
in a budget neutral manner, adjustments as determined to be necessary
to ensure equitable payments.
The CY 2026 transitional exception policy under the OPPS applied to
hospitals that benefited from the CY 2024 low wage index hospital
policy. For those hospitals, we compared the hospital's proposed CY
2026 wage index to the hospital's CY 2024 wage index. If the hospital
was significantly impacted by the discontinuation of the low wage index
hospital policy, meaning the hospital's proposed CY 2026 wage index was
decreasing by more than 9.75 percent from the hospital's CY 2024 wage
index, then the transitional payment exception for CY 2026 for that
hospital was equal to the additional CY 2026 amount the hospital would
be paid under the OPPS if its CY 2026 wage index were equal to 90.25
percent of its CY 2024 wage index. This transitional payment exception
was applied after the application of the 5-percent cap described at 42
CFR 412.64(h)(7). This policy was budget neutral under the OPPS through
the second wage index budget neutrality adjustment applied to the OPPS
conversion factor (which currently includes the 5 percent hold harmless
cap policy).
In the FY 2027 IPPS/LTCH proposed rule (91 FR 19476 through 19478)
we proposed, using our authority under section 1886(d)(5)(I)(i) of the
Act, to continue to apply the narrow transitional payment 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 that we adopted in CY 2026. As indicated in that rule,
we proposed to continue this temporary payment exception because
``[s]ome 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).'' \8\ To address these same
concerns under the OPPS, we correspondingly propose to continue the
transitional payment exception for CY 2027 under the OPPS that we
adopted in CY 2026 using our equitable adjustment authority under
section 1833(t)(2)(E) of the Act.
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\8\ 91 FR 19477.
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Core Based Statistical Areas (CBSAs) are made up of one or more
constituent counties. Each CBSA and constituent county has its own
unique identifying codes. The FY 2018 IPPS/LTCH PPS final rule (82 FR
38130) discussed the two different lists of codes to identify counties:
Social Security Administration (SSA) codes and Federal Information
Processing Standard (FIPS) codes. Historically, CMS listed and used SSA
and FIPS county codes to identify and crosswalk counties to CBSA codes
[[Page 41768]]
for purposes of the IPPS and OPPS wage indexes. However, the SSA county
codes are no longer being maintained and updated, although the FIPS
codes continue to be maintained by the U.S. Census Bureau. The Census
Bureau's most current statistical area information is derived from
ongoing census data received since 2010; the most recent data are from
2015. The Census Bureau maintains a complete list of changes to
counties or county equivalent entities on the website at https://www.census.gov/programs-surveys/geography/technical-documentation/county-changes.html. In the FY 2018 IPPS/LTCH PPS final rule (82 FR
38130), for purposes of crosswalking counties to CBSAs for the IPPS
wage index, we finalized our proposal to discontinue the use of the SSA
county codes and begin using only the FIPS county codes. Similarly, for
the purposes of crosswalking counties to CBSAs for the OPPS wage index,
in the CY 2018 OPPS/ASC final rule with comment period (82 FR 59260),
we finalized our proposal to discontinue the use of SSA county codes
and begin using only the FIPS county codes. For CY 2027, under the
OPPS, we are continuing to use only the FIPS county codes for purposes
of crosswalking counties to CBSAs.
We propose to use the FY 2027 IPPS post-reclassified wage index for
urban and rural areas as the wage index for the OPPS to determine the
wage adjustments for both the OPPS payment rate and the copayment rate
for CY 2027. Therefore, any policies and adjustments that are finalized
for the FY 2027 IPPS post-reclassified wage index would be reflected in
the final CY 2027 OPPS wage index beginning on January 1, 2027, if
appropriate. We refer readers to the FY 2027 IPPS/LTCH PPS proposed
rule (91 FR 19459 through 19479) and the proposed FY 2027 hospital wage
index files posted on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/fy-2027-ipps-proposed-rule-home-page.
Regarding budget neutrality for the CY 2027 OPPS wage index, we
refer readers to section II.C. of this proposed rule. We continue to
believe that using the IPPS post-reclassified wage index as the source
of an adjustment factor for the OPPS is reasonable and logical, given
the inseparable, subordinate status of the HOPD within the hospital
overall.
Hospitals that are paid under the OPPS, but not under the IPPS, do
not have an assigned hospital wage index under the IPPS. Therefore, for
non-IPPS hospitals paid under the OPPS, it is our longstanding policy
to assign the wage index that would be applicable if the hospital was
paid under the IPPS, based on its geographic location and any
applicable wage index policies and adjustments. We propose to continue
this policy for CY 2027. We refer readers to the FY 2027 IPPS/LTCH PPS
proposed rule (91 FR 19459 through 19479) for a detailed discussion of
the proposed changes to the FY 2027 IPPS wage indexes.
It has been our longstanding policy to allow non-IPPS hospitals
paid under the OPPS to qualify for the out-migration adjustment if they
are located in a ``section 505 out-migration county'' (that is, a
county identified under section 505 of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)).
Applying this adjustment is consistent with our policy of adopting IPPS
wage index policies for hospitals paid under the OPPS. We note that,
because non-IPPS hospitals cannot reclassify, they are eligible for the
out-migration wage index adjustment if they are located in a section
505 out-migration county. This is the same out-migration adjustment
policy that would apply if the hospital were paid under the IPPS. For
CY 2027, we propose to continue our policy of allowing non-IPPS
hospitals paid under the OPPS to qualify for the out-migration
adjustment if they are located in a section 505 out-migration county
(section 505 of the MMA) (88 FR 49585 through 49586). Furthermore, we
propose that the wage index that would apply for CY 2027 to non-IPPS
hospitals paid under the OPPS would continue to include the rural floor
adjustment and any other policies and adjustments applied to the IPPS
wage index. In addition, we propose that the wage index that would
apply to non-IPPS hospitals paid under the OPPS would include the 5
percent cap on wage index decreases and the previously described
proposed transitional payment exception for hospitals significantly
impacted by the discontinuation of the low wage index hospital policy.
For CMHCs, for CY 2027, we propose to continue to calculate the
wage index by using the post-reclassification IPPS wage index based on
the CBSA where the CMHC is located. Furthermore, we propose that the
wage index that would apply to a CMHC for CY 2027 would continue to
include the rural floor adjustment and any other policies and
adjustments applied to the IPPS wage index. In addition, the wage index
that would apply to CMHCs would include the 5 percent cap on wage index
decreases and proposed transitional exception. Also, we propose that
the wage index that would apply to CMHCs would not include the out-
migration adjustment because that adjustment only applies to hospitals.
Table 4A associated with the FY 2027 IPPS/LTCH PPS proposed rule
(available via the internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/fy-2027-ipps-proposed-rule-home-page) identifies counties that would be
eligible for the out-migration adjustment. Table 2 associated with the
FY 2027 IPPS/LTCH PPS proposed rule (available for download via the
website noted previously) identifies IPPS hospitals that would receive
the out-migration adjustment for FY 2027. We are including the out-
migration adjustment information from Table 2 associated with the FY
2027 IPPS/LTCH PPS proposed rule as Addendum L to this proposed rule,
with the addition of non-IPPS hospitals that would receive the section
505 out-migration adjustment under this proposed rule. Addendum L is
available via the internet on the CMS website. We refer readers to the
CMS website for the OPPS at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices. At
this link, readers will find a link to the proposed FY 2027 IPPS wage
index tables and Addendum L, associated with this proposed rule.
D. Proposed Statewide Average Default Cost-to-Charge Ratios (CCRs)
In addition to using CCRs to estimate costs from charges on claims
for ratesetting, we use overall hospital-specific CCRs calculated from
the hospital's most recent cost report (OMB control number 0938-0050
for Form CMS-2552-10) to determine outlier payments, payments for pass-
through devices, and monthly interim transitional corridor payments
under the OPPS during the PPS year. For certain hospitals, under the
regulations at 42 CFR 419.43(d)(5)(iii), we use the statewide average
CCRs to determine the payments mentioned earlier if it is not possible
to determine an accurate CCR for a hospital in certain circumstances.
This includes new hospitals, defined for this purpose as entities that
have not accepted assignment of an existing hospital's provider
agreement, and hospitals that have not yet submitted a cost report. We
also use the statewide average default CCRs to determine payments for
hospitals whose CCR falls outside the predetermined ceiling threshold
for a valid CCR or for hospitals in which the most recent cost report
reflects an all-inclusive rate
[[Page 41769]]
status (Medicare Claims Processing Manual (Pub. 100-04), Chapter 4,
Section 10.11).
We discussed our policy for using statewide average CCRs (also
referred to as statewide average default CCRs), including setting the
ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68594 through 68599) in the context of our
adoption of an outlier reconciliation policy for cost reports beginning
on or after January 1, 2009. For details on our process for calculating
the statewide average CCRs, we refer readers to the Claims Accounting
Narrative for this proposed rule, which is posted on the CMS website.
We propose to calculate the default ratios for CY 2027 using the most
recent cost report data.
The statewide average CCRs are available on our website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices; click on the link on the left of the
page titled ``Annual Policy Files'' and then select the relevant year
to download the statewide CCRs and upper limits in the ``Downloads''
section of the web page.
E. Adjustment for Rural Sole Community Hospitals (SCHs) and Essential
Access Community Hospitals (EACHs) Under Section 1833(t)(13)(B) of the
Act for CY 2027
In the CY 2006 OPPS final rule with comment period (70 FR 68556),
we finalized a payment increase for rural sole community hospitals
(SCHs) of 7.1 percent for all services and procedures paid under the
OPPS, excluding separately payable drugs and biologicals, brachytherapy
sources, items paid at charges reduced to costs, and devices paid under
the pass-through payment policy, in accordance with section
1833(t)(13)(B) of the Act, as added by section 411 of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)
(Pub. L. 108-173). Section 1833(t)(13) of the Act provides the
Secretary the authority to make an adjustment to OPPS payments for
rural hospitals, effective January 1, 2006, if justified by a study of
the difference in costs by APC between hospitals in rural areas and
hospitals in urban areas. Our analysis showed a difference in costs for
rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment
adjustment for rural SCHs of 7.1 percent for all services and
procedures paid under the OPPS, excluding separately payable drugs and
biologicals, brachytherapy sources, items paid at charges reduced to
costs, and devices paid under the pass-through payment policy, in
accordance with section 1833(t)(13)(B) of the Act.
In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010
and 68227), for purposes of receiving this rural adjustment, we revised
our regulations at Sec. 419.43(g) to clarify that essential access
community hospitals (EACHs) are also eligible to receive the rural SCH
adjustment, assuming these entities otherwise meet the rural adjustment
criteria. Currently, two hospitals are classified as EACHs, and as of
CY 1998, under section 4201(c) of the Balanced Budget Act of 1997 (BBA)
(Pub. L. 105-33), a hospital can no longer become newly classified as
an EACH.
This adjustment for rural SCHs is budget neutral and applied before
calculating outlier payments and copayments. We stated in the CY 2006
OPPS final rule with comment period (70 FR 68560) that we would not
reestablish the adjustment amount on an annual basis, but we may review
the adjustment in the future and, if appropriate, would revise the
adjustment. As detailed in the CY 2026 OPPS/ASC final rule with comment
period (90 FR 53499), we provided the same 7.1 percent adjustment to
rural SCHs, including EACHs, again in CYs 2008 through 2026.
For CY 2027, we propose to continue the current policy of a 7.1
percent payment adjustment for rural SCHs, including EACHs, for all
services and procedures paid under the OPPS, excluding separately
payable drugs and biologicals, brachytherapy sources, items paid at
charges reduced to costs, and devices paid under the pass-through
payment policy, applied in a budget neutral manner.
F. Payment Adjustment for Certain Cancer Hospitals for CY 2027
1. Background
Since the inception of the OPPS, which was authorized by the BBA,
Medicare has paid the 11 hospitals that meet the criteria for cancer
hospitals identified in section 1886(d)(1)(B)(v) of the Act under the
OPPS for covered outpatient department services. These cancer hospitals
are exempted from payment under the IPPS. With the Medicare, Medicaid
and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), the
Congress added section 1833(t)(7) of the Act, ``Transitional Adjustment
to Limit Decline in Payment,'' which requires the Secretary to
determine OPPS payments to cancer and children's hospitals based on
their pre-BBA payment amount (these hospitals are often referred to
under this policy as ``held harmless'' and their payments are often
referred to as ``hold harmless'' payments).
As required under section 1833(t)(7)(D)(ii) of the Act, a cancer
hospital receives the full amount of the difference between payments
for covered outpatient department services under the OPPS and a ``pre-
BBA amount.'' That is, cancer hospitals are permanently held harmless
to their ``pre-BBA amount,'' and they receive transitional outpatient
payments (TOPs) or hold harmless payments to ensure that they do not
receive a payment that is lower in amount under the OPPS than the
payment amount they would have received before implementation of the
OPPS, as set forth in section 1833(t)(7)(F) of the Act. The ``pre-BBA
amount'' is the product of the hospital's reasonable costs for covered
outpatient department services occurring in the current year and the
base payment-to-cost ratio (PCR) for the hospital defined in section
1833(t)(7)(F)(ii) of the Act. The ``pre-BBA amount'' and the
determination of the base PCR are defined at Sec. 419.70(f). TOPs are
calculated on Worksheet E, Part B, of the Hospital Cost Report or the
Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-
2552-10 (OMB No. 0938-0050), respectively), as applicable each year.
Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality
calculations.
Section 3138 of the Patient Protection and Affordable Care Act
(Pub. L. 111-148) amended section 1833(t) of the Act by adding a new
paragraph (18), which instructs the Secretary to conduct a study to
determine if, under the OPPS, outpatient costs incurred by cancer
hospitals described in section 1886(d)(1)(B)(v) of the Act with respect
to APC groups exceed outpatient costs incurred by other hospitals
furnishing services under section 1833(t) of the Act, as determined
appropriate by the Secretary. Section 1833(t)(18)(A) of the Act
requires the Secretary to take into consideration the cost of drugs and
biologicals incurred by cancer hospitals and other hospitals. Section
1833(t)(18)(B) of the Act provides that, if the Secretary determines
that cancer hospitals' costs are higher than those of other hospitals,
the Secretary shall provide an appropriate adjustment under section
1833(t)(2)(E) of the Act to reflect these higher costs. In 2011, after
conducting the study required by section 1833(t)(18)(A) of the Act, we
determined that outpatient costs incurred by the 11 specified cancer
hospitals were greater than the costs incurred by other OPPS hospitals.
For a
[[Page 41770]]
complete discussion regarding the cancer hospital cost study, we refer
readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR
74200 and 74201).
Based on these findings, we finalized a policy to provide a payment
adjustment to the 11 specified cancer hospitals that reflects their
higher outpatient costs, as discussed in the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74202 through 74206). Specifically, we
adopted a policy to provide additional payments to the cancer hospitals
so that each cancer hospital's final PCR for services provided in a
given calendar year is equal to the weighted average PCR (which we
refer to as the ``target PCR'') for other hospitals paid under the
OPPS. The target PCR is set in advance of the calendar year and is
calculated using the most recently submitted or settled cost report
data that are available at the time of final rulemaking for the
calendar year. The amount of the payment adjustment is made on an
aggregate basis at cost report settlement. We note that the changes
made by section 1833(t)(18) of the Act do not affect the existing
statutory provisions that provide for TOPs for cancer hospitals. The
TOPs are assessed, as usual, after all payments, including the cancer
hospital payment adjustment, have been made for a cost reporting
period. Table 6 displays the target PCR for purposes of the cancer
hospital adjustment for CY 2012 through CY 2026.
[GRAPHIC] [TIFF OMITTED] TP07JY26.021
2. Proposed Policy for CY 2027
Section 16002(b) of the 21st Century Cures Act (Pub. L. 114-255)
amended section 1833(t)(18) of the Act by adding subparagraph (C),
which requires that in applying Sec. 419.43(i) (that is, the payment
adjustment for certain cancer hospitals) for services furnished on or
after January 1, 2018, the Secretary shall use a target PCR that is 1.0
percentage point less than the target PCR that would otherwise apply.
Section 16002(b) of the 21st Century Cures Act also provides that, in
addition to the percentage reduction, the Secretary may consider making
an additional percentage point reduction to the target PCR that takes
into account payment rates for applicable items and services described
under section 1833(t)(21)(C) of the Act for hospitals that are not
cancer hospitals described under section 1886(d)(1)(B)(v) of the Act.
Further, in making any budget neutrality adjustment under section
1833(t) of the Act, section 16002(b) of the 21st Century Cures Act
provides that the Secretary shall not consider the reduced expenditures
that result from application of section 1833(t)(18)(C) of the Act.
We propose to provide additional payments to the 11 specified
cancer hospitals so that each cancer hospital's proposed PCR is equal
to the weighted average PCR (or ``target PCR'') for the other OPPS
hospitals, generally using the most recent submitted or settled cost
report data that are available, reduced by 1.0 percentage point, to
comply with section 16002(b) of the 21st Century Cures Act. As
discussed further below, we are not proposing an additional reduction
beyond the 1.0 percentage point reduction required by section 16002(b)
of the 21st Century Cures Act for CY 2027.
To calculate the proposed CY 2027 target PCR, we propose to use the
same extract of cost report data from HCRIS used to estimate costs for
the CY 2027 OPPS which, in most cases, would be the most recently
available hospital cost reports. Using these cost report data, we
included data from Worksheet E, Part B, for each hospital, using data
from each hospital's most recent cost report, whether as submitted or
settled.
We then limited the dataset to the hospitals with CY 2025 claims
data that we used to model the impact of the proposed CY 2027 APC
relative payment weights (3,374 hospitals) because we believe it is
appropriate to use the same set of hospitals that are being used to
calibrate the modeled CY 2027 OPPS. The cost report data for the
hospitals in this dataset were from cost report periods with fiscal
year ends ranging from 2023 to 2025; however, the cost reporting
periods were predominantly from fiscal years ending in 2024 and 2025.
We then removed the cost report data of the 50 hospitals located in
Puerto Rico from our dataset because we did not believe their cost
structure reflected the costs of most hospitals paid under the OPPS,
and, therefore, their inclusion may bias the
[[Page 41771]]
calculation of hospital-weighted statistics. We also removed the cost
report data of nine hospitals because these hospitals had cost report
data that were not complete (missing aggregate OPPS payments, missing
aggregate cost data, or missing both), so that all cost reports in the
study would have both the payment and cost data necessary to calculate
a PCR for each hospital, leading to a proposed analytic file of 3,315
hospitals with cost report data.
Using this smaller dataset of cost report data, we estimated that,
on average, the OPPS payments to other hospitals furnishing services
under the OPPS were approximately 89 percent of reasonable cost
(weighted average PCR of 0.89). Therefore, after applying the 1.0
percentage point reduction, as required by section 16002(b) of the 21st
Century Cures Act, using our standard process the payment amount
associated with the cancer hospital payment adjustment to be determined
at cost report settlement would be the additional payment needed to
result in a proposed target PCR equal to 0.88 for each cancer hospital.
Table 7 shows the estimated percentage increase in OPPS payments to
each cancer hospital for CY 2027, due to the cancer hospital payment
adjustment policy. The actual, final amount of the CY 2027 cancer
hospital payment adjustment for each cancer hospital will be determined
at cost report settlement and will depend on each hospital's CY 2027
payments and costs from the settled CY 2027 cost report. We note that
the requirements contained in section 1833(t)(18) of the Act do not
affect the existing statutory provisions that provide for TOPs for
cancer hospitals. The TOPs will be assessed, as usual, after all
payments, including the cancer hospital payment adjustment, have been
made for a cost reporting period.
[GRAPHIC] [TIFF OMITTED] TP07JY26.022
G. Proposed Hospital Outpatient Outlier Payments
1. Background
The OPPS provides outlier payments to hospitals to help mitigate
the financial risk associated with high-cost and complex procedures,
where a very costly service could present a hospital with significant
financial loss. As explained in the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66832 through 66834), we set our projected target
for aggregate outlier payments at 1.0 percent of the estimated
aggregate total payments under the OPPS for the prospective year.
Outlier payments are provided on a service-by-service basis when the
cost of a service exceeds the APC payment amount multiplier threshold
(the APC payment amount multiplied by a certain amount) as well as the
APC payment amount plus a fixed-dollar amount threshold (the APC
payment plus a certain dollar amount). In CY 2026, the outlier
threshold was met when the hospital's cost of furnishing a service
exceeded 1.75 times the APC payment amount (the multiplier threshold)
and exceeded the APC payment amount plus $6,225 (the fixed-dollar
amount threshold) (90 FR 53502 through 53504). If the hospital's cost
of furnishing a service exceeds both the multiplier threshold and the
fixed-dollar threshold, the outlier payment is calculated as 50 percent
of the amount by which the hospital's cost of furnishing the service
exceeds 1.75 times the APC payment amount. Beginning with CY 2009
payments, outlier payments are subject to a reconciliation process
similar to the IPPS outlier reconciliation process for cost reports, as
discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68594 through 68599).
[[Page 41772]]
It has been our policy to report the actual amount of outlier
payments as a percent of total spending in the claims being used to
model the OPPS. Our estimate of total outlier payments as a percent of
total CY 2025 OPPS payments, using CY 2025 claims available for this
proposed rule, is approximately 0.93 percent. Therefore, for CY 2025,
we estimate that we did not meet the outlier target by 0.07 percent of
total aggregated OPPS payments.
For the CY 2027 OPPS/ASC proposed rule, using CY 2025 claims data
and CY 2026 payment rates, we estimate that the aggregate outlier
payments for CY 2026 would be approximately 1.19 percent of the total
CY 2026 OPPS payments. We provide estimated CY 2027 outlier payments
for hospitals and CMHCs with claims included in the claims data that we
used to model impacts in the Hospital-Specific Impacts--Provider-
Specific Data file on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.
2. Proposed Outlier Calculation for CY 2027
For CY 2027, we propose to continue our policy of estimating
outlier payments to be 1.0 percent of the estimated aggregate total
payments under the OPPS. We propose that a portion of that 1.0 percent,
an amount equal to less than 0.01 percent of outlier payments (or
0.0001 percent of total OPPS payments), would be allocated to CMHCs for
partial hospitalization program (PHP) and intensive outpatient program
(IOP) outlier payments. This is the amount of estimated outlier
payments that would result from the proposed CMHC outlier threshold as
a proportion of total estimated OPPS outlier payments. We propose to
continue our outlier policy that if a CMHC's cost for PHP and IOP
services exceeds 3.40 times the APC payment rate, the outlier payment
would be calculated as 50 percent of the amount by which the cost
exceeds 3.40 times the proposed APC payment rate.
For further discussion of CMHC outlier payments, we refer readers
to section VIII.C. of this proposed rule.
To ensure that the estimated CY 2027 aggregate outlier payments
would equal 1.0 percent of estimated aggregate total payments under the
OPPS, we propose that the hospital outlier threshold be set so that
outlier payments would be triggered when a hospital's cost of
furnishing a service exceeds 1.75 times the APC payment amount and
exceeds the APC payment amount plus the fixed-dollar threshold.
We calculate the proposed fixed-dollar threshold using the standard
methodology most recently used for CY 2026 (90 FR 53502 through 53504).
For purposes of estimating outlier payments for CY 2027, we used the
hospital-specific overall ancillary CCRs available in the April 2026
update to the Outpatient Provider-Specific File (OPSF). The OPSF
contains provider-specific data, such as the most current CCRs, which
are maintained by the MACs and used by the OPPS Pricer to pay claims.
The claims that we generally use to model each OPPS update lag by 2
years.
In order to estimate CY 2027 hospital outlier payments, we inflate
the charges on the CY 2025 claims using the same proposed charge
inflation factor of 1.15154 that we used to estimate the IPPS fixed-
loss cost threshold for the FY 2027 IPPS/LTCH PPS proposed rule (91 FR
19807 through 19809). We used an inflation factor of 1.07310 to
estimate CY 2026 charges from the CY 2025 charges reported on CY 2025
claims before applying CY 2026 CCRs to estimate the percent of outliers
paid in CY 2026. The proposed methodology for determining these charge
inflation factors is discussed in the FY 2027 IPPS/LTCH PPS proposed
rule (91 FR 19807 through 19809). As we stated in the CY 2005 OPPS
final rule with comment period (69 FR 65844 through 65846), we believe
that the use of the same charge inflation factors is appropriate for
the OPPS because, with the exception of the inpatient routine service
cost centers, hospitals use the same ancillary and cost centers to
capture costs and charges for inpatient and outpatient services.
As noted in the CY 2007 OPPS/ASC final rule with comment period (71
FR 68011), we were concerned that we could systematically overestimate
the OPPS hospital outlier threshold if we did not apply a CCR inflation
adjustment factor. Therefore, we propose to apply the same CCR
adjustment factor that we proposed to apply for the FY 2027 IPPS
outlier calculation to the CCRs used to simulate CY 2027 OPPS outlier
payments to determine the fixed-dollar threshold. Specifically, for CY
2027, we propose to apply an adjustment factor of 0.977497 to the CCRs
that were in the April 2026 OPSF to trend them forward from CY 2026 to
CY 2027. The methodology for calculating the proposed CCR adjustment
factor is discussed in the FY 2027 IPPS/LTCH PPS proposed rule (91 FR
19807 through 19809.
To model hospital outlier payments for this CY 2027 OPPS/ASC
proposed rule, we applied the overall CCRs from the April 2026 OPSF
after adjustment (using the proposed CCR inflation adjustment factor of
0.977497 to approximate CY 2027 CCRs) to charges on CY 2025 claims that
were adjusted (using the proposed charge inflation factor of 1.15154 to
approximate CY 2027 charges). We simulated aggregated CY 2027 hospital
outlier payments using these costs for several different fixed-dollar
thresholds, holding the 1.75 multiplier threshold constant and assuming
that outlier payments would continue to be made at 50 percent of the
amount by which the cost of furnishing the service would exceed 1.75
times the APC payment amount, until the total outlier payments equaled
1.0 percent of aggregated estimated total CY 2027 OPPS payments. We
estimate that a proposed fixed dollar- threshold of $7,100 combined
with the proposed multiplier threshold of 1.75 times the APC payment
rate, would allocate 1.0 percent of aggregated total OPPS payments to
outlier payments for CY 2027. For CMHCs, we propose that, if a CMHC's
cost for partial hospitalization or intensive outpatient services
exceeds 3.40 times the APC payment rate, the outlier payment would be
calculated as 50 percent of the amount by which the cost exceeds 3.40
times the APC payment rate.
Section 1833(t)(17)(A) of the Act, which applies to hospitals, as
defined under section 1886(d)(1)(B) of the Act, requires that hospitals
that fail to report data required for the quality measures selected by
the Secretary, in the form and manner required by the Secretary under
section 1833(t)(17)(B) of the Act, incur a 2.0 percentage point
reduction to their OPD fee schedule increase factor; that is, the
annual payment update factor. The application of a reduced OPD fee
schedule increase factor results in reduced national unadjusted payment
rates that would apply to certain outpatient items and services
furnished by hospitals that are required to report outpatient quality
data and that fail to meet the Hospital Outpatient Quality Reporting
(OQR) Program requirements. For hospitals that fail to meet the
Hospital OQR Program requirements, we propose to continue the policy
that we implemented in CY 2010 that the hospitals' costs would be
compared to the reduced payments for purposes of outlier eligibility
and payment calculation. For more information on the Hospital OQR
Program, we refer
[[Page 41773]]
readers to section XV. of this proposed rule.
H. Calculation of an Adjusted Medicare Payment From the National
Unadjusted Medicare Payment
The national unadjusted payment rate is the payment rate for most
APCs before accounting for the wage index adjustment or any applicable
adjustments. The basic methodology for determining prospective payment
rates for HOPD services under the OPPS is set forth in existing
regulations at 42 CFR part 419, subparts C and D. For this proposed
rule, the payment rate for most services and procedures for which
payment is made under the OPPS is the product of the conversion factor
calculated in accordance with section II.B. of this proposed rule and
the relative payment weight described in section II.A. of this proposed
rule. The national unadjusted payment rate for most APCs contained in
Addendum A to this proposed rule (which is available on the CMS website
at ``Hospital Outpatient Regulations and Notices'') and for most HCPCS
codes to which separate payment under the OPPS has been assigned in
Addendum B to this proposed rule (which is available on the CMS
website, see link above) is calculated by multiplying the proposed CY
2027 scaled weight for the APC by the CY 2027 conversion factor.
We note that section 1833(t)(17) of the Act, which applies to
hospitals, as defined under section 1886(d)(1)(B) of the Act, requires
that hospitals that fail to submit data required to be submitted on
quality measures selected by the Secretary, in the form and manner and
at a time specified by the Secretary, incur a reduction of 2.0
percentage points to their OPD fee schedule increase factor, that is,
the annual payment update factor. The application of a reduced OPD fee
schedule increase factor results in reduced national unadjusted payment
rates that apply to certain outpatient items and services provided by
hospitals that are required to report outpatient quality data and that
fail to meet the Hospital Outpatient Quality Reporting (OQR) Program
requirements. For further discussion of the payment reduction for
hospitals that fail to meet the requirements of the Hospital OQR
Program, we refer readers to section XIV. of this proposed rule.
Below we demonstrate the steps used to determine the APC payments
that will be made in a CY under the OPPS to a hospital that fulfills
the Hospital OQR Program requirements and to a hospital that fails to
meet the Hospital OQR Program requirements for a service that has any
of the following status indicator assignments: ``J1,'' ``J2,'' ``P,''
``Q1,'' ``Q2,'' ``Q3,'' ``Q4,'' ``R,'' ``S,'' ``T,'' ``U,'' or ``V''
(as defined in Addendum D1 to this proposed rule, which is available
via the internet on the CMS website), in a circumstance in which the
multiple procedure discount does not apply, the procedure is not
bilateral, and conditionally packaged services (status indicator of
``Q1'' and ``Q2'') qualify for separate payment. We note that, although
blood and blood products with status indicator ``R'' and brachytherapy
sources with status indicator ``U'' are not subject to wage adjustment,
they are subject to reduced payments when a hospital fails to meet the
Hospital OQR Program requirements.
Individual providers interested in calculating the payment amount
that they would receive for a specific service from the national
unadjusted payment rates presented in Addenda A and B to this proposed
rule (which are available via the internet on the CMS website) should
follow the formulas presented in the following steps. For purposes of
the payment calculations below, we refer to the national unadjusted
payment rate for hospitals that meet the requirements of the Hospital
OQR Program as the ``full'' national unadjusted payment rate. We refer
to the national unadjusted payment rate for hospitals that fail to meet
the requirements of the Hospital OQR Program as the ``reduced''
national unadjusted payment rate. The reduced national unadjusted
payment rate is calculated by multiplying the reporting ratio of 0.9805
times the ``full'' national unadjusted payment rate. The national
unadjusted payment rate used in the calculations below is either the
full national unadjusted payment rate or the reduced national
unadjusted payment rate, depending on whether the hospital met its
Hospital OQR Program requirements to receive the full CY 2027 OPPS fee
schedule increase factor.
Step 1. Calculate 60 percent (the labor-related portion) of the
national unadjusted payment rate. Since the initial implementation of
the OPPS, we have used 60 percent to represent our estimate of that
portion of costs attributable, on average, to labor. We refer readers
to the April 7, 2000 OPPS final rule with comment period (65 FR 18496
through 18497) for a detailed discussion of how we derived this
percentage. During our regression analysis for the payment adjustment
for rural hospitals in the CY 2006 OPPS final rule with comment period
(70 FR 68553), we confirmed that this labor-related share for hospital
outpatient services is appropriate.
The formula below is a mathematical representation of Step 1 and
identifies the labor-related portion of a specific payment rate for a
specific service.
X is the labor-related portion of the national unadjusted payment rate.
X = .60 * (national unadjusted payment rate).
Step 2. Determine the wage index area in which the hospital is
located and identify the wage index level that applies to the specific
hospital. The wage index values assigned to each area would reflect the
geographic statistical areas (which are based upon OMB standards) to
which hospitals are assigned for FY 2027 under the IPPS,
reclassifications through the Medicare Geographic Classification Review
Board (MGCRB), section 1886(d)(8)(B) ``Lugar'' hospitals, and
reclassifications under section 1886(d)(8)(E) of the Act, as
implemented in Sec. 412.103 of the regulations. For CY 2027, we
propose to apply for the CY 2027 OPPS wage index any adjustments for
the FY 2027 IPPS post-reclassified wage index, including, but not
limited to, the rural floor adjustment and a wage index floor of 1.00
in frontier States, in accordance with section 10324 of the Affordable
Care Act of 2010. For further discussion of the wage index we are
applying for the CY 2027 OPPS, including the low wage index hospital
policy, we refer readers to section II.C. of this proposed rule.
Step 3. Adjust the wage index of hospitals located in certain
qualifying counties that have a relatively high percentage of hospital
employees who reside in the county, but who work in a different county
with a higher wage index, in accordance with section 505 of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(Pub. L. 108-173). Addendum L to this proposed rule (which is available
via the internet on the CMS website) contains the qualifying counties
and the associated wage index increase developed for the proposed FY
2027 IPPS wage index, which are listed in Table 3 associated with the
FY 2027 IPPS proposed rule and available via the internet on the CMS
website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. (Click on the link on the left side of the
screen titled ``FY 2027 IPPS Proposed Rule Home Page'' and select ``FY
2027 Proposed Rule Tables''.) This step is to be followed only if the
hospital is not reclassified or redesignated under section 1886(d)(8)
of the Act or section 1886(d)(10) of the Act.
[[Page 41774]]
Step 4. Multiply the applicable wage index determined under Steps 2
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
The formula below is a mathematical representation of Step 4 and
adjusts the labor-related portion of the national unadjusted payment
rate for the specific service by the wage index.
Xa is the labor-related portion of the national unadjusted payment rate
(wage adjusted).
Xa = labor-portion of the national unadjusted payment rate *
applicable wage index.
Step 5. Calculate 40 percent (the nonlabor-related portion) of the
national unadjusted payment rate and add that amount to the resulting
product of Step 4. The result is the wage index adjusted payment rate
for the relevant wage index area.
The formula below is a mathematical representation of Step 5 and
calculates the remaining portion of the national payment rate, the
amount not attributable to labor, and the adjusted payment for the
specific service.
Y is the nonlabor-related portion of the national unadjusted payment
rate.
Y = 0.40 * (national unadjusted payment rate).
Step 6. If a provider is an sole community hospital (SCH), as set
forth in the regulations at Sec. 412.92, or an essential access
community hospital (EACH), which is considered to be an SCH under
section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural
area, as defined in Sec. 412.64(b), or is treated as being located in
a rural area under Sec. 412.103, multiply the wage index adjusted
payment rate by 1.071 to calculate the total payment.
The formula below is a mathematical representation of Step 6 and
applies the rural adjustment for rural SCHs.
Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment *
1.071.
Step 7. The adjusted payment rate is the sum of the wage adjusted
labor-related portion of the national unadjusted payment rate and the
nonlabor-related portion of the national unadjusted payment rate.
Xa is the labor-related portion of the national unadjusted payment rate
(wage adjusted).
Y is the nonlabor-related portion of the national unadjusted payment
rate.
Adjusted Medicare Payment = Xa + Y
We are providing examples below of the calculation of both the full
and reduced national unadjusted payment rates that would apply to
certain outpatient items and services performed by hospitals that meet
and that fail to meet the Hospital OQR Program requirements, using the
steps outlined previously. For purposes of this example, we are using a
provider that is located in Brooklyn, New York that is assigned to CBSA
35614. This provider bills one service that is assigned to APC 5071
(Level 1 Excision/Biopsy/Incision and Drainage). The proposed CY 2027
full national unadjusted payment rate for APC 5071 is $811.46. The
proposed reduced national adjusted payment rate for APC 5071 for a
hospital that fails to meet the Hospital OQR Program requirements is
$795.64. This reduced rate is calculated by multiplying the reporting
ratio of 0.9805 by the full unadjusted payment rate for APC 5071.
Step 1. The labor-related portion of the proposed full national
unadjusted payment is approximately $486.88 (0.60 * $811.46). The
labor-related portion of the proposed reduced national adjusted payment
is approximately $477.38 (0.60 * $795.64).
Step 2 & 3. The FY 2027 wage index for a provider located in CBSA
35614 in New York, which includes the adoption of the proposed IPPS
2027 wage index policies, is 1.3260.
Step 4. The wage adjusted labor-related portion of the proposed
full national unadjusted payment is approximately $645.60 ($486.88 *
1.3260). The wage adjusted labor-related portion of the proposed
reduced national adjusted payment is approximately $633.01 ($795.64 *
1.3260).
Step 5. The nonlabor-related portion of the proposed full national
unadjusted payment is approximately $324.58 (0.40 * $811.46). The
nonlabor-related portion of the proposed reduced national adjusted
payment is approximately $318.26(0.40 * $795.64).
Step 6. For this example of a provider located in Brooklyn, New
York, the rural adjustment for rural SCHs does not apply.
Step 7. The sum of the labor-related and nonlabor-related portions
of the proposed full national unadjusted payment is approximately
$970.18 ($645.60 + $324.58). The sum of the portions of the proposed
reduced national adjusted payment is approximately $951.27 ($633.01 +
$318.26) as shown in Table 8.
[GRAPHIC] [TIFF OMITTED] TP07JY26.023
I. Beneficiary Copayments
1. Background
Section 1833(t)(3)(B) of the Act requires the Secretary to set
rules for determining the unadjusted copayment amounts to be paid by
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of
the Act specifies that the Secretary must reduce the national
unadjusted copayment amount for a covered OPD service (or group of such
services) furnished in a year in a manner so that the effective
copayment rate (determined on a national unadjusted basis) for that
service in the year does not exceed a specified percentage. As
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective
copayment rate for a covered OPD service paid under the OPPS in CY
2006, and in CYs thereafter, shall not exceed 40 percent of the APC
payment rate.
Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered
OPD service (or group of such services) furnished in a year, the
national unadjusted copayment amount cannot be less than 20 percent of
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the
Act limits the amount of beneficiary copayment that may be collected
for a procedure (including items such as drugs and biologicals)
performed in a year to the amount of the inpatient hospital deductible
for that year.
Section 4104 of the Affordable Care Act eliminated the Medicare
Part B coinsurance for preventive services furnished on and after
January 1, 2011,
[[Page 41775]]
that meet certain requirements, including flexible sigmoidoscopies and
screening colonoscopies, and waived the Part B deductible for screening
colonoscopies that become diagnostic during the procedure. For a
discussion of the changes made by the Affordable Care Act with regard
to copayments for preventive services furnished on and after January 1,
2011, we refer readers to section XII.B. of the CY 2011 OPPS/ASC final
rule with comment period (75 FR 72013).
Section 122 of the Consolidated Appropriations Act (CAA), 2021
(Pub. L. 116-260), Waiving Medicare Coinsurance for Certain Colorectal
Cancer Screening Tests, amended section 1833(a) of the Act to offer a
special coinsurance rule for screening flexible sigmoidoscopies and
screening colonoscopies, regardless of the code that is billed for the
establishment of a diagnosis as a result of the test, or for the
removal of tissue or other matter or other procedure, that is furnished
in connection with, as a result of, and in the same clinical encounter
as the colorectal cancer screening test. We refer readers to section
``X.B. Changes to Beneficiary Coinsurance for Certain Colorectal Cancer
Screening Tests'', of the CY 2022 OPPS/ASC final rule with comment
period for the full discussion of this policy (86 FR 63740 through
63743). Under the regulation at 42 CFR 410.152(l)(5)(i)(C), the
Medicare Part B payment percentage for colorectal cancer screening
tests described in the regulation at Sec. 410.37(j) that are furnished
in CY 2027 through CY 2029 is 90 percent, with beneficiary coinsurance
equal to 10 percent.
On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) (Pub.
L. 117-169) was signed into law. Section 11101(a) of the IRA amended
section 1847A of the Act by adding a new subsection (i), which requires
the payment of rebates into the Supplementary Medical Insurance Trust
Fund for Part B rebatable drugs if the payment limit amount exceeds the
inflation-adjusted payment amount, which is calculated as set forth in
section 1847A(i)(3)(C) of the Act. The provisions of section 11101 of
the IRA were initially implemented through program instruction, as
permitted under section 1847A(c)(5)(C) of the Act. On February 9, 2023
and December 14, 2023, we issued initial \9\ and revised \10\ guidance,
respectively, implementing the Medicare Part B Inflation Rebate
Program, including the computation of inflation-adjusted beneficiary
coinsurance under section 1847A(i)(5) of the Act and amounts paid under
section 1833(a)(1)(EE) of the Act.\11\ For additional information
regarding implementation of section 11101 of the IRA, please see the
inflation rebates resources page at https://www.cms.gov/inflation-reduction-act-and-medicare/inflation-rebates-medicare.
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\9\ https://www.cms.gov/files/document/medicare-part-b-inflation-rebate-program-initial-guidance.pdf.
\10\ https://www.cms.gov/files/document/medicare-part-b-inflation-rebate-program-revised-guidance.pdf.
\11\ In addition, beginning with the April 2023 ASP Drug Pricing
file, the file includes the coinsurance percentage for each drug and
specifies ``inflation-adjusted coinsurance'' in the ``Notes'' column
if the coinsurance for a drug is less than 20 percent of the
Medicare Part B payment amount. Drug pricing files are available at
https://www.cms.gov/medicare/medicare-fee-for-service-part-b-drugs/mcrpartbdrugavgsalesprice.
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Section 11101(b) of the IRA amended sections 1833(i) and 1833(t)(8)
of the Act by adding a new paragraph (9) and subparagraph (F),
respectively. Section 1833(i)(9) of the Act requires under the ASC
payment system that, in the case of a Part B rebatable drug for which
payment is not packaged into a payment for a service, in lieu of
calculation of coinsurance that would otherwise apply under the ASC
payment system, the provisions of section 1847A(i)(5) of the Act shall,
as determined appropriate by the Secretary, apply for calculation of
beneficiary coinsurance in the same manner as the provisions of section
1847A(i)(5) of the Act apply under that section. Similarly, section
1833(t)(8)(F) of the Act requires under the OPPS that in the case of a
Part B rebatable drug (except for a drug that has no copayment applied
under subparagraph (E) of such section or for which payment is packaged
into the payment for a covered OPD service or group of services), in
lieu of the calculation of the copayment amount that would otherwise
apply under the OPPS, the provisions of section 1847A(i)(5) of the Act
shall, as determined appropriate by the Secretary, apply in the same
manner as the provisions of section 1847A(i)(5) of the Act apply under
that section. Section 1847A(i)(5) of the Act requires that for Part B
rebatable drugs, as defined in section 1847A(i)(2)(A) of the Act,
furnished on or after April 1, 2023, in quarters in which the payment
amount described in section 1847A(i)(3)(A)(ii)(I) of the Act (or, in
the case of selected drugs described under section 1192(c) of the Act,
the payment amount described in section 1847A(b)(1)(B) of the Act),
exceeds the inflation-adjusted payment amount determined in accordance
with section 1847A(i)(3)(C) of the Act, the coinsurance will be 20
percent of the inflation-adjusted payment amount for such quarter
(hereafter, the inflation-adjusted coinsurance amount). This inflation-
adjusted coinsurance amount is applied as a percent, as determined by
the Secretary, to the payment amount that would otherwise apply for
such calendar quarter in accordance with section 1847A(b)(1)(B) or (C)
of the Act, as applicable, including in the case of a selected drug
described under section 1192(c) of the Act.
Paragraph (9) of section 1833(i) of the Act and subparagraph (F) of
section 1833(t)(8) of the Act, as added by section 11101(b) of the IRA,
also provide that in lieu of the amounts of payment otherwise
applicable under the ASC payment system and the OPPS, the provisions of
paragraph (1)(EE) of subsection (a) of section 1833 of the Act shall
apply, as determined appropriate by the Secretary. Section 11101(b) of
the IRA amended section 1833(a)(1) of the Act by adding a new
subparagraph (EE), which requires that if the payment amount under
section 1847A(i)(3)(A)(ii)(I) of the Act or, in the case of a selected
drug described under section 1192(c) of the Act, the payment amount
described in section 1847A(b)(1)(B) of the Act, for that drug exceeds
the inflation-adjusted payment amount for a Part B rebatable drug, the
Part B payment amount would, subject to the Part B deductible and
sequestration, equal the difference between such payment amount and the
inflation-adjusted coinsurance amount. Consistent with the policy
adopted in section 40 of the revised Medicare Part B Drug Inflation
Rebate Guidance, the calculation to determine the applicable
beneficiary coinsurance amount would not be adjusted for sequestration.
CMS codified the Medicare payment for Part B rebatable drugs in the CY
2024 PFS final rule by adding new paragraph (m) to Sec. 410.152 (88 FR
79043).
In the CY 2024 OPPS/ASC final rule with comment period (88 FR
81594), we codified the OPPS program payment and cost as required by
section 1833(t)(8)(F) of the Act by adding a new paragraph (e) to Sec.
419.41, which cross-references the regulations adopted in the CY 2024
PFS final rule (Sec. Sec. 410.152(m) and 489.30(b)(6)). We also
amended the regulation text to reflect our longstanding policies for
calculating the Medicare program payment and cost sharing amounts for
separately payable drugs and biologicals by adding a new paragraph (d)
to Sec. 419.41. Similarly, we codified the ASC cost sharing amounts
for Part B rebatable drugs as required by section 1833(i)(9) of the Act
by revising Sec. 416.172(d) to include a cross-reference
[[Page 41776]]
to 42 CFR 489.30(b)(6), which codified the cost sharing amounts for
Part B rebatable drugs with prices increasing at a rate faster than
inflation.
In the CY 2025 PFS final rule (89 FR 98228 through 98275), we
codified regulations implementing section 11101 of the IRA in newly
added 42 CFR part 427, chapter IV, including new provisions at
Sec. Sec. 427.200 and 427.201 to codify the policies regarding the
computation of the inflation-adjusted beneficiary coinsurance, defined
in Sec. 427.200, for Part B rebatable drugs as required by section
1847A(i)(5) of the Act. As finalized, Sec. 427.201(a) establishes that
CMS will use the methodology established in such section to calculate
the inflation-adjusted beneficiary coinsurance and associated adjusted
Medicare payment percentage and incorporates references to the existing
provisions at Sec. Sec. 410.152(m), 419.41(e), and 489.30(b)(6).
Section 427.201(c) provides that any category of products that is
excluded from the identification of Part B rebatable drugs at Sec.
427.101(b) is not subject to the inflation-adjusted beneficiary
coinsurance. Examples of these excluded products include separately
payable radiopharmaceuticals, skin substitute products, and qualifying
biosimilar biological products.
Section 427.201(b) sets forth the calculation of the inflation-
adjusted beneficiary coinsurance. We will compare the payment amount in
paragraph (b)(3) of such section to the inflation-adjusted payment
amount for an applicable calendar quarter; if the payment amount
exceeds the inflation-adjusted payment amount, the inflation-adjusted
beneficiary coinsurance is calculated by multiplying the inflation-
adjusted payment amount by 0.20. Section 427.201(b)(3) specifies that
CMS will use the published payment amount in quarterly pricing files
12 13 14 to determine if a Part B rebatable drug should have
an adjusted beneficiary coinsurance. If so, such adjusted beneficiary
coinsurance shall be equal to 20 percent of the inflation-adjusted
payment amount as described in section 1847A(i)(3)(C) of the Act for a
calendar quarter. This approach deviates from the rebate calculation
approach set forth in Sec. 427.302, which relies on the specified
amount defined at Sec. 427.20 even when the specified amount and the
published payment amount in quarterly pricing files differ.
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\12\ See https://www.cms.gov/medicare/payment/part-b-drugs/asp-pricing-files.
\13\ See https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/addendum-a-b-updates.
\14\ See https://www.cms.gov/medicare/payment/prospective-payment-systems/ambulatory-surgical-center-asc/asc-payment-rates-addenda.
---------------------------------------------------------------------------
We note that the cost sharing amounts of rebatable drugs paid under
the OPPS published in the quarterly Addendum A and B updates reflect
the inflation-adjusted coinsurance applied as a percent of the payment
amount that would otherwise apply in accordance with section
1847A(b)(1)(B) or (C) of the Act, as determined by the Secretary
pursuant to 1847A(i)(5) of the Act using the methodology in Sec.
427.201. As we explained in the CY 2025 PFS final rule (89 FR 98237),
this policy is intended to hold beneficiaries harmless in situations
where the payment amount is calculated differently from the specified
amount, and we believe this approach is consistent with the statutory
language and appropriately reflects the differences in the statutory
text of section 1847A(i)(5) of the Act, which sets forth the payment
amount that is used to determine whether coinsurance should be
adjusted, and section 1847A(i)(3)(A) of the Act, which sets forth the
``specified amount'' used to determine rebate amounts. We refer readers
to the full discussion at 89 FR 98237 and 98238 for additional details.
2. OPPS Copayment Policy
For CY 2027, we propose to determine copayment amounts for new and
revised APCs using the same methodology that we implemented beginning
in CY 2004. We refer readers to the November 7, 2003 OPPS final rule
with comment period for a discussion of that methodology (68 FR 63458).
In addition, we propose to use the same standard rounding principles
that we have historically used in instances where the application of
our standard copayment methodology would result in a copayment amount
that is less than 20 percent and cannot be rounded, under standard
rounding principles, to 20 percent. We refer readers to the CY 2008
OPPS/ASC final rule with comment period (72 FR 66687) in which we
discuss our rationale for applying these rounding principles. The
proposed national unadjusted copayment amounts for services payable
under the OPPS that would be effective January 1, 2027, are included in
Addenda A and B to this proposed rule (which are available via the
internet on the CMS website).
As discussed in section XIV.E. of this proposed rule, for CY 2027,
the Medicare beneficiary's minimum unadjusted copayment and national
unadjusted copayment for a service to which a reduced national
unadjusted payment rate applies will equal the product of the reporting
ratio and the national unadjusted copayment, or the product of the
reporting ratio and the minimum unadjusted copayment, respectively, for
the service.
We note that OPPS copayments may increase or decrease each year
based on changes in the calculated APC payment rates, due to updated
cost report and claims data, and any changes to the OPPS cost modeling
process. However, as described in the CY 2004 OPPS final rule with
comment period, the development of the copayment methodology generally
moves beneficiary copayments closer to 20 percent of OPPS APC payments
(68 FR 63458 through 63459).
In the CY 2004 OPPS final rule with comment period (68 FR 63459),
we adopted a new methodology to calculate unadjusted copayment amounts
in situations including reorganizing APCs, and we finalized the
following rules to determine copayment amounts in CY 2004 and
subsequent years.
When an APC group consists solely of HCPCS codes that were
not paid under the OPPS the prior year because they were packaged or
excluded or are new codes, the unadjusted copayment amount would be 20
percent of the APC payment rate.
If a new APC that did not exist during the prior year is
created and consists of HCPCS codes previously assigned to other APCs,
the copayment amount is calculated as the product of the APC payment
rate and the lowest coinsurance percentage of the codes comprising the
new APC.
If no codes are added to or removed from an APC and, after
recalibration of its relative payment weight, the new payment rate is
equal to or greater than the prior year's rate, the copayment amount
remains constant (unless the resulting coinsurance percentage is less
than 20 percent).
If no codes are added to or removed from an APC and, after
recalibration of its relative payment weight, the new payment rate is
less than the prior year's rate, the copayment amount is calculated as
the product of the new payment rate and the prior year's coinsurance
percentage.
If HCPCS codes are added to or deleted from an APC and,
after recalibrating its relative payment weight, holding its unadjusted
copayment amount constant results in a decrease in the coinsurance
percentage for the reconfigured APC, the copayment amount would not
change (unless retaining the copayment amount would result in a
coinsurance rate less than 20 percent).
If HCPCS codes are added to an APC and, after
recalibrating its relative
[[Page 41777]]
payment weight, holding its unadjusted copayment amount constant
results in an increase in the coinsurance percentage for the
reconfigured APC, the copayment amount would be calculated as the
product of the payment rate of the reconfigured APC and the lowest
coinsurance percentage of the codes being added to the reconfigured
APC.
We noted in the CY 2004 OPPS final rule with comment period that we
would seek to lower the copayment percentage for a service in an APC
from the prior year if the copayment percentage was greater than 20
percent. We noted that this principle was consistent with section
1833(t)(8)(C)(ii) of the Act, which accelerates the reduction in the
national unadjusted coinsurance rate so that beneficiary liability will
eventually equal 20 percent of the OPPS payment rate for all OPPS
services to which a copayment applies, and with section 1833(t)(3)(B)
of the Act, which achieves a 20 percent copayment percentage when fully
phased in and gives the Secretary the authority to set rules for
determining copayment amounts for new services. We further noted that
the use of this methodology would, in general, reduce the beneficiary
coinsurance rate and copayment amount for APCs for which the payment
rate changes as the result of the reconfiguration of APCs and/or
recalibration of relative payment weights (68 FR 63459).
3. Calculation of an Adjusted Copayment Amount for an APC Group
Individuals interested in calculating the national copayment
liability for a Medicare beneficiary for a given service provided by a
hospital that met or failed to meet its Hospital OQR Program
requirements should follow the formulas presented in the following
steps.
Step 1. Calculate the beneficiary payment percentage for the APC by
dividing the APC's national unadjusted copayment by its proposed
payment rate. For example, using APC 5071, $162.29 is 20 percent of the
full national unadjusted payment rate of $970.18. For APCs with only a
minimum unadjusted copayment in Addenda A and B to proposed rule (which
are available via the internet on the CMS website), the beneficiary
payment percentage is 20 percent.
The formula below is a mathematical representation of Step 1 and
calculates the national copayment as a percentage of national payment
for a given service.
B is the beneficiary payment percentage.
B = National unadjusted copayment for APC/national unadjusted payment
rate for APC.
Step 2. Calculate the appropriate wage-adjusted payment rate for
the APC for the provider in question, as indicated in Steps 2 through 4
under section II.H. of proposed rule. Calculate the rural adjustment
for eligible providers, as indicated in Step 6 under section II.H. of
this proposed rule.
Step 3. Multiply the percentage calculated in Step 1 by the payment
rate calculated in Step 2. The result is the wage-adjusted copayment
amount for the APC.
The formula below is a mathematical representation of Step 3 and
applies the beneficiary payment percentage to the adjusted payment rate
for a service calculated under section II.H. of this proposed rule,
with and without the rural adjustment, to calculate the adjusted
beneficiary copayment for a given service.
Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment
* B.
Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted
Medicare Payment * 1.071) * B.
Step 4. For a hospital that failed to meet its Hospital OQR Program
requirements, multiply the copayment calculated in Step 3 by the
reporting ratio of 0.9805.
The unadjusted copayments for services payable under the OPPS that
would be effective January 1, 2027, are shown in Addenda A and B to
this proposed rule (which are available via the CMS website). We note
that the proposed national unadjusted payment rates and copayment rates
shown in Addenda A and B to this proposed rule reflect the CY 2027 OPD
fee schedule increase factor discussed in section II.B. of this
proposed rule.
In addition, as noted earlier, section 1833(t)(8)(C)(i) of the Act
limits the amount of beneficiary copayment that may be collected for a
procedure performed in a year to the amount of the inpatient hospital
deductible for that year.
We also note that the co-insurance for a separately payable drug
under the OPPS shall not exceed the amount of inpatient hospital
deductible for that year.
III. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies
A. Proposed OPPS Treatment of New and Revised HCPCS Codes
Payments for OPPS procedures, services, and items are generally
based on medical billing codes, specifically, Healthcare Common
Procedure Coding System (HCPCS) codes, that are reported on hospital
outpatient department (HOPD) claims. HCPCS codes are used to report
surgical procedures, medical services, items, and supplies under the
hospital OPPS. The HCPCS is divided into two principal subsystems,
referred to as Level I and Level II of the HCPCS. Level I is comprised
of CPT (Current Procedural Terminology) codes, a numeric and
alphanumeric coding system that is established and maintained by the
American Medical Association (AMA), and consists of Category I, II,
III, MAAA, and PLA CPT codes. Level II, which is established and
maintained by CMS, is a standardized coding system that is used
primarily to identify products, supplies, and services not included in
the CPT codes. Together, Level I and II HCPCS codes are used to report
procedures, services, items, and supplies under the OPPS payment
system. Specifically, we recognize the following codes on OPPS claims:
Category I CPT codes, which describe surgical procedures,
diagnostic and therapeutic services, and vaccine codes;
Category III CPT codes, which describe new and emerging
technologies, services, and procedures;
MAAA CPT codes, which describe laboratory multianalyte
assays with algorithmic analyses (MAAA);
PLA CPT codes, which describe proprietary laboratory
analyses (PLA) services; and
Level II HCPCS codes (also known as alpha-numeric codes),
which are used primarily to identify drugs, devices, supplies,
temporary procedures, and services not described by CPT codes.
The codes are updated and changed throughout the year. CPT and
Level II HCPCS code changes that affect the OPPS are published through
the annual rulemaking cycle and through the OPPS quarterly update
Change Requests (CRs). Generally, these code changes are effective
January 1, April 1, July 1, or October 1. CPT code changes are released
by the AMA (via their website) while Level II HCPCS code changes are
released to the public via the CMS HCPCS website. CMS recognizes the
release of new CPT and Level II HCPCS codes outside of the formal
rulemaking process via OPPS quarterly update CRs. Based on our review,
we assign the new codes to interim status indicators (SIs) and APCs.
These interim assignments are finalized in the OPPS/ASC final rules.
This quarterly process offers hospitals access to codes that more
accurately describe the items or services furnished and provides
payment for
[[Page 41778]]
these items or services in a timelier manner than if we waited for the
annual rulemaking process. We solicit public comments on the new CPT
and Level II HCPCS codes, status indicators, and APC assignments
through our annual rulemaking process.
We note that, under the OPPS, the APC assignment determines the
payment rate for an item, procedure, or service. The items, procedures,
or services not exclusively paid separately under the hospital OPPS are
assigned to appropriate status indicators. Certain payment status
indicators provide separate payment while other payment status
indicators do not. In section X.I. ``Proposed CY 2027 Payment Status
and Comment Indicators'' of this proposed rule, we discuss the various
status indicators and comment indicators used under the OPPS. We also
provide a complete list of the status indicators and their definitions
in Addendum D1 to this proposed rule.
1. April 2026 HCPCS Codes Proposed Rule Comment Solicitation
For the April 2026 update, 61 new HCPCS codes were established and
made effective on April 1, 2026. Through the April 2026 OPPS quarterly
update CR (Transmittal 13686, Change Request 14380, dated March 13,
2026), we recognized several new HCPCS codes for payment and assigned
them to appropriate interim OPPS status indicators and APCs. In this
proposed rule, we solicit public comments on the proposed APC and
status indicator assignments for the codes listed in Table 9 (New HCPCS
Codes Effective April 1, 2026). The proposed status indicator, APC
assignment, and payment rate for each HCPCS code can be found in
Addendum B to this proposed rule.
The complete list of proposed status indicators and corresponding
definitions used under the OPPS can be found in Addendum D1 to this
proposed rule. In addition, the new codes are assigned to comment
indicator ``NP'' in Addendum B to this proposed rule to indicate that
the codes are assigned to an interim APC assignment, and comments will
be accepted on their interim APC assignments. The complete list of
proposed comment indicators and definitions used under the OPPS can be
found in Addendum D2 to this proposed rule. We note that OPPS Addendum
B (OPPS payment file by HCPCS code), and Addendum D2 (OPPS Comment
Indicators) are available via the internet on the CMS website.
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2. July 2026 HCPCS Codes Proposed Rule Comment Solicitation
For the July 2026 update, 98 new codes were established and made
effective July 1, 2026. Through the July 2026 OPPS quarterly update CR
(Transmittal R13832CP Change Request 14477, dated June 16, 2026) we
recognized several new codes for payment and assigned them to
appropriate interim OPPS status indicators and APCs. In this proposed
rule, we solicit public comments on the proposed APC and status
indicator assignments for the codes listed in Table 10 (New HCPCS Codes
Effective July 1, 2026). The proposed status indicator, APC assignment,
and payment rate for each HCPCS code can be found in Addendum B to this
proposed rule. The complete list of proposed status indicators and
corresponding definitions used under the OPPS can be found in Addendum
D1 to this proposed rule. In addition, the new codes are assigned to
comment indicator ``NP'' in Addendum B to this proposed rule to
indicate that the codes are assigned to interim APC assignments and
comments will be accepted on their interim APC assignments. The
complete list of proposed comment indicators and definitions used under
the OPPS can be found in Addendum D2 to this proposed rule. We note
that OPPS Addendum B (OPPS payment file by HCPCS code), and Addendum D2
(OPPS Comment Indicators) are available via the internet on the CMS
website.
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3. October 2026 HCPCS Codes Final Rule Comment Solicitation
As has been our practice in the past, we will solicit comments on
the new CPT and Level II HCPCS codes that will be effective October 1,
2026, in the CY 2027 OPPS/ASC final rule with comment period, thereby
allowing us to finalize the status indicators and APC assignments for
the codes in the CY 2027 OPPS/ASC final rule with comment period. The
HCPCS codes will be released to the public through the October 2026
OPPS Update CR and the CMS HCPCS website while the CPT codes will be
released to the public through the AMA website.
For CY 2027, we propose to continue our established policy of
assigning comment indicator ``N1'' in Addendum B to this proposed rule
for those new HCPCS codes that will be effective October 1, 2026, to
indicate that we are assigning them an interim status indicator, which
is subject to public comment. We will be inviting public comments in
the CY 2027 OPPS/ASC final rule with comment period on the status
indicator and APC assignments, which would then be finalized in the CY
2028 OPPS/ASC final rule with comment period.
4. January 2027 HCPCS Codes
a. New Level II HCPCS Codes Final Rule Comment Solicitation
Consistent with past practice, we will solicit comments on the new
Level II HCPCS codes that will be effective January 1, 2027, in the CY
2027 OPPS/ASC final rule with comment period, thereby allowing us to
finalize the status indicators and APC assignments for the codes in the
CY 2028 OPPS/ASC final rule with comment period. Unlike the CPT codes
that are effective January 1 and are included in the OPPS/ASC proposed
rules, and except for the proposed new C-codes and G-codes listed in
Addendum O of this proposed rule, most Level II HCPCS codes are not
released until sometime around November to be effective January 1.
Because these codes are not available until November, we are unable to
include them in the OPPS/ASC proposed rules. Consequently, for CY 2027,
we propose to include the new Level II HCPCS codes effective January 1,
2027, in Addendum B to the CY 2027 OPPS/ASC final rule with comment
period, which would be incorporated in the January 2027 OPPS quarterly
update CR. Specifically, for CY 2027, we propose to continue our
established policy of assigning comment indicator ``N1'' in Addendum B
to the OPPS/ASC final rule with comment period to the new HCPCS codes
that will be effective January 1, 2027, to indicate that we are
assigning them an interim status indicator, which is subject to public
comment. We will be inviting public comments in the CY 2027 OPPS/ASC
final rule with comment period on the status indicator and APC
assignments, which would then be finalized in the CY 2028 OPPS/ASC
final rule with comment period.
b. New CPT Codes Proposed Rule Comment Solicitation
In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66841
through 66844), we finalized a revised process of assigning APC and
status indicators for new and revised Category I and III CPT codes that
would be effective January 1. Specifically, for the new/revised CPT
codes that we receive in a timely manner from the AMA's CPT Editorial
Panel, we finalized our proposal to include the codes that would be
effective January 1 in the OPPS/ASC proposed rules, along with proposed
APC and status indicator assignments for them, and to finalize the APC
and status indicator assignments in the OPPS/ASC final rules beginning
with the CY 2016 OPPS update. For those new/revised CPT codes that were
received too late for inclusion in the OPPS/ASC proposed rule, we
finalized our proposal to establish and use HCPCS G-codes that mirror
the predecessor CPT codes and retain the current APC and status
indicator assignments for a year until we can propose APC and status
indicator assignments in the following year's rulemaking cycle. We note
that even if we find that we need to create HCPCS G-codes in place of
certain CPT codes for the PFS proposed rule, we do not anticipate that
these HCPCS G-codes will always be necessary for OPPS purposes. We will
make every effort to include proposed APC and status indicator
assignments for all new and revised CPT codes that the AMA makes
publicly available in time for us to include them in the proposed rule,
and to avoid resorting to use of HCPCS G-codes and the resulting delay
in utilization of the most current CPT codes. Also, we finalized our
proposal to make interim APC and status indicator assignments for CPT
codes that are not available in time for the proposed rule and that
describe wholly new services (such as new technologies or new surgical
procedures), to solicit public comments in the final rule with comment
period, and to finalize the specific APC and status indicator
assignments for those codes in the following year's rule.
For the CY 2027 OPPS update, we received the CPT codes that will be
effective January 1, 2027, from the AMA in time to be included in this
proposed rule. The new, revised, and deleted CPT codes can be found in
Addendum B to this proposed rule (which is available via the internet
on the CMS website). We note that the new and revised CPT codes are
assigned to comment indicator ``NP'' in Addendum B to the proposed rule
to indicate that the code is new for the next calendar year or the code
is an existing code with substantial revision to its code descriptor in
the next calendar year as compared to the current calendar year with a
proposed APC assignment, and that comments will be accepted on the
proposed APC assignment and status indicator.
Further, we note that the CPT code descriptors that appear in
Addendum B are short descriptors and do not accurately describe the
complete procedure, service, or item described by the CPT code.
Therefore, we are including the 5-digit placeholder codes and the long
descriptors for the new and revised CY 2027 CPT codes in Addendum O,
specifically under the column labeled ``CY 2027 OPPS/ASC Proposed Rule
5-Digit AMA/CMS Placeholder Code.'' The final HCPCS code numbers will
be included in the CY 2027 OPPS/ASC final rule with comment period. In
summary, we solicit public comments on the proposed CY 2027 status
indicators and APC assignments for the new and revised CPT codes that
will be effective January 1, 2027. The CPT codes listed in Addendum B
appear with short descriptors only; therefore, we list them again in
Addendum O to this proposed rule with long descriptors. In addition, we
propose to finalize the status indicator and APC assignments for these
codes (with their final CPT code numbers) in the CY 2027 OPPS/ASC final
rule with comment period. The proposed status indicator and APC
assignment for these codes can be found in Addendum B to this proposed
rule. In addition, the complete list of proposed comment indicators and
definitions used under the OPPS can be found in Addendum D2 to this
proposed rule. We note that OPPS Addendum B (OPPS payment file by HCPCS
code), Addendum D1 (OPPS Status Indicators), and Addendum D2 (OPPS
Comment Indicators) are available via the internet on the CMS website.
Finally, in Table 11 (Comment and Finalization Timeframes for New
and Revised OPPS-Related HCPCS Codes),
[[Page 41788]]
we summarize our current process for updating codes through our OPPS
quarterly update CRs, seeking public comments, and finalizing the
treatment of these codes under the OPPS.
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B. Proposed OPPS Changes--Variations Within APCs
1. Background
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered hospital outpatient department
services. In addition, section 1833(t)(2)(B) of the Act provides that
the Secretary may establish groups of covered OPD services within this
classification system, so that services classified within each group
are comparable clinically and with respect to the use of resources. In
accordance with these provisions, we developed a grouping
classification system, referred to as Ambulatory Payment
Classifications (APCs), as set forth in regulations at 42 CFR 419.31.
We use Level I (also known as CPT codes) and Level II HCPCS codes (also
known as alphanumeric codes) to identify and group the services within
each APC. The APCs are organized such that each group is homogeneous
both clinically and in terms of resource use. Using this classification
system, we have established distinct groups of similar services. We
also have developed separate APC groups for certain medical devices,
drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy
devices that are not packaged into the payment for the procedure.
We have packaged into the payment for each procedure or service
within an APC group, the costs associated with those items and services
that are typically ancillary and supportive to a primary diagnostic or
therapeutic modality and, in those cases, are an integral part of the
primary service they support. Therefore, we do not make separate
payment for these packaged items or services. In general, packaged
items and services include, but are not limited to, the items and
services listed in regulations at 42 CFR 419.2(b). A further discussion
of packaged services is included in section II.A.3. of this proposed
rule.
Under the OPPS, we generally pay for covered hospital outpatient
services on a rate-per-service basis, where the service may be reported
with one or more HCPCS codes. Payment varies according to the APC group
to which the independent service or combination of services is
assigned. For CY 2027, we propose that each APC relative payment weight
represents the hospital cost of the services included in that APC,
relative to the hospital cost of the services included in APC 5012
(Clinic Visits and Related Services). The APC relative payment weights
are scaled to APC 5012 because it is the hospital clinic visit APC and
clinic visits are among the most frequently furnished services in the
hospital outpatient setting.
2. Application of the 2 Times Rule
Section 1833(t)(9)(A) of the Act requires the Secretary to review,
not less often than annually, and revise the APC groups, the relative
payment weights, and the wage and other adjustments described in
section 1833(t)(2) of the Act to consider changes in medical practice,
changes in technology, the addition of new services, new cost data, and
other relevant information and factors. Section 1833(t)(9)(A) of the
Act also requires the Secretary to consult with an expert outside
advisory panel composed of an appropriate selection of representatives
of providers to review (and advise the Secretary concerning) the
clinical integrity of the APC groups and the relative payment weights.
We note that the Advisory Panel on Hospital Outpatient Payment (also
[[Page 41789]]
known as the HOP Panel or the Panel) recommendations for specific
services for the CY 2027 OPPS update will be discussed in the relevant
specific sections throughout the CY 2027 OPPS/ASC final rule with
comment period.
In addition, section 1833(t)(2) of the Act provides that, subject
to certain exceptions, the items and services within an APC group
cannot be considered comparable regarding the use of resources if the
highest cost for an item or service in the group is more than 2 times
greater than the lowest median cost (or mean cost if so elected) for an
item or service within the same group (referred to as the ``2 times
rule'').
The statute authorizes the Secretary to make exceptions to the 2
times rule in unusual cases, such as for low-volume items and services
(but the Secretary may not make such an exception in the case of a drug
or biological that has been designated as an orphan drug under section
526 of the Federal Food, Drug, and Cosmetic Act). In determining the
APCs with a 2 times rule violation, we consider only those HCPCS codes
that are significant based on the number of claims. We note that, for
purposes of identifying significant procedure codes for examination
under the 2 times rule, we consider procedure codes that have more than
1,000 single major claims or procedure codes that both have more than
99 single major claims and contribute at least 2 percent of the single
major claims used to establish the APC cost to be significant (75 FR
71832). This longstanding definition of when a procedure code is
significant for purposes of the 2 times rule was selected because we
believe that a subset of 1,000 or fewer claims is negligible within the
set of approximately 100 million single procedure or single session
claims we use for establishing costs. Similarly, a procedure code for
which there are fewer than 99 single claims and that comprises less
than 2 percent of the single major claims within an APC will have a
negligible impact on the APC cost (75 FR 71832). In this section of
this proposed rule, for CY 2027, we propose to make exceptions to this
limit on the variation of costs within each APC group in unusual cases,
such as for certain low-volume items and services.
For the CY 2027 OPPS update, we identified the APCs with violations
of the 2 times rule, and we propose changes to the procedure codes
assigned to these APCs (with the exception of those APCs for which we
have proposed a 2 times rule exception) in Addendum B to this proposed
rule. We note that Addendum B does not appear in the printed version of
the Federal Register as part of this proposed rule. Rather, it is
published and made available via the internet on the CMS website at
https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices.
To eliminate a violation of the 2 times rule and improve clinical
and resource homogeneity in the APCs for which we have not proposed a 2
times rule exception, we propose to reassign these procedure codes to
new APCs that contain services that are similar with regard to both
their clinical and resource characteristics. In many cases, the
proposed procedure code reassignments and associated APC
reconfigurations for CY 2027 included in this proposed rule are related
to changes in costs of services that were observed in the CY 2025
claims data available for CY 2027 ratesetting. Addendum B to this
proposed rule identifies with a comment indicator ``CH'' those
procedure codes for which we propose a change to the APC assignment or
status indicator, or both, that were initially assigned in the July 1,
2026, OPPS Addendum B Update, which is available via the internet on
the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/addendum-a-b-update.
3. Proposed APC Exceptions to the 2 Times Rule
While considering the APC changes that we propose for CY 2027, we
reviewed all of the APCs for which we identified 2 times rule
violations to determine whether any of the APCs would qualify for an
exception. We used the following criteria to evaluate whether to
propose exceptions to the 2 times rule for affected APCs:
Resource homogeneity;
Clinical homogeneity;
Hospital outpatient setting utilization;
Frequency of service (volume); and
Opportunity for upcoding and code fragments.
For a detailed discussion of these criteria, we refer readers to
the April 7, 2000 final rule (65 FR 18457 through 18458).
Based on the CY 2025 claims data available for this proposed rule,
we found 27 APCs with violations of the 2 times rule. We applied the
criteria as described previously in this section to identify the APCs
for which we propose to make exceptions under the 2 times rule for CY
2027 and found that all of the 27 APCs we identified meet the criteria
for an exception to the 2 times rule based on the CY 2025 claims data
available for this proposed rule. We note that, on an annual basis,
based on our analysis of the latest claims data, we identify violations
to the 2 times rule and propose changes when appropriate. Those APCs
that violate the 2 times rule are identified and appear in Table 12. In
addition, we did not include in that determination those APCs where a 2
times rule violation was not a relevant concept, such as APC 5401
(Dialysis), which only has two HCPCS codes assigned to it that have
similar geometric mean costs and do not create a 2 times rule
violation. Therefore, we have only identified those APCs, including
those with criteria-based costs, such as device-dependent CPT/HCPCS
codes, with violations of the 2 times rule, where a 2 times rule
violation is a relevant concept.
Table 12 lists the 27 APCs for which we propose to make an
exception under the 2 times rule for CY 2027 based on the criteria
cited above and claims data submitted between January 1, 2025, and
December 31, 2025, and Cost-to-Charge Ratios (CCRs), if available. The
proposed geometric mean costs for covered hospital outpatient services
for these and all other APCs that were used in the development of this
proposed rule can be found via the internet on the CMS website at
https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices.
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C. Proposed New Technology APCs
1. Background
In the CY 2002 OPPS final rule (66 FR 59903), we finalized changes
to the time period in which a service can be eligible for payment under
a New Technology APC. Beginning in CY 2002, we retain services within
New Technology APC groups until we gather sufficient claims data to
enable us to assign the service to an appropriate clinical APC. This
policy allows us to move a service from a New Technology APC in less
than 2 years if sufficient data are available. It also allows us to
retain a service in a New Technology APC for more than 2 years if
sufficient data upon which to base a decision for reassignment have not
been collected.
We also adopted in the CY 2002 OPPS final rule the following
criteria for assigning a complete or comprehensive service to a New
Technology APC: (1) the service must be truly new, meaning it cannot be
appropriately reported by an existing HCPCS code assigned to a clinical
APC and does not appropriately fit within an existing clinical APC; (2)
the service is not eligible for transitional pass-through payment
(however, a truly new, comprehensive service could qualify for
assignment to a new technology APC even if it involves a device or drug
that could, on its own, qualify for pass-through payment); and (3) the
service falls within the scope of Medicare benefits under section
1832(a) of the Act and is reasonable and necessary in accordance with
section 1862(a)(1)(A) of the Act (66 FR 59898 through 59903). For
additional information about our New Technology APC policy, we refer
readers to https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/pass-through-payment-status-new-technology-ambulatory-payment-classification-apc on the CMS website and then
follow the instructions to access the MEARISTM system for
OPPS New Technology APC applications.\15\
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\15\ Currently approved under OMB control number 0938-0860;
expires October 31, 2027.
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In the CY 2004 OPPS final rule with comment period (68 FR 63416),
we restructured the New Technology APCs to make the cost intervals more
consistent across payment levels and refined the cost bands for these
APCs to retain two parallel sets of New Technology APCs: one set with a
status indicator of ``S'' (Significant Procedures, Not Discounted when
Multiple. Paid under OPPS; separate APC payment) and the other set with
a status indicator of ``T'' (Significant Procedure, Multiple Reduction
Applies. Paid under OPPS; separate APC payment). These current New
Technology APC configurations allow us to price new technology services
more appropriately and consistently.
For CY 2026, there were 52 New Technology APC levels, ranging from
the lowest cost band assigned to APC
[[Page 41791]]
1491 (New Technology--Level 1A ($0-$10)) to the highest cost band
assigned to APC 1908 (New Technology--Level 52 ($145,001-$160,000)). We
note that the cost bands for the New Technology APCs, specifically,
APCs 1491 through 1599 and 1901 through 1908, vary with increments
ranging from $10 to $14,999. These cost bands identify the APCs to
which new technology procedures and services with estimated service
costs that fall within those cost bands are assigned under the OPPS.
Payment for each APC is made at the mid-point of the APC's assigned
cost band. For example, payment for APC 1507 (New Technology--Level 7
($501-$600)) is made at $550.50.
Under the OPPS, one of our goals is to make payments that are
appropriate for the services that are necessary for the treatment of
Medicare beneficiaries. The OPPS, like other Medicare payment systems,
is intended to be budget neutral in comparison to what would have been
paid under the previous reasonable-cost payment system, and increases
are limited to the annual hospital market basket increase reduced by
the productivity adjustment. We believe that our payment rates reflect
the costs that are associated with providing care to Medicare
beneficiaries and continue to be adequate to ensure access to services.
For many emerging technologies, there is a transitional period during
which utilization may be low, often because providers are first
learning about the technologies and their clinical utility. Quite
often, parties request that Medicare make higher payments under the New
Technology APCs for new procedures in that transitional phase. These
requests, and their accompanying estimates for expected total patient
utilization, often reflect very low rates of patient use of expensive
equipment, resulting in high per-use costs for which requesters believe
Medicare should make full payment. Medicare does not, and we believe
should not, assume responsibility for more than its share of the costs
of procedures based on projected utilization for Medicare beneficiaries
and does not set its payment rates based on initial projections of low
utilization for services that require expensive capital equipment. For
the OPPS, we rely on hospitals to make informed business decisions
regarding the acquisition of high-cost capital equipment, taking into
consideration their knowledge about their entire patient base (Medicare
beneficiaries included) and an understanding of Medicare's and other
payers' payment policies. We refer readers to the CY 2013 OPPS/ASC
final rule with comment period (77 FR 68314) for further discussion
regarding this payment policy.
Some services assigned to New Technology APCs have low annual
volume, which we consider to be fewer than 100 claims in the year of
claims data used for ratesetting (86 FR 63528). Where utilization of
services assigned to a New Technology APC is low, it can lead to wide
variation in payment rates from year to year, resulting in even lower
utilization and potential barriers to access of new technologies, which
ultimately limits our ability to assign the service to the appropriate
clinical APC. To mitigate these issues, we finalized a policy in the CY
2019 OPPS/ASC final rule with comment period to utilize our equitable
adjustment authority at section 1833(t)(2)(E) of the Act to adjust how
we determine the costs for low-volume services assigned to New
Technology APCs (83 FR 58892 through 58893). Specifically, in the CY
2019 OPPS/ASC final rule with comment period (83 FR 58893), we
established that, in each of our annual rulemakings, we would calculate
and present the result of each statistical methodology (arithmetic
mean, geometric mean, and median) based on up to 4 years of claims data
and solicit public comment on which methodology should be used to
establish the payment rate for the low-volume new technology service.
However, in the CY 2022 OPPS/ASC final rule with comment period (86 FR
63529), we replaced the New Technology APC low volume policy with the
universal low volume APC policy. Unlike the now-ended New Technology
APC low volume policy, the universal low volume APC policy applies to
clinical APCs and brachytherapy APCs, in addition to procedures
assigned to New Technology APCs, and uses the highest of the geometric
mean, arithmetic mean, or median based on up to 4 years of claims data
to set the payment rate for the APC. We refer readers to the CY 2022
OPPS/ASC final rule with comment period (86 FR 63529) for further
discussion regarding this policy.
Despite the universal low volume APC policy, we continued to see
payment instability for services with very low claims volume of fewer
than 10 claims in the 4-year lookback period used under the universal
low volume APC policy. For CY 2025, we finalized a policy to exempt
services assigned to New Technology APCs with fewer than 10 claims over
the 4-year lookback period used for the universal low volume policy.
Instead of assigning these services to a different New Technology APC
based on the very few claims available, we maintained the New
Technology APC assignment for each service from the prior year, CY
2024. We refer readers to the CY 2025 OPPS/ASC final rule with comment
period for a discussion on the policy (89 FR 94016 through 94018).
Consistent with our overall policy regarding use of updated claims data
in the final rule with comment period, we finalized our proposal to
perform a similar analysis for the final rule with comment period using
updated claims data, including determining whether specific HCPCS codes
continue to meet the criteria for our universal low volume APC policy
or would be subject to our proposed policy to continue exempting
services with fewer than 10 claims in the 4-year lookback period from
the universal low volume APC policy and maintain the New Technology APC
assignment from the previous year.
In the CY 2026 OPPS/ASC final rule with comment period we finalized
a continuation of the policy to exempt services assigned to New
Technology APCs with fewer than 10 claims over the 4-year lookback
period from the universal low volume policy moving forward. We
finalized to continue this policy in future years, until, or unless, an
alternative policy was finalized. We refer readers to the CY 2026 OPPS/
ASC final rule with comment period for a discussion on the policy (90
FR 53530 through 53531).
In addition to the universal low volume policy and the policy to
exempt services with fewer than 10 claims in the 4-year lookback
period, it has been our policy to maintain the New Technology APC
assignment for services with zero claims in the claims year used for
rulemaking. For CY 2027, since we propose CY 2027 OPPS payment rates
based on CY 2025 claims data, if a service has no CY 2025 claims, we
propose to maintain the same New Technology APC assignment for CY 2027.
We continue to believe this approach is appropriate because, in the
absence of new claims data, there is no additional information upon
which to base a reassignment. This policy ensures consistency and
stability in payment until sufficient claims data become available to
support a reassignment to a different New Technology APC or appropriate
clinical APC.
Finally, we note that, in a budget-neutral system, payments may not
fully cover hospitals' costs in a particular circumstance, including
those for the purchase and maintenance of capital equipment. We rely on
hospitals to make their decisions regarding the acquisition of high-
cost equipment with
[[Page 41792]]
the understanding that the Medicare program must be careful to
establish its initial payment rates, including those made through New
Technology APCs, for new services that lack hospital claims data based
on realistic utilization projections for all such services delivered in
cost-efficient hospital outpatient settings. As the OPPS acquires
claims data regarding hospital costs associated with new procedures, we
regularly examine the claims data and any available new information
regarding the clinical aspects of new procedures to confirm that our
OPPS payments remain appropriate for procedures as they transition into
mainstream medical practice.
For CY 2027, the proposed payment rates for New Technology APCs
1491 to 1599 and 1901 through 1908 are provided in Addendum A to this
proposed rule (which is available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.
2. Services in New Technology APCs With Zero Claims for the Rulemaking
Period or Under 10 Claims in the 4-Year Lookback Period
For CY 2027, there are several services that have either zero
claims for CY 2027 rulemaking (based on CY 2025 claims) or fewer than
10 claims in the previous 4-year lookback period. For CY 2027, we
propose to maintain the New Technology APC assignments for services
listed in Table 13.
[GRAPHIC] [TIFF OMITTED] TP07JY26.034
3. Procedures Assigned to New Technology APC Groups for CY 2027
As we described in the CY 2002 OPPS final rule (66 FR 59902), we
generally retain a procedure in the New Technology APC to which it is
initially assigned until we have obtained sufficient claims data to
justify reassignment of the procedure to a clinically appropriate APC.
In addition, in cases where we find that our initial New Technology APC
assignment was based on inaccurate or inadequate information (although
it was the best information available at the time), where we obtain new
information that was not available at the time of our initial New
Technology APC assignment, or where the New Technology APCs are
restructured, we may, based on more recent resource
[[Page 41793]]
utilization information (including claims data) or the availability of
refined New Technology APC cost bands, reassign the procedure or
service to a different New Technology APC that more appropriately
reflects its cost (66 FR 59903).
Consistent with our current policy, for CY 2027, we propose to
retain services within New Technology APC groups until we obtain
sufficient claims data to justify reassignment of the service to an
appropriate clinical APC. The flexibility associated with this policy
allows us to reassign a service from a New Technology APC in less than
2 years if we have obtained sufficient claims data. It also allows us
to retain a service in a New Technology APC for more than 2 years if we
have not obtained sufficient claims data upon which to base a
reassignment decision (66 FR 59902).
a. Administration of Subretinal Therapies Requiring Vitrectomy (APC
1564)
Effective January 1, 2021, CMS established HCPCS code C9770
(Vitrectomy, mechanical, pars plana approach, with subretinal injection
of pharmacologic/biologic agent) and assigned it to a New Technology
APC based on the geometric mean cost of CPT code 67036 (Vitrectomy,
mechanical, pars plana approach) due to similar resource utilization.
For CY 2021, HCPCS code C9770 was assigned to APC 1561 (New
Technology--Level 24 ($3001-$3500)). This code may be used to describe
the administration of HCPCS code J3398 (Injection, voretigene
neparvovec-rzyl, 1 billion vector genomes). This procedure was
previously discussed in depth in the CY 2021 OPPS/ASC final rule with
comment period (85 FR 85939 through 85940). For CY 2022, we maintained
the APC assignment of APC 1561 (New Technology--Level 24 ($3001-$3500))
for HCPCS code C9770 (86 FR 63531 through 63532).
HCPCS code J3398 (Injection, voretigene neparvovec-rzyl, 1 billion
vector genomes) is for a gene therapy product indicated for a rare
mutation-associated retinal dystrophy. Voretigene neparvovec-rzyl
(Luxturna[supreg]) was approved by FDA in December of 2017 and is an
adeno-associated virus vector-based gene therapy indicated for the
treatment of patients with confirmed biallelic RPE65 mutation-
associated retinal dystrophy.\16\ This therapy is administered through
a subretinal injection, which interested parties describe as an
extremely delicate and sensitive surgical procedure. The FDA-approved
package insert describes one of the steps for administering Luxturna
as, ``after completing a vitrectomy, identify the intended site of
administration. The subretinal injection can be introduced via pars
plana''.
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\16\ Luxturna. FDA Package Insert. Available: https://www.fda.gov/media/109906/download.
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Interested parties, including the manufacturer of Luxturna[supreg],
recommended CPT code 67036 (Vitrectomy, mechanical, pars plana
approach) for the administration of the gene therapy.\17\ However, the
manufacturer previously contended the administration was not accurately
described by any existing codes as CPT code 67036 (Vitrectomy,
mechanical, pars plana approach) does not account for the
administration itself. CMS recognized the need to accurately describe
the unique procedure that is required to administer the therapy
described by HCPCS code J3398. Therefore, in the CY 2021 OPPS/ASC final
rule with comment period, we established a new HCPCS code, C9770
(Vitrectomy, mechanical, pars plana approach, with subretinal injection
of pharmacologic/biologic agent) to describe this process (85 FR
85940). For CY 2021, we assigned HCPCS code C9770 to APC 1561 (New
Technology--Level 24 ($3001-$3500)) using the geometric mean cost of
CPT code 67036. For CY 2022, we continued to assign HCPCS code C9770 to
APC 1561 (New Technology--Level 24 ($3001-$3500)) using the geometric
mean cost of CPT code 67036 (86 FR 63532).
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\17\ LUXTURNA REIMBURSEMENT GUIDE FOR TREATMENT CENTERS. https://mysparkgeneration.com/uploads/2022/09/LUXTURNA-Reimbursement-Guide-for-Treatment-Centers-ISI-Update-April-2022-P-RPE65-US-320025.pdf.
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CY 2023 was the first year that claims data were available for
HCPCS code C9770; therefore, we proposed and finalized a policy to base
the payment rate of HCPCS code C9770 on claims data for that code
rather than on the geometric mean cost of CPT code 67036. Given the low
number of claims for this procedure, we designated HCPCS code C9770 as
a low volume procedure under our universal low volume APC policy and
used the greater of the geometric mean, arithmetic mean, or median cost
calculated based on the available claims data to calculate an
appropriate payment rate for purposes of assigning HCPCS code C9770 to
a New Technology APC.
Based on the claims data available for the CY 2023 OPPS/ASC final
rule with comment period, we found the median was the statistical
methodology that estimated the highest cost for the service. The
payment rate calculated using this methodology fell within the cost
band for APC 1562 (New Technology--Level 25 ($3501-$4000)). Therefore,
we finalized our proposal to assign HCPCS code C9770 to APC 1562 for CY
2023 (87 FR 71810).
For CY 2024, we proposed and finalized that we would delete HCPCS
code C9770 effective December 31, 2023 and recognize CPT code 0810T
(Subretinal injection of a pharmacologic agent, including vitrectomy
and 1 or more retinotomies) starting January 1, 2024 (88 FR 81617
through 81619). We determined the payment rate for CPT code 0810T using
the claims data for HCPCS code C9770 and designated CPT code 0810T as a
low volume procedure under our universal low volume APC policy and used
the greater of the geometric mean, arithmetic mean, or median cost
calculated based on the available claims data for HCPCS code C9770 to
calculate an appropriate payment rate for purposes of assigning CPT
code 0810T to a New Technology APC. For CY 2024, we finalized
assignment of CPT code 0810T to APC 1563 (New Technology--Level 26
($4001-$4500)) (88 FR 81618). For 2025, claims data for CPT code 0810T
was not yet available. Therefore, we continued to use claims data for
HCPCS code C9770 to determine the appropriate APC for CPT code 0810T
and finalized to continue to assign CPT code 0810T to APC 1563 for CY
2025 (89 FR 94018 and 94019).
CY 2026 was the first year that we had claims data available for
CPT code 0810T, and there were 7 claims available. Since the procedure
described by CPT code 0810T was billed using HCPCS code C9770 prior to
January 1, 2024, we used the available combined 43 claims for both
codes during this time period to allow for a more accurate picture of
the costs associated with this procedure. For CY 2026, we designated
CPT code 0810T as a low volume procedure under our universal low volume
APC policy, given that there were only 43 combined claims available.
Therefore, we used the greater of the geometric mean, arithmetic mean,
or median cost calculated based on the available claims data from a 4-
year lookback period to calculate an appropriate payment rate for
purposes of assigning CPT code 0810T to a New Technology APC, which was
the arithmetic mean cost of $4,327. This fell within the cost band for
APC 1563 (New Technology--Level 26 ($4001-$4500)), therefore, we
continued to assign CPT code 0810T to APC 1563 for CY 2026 (90 FR
53532).
For CY 2027, there are nine claims available for CPT code 0810T,
with a
[[Page 41794]]
geometric mean cost of $4,183. Since the procedure described by CPT
code 0810T was billed using HCPCS code C9770 prior to January 1, 2024,
we propose to use the available combine claims for both codes during
this time period to allow for a more accurate picture of the costs
associated with this procedure. For CY 2027, we propose to designate
CPT code 0810T as a low volume procedure under our universal low volume
APC policy, given that there were only 39 combined claims available.
This is below the threshold of 100 claims for a service within a year
required to designate a service as a low volume service and apply our
universal low volume APC policy. Using all available claims for CPT
code 0810T and HCPCS code C9770 from the 4-year lookback period, based
on 39 claims, we determined the geometric mean cost to be approximately
$4,239, the arithmetic mean cost to be $4,587, and the median cost to
be $4,502. Because the arithmetic mean is the statistical methodology
that estimated the highest cost for the service, we propose to use this
cost to determine the New Technology APC placement. The arithmetic mean
of $4,587 falls within the cost band for APC 1564 (New Technology--
Level 27 ($4501-$5000)). Therefore, we propose to reassign CPT code
0810T to APC 1564 for CY 2027. Additionally, we propose to perform a
similar analysis using updated claims data, including determining if
CPT code 0810T continues to meet the criteria for our universal low
volume APC policy, in the CY 2027 OPPS/ASC final rule with comment
period and update the APC assignment as needed.
Refer to Table 14 for the final CY 2026 and proposed CY 2027 New
Technology APC and status indicator assignment for CPT code 0810T. The
proposed CY 2027 payment rates can be found in Addendum B to this
proposed rule via the internet on the CMS website. In addition, we
refer readers to Addendum D1 to this proposed rule for the status
indicator meanings for all codes reported under the OPPS. Addendum D1
can also be found via the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TP07JY26.035
b. BgRT (APC 1518 and 1523)
Biology Guided Radiation Therapy (BgRT) uses positron-emitting
radiopharmaceuticals to control delivery of radiation therapy to treat
primary and metastatic lung or bone tumors. During radiation treatment
delivery, the same system applies these firing filters to the real-time
positron emission tomography (PET) data collected by the radiation
treatment delivery machine. Effective January 1, 2024, CMS created
HCPCS codes C9794 (Therapeutic radiology simulation-aided field
setting; complex, including acquisition of PET and CT imaging data
required for radiopharmaceutical-directed radiation therapy treatment
planning (i.e., modeling) and C9795 (Stereotactic body radiation
therapy, treatment delivery, per fraction to 1 or more lesions,
including image guidance and real-time positron emissions-based
delivery adjustments to 1 or more lesions, entire course not to exceed
5 fractions) to describe the modeling and treatment delivery portions
of the BgRT service. We assigned HCPCS code C9794 to APC 1521 (New
Technology--Level 21 ($1901-$2000)) and HCPCS code C9795 to APC 1525
(New Technology--Level 25 ($3501-$4000)) for CY 2024.
For CY 2025, we continued to assign HCPCS code C9794 to APC 1521
(New Technology--Level 21 ($1901-$2000)) with a payment rate of
$1,950.50 and HCPCS code C9795 to APC 1525 (New Technology--Level 25
($3501-$4000)) with a payment rate of $3,750.50 because we did not have
any claims data for the service.
Effective January 1, 2025, HCPCS codes C9794 and C9795 were
replaced by HCPCS codes G0562 and G0563, respectively. For CY 2026, we
utilized available claims data for HCPCS codes C9794 and C9795 to
propose payment rates for HCPCS codes G0562 and G0563. Due to concerns
given the extremely limited number of claims and the substantial
decrease that would occur if the proposed rates were finalized, we did
not finalize the proposed payment rate changes (90 FR 53533 and 53534).
For CY 2026, we finalized the assignment of HCPCS code G0562 to APC
1521 and status indicator ``S'' and HCPCS code G0563 to APC 1524 (New
Technology--Level 24 ($3001-$3500)) and status indicator ``S'' (90 FR
53534).
Since HCPCS code G0562 and G0563 were made effective January 1,
2025, and the proposed OPPS payment rates for CY 2027 are based on
available CY 2025 claims data, this is the first time that we have
available claims for HCPCS codes G0562 and G0563, specifically, for
ratesetting. For CY 2027, we propose to designate HCPCS codes G0562 and
G0563 as low volume procedures under our universal low volume APC
policy, given that there are 24 single frequency claims for G0562 and
47 claims for G0563 during the claims period. For HCPCS code G0562, we
determined the arithmetic mean cost to be approximately $1,461, the
median cost to be approximately $1,601, and the geometric mean cost to
be approximately $1,398. Because the median cost is the statistical
methodology that estimated the highest cost for the service, we propose
to use this cost to determine the New Technology APC placement. The
median cost of $1,601 falls within the cost band for APC 1518 (New
Technology--Level 18 ($1601-$1700)). Therefore, we propose to assign
HCPCS code G0562 to APC 1518 (New Technology--Level 18 ($1601-$1700)
with a payment rate of $1,650.50 for CY 2027. For HCPCS code G0563, we
determined the arithmetic mean cost to be approximately $2,644; the
median cost to be approximately $2,218, and the geometric mean cost to
be approximately $2,467. The arithmetic mean cost is the statistical
methodology
[[Page 41795]]
that estimated the highest cost for the service; therefore, we propose
to use this cost to determine the New Technology APC placement. The
arithmetic mean cost of $2,644 falls within the cost band for APC 1523
(New Technology--Level 23 ($2501-$3000)). Therefore, we propose to
assign HCPCS code G0563 to APC 1523 (New Technology--Level 23 ($2501-
$3000) with a payment rate of $2750.50 for CY 2027.
Additionally, we propose to perform a similar analysis using
updated claims data, including determining if HCPCS codes G0562 and
G0563 continue to meet the criteria for our universal low volume APC
policy, in the CY 2027 OPPS/ASC final rule with comment period and
update the APC assignments as needed.
Refer to Table 15 for the final CY 2026 and proposed CY 2027 OPPS
New Technology APC and status indicator assignment for HCPCS codes
G0562 and G0563. The proposed CY 2027 payment rates can be found in
Addendum B to this proposed rule via the internet on the CMS website.
In addition, we refer readers to Addendum D1 to this proposed rule for
the status indicator meanings for all codes reported under the OPPS.
Addendum D1 can also be found via the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TP07JY26.036
c. Cardiac Positron Emission Tomography (PET)/Computed Tomography (CT)
Studies (APC 5594).
Effective January 1, 2020, we assigned three CPT codes (78431,
78432, and 78433) that describe the services associated with cardiac
PET/CT studies to New Technology APCs. We have explained previously
that services that are assigned to New Technology APCs are typically
new procedures that do not have sufficient claims history to establish
an accurate payment for them. In the CY 2026 OPPS/ASC final rule we
noted that, over the past several years, the claims volumes for CPT
codes 78431 and 78433 have increased significantly while the geometric
mean costs of the codes have remained relatively stable. We explained
that, although we had seen stability in the claims data for CPT codes
78431 and 78433, CPT code 78432, which is closely related to CPT codes
78431 and 78433, continued to have low claims frequency and fluctuating
geometric mean costs. We explained that, due to our concerns regarding
CPT code 78432 and the lack of an appropriate clinical APC for CPT
codes 78431 and 78433 at the time based on resource cost similarity, we
finalized to continue to assign CPT codes 78431 through 78433 to New
Technology APCs for CY 2026 (90 FR 53536 and 53537). While we believe
that cardiac PET/CT services, such as those described by CPT codes
78431 through 78433, are clinically similar to services assigned to the
Nuclear Medicine and Related Services APC series, such as CPT codes
78429 and 78430, we previously had concerns that the resource costs for
the APC series did not align with the resource costs reflected in the
claims data for CPT codes 78431 through 78433. As a result, we
previously maintained CPT codes 78431 through 78433 in New Technology
APCs.
For CY 2027, we propose changes to APCs 5591-5594 (Nuclear Medicine
and Related Services) that includes the shifting of the APC assignments
for several codes in that APC series. We refer readers to section
III.E. Proposed APC-Specific Policies of this proposed rule for a
discussion of the policy proposal. As a result of these proposed
changes, the proposed geometric mean costs of the Nuclear Medicine and
Related Services APC series have also shifted. We believe that the new
geometric mean costs of the proposed Nuclear Medicine and Related
Services APC series more closely align with the costs reflected in the
claims data for CPT codes 78431 through 78433. Therefore, we propose to
assign CPT codes 78431 through 78433 to APC 5594 (Level 4 Nuclear
Medicine and Related Services). Refer to Table 16 for the final CY 2026
and proposed CY 2027 OPPS New Technology APC and status indicator
assignment for CPT codes 78431 through 78433. The proposed CY 2027
payment rates can be found in Addendum B to this proposed rule via the
internet on the CMS website. In addition, we refer readers to Addendum
D1 to this proposed rule for the status indicator meanings for all
codes reported under the OPPS. Addendum D1 can also be found via the
internet on the CMS website.
[[Page 41796]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.037
d. Instillation of Anti-Neoplastic Pharmacologic/Biologic Agent Into
Renal Pelvis (APC 1550)
Effective October 1, 2023, CMS established HCPCS code C9789
(Instillation of anti-neoplastic pharmacologic/biologic agent into
renal pelvis, any method, including all imaging guidance, including
volumetric measurement if performed) and assigned it to APC 1559 (New
Technology--Level 22 ($2001-$2500)), with a payment rate of $2,250.50
based on our review of the clinical and resource characteristics of
this service.
This code may be used to describe the unique procedure associated
with the administration of the drug described by HCPCS code J9281
(Mitomycin pyelocalyceal instillation, 1 mg) or similar products. HCPCS
code J9281 may be used to describe the product, JELMYTO[supreg]
(mitomycin for pyelocalyceal solution). The FDA approved
JELMYTO[supreg] in 2020, and the FDA approved indication and usage for
JELMYTO[supreg] is as an alkylating drug indicated for the treatment of
adult patients with low-grade Upper Tract Urothelial Cancer (LG-
UTUC).\18\
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\18\ Jelmyto Package Insert, Revised January, 2021.
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For CY 2025, the OPPS payment rates were based on available CY 2023
claims data. Because we created HCPCS code C9789 effective October 1,
2023, we had limited claims data from CY 2023 available for CY 2025
rulemaking. Specifically, we only had six claims available for
ratesetting, so we maintained the New Technology APC assignment of APC
1559 (New Technology--Level 22 ($2001-$2500)) with a payment of
$2,250.50 for CY 2025, based on our CY 2025 policy to maintain the New
Technology APC assignment for New Technology APC services with fewer
than 10 claims in the 4-year lookback period applicable for the
universal low-volume APC policy (89 FR 94034).
For CY 2026, the OPPS payment rates were based on available CY 2024
claims data. HCPCS code C9789 had 222 single frequency claims in CY
2024, which exceeded the 100 claims threshold generally used for the
universal low volume APC policy. The geometric mean cost for HCPCS code
C9789 was approximately $1,211. Therefore, for CY 2026, we assigned
HCPCS code C9789 to APC 1551 (New Technology--Level 14 ($1201-$1300))
with a payment rate of $1,250.50 (90 FR 53542 and 53543).
For CY 2027, the proposed OPPS payment rates are based on available
CY 2025 claims data. HCPCS code C9789 has 235 single frequency claims
in CY 2025 and the geometric mean cost for HCPCS code is $1,173.
Therefore, for CY 2027, we propose to assign HCPCS code C9789 to APC
1550 (New Technology--Level 13 ($1101-$1200)) with a payment rate of
$1,150.50.
Refer to Table 17 for the final CY 2026 and proposed CY 2027 OPPS
New Technology APC and status indicator assignment for HCPCS code
C9789. The proposed CY 2027 payment rates can be found in Addendum B to
this proposed rule via the internet on the CMS website. In addition, we
refer readers to Addendum D1 to this proposed rule for the status
indicator meanings for all codes reported under the OPPS. Addendum D1
can also be found via the internet on the CMS website.
[[Page 41797]]
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e. LimFlow TADV Procedure, CPT Code 0620T (APC 1581)
The LimFlow TADV procedure which is described by CPT code 0620T
(Endovascular venous arterialization, tibial or peroneal vein, with
transcatheter placement of intravascular stent graft(s) and closure by
any method, including percutaneous or open vascular access, ultrasound
guidance for vascular access when performed, all catheterization(s) and
intraprocedural roadmapping and imaging guidance necessary to complete
the intervention, all associated radiological supervision and
interpretation, when performed) is an endovascular procedure that is
used to treat patients with chronic limb-threatening ischemia.
According to the developer, these patients are no longer eligible for
conventional endovascular or open bypass surgery to treat their artery
blockage, and without this procedure, they are likely to face limb
amputation.
CPT code 0620T was established in January 2021 and was assigned to
APC 5194 (Level 4 Endovascular Procedures) with a payment rate of
approximately $17,400, which is the highest-paying APC for endovascular
procedures. While we proposed to continue to assign CPT code 0620T to
APC 5194 for CY 2024, we finalized a reassignment from a clinical APC
to a New Technology APC with a higher payment rate based on comments
received expressing concern that the low payment rate of the procedure
would discourage providers from performing the procedure and deny
access to the procedure. For CY 2024, the procedure was assigned to APC
1578 (New Technology--Level 41 ($25,001-$30,000)) (88 FR 81694). For CY
2025 ratesetting, there were 11 single frequency claims for CPT code
0620T in the CY 2023 claims data. As this is below the threshold of 100
claims for a service within a year, we applied our universal low volume
APC policy and used the highest of the geometric mean cost, arithmetic
mean cost, or median cost based on up to 4 years of claims data to
assign the service to the appropriate New Technology APC. Based on our
review of the available claims and the application of the universal low
volume APC policy, we assigned HCPCS code 0620T to APC 1579 (New
Technology--Level 42 ($30,001-$40,000)) with a payment rate of
$35,000.50 based on the median cost of approximately $36,400 (89 FR
94034 through 94036).
For CY 2026, the OPPS payment rates were proposed to be based on
available CY 2024 claims data. There were 19 single frequency claims
for 0620T in the CY 2024 claims data. As this is below the threshold of
100 claims for a service within a year, we proposed to again apply our
universal low volume APC policy and use the highest of the geometric
mean cost, arithmetic mean cost, or median cost based on up to 4 years
of claims data to assign the service to the appropriate New Technology
APC. Based on our review of the available claims and the application of
the universal low volume APC policy, for CY 2026. we assigned HCPCS
code 0620T to APC 1580 (New Technology--Level 43 ($40,001-$50,000))
with a payment rate of $45,000.50 based on the arithmetic mean cost of
approximately $43,748 (90 FR 53543 and 53544).
For CY 2027, the OPPS payment rates are proposed based on available
CY 2025 claims data. There were 28 single frequency claims for 0620T in
the CY 2025 claims data. As this is below the threshold of 100 claims
for a service within a year, we propose to again apply our universal
low volume APC policy and use the highest of the geometric mean cost,
arithmetic mean cost, or median cost based on up to 4 years of claims
data to assign the service to the appropriate New Technology APC. Based
on our review of the available claims, we have determined that the
arithmetic mean is approximately $51,748; the median is approximately
$46,455; and the geometric mean cost is approximately $47,513. Of
these, the arithmetic mean is the statistical methodology that
estimated the highest cost for the service. The payment rate calculated
using this methodology falls within the cost band for APC 1581 (New
Technology--Level 44 ($50,001-$60,000)). Therefore, for CY 2027, we
propose to designate this service as a low volume service under our
universal low volume APC policy and to assign HCPCS code 0620T to APC
1581 (New Technology--Level 44 ($50,001-$60,000)) with a payment rate
of $55,000.50.
f. Liver Histotripsy Service (APC 1575)
CPT code 0686T (Histotripsy (i.e., non-thermal ablation via
acoustic energy delivery) of malignant hepatocellular tissue, including
image guidance) was first effective July 1, 2021, and describes the
histotripsy service associated with the use of the HistoSonics system.
Histotripsy is a non-invasive, non-thermal, mechanical process that
uses a focused beam of sonic energy to destroy cancerous liver tumors
and is currently in a non-randomized, prospective clinical trial to
evaluate the efficacy and safety of the device for the treatment of
primary or metastatic tumors located in the liver.\19\ When HCPCS code
0686T was first effective, the histotripsy procedure was designated as
a Category A IDE clinical study (NCT04573881). Since devices in
Category A IDE studies are excluded from Medicare payment, payment for
CPT code 0686T only reflected the cost of the service that is performed
(absent the cost of the device) each time it is reported on a claim. On
March 2, 2023, the histotripsy IDE clinical study was re-designated as
a Category B (Non-experimental/Investigational) IDE study. Due to this
new designation, payment for CPT code 0686T in CY 2024
[[Page 41798]]
reflected payment for both the service that was performed and the
device used each time it was reported on a claim. For CY 2024, we
assigned CPT code 0686T to APC 1576 (New Technology--Level 39 ($15,001-
$20,000)) with a payment rate of $17,500.50 (88 FR 81631 through
81633). For CY 2025, we continued to assign CPT code 0686T to APC 1576
(New Technology--Level 39 ($15,001-$20,000) due to our CY 2025 policy
to maintain current New Technology APC assignments for CY 2025 for New
Technology APC services with fewer than 10 claims in the 4-year
lookback period applicable for the universal low volume APC policy, and
based on the fact that there were only three claims for CPT code 0686T
in the prior 4-year period (89 FR 94036 and 94037).
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\19\ ClinicalTrials.gov. ``The HistoSonics System for Treatment
of Primary and Metastatic Liver Tumors Using Histotripsy
(#HOPE4LIVER) (#HOPE4LIVER).'' Accessed May 10, 2022. https://clinicaltrials.gov/ct2/show/study/NCT04573881.
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For CY 2026, the OPPS payment rates were proposed to be based on
available CY 2024 claims data. For the CY 2026 OPPS/ASC proposed rule,
we identified 94 claims for CPT code 0686T within this period. As this
was below the threshold of 100 claims for a service within a year, we
proposed to apply our universal low volume APC policy and used the
highest of the geometric mean cost, arithmetic mean cost, or median
cost based on up to 4 years of claims data to assign CPT code 0686T to
the appropriate New Technology APC. We identified $32,307.41 as the
arithmetic mean, $20,577.77 as the median, and $21,264.91 as the
geometric mean. The arithmetic mean was the statistical methodology
that estimated the highest cost for CPT code 0686T. However, six
additional claims were processed since the CY 2026 OPPS/ASC proposed
rule, bringing the total number of claims to 100. Since the total
number of CY 2024 single-frequency claims for CPT code 0686T surpassed
the 99-claim threshold for the universal low-volume APC policy, we used
the geometric mean cost ($16,008) of the CY 2024 claims data for CPT
code 0686T to set the payment rate for CY 2026 under our standard
ratesetting methodology, rather than the highest of the three
statistical methodologies over a 4-year lookback period. Due to the
updated claims data available for the CY 2026 OPPS/ASC final rule with
comment period, we finalized a New Technology APC assignment for CPT
code 0686T to APC 1576 (New Technology--Level 39 ($15,001-$20,000))
with a payment rate of around $17,500.50, which was the same APC to
which the service was assigned in CY 2025 (90 FR 53544 and 53545) .
For CY 2027, the OPPS payment rates are proposed to be based on
available CY 2025 claims data. We have identified 166 single claims for
CPT code 0686T within this period. As this surpasses the 99-claim
threshold for the universal low volume APC policy for a service within
a year, we propose to assign CPT code 0686T using our standard
ratesetting methodology using the geometric mean cost to set the
payment rate for CPT code 0686T. The geometric mean cost of CPT code
0686T is approximately $14,311. The geometric mean falls within APC
1575 (New Technology--Level 38 ($10,001-$15,000)). Therefore, for CY
2027, we propose to assign CPT code 0686T to APC 1575 (New Technology--
Level 38 ($10,001-$15,000)) with a payment rate of $12,500.50.
Refer to Table 18 for the final CY 2026 and proposed CY 2027 OPPS
New Technology APC and status indicator assignments for CPT code 0686T.
The proposed CY 2027 payment rates can be found in Addendum B to this
proposed rule via the internet on the CMS website. In addition, we
refer readers to Addendum D1 to this proposed rule for the status
indicator meanings for all codes reported under the OPPS. Addendum D1
can also be found via the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TP07JY26.039
g. Supervised Visits for Esketamine Self-Administration (APCs 1513 and
1518)
On March 5, 2019, FDA approved SpravatoTM (esketamine)
nasal spray, used in conjunction with an oral antidepressant,\20\ for
treatment of depression in adults who have tried other antidepressant
medicines but have not benefited from them (treatment-resistant
depression (TRD)). This is the first FDA approval of esketamine for any
use.
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\20\ Subsequently, the FDA approved a prior approval
supplemental new drug application (sNDA) providing for the following
labeling modification: expansion of the indication to include
monotherapy of SpravatoTM (esketamine) for treatment
resistant depression (TRD). See https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2025/211243Orig1s016ltr.pdf.
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Esketamine is a noncompetitive N-methyl D-aspartate (NMDA) receptor
antagonist. It is a nasal spray supplied as an aqueous solution of
esketamine hydrochloride in a vial with a nasal spray device. Each
device delivers two sprays containing a total of 28 mg of esketamine.
Patients would require either two (2) devices (for a 56 mg dose) or
three (3) devices (for an 84 mg dose) per treatment.
Because of the risk of serious adverse outcomes resulting from
sedation and dissociation and respiratory depression caused by
esketamine nasal spray administration, and the potential for abuse and
misuse of the product, it is only available through a restricted
distribution system under a Risk Evaluation and Mitigation Strategy
(REMS). A REMS is a drug safety program that the FDA can require for
certain medications with serious safety concerns to help ensure the
benefits of the medication outweigh its risks. The
SpravatoTM REMS program requires, among other requirements,
that the esketamine nasal spray be dispensed and administered to
enrolled patients in health care settings that are certified in
[[Page 41799]]
the REMS. See www.fda.gov for more information regarding the
SpravatoTM REMS program requirements.
A treatment session of esketamine consists of instructed nasal
self-administration by the patient followed by a period of at least 2
hours post-administration observation of the patient under direct
supervision of a health care professional in the certified health care
setting. Refer to the CY 2020 PFS final rule and interim final rule for
more information about supervised visits for esketamine nasal spray
self-administration (84 FR 63102 through 63105); see also the Spravato
REMS document and Spravato labeling available on the FDA website.\21\
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\21\ The REMS document is available at https://www.fda.gov/drugs/drug-safety-and-availability/risk-evaluation-and-mitigation-strategies-rems, and labeling can be found at https://www.accessdata.fda.gov/scripts/cder/daf/index.cfm.
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To facilitate prompt beneficiary access to the new, potentially
life-saving treatment for TRD using esketamine, we created two new
HCPCS G codes, G2082 and G2083, effective January 1, 2020. HCPCS code
G2082 is for an outpatient visit for the evaluation and management of
an established patient who requires the supervision of a physician or
other qualified health care professional and provision of up to 56 mg
of esketamine through nasal self-administration and includes two hours
of post-administration observation. HCPCS code G2083 describes a
similar service to HCPCS code G2082 but involves the administration of
more than 56 mg of esketamine.
For CY 2025, HCPCS code G2082 was assigned to APC 1513 (New
Technology--Level 13 ($1101-$1200)) with a payment rate of $1,150.50
and HCPCS code G2083 was assigned to APC 1516 (New Technology--Level 16
($1401-$1,500)) with a payment rate of $1,450.50.
For CY 2027, the OPPS payment rates are proposed based on available
CY 2025 claims data as the available single frequency claims exceed the
100 claims threshold generally used for our universal low volume
policy. Therefore, for CY 2027, we propose to assign HCPCS codes G2082
and G2083 to New Technology APCs based on each of the codes' geometric
mean costs. Specifically, we propose to assign HCPCS code G2082 to APC
1513 (New Technology--Level 13 ($1101-$1200)) with a payment rate of
$1,150.50 based on its approximate geometric mean cost of $1,181, which
was calculated using the available 742 single frequency claims from CY
2025 claims data. We also propose to maintain the APC assignment for
HCPCS code G2083 (APC 1518 (New Technology--Level 18 ($1601-$1700))
with a payment rate of $1,650.50 based on its approximate geometric
mean cost of $1,648, which was calculated using the available 5,741
single frequency claims from CY 2025 claims data. As we continue to
gather adequate claims data on these codes, we invite public comment on
the appropriate clinical APC assignments for HCPCS codes G2082 and
G2083.
Please refer to Table 19 for the final CY 2026 and proposed CY 2027
OPPS New Technology APC and status indicator assignments for HCPCS code
G2082 and G2083. The proposed CY 2027 payment rates for these CPT codes
can be found in Addendum B to this proposed rule via the internet on
the CMS website. In addition, we refer readers to Addendum D1 to this
proposed rule for the status indicator meanings for all codes reported
under the OPPS. Addendum D1 can also be found via the internet on the
CMS website.
[GRAPHIC] [TIFF OMITTED] TP07JY26.040
[[Page 41800]]
h. SAINT Neuromodulation System (APCs 1511, 1520, 1521 and 1523)
The SAINT Neuromodulation System is a non-invasive repetitive
transcranial magnetic stimulation (rTMS) system that identifies an
individualized target and delivers navigationally directed repetitive
magnetic pulses to that individualized target located within the left
dorsolateral prefrontal cortex to treat major depressive disorder
(MDD). The patient first receives structural MRI and functional MRI
scans that are analyzed by the provider to identify and localize the
personalized stimulation target in the patient's dorsolateral
prefrontal cortex. Once the areas targeted for treatment are
identified, the patient receives non-invasive magnetic stimulation in
the targeted area. The patient has 10 treatment sessions per day with
each treatment session lasting 10 minutes followed by 50 minutes of
rest before another treatment session occurs. The treatment is
administered over 5 days for a total of 50 sessions of non-invasive
magnetic stimulation therapy. There are four CPT codes listed below
that describe the MRI scans that are used to target the treatment and
describe the administration of the non-invasive magnetic stimulation
therapy.
0889T--Personalized target development for accelerated,
repetitive high-dose functional connectivity MRI-guided theta-burst
stimulation derived from a structural and resting-state functional MRI,
including data preparation and transmission, generation of the target,
motor threshold-starting location, neuronavigation files and target
report, review and interpretation.
0890T--Accelerated, repetitive high-dose functional
connectivity MRI-guided theta-burst stimulation, including target
assessment, initial motor threshold determination, neuronavigation,
delivery and management, initial treatment day.
0891T--Accelerated, repetitive high-dose functional
connectivity MRI-guided theta-burst stimulation, including
neuronavigation, delivery and management, subsequent treatment day.
0892T--Accelerated, repetitive high-dose functional
connectivity MRI-guided theta-burst stimulation, including
neuronavigation, delivery and management, subsequent motor threshold
redetermination with delivery and management, per treatment day.
For CY 2025, the OPPS payment rates were proposed based on
available CY 2023 claims data. However, CPT codes 0889T, 0890T, 0891T,
and 0892T did not become effective until July 1, 2024, which means
there were no claims data for the procedures described these CPT codes.
We assigned our proposed rates for these services based on our
evaluation of the resources needed to perform these services.
Because we only had a partial year of data for CY 2026 rulemaking,
we used our equitable adjustment authority under section 1833(t)(2)(E)
of the Act to maintain the current APCs assignments for CPT codes
0889T, 0890T, 0891T, and 0892T.
For CY 2027, the OPPS payment rates are proposed based on available
CY 2025 claims data. We note that this is the first year that we have a
full year of claims data. We identified 74 single frequency CY 2025
claims for ratesetting for CPT code 0889T. Using this claims data from
CY 2025, our analysis found the geometric mean cost of CPT 0889T is
$673, the median cost is $971, and the arithmetic mean cost is $776.
The median is the statistical methodology that estimates the highest
cost for the service. Therefore, we propose, for CY 2027, to assign CPT
code 0889T to APC 1511 (New Technology--Level 11 ($901-$1000)) with a
payment rate of $950.50.
We identified 73 single frequency CY 2025 claims for ratesetting
for CPT code 0890T. Using this claims data from CY 2025, our analysis
found the geometric mean cost of CPT 0890T is $1,750, the median cost
is $1,868, and the arithmetic mean cost is $1,955. The arithmetic mean
is the statistical methodology that estimates the highest cost for the
service. Therefore, we propose, for CY 2027, to assign CPT code 0890T
to APC 1521 (New Technology--Level 21 ($1901-$2000)) with a payment
rate of $1950.50.
We identified 19 single frequency CY 2025 claims for ratesetting
for CPT code 0892T. Using this claims data from CY 2025, our analysis
found the geometric mean cost of CPT 0892T is approximately $2,649, the
median cost is approximately $2,193 and the arithmetic mean cost is
approximately $2,719. The arithmetic mean is the statistical
methodology that estimates the highest cost for the service. Therefore,
we propose, for CY 2027, to assign CPT code 0892T to APC 1523 (New
Technology--Level 23 ($2501-$3000)) with a payment rate of $2,750.50.
For CPT code 0891T, the OPPS payment rate is proposed based on
available CY 2025 claims data as the available single frequency claims
exceed the 100 claims threshold generally used for our universal low
volume policy. Therefore, for CY 2027, we propose to assign CPT code
0891T to a New Technology APC based on the code's geometric mean costs.
Specifically, we propose to assign CPT code 0891T to APC 1520 (New
Technology--Level 20 ($1801-$1900)) with a payment rate of $1,850.50
based on its approximate geometric mean cost of $1,885, which is
calculated using the available 241 single frequency claims from CY 2025
claims data. Please refer to Table 20 for the final CY 2026 and
proposed CY 2027 OPPS New Technology APC and status indicator
assignments for CPT codes 0889T, 0890T, 0891T, and 0892T.
The proposed CY 2027 payment rates for these CPT codes can be found
in Addendum B to this proposed rule via the internet on the CMS
website. In addition, we refer readers to Addendum D1 to this proposed
rule for the status indicator meanings for all codes reported under the
OPPS. Addendum D1 can also be found via the internet on the CMS
website.
[[Page 41801]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.041
i. Skin Cell Suspension Autograft (SCSA) Procedures (CPT Codes 15X19
Through 15X22) (APC 1575)
Effective January 1, 2025, both CPT code 15013 (Preparation of skin
cell suspension autograft, requiring enzymatic processing, manual
mechanical disaggregation of skin cells, and filtration; first 25 sq cm
or less of harvested skin) and HCPCS code C8002 (Preparation of skin
cell suspension autograft, automated, including all enzymatic
processing and device components (do not report with manual suspension
preparation)) describe the preparation step of a skin cell suspension
autograft (SCSA) procedure to treat acute thermal burn injuries. Both
codes describe the preparation step of a three-step SCSA procedure:
harvesting, preparation, and application. The difference between the
codes is that CPT code 15013 describes the manual preparation of the
SCSA, and HCPCS code C8002 describes the automated preparation of the
SCSA. Due to the similarities between the procedures, in the CY 2025
OPPS/ASC final rule with comment period, we assigned both CPT code
15013 and HCPCS code C8002 to APC 1567 (New Technology--Level 30
($6,001-$6,500)) with a payment rate of $6,250.50 and status indicator
``T''. In the CY 2025 OPPS/ASC final rule with comment period, we noted
that we believed the sum of the payment rates for the three-step
process should approximate $10,000. However, because of the effect of
the multiple procedure reduction, the total payment for the skin cell
suspension autograft furnished using the RECELL System would have been
approximately $8,000, contrary to the intended target of $10,000 as
stated in the CY 2025 OPPS/ASC final rule with comment period. To
correct this error, in the CY 2025 OPPS/ASC Correction Notice, we
assigned both CPT code 15013 and HCPCS code C8002 to APC 1532 (New
Technology--Level 32 ($7,001-$7,500)) with a payment rate of $7,250.50
and status indicator ``S'' (Procedure or service, not discounted when
multiple, paid under OPPS; separate APC payment).
For CY 2026, the OPPS payment rates were based on available CY 2024
claims data. Since CPT code 15013 and HCPCS code C8002 were not
effective until January 1, 2025, we did not have any claims for either
code for CY 2024. Therefore, for CY 2026, we finalized to continue to
assign CPT code 15013 and HCPCS code C8002 to APC 1532 (New
Technology--Level 32 ($7,001-$7,500)) with a payment rate of $7,250.50.
Effective January 1, 2027, CPT codes 15011 through 15018 will be
deleted and replaced with a bundled four code structure: CPT code 15X19
through 15X22:
CPT 15X19: Skin cell suspension autograft (SCSA), trunk,
arms, and/or legs; first 100 sq cm or less, or 1 percent of body area
of infants and children
CPT 15X20: each additional 100 sq cm, or each additional 1
percent of body area of infants and children, or part thereof (List
separately in addition to code for primary procedure)
CPT 15X21: Skin cell suspension autograft (SCSA), face,
scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/
or multiple digits; first 100 sq cm or less, or 1 percent of body area
of infants and children
[[Page 41802]]
CPT 15X22: Skin cell suspension autograft (SCSA), face,
scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/
or multiple digits; each additional 100 sq cm, or each additional 1
percent of body area of infants and children, or part thereof (List
separately in addition to code for primary procedure)
Unlike CPT codes 15011 through 15018, which provide a three step-
based coding structure with each procedural step billed separately, CPT
codes 15X19 through 15X22 provide a simplified bundled coding structure
based on anatomic size.
In light of these coding changes, we propose for CY 2027 to
maintain overall payment rates for the SCSA procedure, as we do not
believe that changes in coding structure alone warrant changes in
payment for a procedure that remains clinically unchanged. The proposed
APC and status indicator assignments for CPT Codes 15X19 through 15X22
are provided in Table 21. Due to the new bundled coding structure, for
CY 2027 we also propose to delete HCPCS code C8002 (Preparation of skin
cell suspension autograft, automated, including all enzymatic
processing and device components (do not report with manual suspension
preparation)), which describes the automated preparation step of the
SCSA procedure.
[GRAPHIC] [TIFF OMITTED] TP07JY26.042
The proposed CY 2027 payment rates for CPT codes 15X19 through
15X22 can be found in Addendum B to this proposed rule via the internet
on the CMS website.
j. Renal Histotripsy Service (APC 1534)
HCPCS code C9790 (Histotripsy (that is, non-thermal ablation via
acoustic energy delivery) of malignant renal tissue, including image
guidance) was created October 1, 2023, and was used to describe the
Medicare approved Category B IDE (investigational device exemption)
clinical study involving the renal histotripsy procedure associated
with the use of the HistoSonics Edison System. CPT code 0888T
(Histotripsy (i.e., non-thermal ablation via acoustic energy delivery)
of malignant renal tissue, including image guidance) replaced HCPCS
code C9790 effective July 1, 2024.
Renal histotripsy is a non-invasive, non-thermal, mechanical
process that uses a focused beam of sonic energy to destroy solid renal
tumors and is currently in a prospective, multi-center, single-arm
pivotal trial designed to evaluate the effectiveness and safety of the
device for the destruction of kidney tissue by treating primary solid
renal tumors. Because the renal histotripsy clinical study is
designated as a Category B (non-experimental/investigational) IDE
study, the Medicare payment for CPT code 0888T reflects payment for
both the service that is performed, and the device used each time it is
reported on a claim. For CY 2025 we assigned CPT code 0888T to APC 1576
(New Technology--Level 39 ($15,001-$20,000)) with a payment rate of
$17,500.50 based on the previous APC and status indicator assignments
for HCPCS code C9790.
For CY 2026, the proposed OPPS payment rates were based on
available CY 2024 claims data. We had identified one single frequency
claim for HCPCS code C9790 and eight single frequency claims for CPT
code 0888T. Given our proposal to maintain current New Technology APC
assignments for CY 2026 for New Technology services with fewer than 10
claims in the 4-year lookback period applicable for the universal low-
volume APC policy, we finalized maintaining the APC assignment for CPT
code 0888T to APC 1576 (New Technology--Level 39 ($15,001-$20,000))
with a payment rate of $17,500.50.
For CY 2027, the proposed rates are based on available CY 2025
claims data. We identified 14 single frequency CY 2025 claims for
ratesetting for CPT code 0888T. Using this claims data from CY 2025,
our analysis found the geometric mean cost of CPT 0888T is
approximately $5,940, the median cost is approximately $6,740 and the
arithmetic mean cost is approximately $8,145. The arithmetic mean is
the statistical methodology that estimates the highest cost for the
service. Therefore, we propose, for CY 2027, to assign CPT code 0888T
to APC 1534 (New Technology--Level 34 ($8001-$8500)) with a payment
rate of $8,250.50.
Refer to Table 22 for the final CY 2026 and proposed CY 2027 OPPS
New Technology APC and status indicator assignment for CPT code 0888T.
The proposed CY 2027 payment rates for this CPT code can be found in
[[Page 41803]]
Addendum B to this proposed rule via the internet on the CMS website.
In addition, we refer readers to Addendum D1 to this proposed rule for
the status indicator meanings for all codes reported under the OPPS.
Addendum D1 can also be found via the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TP07JY26.043
4. CY 2027 Proposals for SaMS Procedures Currently Assigned to New
Technology APCs
For CY 2027, we propose an interim payment policy for software-
based medical services with algorithmic analyses, which is detailed in
section X.B. of this proposed rule. Since this CY 2027 proposal
involves services assigned to New Technology APCs, this section
specifically addresses the interaction between software-based services
with algorithmic analyses that are currently assigned to new technology
APCs for CY 2026, including the CY 2027 proposed changes to terminology
and status indicator assignments. For the full discussion on proposed
CY 2027 policies on software-based medical services with algorithmic
analyses, including services that are currently assigned to clinical
APCs for CY 2026 and analyses currently paid under the Clinical Lab Fee
Schedule (CLFS), we refer readers to section X.B. of this proposed rule
with comment period.
For CY 2027, we propose three changes regarding software-based
medical services with algorithmic analyses. First, we propose to change
the terminology from SaaS (Software as a Service), which is how we have
referred to these services in prior rulemaking, to Software as a
Medical Service (SaMS). For a detailed discussion on the rationale for
this proposed terminology change from SaaS to SaMS, we refer readers to
section X.B. of this proposed rule with comment period.
Second, for SaMS that are currently assigned to new technology APCs
for CY 2026, we propose to maintain the current new technology APC
assignments under our equitable adjustment authority at section
1833(t)(2)(E) of the Act for CY 2027. While we typically apply our
standard rate-setting methodologies for all services assigned to new
technology APCs, such as the universal low-volume policy or making
adjustments based on geometric mean cost using available claims data,
we are not proposing to do so for SaMS because this is an interim
policy. As discussed in section X.B. of this proposed rule, we propose
to use CY 2027 as a transitional period to take an incremental step
toward developing a more comprehensive and appropriate payment
methodology for services we propose to identify as SaMS. In light of
this broader policy objective, we believe it is important to minimize
potential disruptions in payment for SaMS during this period.
Additionally, given the evolving nature of these types of services and
anticipated potential policy changes in the future, we believe
maintaining current payment levels for CY 2027 is a reasonable step
while we continue to refine a more comprehensive payment framework for
these services. We note that this approach of maintaining payment is
not unusual for SaMS services, as we have historically used our
equitable adjustment authority to maintain the new technology APC
assignments for some SaMS when there have been concerns regarding low
volume and limited claims data. Consistent with this approach, we
propose to maintain the existing new technology APC assignments for
SaMS rather than assign payment rates based on current claims data.
Third, we propose to assign SaMS assigned to new technology APCs to a
proposed new status indicator ``O1''--Software as a Medical Service,
paid under OPPS; separate APC payment. We refer readers to section XI.
of this proposed rule with comment period for the payment status of
status indicator ``O1.''
We refer readers to section X.B. of this proposed rule for a full
discussion on our CY 2027 proposals for SaMS.
(1) Atherosclerosis Imaging-Quantitative Computer Tomography (AI-QCT)
(APC 1511)
Atherosclerosis Imaging-Quantitative Computer Tomography (AI-QCT)
is a software-based service with algorithmic analysis that assesses the
extent of coronary artery disease severity. This procedure is performed
to quantify the extent of coronary plaque and stenosis in patients who
have undergone coronary computed tomography analysis (CCTA). The AMA
CPT Editorial Panel established the following four codes associated
with this service, effective January 1, 2021:
0623T: Automated quantification and characterization of
coronary atherosclerotic plaque to assess severity of coronary disease,
using data from coronary computed tomographic angiography; data
preparation and transmission, computerized analysis of data, with
review of computerized analysis output to reconcile discordant data,
interpretation and report.
0624T: Automated quantification and characterization of
coronary atherosclerotic plaque to assess severity of coronary disease,
using data from coronary computed tomographic angiography; data
preparation and transmission.
0625T: Automated quantification and characterization of
coronary atherosclerotic plaque to assess severity of coronary disease,
using data from coronary computed tomographic angiography; computerized
analysis of data from coronary computed tomographic angiography.
0626T: Automated quantification and characterization of
coronary atherosclerotic plaque to assess severity of coronary disease,
using data from coronary computed tomographic angiography; review of
computerized analysis output to reconcile discordant data,
interpretation and report.
[[Page 41804]]
Of these four CPT codes, only CPT code 0625T was determined to be
separately payable in the OPPS and was assigned to status indicator
``S'' (Procedure or Service, Not Discounted When Multiple) starting
October 1, 2022. We assigned CPT code 0625T to a separately payable
status indicator based on the technology and its potential utilization
in hospital outpatient departments, our evaluation of the service, as
well as input from our medical advisors. The procedure was assigned to
APC 1511 (New Technology--Level 11 ($900-$1000)) with a payment rate of
$950.50 for CY 2023.
For CY 2024, the OPPS payment rates were based on available CY 2022
claims data. There were 37 claims for CPT code 0625T during this time
period. As this was below the threshold of 100 claims for a service
within a year, we explained that we could propose to designate CPT code
0625T as a low volume service under our universal low volume New
Technology APC policy and use the highest of the geometric mean cost,
arithmetic mean cost, or median cost based on up to 4 years of claims
data to assign code 0625T to the appropriate New Technology APC. We
found the geometric mean cost for the service to be approximately
$3.70, the arithmetic mean cost to be approximately $4.10, and the
median cost to be approximately $3.50. Under our universal low volume
new technology APC policy, we would use the greatest of the statistical
methodologies, the arithmetic mean, to assign CPT code 0625T to New
Technology 1491 (New Technology Level 1A--(0-$10)) with a payment rate
of $5.00. However, we acknowledged that, because CPT code 0625T was
only made separately payable as part of the OPPS in October 2022, and,
therefore, the CY 2022 claims available only reflected 2 months of
data, we were concerned that we did not have sufficient claims data to
justify reassignment to another new technology APC (66 FR 69902).
Therefore, consistent with our current policy to retain services within
new technology APC groups until we obtain sufficient claims data to
justify reassignment (66 FR 69902), for CY 2024, we finalized our
proposal to maintain CPT code 0625T's assignment to APC 1511 (New
Technology--Level 11 ($901-$1000) with a payment rate of $950.50 rather
than applying the universal low volume APC policy (88 FR 81649).
For CY 2025, there were only three available claims for 0625T. We
continued to have concerns that we did not have sufficient claims data
to justify reassignment to another New Technology APC based on the CY
2023 geometric mean cost of $180. Therefore, we used our authority
under section 1833(t)(2)(E) for CY 2025 to continue to assign CPT code
0625T to APC 1511 (New Technology--Level 11 ($901-$1000) with a payment
rate of $950.50 (89 FR 94039).
Effective January 1, 2026, the AMA CPT Editorial Panel created a
new Category I CPT code for AI-QCT: CPT code 75577 (Quantification and
characterization of coronary atherosclerotic plaque to assess severity
of coronary disease, derived from augmentative software analysis of the
data set from a coronary computed tomographic angiography, with
interpretation and report by a physician or other qualified healthcare
professional). CPT codes 0623T-0626T were deleted and replaced with CPT
code 75577. Since CPT code 75577 was effective on January 1, 2026, we
will not have claims data available for ratesetting for this code until
the CY 2028 rulemaking cycle. However, as CPT code 0625T was still in
use until December 31, 2025, we determined the payment rate for CY 2026
for CPT code 75577 using the available CY 2024 claims data for CPT code
0625T.
For the CY 2026 OPPS/ASC proposed rule, there were 22 separately
payable claims in the CY 2024 data reported for CPT code 0625T with a
geometric mean cost of approximately $496 (90 FR 53539). We continued
to have concerns that we did not have sufficient claims data to justify
reassignment to another APC based on the 4-year lookback period, which
determined the highest value to be the arithmetic mean of $243.
Therefore, we used our authority under section 1833(t)(2)(E) of the Act
for CY 2026 to assign CPT code 75577 to APC 1511 (New Technology--Level
11 ($901-$1000) with a payment rate of $950.50 (90 FR 53540).
For CY 2027, we propose to designate the AI-QCT procedure as a SaMS
procedure, as such term is provided in section X.B. of this proposed
rule, and maintain the existing new technology APC assignment for CPT
code 75577 using our authority under section 1833(t)(2)(E) of the Act.
By maintaining the existing APC assignment, we hope to minimize
potential disruptions in payment for this service while we continue to
evaluate longer-term payment approaches. Therefore, for CY 2027, we
propose to maintain the APC assignment for CPT code 75577 to APC 1511
(New Technology--Level 11 ($901-$1000) with a payment rate of $950.50.
Additionally, we propose to assign CPT code 75577 to proposed new
status indicator ``O1'' to designate the service as SaMS.
The proposed CY 2027 payment rates can be found in Addendum B to
this proposed rule via the internet on the CMS website. In addition, we
refer readers to Addendum D1 to this proposed rule for the status
indicator meanings for all codes reported under the OPPS. Addendum D1
can also be found via the internet on the CMS website.
(2) LiverMultiScan Service (APC 1511)
CPT codes 0648T (Quantitative magnetic resonance for analysis of
tissue composition (e.g., fat, iron, water content), including
multiparametric data acquisition, data preparation and transmission,
interpretation and report, obtained without diagnostic mri examination
of the same anatomy (e.g., organ, gland, tissue, target structure)
during the same session; single organ) and 0649T (Quantitative magnetic
resonance for analysis of tissue composition (e.g., fat, iron, water
content), including multiparametric data acquisition, data preparation
and transmission, interpretation and report, obtained with diagnostic
mri examination of the same anatomy (e.g., organ, gland, tissue, target
structure); single organ (list separately in addition to code for
primary procedure)) became effective July 1, 2021 and are associated
with the LiverMultiScan service.
LiverMultiScan is a software-based service with algorithmic
analysis that is intended to aid the diagnosis and management of
chronic liver disease, the most prevalent of which is Non-Alcoholic
Fatty Liver Disease (NAFLD). It provides standardized, quantitative
imaging biomarkers for the characterization and assessment of
inflammation, hepatocyte ballooning, and fibrosis, as well as
steatosis, and iron accumulation. LiverMultiScan receives MR images
acquired from patients' providers and analyzes the images using their
proprietary Artificial Intelligence (AI) algorithms. It then sends the
providers a quantitative metric report of the patient's liver fibrosis
and inflammation. In accordance with our add-on codes policy for SaaS
\22\ (87 FR 72032 to 72033), SaaS CPT add-on codes are assigned to the
same APCs and status indicators as their standalone codes.
[[Page 41805]]
Thus, CPT code 0649T, the add-on code for LiverMultiScan, is assigned
to the identical APC and status indicator as CPT code 0648T, the
standalone code for the same service.
---------------------------------------------------------------------------
\22\ We note that at the time that the add-on code policy was
created (87 FR 72032 through 72033), we referred to these services
as SaaS. We will continue to refer to the policy as the SaaS add-on
code policy as provided in rulemaking. However, when we refer to
these services generally, we will use the term SaMS, as explained in
this proposed rule. The SaaS and SaMS terms are interchangeable.
---------------------------------------------------------------------------
For CY 2024, CY 2025, and CY 2026, we used our equitable adjustment
authority under section 1833(t)(2)(E) to continue to assign CPT codes
0648T and 0649T to APC 1511 (New Technology--Level 11 ($901-$1,000)
with a payment rate of $950.50 (90 FR 53545 and 53546).
For CY 2027, we propose to designate the LiverMultiScan service as
a SaMS procedure, as such term is provided section X.B. of this
proposed rule, and maintain the existing new technology APC assignment
for CPT codes 0648T and 0649T using our authority under section
1833(t)(2)(E) of the Act. By maintaining the existing APC assignments,
we hope to minimize potential disruptions in payment for this service
while we continue to evaluate longer-term payment approaches.
Therefore, for CY 2027, we propose to maintain the APC assignment for
CPT codes 0648T and 0649T to APC 1511 (New Technology--Level 11 ($901-
$1000) with a payment rate of $950.50.
The proposed CY 2027 payment rates can be found in Addendum B to
this proposed rule via the internet on the CMS website. In addition, we
refer readers to Addendum D1 to this proposed rule for the status
indicator meanings for all codes reported under the OPPS. Addendum D1
can also be found via the internet on the CMS website.
(3) Optellum Lung Cancer Prediction (LCP) (APC 1508)
CPT codes 0721T (Quantitative computed tomography (CT) tissue
characterization, including interpretation and report, obtained without
concurrent CT examination of any structure contained in previously
acquired diagnostic imaging) and 0722T (Quantitative computed
tomography (CT) tissue characterization, including interpretation and
report, obtained with concurrent CT examination of any structure
contained in the concurrently acquired diagnostic imaging dataset (list
separately in addition to code for primary procedure)) became effective
July 1, 2022, and are associated with the Optellum LCP technology. The
Optellum LCP is a software-based service with algorithmic analysisthat
applies an algorithm to a patient's CT scan to produce a raw risk score
for a patient's pulmonary nodule. The physician uses the risk score to
quantify the risk of lung cancer and to determine what the next
management step should be for the patient (for example, CT surveillance
versus invasive procedure). In accordance with our SaaS add-on codes
policy \23\ (87 FR 72032 to 72033), SaaS CPT add-on codes are assigned
to the same APCs and status indicators as their standalone codes. Thus,
CPT code 0722T, the add-on code for the Optellum LCP service, is
assigned to the identical APC and status indicator as CPT code 0721T,
the standalone code for the same service.
---------------------------------------------------------------------------
\23\ We note that when the add-on code policy was created in the
CY 2023 OPPS/ASC final rule with comment period, we referred to
these services as SaaS. We will continue to refer to the policy as
the SaaS add-on code policy as provided in rulemaking. However, when
we refer to these services generally, we will use the term SaMS, as
explained in this proposed rule. The SaaS and SaMS terms are
interchangeable.
---------------------------------------------------------------------------
For CY 2024, we assigned CPT codes 0721T and 0722T to APC 1508 (New
Technology--Level 8 ($601-$700)) (88 FR 81640 and 81641).
For CY 2025, we continued to assign CPT codes 0721T and 0722T to
APC 1508 (New Technology--Level 8 ($601-$700)) with a payment rate of
$650.50 based on our CY 2025 policy to maintain new technology APC
assignments for CY 2025 for new technology APC services with fewer than
10 claims in the 4-year lookback period applicable for the universal
low-volume APC policy (89 FR 94039 through 94041).
For CY 2026, we finalized OPPS payment rates for CPT codes 0721T
and 0722T based on CY 2024 claims data, which would have resulted in
assignment to APC 1502 (New Technology--Level 2 ($51-$100)). However,
due to limited claims data, the resulting approximate 90 percent
reduction in payment, and questions we had regarding potential
adjustments to our payment methodologies to reflect the underlying
value of SaMS, we instead used our authority under section
1833(t)(2)(E) of the Act to maintain the APC assignment. Therefore, for
CY 2026, we continued to assign CPT codes 0721T and 0722T to APC 1508
(New Technology--Level 8 ($601-$700)) with a payment rate of $650.50
(90 FR 53546 and 53547).
For CY 2027, we propose to designate the Optellum LCP service as a
SaMS procedure, as such term is provided section X.B. of this proposed
rule, and maintain the existing new technology APC assignment for CPT
codes 0721T and 0722T using our authority under section 1833(t)(2)(E)
of the Act. By maintaining the existing APC assignments, we hope to
minimize potential disruptions in payment for this service while we
continue to evaluate longer-term payment approaches. Therefore, for CY
2027, we propose to maintain the APC assignments for CPT codes 0721T
and 0722T to APC 1508 (New Technology--Level 8 ($601-$700) with a
payment rate of $650.50. Additionally, we propose to assign CPT codes
0721T and 0722T to proposed new status indicator ``O1'' to designate
the service as SaMS.
The proposed CY 2027 payment rates can be found in Addendum B to
this proposed rule via the internet on the CMS website. In addition, we
refer readers to Addendum D1 to this proposed rule for the status
indicator meanings for all codes reported under the OPPS. Addendum D1
can also be found via the internet on the CMS website.
(4) Quantitative Magnetic Resonance (QMR) for Analysis of Tissue
Composition (APC 1511)
Effective January 1, 2022, CPT codes 0697T (Quantitative magnetic
resonance for analysis of tissue composition (e.g., fat, iron, water
content), including multiparametric data acquisition, data preparation
and transmission, interpretation and report, obtained without
diagnostic mri examination of the same anatomy (e.g., organ, gland,
tissue, target structure) during the same session; multiple organs) and
0698T (Quantitative magnetic resonance for analysis of tissue
composition (e.g., fat, iron, water content), including multiparametric
data acquisition, data preparation and transmission, interpretation and
report, obtained with diagnostic mri examination of the same anatomy
(e.g., organ, gland, tissue, target structure); multiple organs (list
separately in addition to code for primary procedure)) are associated
with the CoverScan, which is a software-based service with algorithmic
analyses. This service is a medical image management and processing
software package that analyzes MR data and provides quantified metrics
of multiple organs such as the heart, lungs, liver, spleen, pancreas,
and kidney. For CY 2024, we assigned CPT codes 0697T and 0698T to APC
1511 (New Technology--Level 11 ($900-$1,000)).
For CY 2025, there were fewer than 100 claims for ratesetting and
because we recognized that the number of claims used to apply our
universal low volume policy (using the highest of the geometric mean
cost, arithmetic mean cost, or median cost based on up to 4 years of
claims data) may not have represented the cost of this SaaS, we used
our equitable adjustment authority under section 1833(t)(2)(E) of the
Act to
[[Page 41806]]
continue to assign CPT codes 0697T and 0698T to APC 1511 (New
Technology--Level 11 ($900-$1,000)) with a payment of $950.50. In
accordance with our SaaS add-on codes policy \24\ (87 FR 72032 to
72033), SaaS CPT add-on codes are assigned to the same APCs and status
indicators as their standalone codes. Thus, CPT code 0698T, the add-on
code for CoverScan was assigned to the identical APC and status
indicator as CPT code 0697T, the standalone code for the same service
(89 FR 94041 to 94043).
---------------------------------------------------------------------------
\24\ We note that when the add-on code policy was created in the
CY 2023 OPPS/ASC final rule with comment period, we referred to
these services as SaaS. We will continue to refer to the policy as
the SaaS add-on code policy as provided in rulemaking. However, when
we refer to these services generally, we will use the term SaMS, as
explained in this proposed rule. The SaaS and SaMS terms are
interchangeable.
---------------------------------------------------------------------------
For CY 2026, the OPPS payment rates were based on available CY 2024
claims data. We identified 55 single frequency claims for CPT code
0698T and no claims for CPT code 0697T in CY 2024. Because the
standalone service and add-on services are identical, we believed it
was important for purposes of ratesetting to use the data that is
available, whether it was associated with the standalone code or the
add-on code, to determine appropriate payment. As the 55 single
frequency claims were below the threshold of 100 claims for a service
within a year, we would have proposed applying our universal low volume
APC policy and would have used the highest of the geometric mean cost,
arithmetic mean cost, or median cost based on up to 4 years of claims
data to assign CPT codes 0697T and 0698T to the appropriate New
Technology APC. Our analysis of the combined data, zero claims for CPT
code 0697T and 137 claims for CPT code 0698T, yielded a geometric mean
cost of approximately $422, an arithmetic mean cost of approximately
$600, and a median cost of approximately $777. The median cost was the
statistical methodology that estimated the highest cost for CPT codes
0697T and 0698T. Based on the median cost, we would have proposed to
assign CPT codes 0697T and 0698T to APC 1509 (New Technology--Level 9
($701-$800)) with a payment of $750.50.
For CY 2026 OPPS/ASC final rule with comment period (90 FR 53547 to
53549), we recognized that the few claims available for CPT codes 0697T
and 0698T may not have truly represented the cost of this SaMS. We
recognized that software-based technologies, like those described by
CPT codes 0697T and 0698T, are unique and rapidly evolving and that a
significant fluctuation in payment may hinder patient access to these
new services. For CY 2026, we finalized continuing to assign CPT codes
0697T and 0698T to APC 1511 (New Technology--Level 11 ($900-$1,000))
with a payment of $950.50 which we believe best reflected the cost of
the service at the time.
For CY 2027, we propose to identify the CoverScan procedure as a
SaMS procedure, as such term is provided section X.B. of this proposed
rule, and maintain the existing new technology APC assignment for CPT
codes 0697T and 0698T using our authority under section 1833(t)(2)(E).
By maintaining the existing APC assignments, we hope to minimize
potential disruptions in payment for this service while we continue to
evaluate longer-term payment approaches. Therefore, for CY 2027, we
propose to maintain the APC assignment for CPT codes 0697T and 0698T to
APC 1511 (New Technology--Level 11 ($901-$1000) with a payment rate of
$950.50. Additionally, we propose to assign CPT codes 0697T and 0698T
to proposed new status indicator ``O1'' to designate the service as
SaMS.
The proposed CY 2027 payment rates can be found in Addendum B to
this proposed rule via the internet on the CMS website. In addition, we
refer readers to Addendum D1 to this proposed rule for the status
indicator meanings for all codes reported under the OPPS. Addendum D1
can also be found via the internet on the CMS website.
(5) Quantitative Magnetic Resonance Cholangiopancreatography (QMRCP)
(APC 1511)
Effective July 1, 2022, CPT codes 0723T (Quantitative magnetic
resonance cholangiopancreatography (QMRCP) including data preparation
and transmission, interpretation and report, obtained without
diagnostic magnetic resonance imaging (MRI) examination of the same
anatomy (e.g., organ, gland, tissue, target structure) during the same
session) and 0724T (Quantitative magnetic resonance
cholangiopancreatography (QMRCP), including data preparation and
transmission, interpretation and report, obtained with diagnostic
magnetic resonance imaging (MRI) examination of the same anatomy (e.g.,
organ, gland, tissue, target structure) (list separately in addition to
code for primary procedure)) are associated with the QMRCP, a software-
based service with algorithmic analysis. The service performs
quantitative assessment of the biliary tree and gallbladder. It uses a
proprietary algorithm that produces a three-dimensional reconstruction
of the biliary tree and pancreatic duct and also provides precise
quantitative information of biliary tree volume and duct metrics. In
accordance with our SaaS add-on codes policy \25\ (87 FR 72032 to
72033), SaaS CPT add-on codes are assigned to the same APCs and status
indicators as their standalone codes. Consistent with our SaaS add-on
codes policy, CPT code 0724T, the add-on code for QMRCP is assigned to
the identical APC and status indicator as CPT code 0723T, the
standalone code for the same service. For CY 2024, we assigned CPT
codes 0723T and 0724T to APC 1511 (New Technology--Level 11 ($900-
$1,000)). For CY 2025, we continued to assign CPT codes 0723T and 0724T
to APC 1511 (New Technology--Level 11 ($900-$1,000)) based on there
being fewer than 10 claims in the 4-year lookback period and the
exception from the universal low- volume APC policy.
---------------------------------------------------------------------------
\25\ We note that when the add-on code policy was created in the
CY 2023 OPPS/ASC final rule with comment period, we referred to
these services as SaaS. We will continue to refer to the policy as
the SaaS add-on code policy as provided in rulemaking. However, when
we refer to these services generally, we will use the term SaMS, as
explained in this proposed rule. The SaaS and SaMS terms are
interchangeable.
---------------------------------------------------------------------------
For CY 2026, the OPPS payment rates were proposed to be based on
available CY 2024 claims data. There were only four new claims for
HCPCS code 0724T and no claims for CPT code 0723T. Given our proposal
to maintain current New Technology APC assignments for CY 2026 for New
Technology APC services with fewer than 10 claims in the 4-year
lookback period due to an exception from the universal low-volume APC
policy, we proposed, for CY 2026, to continue to assign CPT codes 0723T
and 0724T to APC 1511 (New Technology--Level 11 ($901-$1000)), with a
payment rate of $950.50.
For CY 2027, we propose to designate the QMRCP procedure as a SaMS
procedure, as such term is provided section X.B. of this proposed rule,
and maintain the existing new technology APC assignments for CPT codes
0723T and 0724T using our authority under section 1833(t)(2)(E) of the
Act. By maintaining the existing APC assignments, we hope to minimize
potential disruptions in payment for this service while we continue to
evaluate longer-term payment approaches. Therefore, for CY 2027, we
propose to maintain the APC assignments for CPT codes 0723T and 0724T
to APC 1511 (New Technology--Level 11 ($901-$1000) with a payment
[[Page 41807]]
rate of $950.50. Additionally, we propose to assign CPT codes 0723T and
0724T to proposed new status indicator ``O1'' to designate the service
as SaMS.
The proposed CY 2027 payment rates can be found in Addendum B to
this proposed rule via the internet on the CMS website. In addition, we
refer readers to Addendum D1 to this proposed rule for the status
indicator meanings for all codes reported under the OPPS. Addendum D1
can also be found via the internet on the CMS website.
(6) Fibresolve, 0877T and 0878T (APC 1508)
Effective July 1, 2024, the AMA CPT Editorial Panel established the
following CPT codes to describe the software-based service with
algorithmic analysis medical technology used for the non-invasive
assessment of interstitial lung disease and idiopathic pulmonary
fibrosis utilizing data from chest computed tomography (CT) images. The
CPT codes, their long descriptors, and their current payment
assignments are listed below that describe Fibresolve.
0877T--Augmentative analysis of chest CT imaging data to
provide categorical diagnostic subtype classification of interstitial
lung disease; obtained without concurrent CT examination of any
structure contained in previously acquired diagnostic imaging. CPT code
0877T is assigned to New Technology APC 1508 New Technology--Level 8
($601-$700) and a status indicator of ``S'' (Procedure or Service, Not
Discounted When Multiple; Paid under OPPS) with a payment of $650.50.
0878T--Augmentative analysis of chest CT imaging data to
provide categorical diagnostic subtype classification of interstitial
lung disease; obtained with concurrent CT examination of the same
structure. CPT code 0878T is assigned to New Technology APC 1508 New
Technology--Level 8 ($601-$700) and a status indicator of ``S''
(Procedure or Service, Not Discounted When Multiple; Paid under OPPS)
with a payment of $650.50.
For CY 2027, we propose to designate the Fibresolve procedure as a
SaMS procedure, as such term is provided section X.B. of this proposed
rule, and maintain the existing new technology APC assignments for CPT
codes 0877T and 0878T using our authority under section 1833(t)(2)(E)
of the Act. By maintaining the existing APC assignments, we hope to
minimize potential disruptions in payment for this service while we
continue to evaluate longer-term payment approaches. Therefore, for CY
2027, we propose to maintain the APC assignments for CPT codes 0877T
and 0878T to APC 1508 (New Technology--Level 8 ($601-$700) with a
payment rate of $650.50. Additionally, we propose to assign CPT codes
0877T and 0878T to proposed new status indicator ``O1'' to designate
the service as SaMS.
The proposed CY 2027 payment rates can be found in Addendum B to
this proposed rule via the internet on the CMS website. In addition, we
refer readers to Addendum D1 to this proposed rule for the status
indicator meanings for all codes reported under the OPPS. Addendum D1
can also be found via the internet on the CMS website.
D. Proposed Universal Low Volume APC Policy for Clinical and
Brachytherapy APCs
In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63743
through 63747), we adopted a policy to designate clinical and
brachytherapy APCs as low volume APCs if they have fewer than 100
single claims that can be used for ratesetting purposes in the claims
year used for ratesetting for the prospective year. For the CY 2026
OPPS/ASC proposed rule, CY 2024 claims were generally the claims used
for ratesetting; and clinical and brachytherapy APCs with fewer than
100 single claims from CY 2024 that can be used for ratesetting would
be low volume APCs subject to our universal low volume APC policy. As
we stated in the CY 2022 OPPS/ASC final rule with comment period, we
adopted this policy to reduce the volatility in the payment rate for
those APCs with fewer than 100 single claims. Where a clinical or
brachytherapy APC has fewer than 100 single claims that can be used for
ratesetting, under our low volume APC payment adjustment policy, we
determine the APC cost as the greatest of the geometric mean cost,
arithmetic mean cost, or median cost based on up to 4 years of claims
data. We excluded APC 5853 (Partial Hospitalization for CMHCs) and APC
5863 (Partial Hospitalization for Hospital-based PHPs) from our
universal low volume APC policy given the different nature of policies
that affect the partial hospitalization program. We also excluded APC
2698 (Brachytx, stranded, nos) and APC 2699 (Brachytx, non-stranded,
nos) as our current methodology for determining payment rates for non-
specified brachytherapy sources is appropriate.
Based on claims data available for the CY 2027 OPPS/ASC proposed
rule, we proposed to designate five brachytherapy APCs and four
clinical APCs as low volume APCs under the OPPS. The five brachytherapy
APCs and four clinical APCs meet our criteria of having fewer than 100
single claims in the claims' year used for ratesetting (CY 2025 for the
CY 2027 OPPS/ASC proposed rule). Nine of the 10 APCs were designated as
low volume APCs in CY 2025. Based on data for the CY 2026 OPPS/ASC
proposed rule, APC 2645 (Brachytx, non-stranded, gold-198) has 87
single claims and now meets our criteria to be designated as a low
volume APC. Table 23 includes the CY 2025 claims available for
ratesetting for each of the APCs we propose to designate as a low
volume APC for CY 2027. The proposed cost statistics for our CY 2027
low volume APCs, such as the median, arithmetic mean, and geometric
mean cost are available for download with this proposed rule on the CMS
website. We refer readers to our website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices; click on the relevant regulation to download the
low volume APC cost statistics under the comprehensive (OPPS)
ratesetting methodology in the downloads section of the web page.
[[Page 41808]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.044
E. Proposed APC-Specific Policies
1. Nuclear Medicine and Related Services APC Series (APC 5591 Through
5594)
The Nuclear Medicine and Related Services APC series was created as
part of the broader APC restructuring and consolidation in the CY 2016
OPPS/ASC final rule with comment period (80 FR 70392 through 70397).
The APC series was developed from what were previously separate APC
groupings primarily organized by anatomy and imaging modality. Since
the initial establishment of the Nuclear Medicine and Related Services
series in the CY 2016 OPPS/ASC final rule with comment period, we have
maintained the four-level APC structure for the series.
In the CY 2025 OPPS/ASC final rule with comment period, we
finalized a policy of paying separately for diagnostic
radiopharmaceuticals with estimated per day costs higher than a
packaging threshold specific to diagnostic radiopharmaceuticals (89 FR
93948 through 93963). Because certain diagnostic radiopharmaceuticals
are paid separately under the policy, the nuclear medicine and other
services these diagnostic radiopharmaceuticals would otherwise be
packaged into would no longer include those costs. As a result, based
on the associated changes to the ratesetting process, we observed
impacts on the estimated cost of services assigned to the Nuclear
Medicine and Related Services APC series such that the range of cost
significant codes across the various APC levels became less distinct,
in particular between Levels 3 and 4.
As part of our standard process of reviewing updated claims and
cost report data, we continue to observe in the CY 2027 OPPS data that
the differences between the four levels of APC geometric means are less
distinct then they were previously, in part due to the policy of paying
separately for diagnostic radiopharmaceuticals. Specifically, under a
four level APC structure using the NPRM claims data and maintaining the
same APC assignments as in the CY 2026 OPPS/ASC final rule with comment
period, the geometric mean cost of the Level 3 APC would be $1,367.99
while the geometric mean cost of the Level 4 APC would be $1,497.06.
The range of cost significant codes in the Level 3 APC would be from
$812 to $1,404, while the range for the Level 4 APC would be from
$1,024 to $1,676; indicating a high degree of overlap in the estimated
costs of the services assigned to those APC levels. Given the relative
proximity of the APC geometric mean costs and the clinical and cost
similarities of the services between the APCs in the Nuclear Medicine
and Related Services series, we believe that it is appropriate to
reorganize the Nuclear Medicine and Related Services APC series for the
CY 2027 OPPS.
Additionally, we note that CPT codes 78431 (Myocardial imaging,
positron emission tomography (pet), perfusion study (including
ventricular wall motion[s] and/or ejection fraction[s], when
performed); multiple studies at rest and stress (exercise or
pharmacologic), with concurrently acquired computed tomography
transmission scan), 78432 (Myocardial imaging, positron emission
tomography (pet), combined perfusion with metabolic evaluation study
(including ventricular wall motion[s] and/or ejection fraction[s], when
performed), dual radiotracer (e.g., myocardial viability);), and 78433
(Myocardial imaging, positron emission tomography (pet), combined
perfusion with metabolic evaluation study (including ventricular wall
motion[s] and/or ejection fraction[s], when performed), dual
radiotracer (e.g., myocardial viability); with concurrently acquired
computed tomography transmission scan) have sufficient CY 2025 claims
data available to be appropriate assigned to clinical APCs for CY 2027
OPPS ratesetting. We believe the restructuring of the series now makes
it appropriate to propose to assign these codes to APC 5594 (Level 4
Nuclear Medicine and Related Services) and we propose to assign these
three CPT codes to APC 5594 for CY 2027.
Based on our review of the updated claims data, we propose to
reassign a number of services to revised levels in the Nuclear Medicine
and Related Services APC series for CY 2027 and to assign CPT codes
78431, 78432, and 78433 to APC 5594 (Level 4 Nuclear Medicine and
Related Services) in the CY 2027 OPPS. Please see the APC-sorted Two
Times Listing for this proposed rule on the CMS website or Addendum B
to this proposed rule to see the Nuclear Medicine APC we have proposed
to assign each HCPCS code in the series.
2. Breast/Lymphatic Surgery and Related Procedures APC Series (APC 5091
Through 5093)
The Breast/Lymphatic Surgery and Related Procedures APC series was
initially created as part of the broader APC restructuring and
consolidation in the CY 2016 OPPS/ASC final rule with comment period
(80 FR 70379 through 70380). The APC series was reorganized
[[Page 41809]]
from what were previously separate APC groupings for breast and skin
surgery. In the CY 2017 OPPS/ASC final rule with comment period, we
created an additional level 4 APC to the Breast/Lymphatic Surgery and
Related Procedures APC series (81 FR 79584). Since that time, we have
maintained the four-level APC structure for the series.
In the CY 2026 OPPS/ASC final rule with comment period, we observed
that certain complexity adjustments in the APC series were being
promoted up by two APC levels (90 FR 53466) due to cost inversion
between the Level 2 and 3 APCs. This data anomaly occurred as a
combined result of the APC levels having cost ranges that were not
sufficiently distinct, and the contribution of the complexity
adjustment claims data contributing to the APC geometric means. In the
CY 2026 OPPS/ASC final rule with comment period, we were able to
recalibrate the APCs to address these concerns, and, as part of our
standard practice, would continue to monitor the claims data as
available.
In reviewing the claims data available for ratesetting for the CY
2027 OPPS proposed rule, we continue to observe data anomalies due to
the APC cost ranges not being sufficiently distinct, in particular
between the Level 2 and 3 APCs for the Breast/Lymphatic Surgery and
Related Procedures APC series. While APC 5092 (Level 2 Breast/Lymphatic
Surgery and Related Procedures) has a cost significant range from
approximately $7,131.27 to $8,734.72, the single cost significant code
currently assigned to the Level 3 APC, that is not a complexity
adjustment, has an estimated geometric mean cost of $8,219.71, falling
well within the Level 2 cost significant range. As a result of the cost
ranges overlapping and based on the cost and payment anomalies that
would otherwise occur as a result, we believe that it is appropriate to
consolidate the current Level 2 and 3 APCs in the Breast/Lymphatic
Surgery and Related Procedures APC series into a single Level 2 APC.
Accordingly, the current Level 4 Breast/Lymphatic Surgery and Related
Procedures APC would then become the Level 3 Breast/Lymphatic Surgery
and Related Procedures APC. We note that while there would be changes
in the naming and structure of the levels, the APC geometric means, and
resulting payment rates, would likely not be significantly different
relative to where they otherwise would have been absent this proposal.
Based on our review of the updated claims data, for CY 2027, we
propose to establish a 3 level Breast/Lymphatic Surgery and Related
Procedures APC series by consolidating the current Level 2 and 3 APCs
into a single Level 2 APC, and remapping the current Level 4 APC as the
level 3 APC.
Please see the APC-sorted Two Times Listing for this proposed rule
on the CMS website, or Addendum B to this proposed rule, to see the
reconfigured Breast/Lymphatic Surgery and Related Procedures APC series
and the APC placement and payment rate for each HCPCS code within the
reconfigured APC series.
3. Hypoglossal Nerve Neurostimulator (HGNS) Procedures (APCs 5465,
5463, and 5432)
Effective January 1, 2022, the AMA's CPT Editorial Panel created
three new codes to describe the open implantation of hypoglossal nerve
neurostimulator (HGNS) array with an implanted pulse generator and a
separate distal respiratory sensor, the revision or replacement of the
HGNS, and the removal of the HGNS for the treatment of obstructive
sleep apnea (OSA). The codes, their long descriptors, and APC and
status indicators are listed below.
64582--Open implantation of hypoglossal nerve
neurostimulator array, pulse generator, and distal respiratory sensor
electrode or electrode array. CPT code 64582 is assigned to APC 5465
(Level 5 Neurostimulator and Related Procedures) and status indicator
``J1'' (Hospital Part B Services Paid Through a Comprehensive APC).
64583--Revision or replacement of hypoglossal nerve
neurostimulator array and distal respiratory sensor electrode or
electrode array, including connection to existing pulse generator. CPT
code 64583 is assigned to APC 5463 (Level 3 Neurostimulator and Related
Procedures) and status indicator ``J1'' (Hospital Part B Services Paid
Through a Comprehensive APC).
64584--Removal of hypoglossal nerve neurostimulator array,
pulse generator, and distal respiratory sensor electrode or electrode
array. CPT code 64584 is assigned to APC 5432 (Level 2 Nerve
Procedures) and status indicator ``Q2'' (T-Packaged Codes).
As the technology has evolved, we realize that the current HGNS CPT
codes do not accurately describe newer hypoglossal nerve
neurostimulators that are on the market. As a result, some providers
are utilizing CPT code 64568 (Open implantation of cranial nerve (e.g.,
vagus nerve) neurostimulator electrode array and pulse generator) to
describe the implantation of hypoglossal nerve neurostimulators that
are not described by the current hypoglossal nerve neurostimulator
implantation code.
To address the questions and concerns regarding coding and billing
for the implantation, revision or replacement, or removal of
hypoglossal nerve neurostimulators that are not described by existing
coding, we created six new C-codes. These new C-codes describe the
implantation, revision or replacement, and removal of hypoglossal nerve
neurostimulators that do not contain a separate implantable respiratory
sensor electrode or electrode array, and systems that do not contain an
implanted battery or pulse generator. We used the current HGNS CPT
codes as the crosswalk codes for the new C-codes. These new HCPCS codes
and their APC and status indicator assignments were published in the
April 2026 quarterly update CR (Transmittal 13686, Change Request
14380, dated March 13, 2026), and are retroactive to January 1, 2026.
The proposed APC and status indicator assignments for HCPCS codes
C8007-C8009 and C8011-C8013, along with their long descriptors are
shown in Table 24. The proposed CY 2027 rates for these codes can be
found in Addendum B to this proposed rule via the internet on the CMS
website.
[[Page 41810]]
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4. Permanent Prostatic Urethral Stent, CPT Code 52282 (APC 5375)
The ProVee[supreg] System is indicated to treat obstructive lower
urinary tract symptoms (LUTS) secondary to benign prostatic hyperplasia
(BPH) in men with prostatic urethral lengths greater than or equal to
3.75 cm and prostatic volumes between 30 cc and 80 cc. The insertion of
a permanent prostatic urethral stent procedure, represented by CPT code
52282 (Cystourethroscopy, with insertion of permanent urethral stent),
became effective January 1, 1998, and describes the insertion of a
permanent urethra stent using an endoscope. This procedure offers
another therapy option for select patients with lower urinary tract
symptoms (LUTS) secondary to BPH.
For CY 2026, we assigned CPT code 52282 to APC 5374 (Level 4
Urology and Related Services) with a payment rate of $3,601.33 based on
its geometric mean cost of approximately $3,775, which was calculated
using the available 115 single frequency claims from the CY 2024 claims
data.
For this CY 2027 OPPS/ASC proposed rule, we reviewed the CY 2025
claims submitted between January 1, 2025 through December 31, 2025,
that were processed on or before December 31, 2025, for CPT code 52282
and found 109 single frequency claims available for ratesetting, with a
resulting geometric mean cost of $4,005. Additionally, for this CY 2027
OPPS/ASC proposed rule, we examined the claims reported for CPT code
52282. We noted that there has not been an FDA approved permanent
prostatic urethral stent on the US market for approximately 9 years
until a permanent prostatic urethral stent received their FDA PMA
approval in late 2025. Therefore, we believe the report claims for CPT
code 52282 do not accurately represent the device and service cost
associated with inserting a permanent prostatic urethral stent. Based
on our examination of device and service costs associated with a
permanent prostatic urethral stent, we believe it is appropriate to
move CPT code 52282 to APC 5375 (Level 5 Urology and Related Services)
from APC 5374 (Level 4 Urology and Related Services) because CPT code
52282 shares more resource cost and clinical homogeneity with
procedures in APC 5375. Specifically, we believe CPT code 52282 shares
resource and clinical homogeneity with HCPCS code C9739
(Cystourethroscopy, with insertion of transprostatic implant; 1 to 3
implants). Therefore, for CY 2027, we propose to reassign CPT code
52282 from APC 5374 (Level 4 Urology and Related Services) to APC 5375
(Level 5 Urology and Related Services).
5. Integrated Sacral Neurostimulator, CPT Code 0786T (APC 5464)
Effective January 1, 2024, the CPT Editorial Panel separated
integrated from non-integrated (i.e., traditional) sacral
neurostimulator procedures by establishing new CPT code, 0786T to
report procedures using integrated sacral neurostimulator devices,
while CPT code 64590 was updated to reflect the use of traditional
technology. We assigned CPT code 0786T to status indicator ``E1'' (Not
covered by any outpatient benefit category) because the device
associated with this CPT code did not have FDA approval. The long
descriptors for CPT codes 0786T and 64590 are listed below:
0786T--Insertion or replacement of percutaneous electrode
array, sacral, with integrated neurostimulator, including imaging
guidance, when performed.
64590--Insertion or replacement of peripheral, sacral, or
gastric neurostimulator pulse generator or receiver, requiring pocket
creation and connection between electrode array and pulse generator or
receiver.
On June 17, 2025, Neuspera received FDA approval for their
implanted sacral neurostimulator for urge urinary incontinence (UUI).
At the August 2025 HOP Panel meeting, the manufacturer requested that
we assign CPT code 0786T to APC 5464 (Level 4 Neurostimulator and
Related
[[Page 41811]]
Procedures). The HOP Panel agreed with the presenter and made that
recommendation.
In the CY 2026 OPPS/ASC final rule with comment period, we assigned
CPT code 0786T to APC 5463 (Level 3 Neurostimulator and Related
Procedures) and status indicator ``J1'' based on what we believed were
the costs and resources required to perform the procedure with an
integrated device.
For CY 2027, proposed OPPS payment rates are based on available CY
2025 claims data. Because 0786T was not assigned to a clinical APC
before January 1, 2026, we do not have any claims data. Based on our
examination of the procedures assigned to the Level 3 and Level 4
Neurostimulator and Related Procedures APCs, we believe it is
appropriate to reassign CPT code 0786T from APC 5463 (Level 3
Neurostimulator and Related Procedures) to APC 5464 (Level 4
Neurostimulator and Related Procedures) because CPT code 0786T shares
more resource cost and clinical homogeneity with procedures in APC
5464, specifically, with the other sacral and tibial neuromodulation
procedures for bladder dysfunction that are assigned to APC 5464 (Level
4 Neurostimulator and Related Procedures). Therefore, for CY 2027, we
propose to reassign CPT code 0786T from APC 5463 (Level 3
Neurostimulator and Related Procedures) to APC 5464 (Level 4
Neurostimulator and Related Procedures). The proposed APC and status
indicator assignment for CPT code 0786T is shown in Table 25. The
proposed CY 2027 payment rates for CPT code 0786T can be found in
Addendum B to this proposed rule via the internet on the CMS website.
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6. C-Codes Describing Percutaneous Coronary Intervention (PCI) With
Drug-Eluting Stents, C-codes C9601, C9603, C9605, and C9608
Effective January 1, 2013, CMS created several HCPCS C-codes to
describe certain percutaneous coronary intervention (PCI) procedures
utilizing drug eluting stents to mirror those PCI CPT codes that do not
utilize drug eluting stents. The AMA CPT Editorial Board deleted
several of those CPT codes effective January 1, 2026. For CY 2027, we
propose to delete the C-codes that mirrored the deleted CPT codes,
specifically revising the status indicators for C9601, C9603, C9605,
and C9608 to ``D'' (Discontinued Codes) indicating that they are no
longer active codes. The C-codes, long descriptors, status indicators,
and their corresponding CPT code (listed below each C-code) are shown
in Table 26.
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7. Electrophysiologic Evaluation of Cardiac Contractility Modulation
Systems, CPT Code 0930T
CPT code 0930T (Electrophysiologic evaluation of cardiac
contractility modulation-defibrillator leads, including defibrillation-
threshold evaluation (induction of arrhythmia, evaluation of sensing
and therapy for arrhythmia termination), at time of initial
implantation or replacement with testing of cardiac contractility
modulation-defibrillator pulse generator) became effective January 1,
2025 and is used to describe the electrophysiologic evaluation of a
cardiac contractility modulation system at the time of initial
implantation or replacement of the system. This code is currently
assigned to APC 5211 (Level 1 Electrophysiologic Procedures) and status
indicator ``J1'' (Hospital Part B Services Paid Through a Comprehensive
APC). There are currently no claims data for CPT 0930T.
After review of the service and other like services, we believe
this service is always performed with the initial implantation or
replacement of the system and therefore, we believe that the
electrophysiologic evaluation is integral, ancillary, supportive,
dependent, and adjunctive to the primary service (the implantation or
replacement of the system) and should therefore be packaged into the
CPT code describing the initial implantation or replacement of the
cardiac contractility modulation-defibrillator pulse generator.
Therefore, for CY 2027, we propose to revise the status indicator
for CPT 0930T to ``N''. The proposed status indicator assignment for
CPT code 0930T is shown in Table 27. The proposed CY 2027 payment rate
for this HCPCS code can be found in Addendum B to the CY 2027 OPPS/ASC
proposed rule via the internet on the CMS website.
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8. Endovenous Femoral-Popliteal Arterial Revascularization With
Placement of Stent Graft, CPT Code 0505T
CPT code 0505T (Endovenous femoral-popliteal arterial
revascularization, with transcatheter placement of intravascular stent
graft(s) and closure by any method, including percutaneous or open
vascular access, ultrasound guidance for vascular access when
performed, all catheterization(s) and intraprocedural roadmapping and
imaging guidance necessary to complete the intervention, all associated
radiological supervision and interpretation, when performed, with
crossing of the occlusive lesion in an extraluminal fashion) became
effective January 1, 2018 and is used to treat patients with advanced
peripheral vascular disease, specifically those with long complex
femoropopliteal artery stenoses and occlusions resulting in lifestyle
limiting claudication or severe lower limb threatening ischemia.
The DETOURTM System is a graft system used with the
service described by CPT 0505T. It restores arterial blood flow to the
lower limb around the blocked femoral artery and allows for venous
return, which reduces the signs and symptoms of lower limb ischemia and
prevents amputation. We created HCPCS code C1604 (Graft, transmural
transvenous arterial bypass (implantable), with all delivery system
components) when the DETOURTM System was approved for
transitional device pass-through payment under OPPS effective January
1, 2024. The pass-through payment for this device
[[Page 41814]]
expires December 31, 2026. Once the pass-through payment period
expires, payment for the device is packaged into the OPPS payment rate
for the associated procedure(s).
We review, on an annual basis, the APC assignments for all services
and items paid under the OPPS based on our analysis of the latest
claims data and review of the clinical characteristics of the
procedure. For CY 2027, the OPPS payment rates are proposed based on
available CY 2025 claims data. CPT code 0505T is currently assigned to
APC 5193 (Level 3 Endovascular Procedures) with a payment of
approximately $11,800. We note that CPT code 0505T has a geometric mean
cost (GMC) of $41,123 based on 46 single frequency claims. We
considered reassigning CPT 0505T to APC 5194 (Level 4 Endovascular
Procedures) with a payment of approximately $18,700 but we do not
believe this APC is appropriate after incorporating the costs of the
expiring pass-through device. Given the low volume of claims data for
this procedure and the absence of a clinical APC in terms of clinical
and resource similarity, we propose to reassign CPT 0505T to APC 1580
(New Technology--Level 43 ($40,001-$50,000)) with a payment of
$45,000.50. As we continue to gather adequate claims data on this code,
we invite public comment on the appropriate clinical APC for CPT code
0505T.
Please refer to Table 28 for the proposed APC and status indicator
assignment for CPT code 0505T. The proposed payment rate for this HCPCS
code can be found in Addendum B to this proposed rule via the internet
on the CMS website.
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IV. OPPS Payment for Devices
A. Pass-Through Payment for Devices
1. Beginning Eligibility Date for Device Pass-Through Status and
Quarterly Expiration of Device Pass-Through Payments
a. Background
The intent of transitional device pass-through payment, as
implemented at 42 CFR 419.66, is to facilitate access for beneficiaries
to the advantages of new and truly innovative devices by allowing for
adequate payment for these new devices while the necessary cost data is
collected to incorporate the costs for these devices into the procedure
APC rate (66 FR 55861). Under section 1833(t)(6)(B)(iii) of the Act,
OPPS transitional pass-through payment status for a device category are
limited to a period of not less than 2 years but not more than 3 years.
In the CY 2017 OPPS/ASC final rule with comment period, in
accordance with section 1833(t)(6)(B)(iii)(II) of the Act, we amended
Sec. 419.66(g) to provide that the pass-through eligibility period for
a device category begins on the first date on which pass-through
payment is made under the OPPS for any medical device described by such
category (81 FR 79654). In addition, in the CY 2017 OPPS/ASC final rule
with comment period, we finalized a policy to allow for quarterly
expiration of pass-through payment status for devices to afford a pass-
through payment period that is as close to a full 3 years as possible
for all pass-through payment devices (81 FR 79655). We also established
a policy to package the costs of the devices that are no longer
eligible for pass-through payments into the costs of the procedures
with which the devices are reported in the claims data used to set the
payment rates (67 FR 66763). We refer readers to the CY 2017 OPPS/ASC
final rule with comment period (81 FR 79648 through 79661) for a full
discussion of the current device pass-through payment policy.\26\
---------------------------------------------------------------------------
\26\ To apply for OPPS transitional device pass-through status,
applicants complete an application that is subject to the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.). This
collection (CMS-10052) has an OMB control number of 0938-0857 and an
expiration date of June 30, 2029.
---------------------------------------------------------------------------
b. Expiration of Transitional Pass-Through Payments for Certain Devices
As stated earlier, section 1833(t)(6)(B)(iii) of the Act requires
that, under the OPPS, a category of devices be eligible for
transitional pass-through payments for at least 2 years, but not more
than 3 years. Currently, 21 device categories are eligible for pass-
through payment. These devices are listed in Table 29 where we detail
the expiration dates of pass-through payment status for each of the 21
devices currently receiving device pass-through payment.
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2. New Device Pass-Through Applications for CY 2027
a. Background
Section 1833(t)(6) of the Act provides for pass-through payments
for devices, and section 1833(t)(6)(B) of the Act requires CMS to use
categories to determine the eligibility of devices for pass-through
payments. As part of implementing the statute through regulations, we
continue to believe that pass-through payments for devices that offer
substantial clinical improvement are important to ensure hospitals can
provide Medicare beneficiaries with access to the advantages of the new
technology. Conversely, we have noted that the need for additional
payments for devices that offer little or no clinical improvement over
previously existing devices is less apparent. In such cases, these
devices can still be used by hospitals, and hospitals will be paid for
them through appropriate APC payment. Moreover, a goal is to target
pass-through payments for devices where cost considerations are most
likely to interfere with patient access (66 FR 55852; 67 FR 66782; and
70 FR 68629).
As specified in regulations at Sec. 419.66(b)(1) through (3), to
be eligible for transitional pass-through payment under the OPPS, a
device must meet the following criteria:
If required by FDA, the device must have received FDA
approval or clearance (except for a device that has received an FDA
investigational device exemption (IDE) and has been classified as a
Category B device by FDA), or meet another appropriate FDA exemption;
and the pass-through payment application must be submitted within 3
years from the date of the initial FDA marketing authorization, if
required, unless there is a documented, verifiable delay in U.S. market
availability after FDA marketing authorization is granted, in which
case CMS will consider the pass-through payment application if it is
submitted within 3 years from the date of market availability;
The device is determined to be reasonable and necessary
for the diagnosis or treatment of an illness or injury or to improve
the functioning of a malformed body part, as required by section
1862(a)(1)(A) of the Act; and
The device is an integral part of the service furnished,
is used for one patient only, comes in contact with human tissue, and
is surgically implanted or inserted (either permanently or
temporarily), or applied in or on a wound or other skin lesion.
As finalized in CY 2026 OPPS/ASC final rule with comment period,
skin substitutes with an approved Biologics License Application (BLA)
will be considered under transitional drug pass-through payment status,
and skin substitutes with FDA Premarket approval (PMA) or FDA 510(k)
clearance will continue to be evaluated under transitional device pass-
through payment status (90 FR 53636).
In addition, according to Sec. 419.66(b)(4), a device is not
eligible to be considered for device pass-through payment if it is any
of the following: (1) equipment, an instrument, apparatus, implement,
or item of this type for which depreciation and financing expenses are
recovered as depreciable assets as defined in Chapter 1 of the Medicare
Provider Reimbursement Manual (CMS Pub. 15-1); or (2) a material or
supply furnished incident to a service (for example, a suture,
customized surgical kit, or clip, other than a radiological site
marker).
Separately, we use the following criteria, under Sec. 419.66(c),
to determine whether a new category of pass-through payment devices
should be established.
[[Page 41817]]
The device to be included in the new category must--
Not be appropriately described by an existing category or
by any category previously in effect established for transitional pass-
through payments, and was not being paid for as an outpatient service
as of December 31, 1996;
Have an average cost that is not ``insignificant''
relative to the payment amount for the procedure or service with which
the device is associated as determined under Sec. 419.66(d) by
demonstrating: (1) the estimated average reasonable cost of devices in
the category exceeds 25 percent of the applicable APC payment amount
for the service related to the category of devices; (2) the estimated
average reasonable cost of the devices in the category exceeds the cost
of the device-related portion of the APC payment amount for the related
service by at least 25 percent; and (3) the difference between the
estimated average reasonable cost of the devices in the category and
the portion of the APC payment amount for the device exceeds 10 percent
of the APC payment amount for the related service (with the exception
of brachytherapy and temperature-monitored cryoablation, which are
exempt from the cost requirements as specified at Sec. 419.66(c)(3)
and (e)).
To meet the cost criterion for device pass-through payment status,
a device must pass all three tests of the cost criterion for at least
one APC. We generally use the lowest APC payment rate applicable for
use with the nominated device when we assess whether a device meets the
cost significance criterion, thus increasing the probability the device
will pass the cost significance test (69 FR 65775), and we calculate
the device offset amount at the HCPCS/CPT code level (81 FR 79657); and
Demonstrate a substantial clinical improvement, that is,
the device to be included in the category has demonstrated that it will
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, or, for devices for which pass-
through payment status will begin on or after January 1, 2020, as an
alternative pathway to demonstrating substantial clinical improvement,
a device is part of the FDA's Breakthrough Devices Program and has
received marketing authorization for the indication covered by the
Breakthrough Device designation.
In the CY 2016 OPPS/ASC final rule, we changed our device pass-
through evaluation and determination process. Device pass-through
applications are still submitted to CMS through the quarterly process,
but the applications are subject to notice and comment rulemaking in
the next applicable OPPS annual rulemaking cycle. Under this process,
all applications preliminarily approved during quarterly review will
automatically be included in the next applicable OPPS annual rulemaking
cycle, while applicants whose submissions are not approved during
quarterly review will have the option of being included in the next
applicable OPPS annual rulemaking cycle or withdrawing their
application from consideration. Under this notice-and-comment process,
applicants may submit new evidence, such as clinical trial results
published in a peer-reviewed journal or other materials, for
consideration during the public comment process for the proposed rule.
This process allows those applications that we are able to determine
meet all of the criteria for device pass-through payment under the
quarterly review process to receive timely pass-through payment status,
while still allowing for a transparent, public review process for all
applications (80 FR 70417 through 70418).
In the CY 2023 OPPS/ASC final rule, we finalized our policy to
publicly post online OPPS device pass-through applications received on
or after March 1, 2023, beginning with the issuance of the CY 2025
OPPS/ASC proposed rule and for each OPPS rulemaking thereafter. We
refer readers to the CY 2023 OPPS/ASC final rule with comment period
(87 FR 71934 through 71938) for a full discussion of the policy to
publicly post OPPS device pass-through applications.
In the CY 2020 OPPS/ASC final rule with comment period, we
finalized an alternative pathway for devices that are granted a
Breakthrough Device designation (84 FR 61295) and receive FDA marketing
authorization for the indication covered by the Breakthrough Device
designation. Under this alternative pathway, devices that are granted
an FDA Breakthrough Device designation are not evaluated in terms of
the current substantial clinical improvement criterion at Sec.
419.66(c)(2) for the purposes of determining device pass-through
payment status, but do need to meet the other requirements for pass-
through payment status in our regulation at Sec. 419.66. Devices that
are part of the Breakthrough Devices Program, have received FDA
marketing authorization for the indication covered by the Breakthrough
Devices designation, and meet the other criteria in the regulation can
be approved through the quarterly process and announced through that
process (81 FR 79655). Proposals regarding these devices and whether
pass-through payment status should continue to apply are included in
the next applicable OPPS rulemaking cycle.
As discussed in the FY 2027 IPPS/LTCH PPS proposed rule (91 FR
19457 to 19459), we have proposed 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 the same
eligibility requirements to receive add-on payments and/or pass-through
payments. Specifically, we proposed 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 Sec.
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 Sec. 419.66(g). Previously existing
device category codes that were no longer eligible for device pass-
through payment status would remain unchanged. We proposed to revise
paragraph Sec. 419.66(c)(2)(ii) to reflect this proposed policy. If
finalized as proposed, the change would go into effect on October 1,
2026 (91 FR 19458).
More details on the requirements for device pass-through payment
applications are included on the CMS website in the application form
itself at
[[Page 41818]]
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html, in the ``Downloads''
section.
b. Applications Received for Device Pass-Through Status for CY 2027
We received 19 applications by the March 2, 2026, quarterly
deadline, which was the last quarterly deadline for applications to be
received in time to be included in the CY 2027 OPPS/ASC proposed rule.
Six applications subsequently withdrew. Discussions of the 13 complete
applications, 10 under alternative pathway and 3 under traditional
pathway, we received by the March 2, 2026 deadline are included
following section IV.2.b. of this proposed rule. Of the applications,
we received five in the second quarter of 2025, eight in the third
quarter of 2025, one in the fourth quarter of 2025, and five in the
first quarter of 2026. Seven of the applications were preliminarily
approved for device pass-through payment status during the quarterly
review process: The MY01 Continuous Compartmental Pressure Monitor,
RemeOsTM Screw LAG Solid, WiSE[supreg] CRT System, SetPoint
System, TOUCH[supreg] CMC 1 Prosthesis, EspritTM BTK
Everolimus Eluting Resorbable Scaffold System, and TOPS\TM\ System.
Applications received after the March 2026 deadline for the
remaining 2027 quarters (the quarters beginning June 1, September 1,
and December 1 of 2026) through March 1, 2027, if any, will be
discussed in the CY 2028 OPPS/ASC proposed rule. We note that the
quarterly application process and requirements have not changed because
of the addition of rulemaking review. Detailed instructions on
submission of a quarterly device pass-through payment application are
included on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/catapp.pdf.
(1) Alternative Pathway Device Pass-Through Applications
We received 10 device pass-through applications by the March 2026
application deadline for devices that were eligible to apply under the
alternative pathway.
(a) Altius[supreg] Direct Electrical Nerve Stimulation System
Neuros[supreg] Medical, Inc. submitted an application for a new
device category for transitional pass-through payment status for the
Altius[supreg] Direct Electrical Nerve Stimulation System (the
Altius[supreg] System) for CY 2027. According to the applicant, the
Altius[supreg] System is an implantable neuromodulation system that
provides continuous, high frequency, high amplitude nerve stimulation
to either the sciatic nerve or both the tibial and common peroneal
nerves by directly stimulating targeted nerves via implanted cuff
electrode leads that are wrapped circumferentially around target nerves
in the amputated leg. The applicant stated that the Altius[supreg]
System consists of the (1) Altius[supreg] Implantable Pulse Generator
(IPG), which is implanted in the abdomen; (2) Altius[supreg] Cuff
Electrode Leads; (3) Altius[supreg] Battery Charger and alternating
current (AC) adapter; (4) Altius[supreg] Patient Controller, which
allows the patient to activate the IPG to initiate therapy; (5)
Programming Wand, which is used by the provider to program and set
stimulus therapy parameters; and (6) Programmer Application Personal
Computer (PAPC), which includes physician programming software. The
applicant is seeking a new device category for transitional pass-
through payment status for only the Altius[supreg] IPG and the
Altius[supreg] Cuff Electrode Lead components of the Altius[supreg]
System. The applicant stated that the Altius[supreg] IPG is a
rechargeable neurotransmitter device that is implanted in the abdomen
and when activated, generates a continuous high frequency, high
amplitude alternating current electrical stimulus (5kHz and 10kHz) via
the Altius[supreg] Cuff Electrode Leads, which are circumferentially
wrapped, anchored, and implanted around the nerve(s). Per the applicant
the ``alternating'' nature of the delivered electrical stimulus refers
to the direct electrical stimulation of the circumferential electrodes
within a lead distributed in an alternating fashion across these
electrodes.
---------------------------------------------------------------------------
\27\ The applicant conducted cost calculations for both the
Altiusr IPG with one Altiusr Cuff Electrode Lead ($41,000.00) and
the Altiusr IPG with two Altiusr Cuff Electrode Leads ($52,000.00).
We consider both costs as the estimated reasonable cost to assess
whether the Altiusr System meets the cost significance requirements.
---------------------------------------------------------------------------
Table 30 provides an overview of the transitional device pass-
through payment status application for the Altius[supreg] System and
CMS's preliminary assessment. For additional details provided by the
applicant, please refer to the online application posting available at
https://mearis.cms.gov/public/publications/device-ptp/DEP250530FMCYD.
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We are inviting public comment on whether the Altius[supreg] System
meets the newness criterion at Sec. 419.66(b)(1) and whether the
Altius[supreg] IPG and the Altius[supreg] Cuff Electrode Lead
components meet the eligibility criteria at Sec. 419.66(b)(3) and
(b)(4).\28\
---------------------------------------------------------------------------
\28\ For its cost calculations, the applicant selected HCPCS
code 64590 in APC 5464 and based its calculations on CY 2026 data.
As we explained in the CY 2005 OPPS final rule with comment period
(69 FR 65775), we generally use the lowest APC payment rate
applicable for use with the nominated device when we assess whether
a device meets the cost significance criterion, thus increasing the
probability the device will pass the cost significance test.
Beginning in CY 2017, we calculate the device offset amount at the
HCPCS/CPT code level instead of the APC level (81 FR 79657). For our
calculations, we used APC 5463, which we believe has the lowest
applicable APC payment rate ($11,384.04) related to the HCPCS codes
provided by the applicant, and HCPCS code 64575 in APC 5463, which
has a device offset amount of $7,697.89, at the time the application
was received. Based on our initial assessment for this proposed
rule, using the APC payment rate of $11,384.04 and the device offset
amount of $7,697.89, we believe the Altiusr System meets the cost
significance requirements.
---------------------------------------------------------------------------
Regarding the device category eligibility criterion at Sec.
419.66(c)(1), with respect to the Altius[supreg] IPG and Altius[supreg]
Cuff Electrode Lead components, the applicant stated that no existing
(current or previous) device pass-through payment categories
appropriately describe the nominated device components. Per the
applicant, the existing pass-through codes C1778 (Lead, neurostimulator
(implantable)) and C1822 (Generator, neurostimulator (implantable),
high frequency, with rechargeable battery and charging system) do not
describe the Altius[supreg] IPG and the Altius[supreg] Cuff Electrode
Lead components because these codes (1) are not specifically indicated
for treating chronic intractable lower limb amputation pain; (2) are
not capable of delivering continuous, high amplitude, high frequency
alternating current; (3) do not use circumferentially wrapped and
anchored cuff electrode leads to provide direct energy delivery to the
targeted nerves; and (4) do not allow for physician-pre-programmed
therapy delivery controlled by the patient using the patient
stimulation controller. The applicant also stated that devices
described by C1778 do not make direct contact with the target nerve;
instead they deliver stimulation to the general region of the pain,
unlike the Altius[supreg] Cuff Electrode Leads. The applicant added
that existing devices described by C1822 deliver low-amplitude,
rectangular pulses per second to general or peripheral areas to
increase nerve activity and produce pain relief, whereas the
Altius[supreg] IPG provides continuous, high-amplitude sinusoidal
waveform stimulation to decrease target nerve activity and produce on-
demand pain relief. The applicant asserted that the Altius[supreg]
System, including the Altius[supreg] IPG and Altius[supreg] Cuff
Electrode Lead components, is the only FDA-authorized neuromodulation
system indicated as an aid in the management of chronic intractable
phantom and residual lower limb post-amputation pain in adult amputees.
Based on the description the applicant provided, the Altius[supreg]
IPG is a rechargeable neurotransmitter device that generates a
continuous high frequency, high amplitude alternating electrical
stimulus (5kHz and 10kHz) via the Altius[supreg] Cuff Electrode Leads,
which are circumferentially wrapped, anchored, and implanted around the
nerve(s), and therefore, could be appropriately described by C1778
(Lead, neurostimulator (implantable) and C1822 (Generator,
neurostimulator (implantable), high frequency, with rechargeable
battery and charging system), respectively. Specifically, we believe
that the pass-through payment category C1778 may appropriately describe
the Altius[supreg] Cuff Electrode Lead component because the pass-
through payment category describes any device that is an implantable
neurostimulator lead. Additionally, we believe the pass-through payment
category C1822 may appropriately describe the Altius[supreg] IPG
because the category includes implantable neurostimulator pulse
generators that deliver high-frequency stimulation (including
approximately 10 kHz) and are rechargeable using an external charging
system. Further, C1822 does not describe the amplitude, pulse
frequency, or waveform of the stimulation generated by the device. We
note that CMS does not establish pass-through device categories for the
purpose of describing specific devices, but rather, device categories
are intended to encompass all devices that can be appropriately
described by a category. In this context, we believe the Altius[supreg]
IPG and the Altius[supreg] Cuff Electrode Lead components may be
appropriately described by C1778 and C1822.
We are inviting public comment on whether the Altius[supreg] IPG
and the Altius[supreg] Cuff Electrode Lead components meet the device
category eligibility criterion at Sec. 419.66(c)(1).
We are also inviting public comment on whether the Altius[supreg]
IPG and the Altius[supreg] Cuff Electrode Lead components meet the cost
criterion at Sec. 419.66(d)(3).
After reviewing the information provided by the applicant, we are
unable to determine that the Altius[supreg] System, inclusive of the
Altius[supreg] IPG and the Altius[supreg] Cuff Electrode Lead
components meet the device category eligibility criteria, and
therefore, we propose to deny transitional pass-through payment status
for CY 2027.
We are inviting public comments on our proposal to deny
transitional pass-through payment status for the Altius[supreg] System,
inclusive of the Altius[supreg] IPG and the Altius[supreg] Cuff
Electrode Lead components for CY 2027.
(b) EspritTM BTK Everolimus Eluting Resorbable Scaffold
System
Abbott Laboratories submitted an application for a new device
category for transitional pass-through payment status for the
EspritTM BTK Everolimus Eluting Resorbable Scaffold System
(EspritTM BTK) for CY 2027. According to the applicant, the
EspritTM BTK is a temporary, balloon-expandable resorbable
polymer scaffold with a drug (everolimus) and resorbable polymeric
coating, delivered via a balloon dilatation catheter, that is designed
to resorb over time and is intended to improve luminal diameter in
infrapopliteal lesions in patients with chronic limb-threatening
ischemia.
Table 31 provides an overview of the transitional device pass-
through payment status application for the EspritTM BTK and
CMS's preliminary assessment. For additional details provided by the
applicant, please refer to the online application posting available at
https://mearis.cms.gov/public/publications/device-ptp/DEP250829XYFGP.
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[[Page 41821]]
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The EspritTM BTK was preliminarily approved for device
pass-through payment status effective April 1, 2026. We are inviting
public comment on whether we should finalize approval for device pass-
through payment status for the EspritTM BTK under the
alternative pathway for devices that have an FDA Breakthrough Device
designation and have received FDA marketing authorization for the
indication covered by the Breakthrough Device designation.
After review of the information provided by the applicant, we agree
that the EspritTM BTK meets all applicable device pass-
through payment status criteria as specified in regulations at Sec.
419.66. Therefore, based on the information available at the time of
this proposed rule, we propose to finalize approval for the
EspritTM BTK for device pass-through payment status for CY
2027.
[[Page 41822]]
(c) MY01 Continuous Compartmental Pressure Monitor
MY01 Inc. submitted an application for a new device category for
transitional pass-through payment status for the MY01 Continuous
Compartmental Pressure Monitor for CY 2027. According to the applicant,
the MY01 Continuous Compartmental Pressure Monitor is used for real-
time and continuous measurement of muscle compartment pressure to aid
in the diagnosis of acute and chronic compartment syndrome. The
nominated device consists of an introducer and a pressure monitor which
are used in conjunction with the MY01 Mobile Application. The applicant
stated that it is only seeking a new device category for transitional
pass-through payment status for the MY01 Continuous Compartmental
Pressure Monitor component.
Table 32 provides an overview of the transitional device pass-
through payment status application for the MY01 Continuous
Compartmental Pressure Monitor and CMS's preliminary assessment. For
additional details provided by the applicant, please refer to the
online application posting available at https://mearis.cms.gov/public/publications/device-ptp/DEP250602XAAW9.
BILLING CODE 4169-69-P
[GRAPHIC] [TIFF OMITTED] TP07JY26.056
[[Page 41823]]
BILLING CODE 4169-69-C
The MY01 Continuous Compartmental Pressure Monitor was
preliminarily approved for device pass-through payment status effective
October 1, 2025. We are inviting public comment on whether we should
finalize approval for device pass-through payment status for the MY01
Continuous Compartmental Pressure Monitor under the alternative pathway
for devices that have an FDA Breakthrough Device designation and have
received FDA marketing authorization for the indication covered by the
Breakthrough Device designation.
After review of the information provided by the applicant, we agree
that the MY01 Continuous Compartmental Pressure Monitor meets all
applicable device pass-through payment status criteria as specified in
regulations at Sec. 419.66. Therefore, based on the information
available at the time of this proposed rule, we propose to finalize
approval for the MY01 Continuous Compartmental Pressure Monitor for
device pass-through payment status for CY 2027.
(d) ProSense[supreg] Cryoablation System
IceCureTM Medical Ltd. submitted an application for a
new device category for transitional pass-through payment status for
the ProSense[supreg] Cryoablation System for CY 2027. According to the
applicant, the ProSense[supreg] Cryoablation System is designed to
destroy tissue by the application of extreme cold temperatures
utilizing liquid nitrogen for the treatment of breast cancer for
patients with low-risk tumors. The applicant stated that the
ProSense[supreg] Cryoablation System is comprised of (1) the
ProSense[supreg] Chassis, (2) an adjustable touch screen, and (3)
external accessories, including introducers, liquid nitrogen dewar,
holder, foot pedal, and Prosense[supreg] Cryoprobes. The applicant is
seeking a new device category for transitional pass-through payment
status for only the ProSense[supreg] Cryoprobe component of the
ProSense[supreg] Cryoablation System. Per the applicant, the
ProSense[supreg] Cryoprobe is a rigid probe with a tip that creates ice
balls to destroy target tissue through cycles of freezing and thawing.
Table 33 provides an overview of the transitional pass-through
payment status application for the ProSense[supreg] Cryoablation System
and CMS's preliminary assessment. For additional details provided by
the applicant, please refer to the online application posting available
at https://mearis.cms.gov/public/publications/device-ptp/DEP251226K6A1C.
BILLING CODE 4169-69-P
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As stated previously, with respect to the newness criterion at
Sec. 419.66(b)(1), the device must have received FDA approval or
clearance (that is, FDA marketing authorization), and the pass-through
payment application must be submitted within 3 years from the date of
the initial FDA marketing authorization. In the CY 2016 OPPS/ASC final
rule with comment period, we clarified that we intended to convey that
the 3-year timeframe for submitting a device pass-through payment
application would be triggered by the initial FDA approval or
clearance, and not by any subsequent FDA approvals or clearances. We
specified ``initial'' FDA clearance or approval in Sec. 419.66(b)(1)
because, in some cases, FDA will provide supplemental approvals or
clearances for a device after the initial approval or clearance (80 FR
70420). We received a pass-through payment status application for the
ProSense[supreg] Cryoablation System on December 26, 2025, which we do
not believe is within 3 years of the initial FDA marketing
authorization.
The ProSense[supreg] Cryoablation System, inclusive of the
ProSense[supreg] Cryoprobe, was previously cleared on December 20,
2019, in K183213, the 510(k) clearance for the IceCure Family
Cryoablation System (IceSenseTM3, ProSense[supreg],
MultiSense).\29\ The predicate device described in K183213, the
IceSenseTM3 System, was previously cleared on November 29,
2010, in K102360,\30\ and the preceding predicate device, the Galil
Medical SeedNet Family was cleared on November 18, 2005, in
K052530.\31\ We note that K183213 states that cryoablation is the
fundamental technological principle for both the subject IceCure Family
of cryotherapy devices and the predicate IceSenseTM3 System
cleared in K102360 and the Galil Medical SeedNet Family cleared in
K052530. Finally, according to K183213, the ProSense[supreg]
Cryoablation System is a mere rebranding of the cleared
IceSenseTM3 single-probe system cleared in K102360, and the
ProSense[supreg] Cryoablation System has the same hardware and software
components as the IceSenseTM3 System. K183213 also states
that the hardware and software changes introduced since the device was
originally cleared on November 29, 2010, in K102360, were analyzed and
determined not to require new 510(k) premarket notifications and that
the K183213 submission includes the current configuration of the
system.
---------------------------------------------------------------------------
\29\ U.S. Food and Drug Administration. (2019, December 20).
Decision Summary for K183213 [IceCure Family Cryoablation System
(IceSenseTM3, ProSense[supreg], MultiSense)]. U.S.
Department of Health and Human Services. https://www.accessdata.fda.gov/cdrh_docs/pdf18/K183213.pdf.
\30\ U.S. Food and Drug Administration. (2010, November 29).
510(k) Summary for K102360 [IceCure's IceSenseTM3
device]. U.S. Department of Health and Human Services. https://www.accessdata.fda.gov/cdrh_docs/pdf10/K102360.pdf.
\31\ U.S. Food and Drug Administration. (2005, November 18).
510(k) Summary for K052530 [SeedNet Family]. U.S. Department of
Health and Human Services. https://www.accessdata.fda.gov/cdrh_docs/pdf5/K052530.pdf.
---------------------------------------------------------------------------
While the October 3, 2025, FDA decision summary for De Novo
classification for the ProSense[supreg] Cryoablation System includes a
new indication for use in the treatment of patients with T1 invasive
breast cancer and/or patients not suitable for surgical alternatives
for the treatment of breast cancer, based on the information in
K183213, we believe that the initial FDA marketing authorization date
for the ProSense[supreg] Cryoablation System, inclusive of the
nominated ProSense[supreg] Cryoprobe component, may be as early as
November 18, 2005, or as recent as December 20, 2019. The applicant
submitted the pass-through payment application on December 26, 2025,
which is more than 3 years after either November 18, 2005, or December
20, 2019; therefore, we do not believe that the ProSense[supreg]
Cryoablation System, inclusive of the nominated ProSense[supreg]
Cryoprobe, meets the newness criterion.
We are inviting public comment on whether the ProSense[supreg]
Cryoablation System meets the newness criterion at Sec. 419.66(b)(1).
We also are inviting public comment on whether the ProSense[supreg]
Cryoprobe meets the eligibility criteria at Sec. 419.66(b)(3) and
(b)(4).
Regarding the device category eligibility criterion at Sec.
419.66(c)(1), with respect to the ProSense[supreg] Cryoprobe, the
applicant stated that the existing pass-through code C2618 (Probe,
cryoablation) does not appropriately describe the ProSense[supreg]
Cryoprobe. According to the applicant, the ProSense[supreg] Cryoprobe
is currently included in this existing category only because that
category is old, extremely broad, and does not allow for appropriate
recognition of innovative new technologies or include those that have
received FDA Breakthrough Device designation. The applicant also stated
that since C2618 was established, CMS has created other categories for
ablation catheters that are specific to use in specific anatomic
locations, such as non-cardiac endovascular (C1888) and extravascular
(C1886). Further, the applicant stated that the ProSense[supreg]
Cryoprobe is the only device cleared under product code QXW as a
cryoablation device for local low-risk breast cancer treatment.
Based on the description the applicant provided, the
ProSense[supreg] Cryoprobe is a probe used for cryoablation, and
therefore, could be appropriately described by C2618 (Probe,
cryoablation). Specifically, we believe that the pass-through payment
category C2618 may appropriately describe the ProSense[supreg]
Cryoprobe because C2618 describes any probe used for cryoablation and
is not specific to an anatomical location. We note that we do not
establish pass-through device categories for the purpose of describing
specific devices, rather, device categories are intended to encompass
all devices that can be appropriately described by a given category. In
this context, we believe the ProSense[supreg] Cryoprobe may be
appropriately described by C2618.
We are inviting public comment on whether the ProSense[supreg]
Cryoprobe meets the device category eligibility criterion at Sec.
419.66(c)(1).
We are also inviting public comment on whether the ProSense[supreg]
Cryoprobe meets the cost criterion at Sec. 419.66(d)(3).
[[Page 41826]]
After reviewing the information provided by the applicant, we are
unable to determine that the ProSense[supreg] Cryoablation System,
inclusive of the ProSense[supreg] Cryoprobe, meets the new device
category eligibility criteria, and therefore, we propose to deny
transitional pass-through payment status for the ProSense[supreg]
Cryoablation System, inclusive of the ProSense[supreg] Cryoprobe for CY
2027.
We are inviting public comments on our proposal to deny
transitional pass-through payment status for the ProSense[supreg]
Cryoablation System, inclusive of the ProSense[supreg] Cryoprobe, for
CY 2027.
(e) RemeOsTM Screw LAG Solid
Bioretec, Inc. submitted an application for a new device category
for transitional pass-through payment status for the
RemeOsTM Screw LAG Solid for CY 2027. According to the
applicant, the RemeOsTM Screw LAG Solid is an absorbable,
magnesium-based alloy screw intended for the use in traumatic and
orthopedic surgery for the fixation of bone fractures and for fixation
after osteotomies, such as for the correction of deformities or
malalignments. The absorbable implant provides temporary fixation and
stabilization through osteosynthesis of bone fractures and osteotomies
until bony fusion has occurred.
Table 34 provides an overview of the transitional device pass-
through payment status application for the RemeOsTM Screw
LAG Solid and CMS's preliminary assessment. For additional details
provided by the applicant, please refer to the online application
posting available at https://mearis.cms.gov/public/publications/device-ptp/DEP2506023YUR4.
BILLING CODE 4169-69-P
[GRAPHIC] [TIFF OMITTED] TP07JY26.059
BILLING CODE 4169-69-C
The RemeOsTM Screw LAG Solid was preliminarily approved
for device pass-through payment status effective October 1, 2025. We
are inviting public comment on whether we should finalize approval for
device pass-through payment status for the RemeOsTM Screw
LAG Solid under the alternative pathway for devices that have an FDA
Breakthrough Device designation and have received FDA marketing
[[Page 41827]]
authorization for the indication covered by the Breakthrough Device
designation.
After review of the information provided by the applicant, we agree
that the RemeOsTM Screw LAG Solid meets all applicable
device pass-through payment status criteria as specified in regulations
at Sec. 419.66. Therefore, based on the information available at the
time of this proposed rule, we propose to finalize approval for the
RemeOsTM Screw LAG Solid for device pass-through payment
status for CY 2027.
(f) SetPoint System
SetPoint Medical submitted an application for a new device category
for transitional pass-through payment status for the SetPoint System
for CY 2027. According to the applicant, the SetPoint System is a non-
pharmacological treatment for rheumatoid arthritis (RA) and is a fully
integrated neuroimmune modulation therapy for adults with moderately to
severely active RA. The system consists of a rechargeable neuroimmune
stimulator implanted on the left cervical vagus nerve during a 60-90-
minute procedure which subsequently delivers one minute of stimulation
per day to activate the body's innate neuroimmune pathway.
Table 35 provides an overview of the transitional device pass-
through payment status application for the SetPoint System and CMS's
preliminary assessment. For additional details provided by the
applicant, please refer to the online application posting available at
https://mearis.cms.gov/public/publications/device-ptp/DEP2508042W2C1.
BILLING CODE 4169-69-P
[GRAPHIC] [TIFF OMITTED] TP07JY26.146
The SetPoint System was preliminarily approved for device pass-
through payment status effective January 1, 2026. We are inviting
public comment on whether we should finalize approval for device pass-
through payment status for the SetPoint System under the alternative
pathway for devices that have an FDA Breakthrough Device designation
and have received FDA marketing authorization for the indication
covered by the Breakthrough Device designation.
After review of the information provided by the applicant, we agree
that the SetPoint System meets all applicable device pass-through
payment status criteria as specified in regulations at Sec. 419.66.
Therefore, based on the information available at the time of this
proposed rule, we propose to finalize approval for the SetPoint System
for device pass-through payment status for CY 2027.
(g) TIDALTM Fusion Cage System (OsseraTM AFX)
restor3d submitted an application for a new device category for
transitional pass-through payment status for the TIDALTM
Fusion Cage System for CY 2027. According to the applicant, the
TIDALTM Fusion Cage is a single, continuous, porous piece of
titanium
[[Page 41828]]
alloy containing a circular window for an intramedullary nail used
during salvage procedures to restore bone length due to bone void,
absent bone or surgical resection. The TIDALTM Fusion Cage
System is composed of the TIDALTM Fusion Cage and a
Disposable Instrument Kit, which includes size trials, cannulated
reamers, and inserters. The applicant stated that the
TIDALTM Fusion System is not for standalone use and is
intended for use as an accessory to the DynaNail[supreg] TTC Fusion
System and with an autograft and/or allogenic bone graft.
Table 36 provides an overview of the device category for
transitional pass-through payment status application for
TIDALTM Fusion Cage System and CMS's preliminary assessment.
For additional details provided by the applicant, please refer to the
online application posting available at https://mearis.cms.gov/public/publications/device-ptp/DEP250529B0B27.
[[Page 41829]]
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BILLING CODE 4169-69-C
Regarding the Breakthrough Device designation, we note that
restor3d submitted a new technology add-on payment application for FY
2026 for the TIDALTM Fusion Cage under the alternative
pathway, as discussed in the FY 2026 IPPS/LTCH PPS proposed and final
rules (90 FR 18200 through 18202; 36817 through 36819). In the final
rule, we stated that because the Disposable Instrument Kit was not
included in the Breakthrough Device designation, only the
TIDALTM Fusion Cage was eligible for new technology add-on
payments under the alternative pathway. Consistent with our decision
regarding new technology add-on payment
[[Page 41830]]
eligibility, we will not consider the Disposable Instrument Kit for
transitional pass-through payment status under the alternative pathway
because it is not included in the Breakthrough Device designation. We
will only be discussing the TIDALTM Fusion Cage in the
following paragraphs.
We are inviting public comment on whether the TIDALTM
Fusion Cage meets the newness criterion at Sec. 419.66(b)(1).
We also are inviting public comment on whether the
TIDALTM Fusion Cage meets the eligibility criteria at Sec.
419.66(b)(3) and (b)(4).
Regarding the device category eligibility criterion at Sec.
419.66(c)(1), the applicant stated that no existing (current or
previous) device pass-through payment categories appropriately describe
the TIDALTM Fusion Cage. Per the applicant, the existing
pass-through code C1713 (Anchor/screw for opposing bone-to-bone or soft
tissue-to-bone (implantable)) does not appropriately describe the
TIDALTM Fusion Cage because C1713 is typically used to
represent fixation components, such as an intramedullary nail or other
fixation screws, but does not represent the TIDALTM Fusion
Cage.
Based on the description the applicant provided, the
TIDALTM Fusion Cage is a porous cage used as part of a limb
salvage arthrodesis construct to bridge bone loss or a critical bone
defect in the ankle and restore length due to bone void, absent bone,
or surgical resection and therefore, could be described by C1713
(Anchor/screw for opposing bone-to-bone or soft tissue-to-bone
(implantable)). Specifically, we believe that the pass-through payment
category C1713 may appropriately describe the TIDALTM Fusion
Cage because C1713 is defined as implantable pins and/or screws
inserted or drilled into bone, principally with the intent to
facilitate stabilization or oppose bone-to-bone contact and may include
orthopedic plates with accompanying washers or nuts as well as
synthetic bone substitutes that may be used to fill bony voids or
gaps.\33\ In this context, we believe that the TIDALTM
Fusion Cage may be appropriately described by C1713.
---------------------------------------------------------------------------
\33\ Centers for Medicare & Medicaid Services. (2024). Medicare
Claims Processing Manual (CMS Pub. 100-04), Chapter 4: Part B
Hospital (including inpatient hospital part B and OPPS). U.S.
Department of Health and Human Services. https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c04.pdf.
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We are inviting public comment on whether the TIDALTM
Fusion Cage meets the device category eligibility criterion at Sec.
419.66(c)(1).
We are also inviting public comment on whether the
TIDALTM Fusion Cage meets the cost criterion at Sec.
419.66(d)(3).
After reviewing the information provided by the applicant, we are
unable to determine that the TIDALTM Fusion Cage meets the
new device category eligibility criteria, and therefore, we propose to
deny transitional pass-through payment status for the
TIDALTM Fusion Cage for CY 2027.
We are inviting public comments on our proposal to deny
transitional pass-through payment status for the TIDALTM
Fusion Cage for CY 2027.
(h) TOPSTM System
Premia Spine, Inc. submitted an application for a new device
category for transitional pass-through payment status for the
TOPSTM System for CY 2027. According to the applicant, the
TOPSTM System is a motion preserving device comprised of a
titanium construct with an interlocking polycarbonate urethane (PcU)
articulating core that is inserted into the lumbar vertebral joint
after open posterior decompression and anchored using pedicle screws,
preserving normal spinal motion and providing stabilization of the
lumbar intervertebral segment. According to the applicant, the
TOPSTM System replaces anatomical structures, such as the
lamina and facet joints removed during spinal decompression treatment
to alleviate pain, while preserving normal spinal motion and
stabilizing the lumbar intervertebral segment. Per the applicant,
unlike lumbar fusion, the TOPSTM System preserves normal
biomechanical motion allowing relative motion in axial rotation,
lateral bending, flexion, and extension while blocking sagittal
translation, and stabilizing the spine after a decompression.
Table 37 provides an overview of the transitional device pass-
through payment status application for the TOPSTM System and
CMS's preliminary assessment. For additional details provided by the
applicant, please refer to the online application posting available at
https://mearis.cms.gov/public/publications/device-ptp/DEP2602261DX3J.
BILLING CODE 4169-69-P
[[Page 41831]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.061
BILLING CODE 4169-69-C
The TOPSTM System was preliminarily approved for device
pass-through payment status effective July 1, 2026. We are inviting
public comment on whether we should finalize approval for device pass-
through payment status for the TOPSTM System under the
alternative pathway for devices that have an FDA Breakthrough Device
designation and have received FDA marketing authorization for the
indication covered by the Breakthrough Device designation.
After review of the information provided by the applicant, we agree
that the TOPSTM System meets all applicable device pass-
through payment status criteria as specified in regulations at Sec.
419.66. Therefore, based on the information available at the time of
this proposed rule, we propose to finalize approval for the
TOPSTM System for device pass-through payment status for CY
2027.
(i) TOUCH[supreg] CMC 1 Prosthesis
Medartis submitted an application for a new device category for
transitional pass-through payment status for the TOUCH[supreg] CMC 1
Prosthesis for CY 2027. According to the applicant, the TOUCH[supreg]
CMC 1 Prosthesis is a cementless, ball-and-socket dual-mobility, total
first carpometacarpal (CMC 1) joint prosthesis composed of a metacarpal
implant (stem), trapezial implant (cup), and junction implant (neck),
and has multiple sizes and
[[Page 41832]]
variants to fit patient anatomy. According to the applicant, the
TOUCH[supreg] CMC 1 Prosthesis is the first total joint prosthesis for
the CMC 1 joint and enables functional improvement, pain reduction, and
improvements in patient quality of life.
Table 38 provides an overview of the transitional device pass-
through payment status application for the TOUCH[supreg] CMC 1
Prosthesis and CMS's preliminary assessment. For additional details
provided by the applicant, please refer to the online application
posting available at https://mearis.cms.gov/public/publications/device-ptp/DEP250829G4VEC.
[GRAPHIC] [TIFF OMITTED] TP07JY26.062
The TOUCH[supreg] CMC 1 Prosthesis was preliminarily approved for
device pass-through payment status effective January 1, 2026. We are
inviting public comment on whether we should finalize approval for
device pass-through payment status for the TOUCH[supreg] CMC 1
Prosthesis under the alternative pathway for devices that have an FDA
Breakthrough Device designation and have received FDA marketing
authorization for the indication covered by the Breakthrough Device
designation.
After review of the information provided by the applicant, we agree
that the TOUCH[supreg] CMC 1 Prosthesis meets all applicable device
pass-through payment status criteria as specified in regulations at
Sec. 419.66. Therefore, based on the information available at the time
of this proposed rule, we propose to finalize approval for the
TOUCH[supreg] CMC 1 Prosthesis for device pass-through payment status
for CY 2027.
(j) WiSE[supreg] (Wireless Stimulation of the Endocardium Technology)
CRT System
EBR Systems, Inc. submitted an application for a new device
category for transitional pass-through payment status for the
WiSE[supreg] CRT System for CY 2027. According to the applicant, the
WiSE[supreg] CRT System is an implantable, cardiac device capable of
pacing the heart without a lead. It includes a subcutaneously implanted
transmitter that generates ultrasonic pulses that
[[Page 41833]]
travel to a receiver implanted in the heart. The receiver, also known
as the electrode, converts ultrasonic waves into electrical energy to
stimulate cardiac tissue. The WiSE[supreg] CRT System uses leadless
technology to stimulate the endocardial surface of the LV. Working in
conjunction with a standard commercially available pacemaker (with or
without leads) or defibrillator already implanted in the patient, the
WiSE[supreg] CRT System replaces the pacing function of a coronary
sinus (CS) lead to achieve cardiac resynchronization therapy (CRT).
Table 39 provides an overview of the transitional device pass-
through payment status application for the WiSE[supreg] CRT System and
CMS's preliminary assessment. For additional details provided by the
applicant, please refer to the online application posting available at
https://mearis.cms.gov/public/publications/device-ptp/DEP250429663YG.
BILLING CODE 4169-69-P
[[Page 41834]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.063
BILLING CODE 4169-69-C
The WiSE[supreg] CRT System was preliminarily approved for device
pass-through payment status effective October 1, 2025. We are inviting
public comment on whether we should finalize approval for device pass-
through payment status for the WiSE[supreg] CRT System under the
alternative pathway for devices that have an FDA Breakthrough Device
designation and have received FDA marketing authorization for the
indication covered by the Breakthrough Device designation.
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\34\ We note that the applicant selected the APC level device
offset amount of $15,312.79 for APC 5231 found in CY 2025 NFRM APC
Offset File. Beginning in CY 2017, we calculate the device offset
amount at the HCPCS code level instead of the APC level (81 FR
79657). We note the HCPCS code level device offset amounts for the
HCPCS codes provided by the applicant are available in the Addendum
P to the CY 2025 OPPS/ASC final rule with comment period (89 FR
93912). For our calculation, we selected the HCPCS level device
offset amount of $15,487.87 related to HCPCS 0515T in APC 5231 found
in the Addendum P. Based on our initial assessment for this proposed
rule, using the device offset amount of $15,487.87 would result in
WiSE[supreg] CRT System meeting the cost significance requirement.
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[[Page 41835]]
After review of the information provided by the applicant, we agree
that the WiSE[supreg] CRT System meets all applicable device pass-
through payment status criteria as specified in regulations at Sec.
419.66. Therefore, based on the information available at the time of
this proposed rule, we propose to finalize approval for the
WiSE[supreg] CRT System for device pass-through payment status for CY
2027.
(2) Traditional Device Pass-Through Applications
(a) EndoForceTM Connector for Endovascular Venous
Anastomosis
Phraxis Inc. submitted an application for a new device category for
transitional pass-through payment status for the EndoForceTM
Connector for Endovascular Venous Anastomosis (the
EndoForceTM System) for CY 2027. According to the applicant,
the EndoForceTM System provides an endovascular method for
attachment of a non-autogenous arteriovenous graft (AVG) to a vein in
the upper arm in patients with end stage renal disease (ESRD) requiring
hemodialysis. Per the applicant, the EndoForceTM System is
provided as a sterile, single-use EndoForceTM Connector
Delivery System with a pre-mounted EndoForceTM Connector
that is attached endovascularly at the venous anastomosis, in
conjunction with a standard 6mm expanded polytetrafluoroethylene
(ePTFE) vascular access graft, to establish an end-to-end endovascular
anastomotic conduit designed to help absorb the shear forces of blood
flow at the AVG-vein junction and to provide a physical barrier to the
ingress of neointimal hyperplasia.
Table 40 provides an overview of the transitional pass-through
payment status application for the EndoForceTM System and
CMS's preliminary assessment. For additional details provided by the
applicant, please refer to the online application posting available at
https://mearis.cms.gov/public/publications/device-ptp/DEP260228AHPFT.
[[Page 41836]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.064
We are inviting public comments on whether the
EndoForceTM System meets the newness criterion at Sec.
419.66(b)(1), the eligibility criteria at Sec. 419.66(b)(3) and
(b)(4), and the device category eligibility criterion at Sec.
419.66(c)(1).
Regarding the substantial clinical improvement criterion at Sec.
419.66(c)(2), after reviewing the information provided by the
applicant, we have the following concerns regarding whether the
EndoForceTM System meets the substantial clinical
improvement criterion.
In support of claims one through four, eight, and nine, the
applicant submitted a single published study evaluating the
EndoForceTM System: Burgess et al. (2024), two un-published
studies assessing the EndoForceTM System: Kramer et al.
(n.d.) and Astor et al. (n.d.), and three background studies: Halbert
et al. (2020), Harms et al. (2016), and Woodside et al. (2021) which
did not assess the nominated device. In support of claims five through
seven the applicant submitted three background articles (Pisoni et al.
(2021); Berland et al. (2019); Hull et al. (2018)) which did not assess
the nominated device.35 36 37
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\35\ Pisoni, R. L., Zepel, L., Zhao, J., Burke, S., Lok, C. E.,
Woodside, K. J., Wasse, H., Kawanishi, H., Schaubel, D. E., Zee, J.,
& Robinson, B. M. (2021). International Comparisons of Native
Arteriovenous Fistula Patency and Time to Becoming Catheter-Free:
Findings From the Dialysis Outcomes and Practice Patterns Study
(DOPPS). American journal of kidney diseases: the official journal
of the National Kidney Foundation, 77(2), 245-254. https://doi.org/10.1053/j.ajkd.2020.06.020.
\36\ Berland, T. L., Clement, J., Griffin, J., Westin, G. G., &
Ebner, A. (2019). Endovascular Creation of Arteriovenous Fistulae
for Hemodialysis Access with a 4 Fr Device: Clinical Experience from
the EASE Study. Annals of vascular surgery, 60, 182-192. https://doi.org/10.1016/j.avsg.2019.02.023.
\37\ Hull, J. E., Jennings, W. C., Cooper, R. I., Waheed, U.,
Schaefer, M. E., & Narayan, R. (2018). The Pivotal Multicenter Trial
of Ultrasound-Guided Percutaneous Arteriovenous Fistula Creation for
Hemodialysis Access. Journal of vascular and interventional
radiology: JVIR, 29(2), 149-158.e5. https://doi.org/10.1016/j.jvir.2017.10.015.
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[[Page 41837]]
The Burgess et al. (2024) study is a single-arm, non-randomized
study that analyzed the use of the EndoForceTM System in 158
patients aged 18 and older diagnosed with ESRD scheduled to have an AVG
for hemodialysis placed in their upper arm in 10 U.S. institutions
between 2018 and 2021 after a 6-month follow-up period.\38\ We have
several concerns with this study.
---------------------------------------------------------------------------
\38\ Burgess, J. S., Beaver, J. D., London, M., Rohan, V.,
Orland, P., Yevzlin, A., Setum, C., Ross, J., & InterGraft Study
Investigators. (2024). Prospective multicenter study of a novel
endovascular venous anastomotic procedure and device for
implantation of an arteriovenous graft for hemodialysis. The Journal
of Vascular Access, 25(4), 1244-1251. https://doi.org/10.1177/11297298231159691.
---------------------------------------------------------------------------
First, we are concerned that the study does not provide a
comparison to a control group, such as patients treated with standard
graft-to-vein sutured anastomosis. Without a comparison to currently
available treatments, particularly in the clinical setting where it is
most likely to be used, we are unable to assess whether the
EndoForceTM System demonstrates substantial clinical
improvement over currently available treatments. To demonstrate
substantial clinical improvement, we consider supporting evidence,
preferably published peer-reviewed clinical trials, that show improved
clinical outcomes, such as reduction in mortality, complications,
subsequent interventions, future hospitalizations, recovery time, pain,
or a more rapid beneficial resolution of the disease process compared
to other currently available treatments.
Second, we are concerned that the smaller patient population and
study design of Burgess et al. (2024), and the lack of stratification
by key clinical factors known to affect AVG outcomes, may limit both
the reliability of the cumulative patency findings and the
generalizability of results to the Medicare population. Stratification
factors, such as coronary artery disease, hypertension status, and
ipsilateral access placement, which have all been shown to be
associated with thrombosis, need for intervention, and cumulative
patency would be helpful to assess the outcomes.
In addition, it is unclear to what extent any improvement in
cumulative patency is due to use of the EndoForceTM
Connector versus the less invasive endovascular procedure used for
implantation. We would welcome additional information on
differentiating how the EndoForceTM System's connection to
AVG versus the less invasive nature of the endovascular procedure leads
to improvements in cumulative patency.
Furthermore, we note that, in Burgess et al. (2024), the authors
compared results to three background studies, Halbert et al. (2020)
(submitted in support of claim 4), Harms et al. (2016) (submitted in
support of claim 8), and Woodside et al. (2021) (submitted in support
of claim 8), none of which directly address the EndoForceTM
System.39 40 41 We question the appropriateness of comparing
cumulative patency, intervention rates, and AVG abandonment in Burgess
et al. (2024) to outcomes reported in the three background studies, as
observed differences may be influenced by variations in study design,
study location, patient population and characteristics, and study
period. Specifically, Burgess et al. (2024) reports a 6-month
cumulative patency of 92 percent in its patient population and compares
it to the 80 percent rate reported in Halbert et al. (2020). However,
Halbert et al. (2020) is a meta-analysis of 32 studies conducted across
14 countries between 2007 and 2019, representing 3,381 AVGs placed in
patients with chronic kidney disease or ESRD undergoing or preparing
for hemodialysis using ePTFE grafts. In contrast, Burgess et al. (2024)
analyzed ESRD patients between 2018 and 2021. Thus, we question whether
the results in Halbert et al. (2020), which included studies dating
back more than a decade, reflect current operative techniques and
perioperative care in the U.S. and therefore whether they are an
appropriate comparator to Burgess et al. (2024). Similarly, Harms et
al. (2016) is a retrospective study of 599 patients treated between
January 2006 and December 2011, and Woodside et al. (2021) is an
observational cohort study of 73,027 patients using data from July 2012
to December 2014. These studies reflect earlier clinical practices and
patient populations that differ from those in Burgess et al. (2024),
which evaluated patients between 2018 and 2021. Burgess et al. (2024)
compared its reported intervention rate of 1.22 per patient-year to
higher rates reported in Harms et al. (2016) and Woodside et al.
(2021), 1.58 and 1.87 respectively; however, these comparisons may not
be appropriate given the significant differences in study design, time
periods and patient populations. These earlier studies do not
adequately account for changes in clinical practice over time and any
observed differences in outcomes are likely confounded by these factors
rather than attributable to the technology itself. As such, these
studies may not provide a valid basis for comparison to Burgess et al.
(2024).
---------------------------------------------------------------------------
\39\ Halbert, R. J., Nicholson, G., Nordyke, R. J., Pilgrim, A.,
& Niklason, L. (2020). Patency of ePTFE Arteriovenous Graft
Placements in Hemodialysis Patients: Systematic Literature Review
and Meta-Analysis. Kidney360, 1(12), 1437-1446. https://doi.org/10.34067/kid.0003502020.
\40\ Harms, J. C., Rangarajan, S., Young, C. J., Barker-Finkel,
J., & Allon, M. (2016). Outcomes of arteriovenous fistulas and
grafts with or without intervention prior to successful use. Journal
of Vascular Surgery, 64(1), 155-162. https://doi.org/10.1016/j.jvs.2016.02.033.
\41\ Woodside, K. J., Repeck, K. J., Mukhopadhyay, P., Schaubel,
D. E., Shahinian, V. B., Saran, R., & Pisoni, R. L. (2021).
Arteriovenous Vascular Access-Related Procedural Burden Among
Incident Hemodialysis Patients in the United States. American
Journal of Kidney Diseases, 78(3), 369-379.e1. https://doi.org/10.1053/j.ajkd.2021.01.019.
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Moreover, we note patient populations varied across studies, and it
is unclear how these differences may have affected intervention rates
per patient-year. For example, Burgess et al. (2024) included patients
with two or fewer previous vascular accesses in the treatment arm,
while Woodside et al. (2021) included patients undergoing a first-time
AVG placement between dialysis initiation and 1 year. We note that
patients who have had previous hemodialysis access points experience
damage to the blood vessels regardless of whether the access point is a
central venous catheter, AVG, or AVF.42 43 Further, having
prior vascular access points in the ipsilateral arm has been shown to
decrease cumulative patency in Harms et al. (2016). We welcome
additional studies that control for patients with comparable vascular
access placement histories, to more accurately quantify the
contributions of the EndoForceTM System to improvements in
interventions per patient-year.
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\42\ Harms, J. C., Rangarajan, S., Young, C. J., Barker-Finkel,
J., & Allon, M. (2016). Outcomes of arteriovenous fistulas and
grafts with or without intervention prior to successful use. Journal
of Vascular Surgery, 64(1), 155-162. https://doi.org/10.1016/j.jvs.2016.02.033.
\43\ Lok, C. E., Huber, T. S., Orchanian-Cheff, A., & Rajan, D.
K. (2024). Arteriovenous access for hemodialysis: A review. Journal
of American Medical Association, 331(15), 1307-1317. https://doi.org/10.1001/jama.2024.0535.
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Finally, we are concerned that differences in vascular location for
[[Page 41838]]
patients in the Burgess et al. (2024) compared to patients in the
background studies may influence outcomes and adversely impact
comparability of results. Specifically, while Burgess et al. (2024)
evaluated patients with upper arm AVGs consistent with the
EndoForceTM System's FDA indication, this varied across the
comparator studies: Halbert et al. (2020) excluded studies that
exclusively assessed lower extremity AVGs, Harms et al. (2016) included
patients who had AVGs in the chest and thigh in addition to the upper
extremity, and Woodside et al. (2021) did not specify the anatomical
location of AVGs. It is unclear whether some of the studies included
patient populations with upper extremity, lower extremity, and chest
AVGs. As discussed in greater detail later in this section for the
second claim, it is unclear whether upper extremity and upper arm are
used interchangeably. We question whether vascular access location
influences clinical outcomes, and as such, the results in these
background studies may be confounded by inclusion of patients with
additional graft locations that could adversely impact the
comparability of the results to Burgess et al. (2024).
With regard to the second claim that the EndoForceTM
System improves patency and reduces AVG abandonment, the applicant
submitted one unpublished analysis (Astor et al. (n.d.)) that compared
the primary patency (defined as the time interval from initial
implantation until first intervention) and cumulative patency (defined
as the time interval between implantation of the graft to abandonment)
results from Burgess et al. (2024) to pooled results from a meta-
analysis of 34 studies of AVGs implanted using traditional surgical
techniques.\44\ We are concerned that Astor et al. (n.d.) may not
demonstrate that the EndoForceTM System substantially
improves the diagnosis or treatment of an illness when compared to the
benefits of other available treatments. Astor et al. (n.d.) reported a
high degree of variability among the comparator studies included in the
meta-analysis (primary patency I\2\=99.44; cumulative patency
I\2\=99.36), many of which showed similar or higher primary patency
(60.21 percent; 95 percent confidence interval (CI): 50.84, 69.59) and
cumulative patency (92.08 percent; 95 percent CI: 86.98, 97.18)
compared to results from Burgess et al. (2024). We note that 19 of the
31 studies that provided data on cumulative patency in Astor et al.
(n.d.) did not specifically report 6-month patency outcomes in tables
or text the studies only provided data in survival curves from which
the authors of Astor et al. (n.d.) derived 6-month patency
measurements. The estimated 6-month cumulative patency including all 31
studies was 83.23 percent (95 percent CI: 80.18, 86.28), whereas the 6-
month cumulative patency estimated from the 12 studies reporting
numerical values was 86 percent (95 percent CI: 81.78, 90.22). Astor et
al. (n.d.) did not state whether the difference between the 6-month
cumulative patency rates of 92 percent in Burgess et al. (2024) and 86
percent was statistically significant. However, we note the lower 95
percent CI bound reported in Burgess et al. (2024) was 86.98 percent,
lower than the upper 95 percent CI bound of 90.22 percent for the 12
studies in Astor et al. (n.d.) providing numerical data. We also note
that Astor et al. (n.d.) states that the primary patency for the
EndoForceTM System is similar to pooled results from
comparator studies (60.21 percent vs 60.35 percent; p=0.75).
Additionally, we note that the 20 percent AVG abandonment rate used as
a baseline by Astor et al. (n.d.) which they report was reduced to 8
percent, comes from a single meta-analysis (Halbert) based on 32
studies from 14 countries conducted between 2007 and 2019. We question
whether this is an appropriate comparator to the 158 patients treated
between 2018 and 2021 in 10 U.S. institutions reported in Burgess et
al. (2024).
---------------------------------------------------------------------------
\44\ Astor, B.C., Moorthi, K., Grant, L., Litchfield, T. (Pre-
publication). Endovascular AVG venous anastomosis improves
cumulative patency compared to traditional sutured anastomosis: a
meta-analysis.
---------------------------------------------------------------------------
We also note that the criteria for comparator studies included in
the meta-analysis in Astor et al. (n.d.) excluded those studies which
only assessed lower extremity or chest AVGs. However, it is unclear
whether some of the studies included patient populations with upper
extremity AVGs as well as lower extremity and chest AVGs. As previously
discussed, vascular access location may influence outcomes, therefore,
the results in these background studies may be confounded by inclusion
of patients with additional graft locations that could adversely impact
the comparability of the results to Burgess et al. (2024).
Additionally, because of the EndoForceTM System's FDA
indication for use in the upper arm, we question whether the comparison
is appropriate. Further, we note it is unclear in the application
whether the upper arm means the entire upper extremity, including the
forearm (distal to the elbow) or only a portion of the arm (proximal to
the elbow). We are interested in additional information clarifying the
meaning of upper arm to help us evaluate the evidence provided in
support of substantial clinical improvement and determine if it is
applicable.
With regard to the third claim that the EndoForceTM
System sustains patency and requires fewer interventions to maintain
patency, the applicant submitted one unpublished, extended follow-up
study (Kramer et al. (n.d.)) of 37 patients from Burgess et al. (2024),
that evaluates the number of interventions performed to achieve
cumulative patency for an additional 6 months beyond the most recent
intervention.\45\ Similar to our concerns regarding Burgess et al.
(2024), we are concerned that Kramer et al. (n.d.) does not provide a
control group for comparison. We note that the authors in Kramer et al.
(n.d.) stated that, since both the EndoForceTM System's
pivotal trial (Burgess et al. (2024)) as well as this extended follow-
up study do not directly compare outcomes to sutured AVGs, a meta-
analytic approach to compare endovascular anastomosis of an AVG with a
traditional sutured anastomosis may be warranted. We would welcome
additional information directly comparing endovascular anastomosis of
an AVG with a traditional sutured anastomosis.
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\45\ Kramer, A., Moorthi, K., Grant, L., Litchfield, T. (Pre-
publication). Extended Follow-Up of an Endovascular Venous
Anastomotic Connector for Arteriovenous Graft Creation in
Hemodialysis: A Multicenter Study.
---------------------------------------------------------------------------
Like Burgess et al. (2024), the authors of Kramer et al. (n.d.)
compared results to two background studies, Harms et al. (2016) and
Woodside et al. (2021), neither of which directly address the
EndoForceTM System. As mentioned previously, we question
whether the comparison of rates of interventions per patient-year in
Kramer et al. (n.d.) to Harms et al. (2016) and Woodside et al. (2021)
are appropriate and reflect true improvements or are attributable to
differences in study design, patient population, and study period.
Kramer et al. (n.d.) reported a rate of 1.32 interventions per patient-
year in its patient population using the nominated technology and
compared it to rates of 1.58 and 1.87 reported in Harms et al. (2016)
and Woodside et al. (2021). However, as previously noted in our
discussion of the first claim that the EndoForceTM System
improves patency, reduces intervention burden, and reduces AVG
abandonment at 6 months, due to the differences in study periods
between Kramer et al. (n.d.) and Harms
[[Page 41839]]
et al. (2016) and Woodside et al. (2021), we question whether the
results in the comparator studies, some of which are over a decade old,
reflect current operative techniques and latest perioperative care in
the U.S. Also, as previously noted in our discussion of the first
claim, the extent of variance in vascular access locations of the
patient populations assessed in these three studies is unclear. As
such, we are concerned that the results in these background studies may
be confounded by inclusion of patients with additional graft locations
which could adversely impact the comparability of the results to Kramer
et al. (n.d.).
We are also concerned about whether the patient population in
Kramer et al. (n.d.), which included 29 active patients at the end of
the study period from the 37 patients initially assessed, is powered
sufficiently to assess statistical significance, especially compared to
Burgess et al. (2024), which included 134 active patients at the end of
the study period from the 158 patients initially assessed. We note that
when a study is not adequately powered for the statistical analysis,
the statistics may appear artificially inflated and do not reflect
confounding effects. Further, we are concerned that the cohort in
Kramer et al. (n.d.) was selected and analyzed post-hoc, rather than
identified as a variable of interest at the initiation of Burgess et
al. (2024), and question whether quality of the study was diminished
due to selection bias.
Additionally, we question whether Kramer et al. (n.d.) conclusively
demonstrates that the EndoForceTM System provides a
substantial clinical improvement compared to other available
treatments. Kramer et al. (n.d.) estimated a cumulative patency of 78.4
percent at 180 days into the extended follow-up period (12 months from
AVG implant at the start of Burgess et al. (2024)). In comparison,
Halbert et al. (2020) reported a 12-month cumulative patency of 70
percent (95 percent CI: 64, 75). We also note the high degree of
variability (I\2\=91) among the comparator studies in Halbert et al.
(2020), many of which showed similar or higher cumulative patency
compared to Kramer et al. (n.d.). Therefore, we are unable to
conclusively attribute the difference in outcomes to the nominated
device.
Lastly, we question the appropriateness of comparing measures of
cumulative patency that are not equally defined. Kramer et al. (n.d.)
compared cumulative patency between participants with and without graft
interventions within the 6-month study period discussed in Burgess et
al. (2024) and stated that the cumulative patency at 6 months was
nearly identical (91.79 percent versus 91.80 percent, respectively). In
Kramer et al. (n.d.), for patients without an intervention, time to
loss of patency was measured from the date of implant, while for
patients with interventions, time to loss of patency was measured from
the date of first intervention. We question the appropriateness of
comparing cumulative patency between AVGs used at first hemodialysis
without intervention and those that required intervention prior to
first hemodialysis use. As Harms et al. (2016) notes, intervention
prior to first hemodialysis use is associated with a shortened
cumulative patency. As such, we question if making such comparisons
could be potentially misleading.
In support of claims five through seven, that the
EndoForceTM System improves cumulative (secondary) patency
compared to mature AV fistulas (AVFs), and devices used for AVF
creation, including WaveLinQTM, and EllipsysTM,
the applicant submitted three background articles (Pisoni et al.
(2021); Berland et al. (2019); Hull et al. (2018)) which did not assess
the nominated device.46 47 48 The applicant stated that
improvement in AVG patency is comparable to the 6-month cumulative
patency associated with mature AVFs (71 to 93 percent) (Liu, P. et al.
(2023)). However, we note that the EndoForceTM System is
indicated for attachment of an AVG to a vein, not for the creation of
an AVF. An AVF involves a direct anastomosis between an artery and a
vein, whereas an AVG uses a graft as a conduit between the artery and
the vein. Therefore, we question whether it is clinically appropriate
to compare the EndoForceTM System, a device used for AVG
attachment, to mature AVFs and devices used for AVF creation, including
WaveLinQTM and EllipsysTM. Given these
fundamental differences in mechanism and clinical use, we question
whether these claims demonstrate a substantial clinical improvement
over existing technologies.
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\46\ Pisoni, R. L., Zepel, L., Zhao, J., Burke, S., Lok, C. E.,
Woodside, K. J., Wasse, H., Kawanishi, H., Schaubel, D. E., Zee, J.,
& Robinson, B. M. (2021). International Comparisons of Native
Arteriovenous Fistula Patency and Time to Becoming Catheter-Free:
Findings From the Dialysis Outcomes and Practice Patterns Study
(DOPPS). American journal of kidney diseases: the official journal
of the National Kidney Foundation, 77(2), 245-254. https://doi.org/10.1053/j.ajkd.2020.06.020.
\47\ Berland, T. L., Clement, J., Griffin, J., Westin, G. G., &
Ebner, A. (2019). Endovascular Creation of Arteriovenous Fistulae
for Hemodialysis Access with a 4 Fr Device: Clinical Experience from
the EASE Study. Annals of vascular surgery, 60, 182-192. https://doi.org/10.1016/j.avsg.2019.02.023.
\48\ Hull, J. E., Jennings, W. C., Cooper, R. I., Waheed, U.,
Schaefer, M. E., & Narayan, R. (2018). The Pivotal Multicenter Trial
of Ultrasound-Guided Percutaneous Arteriovenous Fistula Creation for
Hemodialysis Access. Journal of vascular and interventional
radiology: JVIR, 29(2), 149-158.e5. https://doi.org/10.1016/j.jvir.2017.10.015.
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We are inviting public comment on whether the
EndoForceTM System meets the device category criterion at
Sec. 419.66(c)(2) and the cost criterion at Sec. 419.66(d)(3).
After reviewing the information provided by the applicant, we are
unable to determine that the EndoForceTM System meets the
new device category eligibility criteria, and therefore, we propose to
deny the transitional pass-through payment status for the
EndoForceTM System for CY 2027.
We are inviting public comments on our proposal to deny
transitional pass-through payment status for the EndoForceTM
System for CY 2027.
(b) LINKTM External Fixator
Metric Medical Devices, Inc. submitted an application for a new
device category for transitional pass-through payment status for the
LINKTM External Fixator for CY 2027. According to the
applicant, the LINKTM External Fixator is a dynamic
percutaneous bone external fixator that provides continuous compression
during the healing of bony fractures, fusions, and osteotomies. The
applicant stated that the LINKTM External Fixator is
composed of the (1) LINKTM, a stainless steel box-shaped
spring that applies forces to wires or pins inserted in the bone to
either actively pull together and compress or distract the bones; (2)
LINKTM Cover, a silicone cap that covers the bone pins or
wire; and (3) LINKTM Bone Pins, which are inserted in a
patient's bones and to which the LINK[Ocirc] attaches.
Table 41 provides an overview of the transitional pass-through
payment status application for the LINKTM External Fixator
and CMS's preliminary assessment. For additional details provided by
the applicant, please refer to the online application posting available
at https://mearis.cms.gov/public/publications/device-ptp/DEP250902M814F.
[[Page 41840]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.065
BILLING CODE 4169-69-C
We are inviting public comment on whether the LINKTM
External Fixator meets the newness criterion at Sec. 419.66(b)(1).
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\49\ Per the applicant, the LINKT is the shape changing force
creating bridging element between bone pin implants with the
fracture or site of fusion between the pins. The cost and components
listed in the table are for a 4-pin LINKT External Fixator.
According to the applicant, a 2-pin LINKT External Fixator is
available and would cost $3,650 for the 2-pin LINKT and LINKT Cover
($3,500) as well as one LINKT Bone Pin package (2 pins in each
package) ($150). Each LINKT package includes a cover to protect it
from the environment. Additional LINKT Covers can be purchased in a
separate package if a replacement cover is needed ($300 for a 2-pin
cover or $350 for a 4-pin cover). Per the applicant, all components
(LINKT, LINKT Bone Pins, and LINKT Cover) are required, and there
are no partial systems. The applicant stated that multiple LINKT
units may be used for higher level musculoskeletal procedures, such
as five LINKT units for a Lisfranc dislocation, complex fractures,
or Charcot foot fixation.
\50\ We note that the applicant selected the APC level device
offset amount of $0.19 for APC 5111 found in CY 2025 NFRM APC Offset
File. Beginning in CY 2017, we calculate the device offset amount at
the HCPCS code level instead of the APC level (81 FR 79657). We note
the HCPCS code level device offset amounts for the HCPCS codes
provided by the applicant are available in Addendum P to the CY 2025
OPPS/ASC final rule with comment period (89 FR 93912). For our
calculation, we selected the HCPCS level device offset amount of
$50.18 related to HCPCS 28899 in APC 5111 found in Addendum P. Based
on our initial assessment for this proposed rule, using the device
offset amount of $50.18 would result in the LINKT External Fixator
meeting the cost significance requirements.
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[[Page 41841]]
Regarding the eligibility criterion at Sec. 419.66(b)(3), we are
concerned that the LINKTM External Fixator components may
not be integral to the service furnished, come in contact with human
tissue, or be surgically inserted or implanted.
With respect to whether the LINKTM Bone Pins and
LINKTM Cover are integral to the service furnished, based on
the information provided by the applicant, we question whether the
components are necessary to furnish or deliver the primary procedure
with which it is used. We note that, in the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75005), we stated that we have interpreted
the term ``integral'' to mean that the device is necessary to furnish
or deliver the primary procedure with which it is used. For example, a
pacemaker is integral to the procedure of implantation of a pacemaker.
According to the applicant, the LINKTM uses a single- use
external fixator consisting of a stainless-steel bridge spring formed
into a box shape, with holes that are held in alignment by surgical
needle drivers during pin placement. When released, the bridge shortens
to apply forces and the side elements swing outward to create moments
on bone fixation pins or wires embedded in bone, pulling together and
compressing or distracting bony structures. While the LINKTM
External Fixator may include LINKTM Bone Pins, per the
applicant, other commercially available bone pins, k-wires, or
Steinmann pins (hereinafter referred to collectively as ``bone fixation
pins or wires'') may be compatible with the LINKTM External
Fixator, and we therefore question whether the LINKTM Bone
Pins are integral to the service furnished as they may be replaced with
other commercially available bone fixation pins or wires. We further
question whether the LINKTM Bone Pins are integral to the
service furnished as it is unclear, based on the information provided
in the application, whether any LINKTM Bone Pins are
included in the LINKTM External Fixator packaging, or if
they are packaged and sold separately from the LINKTM
External Fixator. With respect to the LINKTM Cover, because
the applicant stated that the LINKTM Cover is a separate
removable silicon elastomer cover that protects the LINKTM
and the patient from the pin and wire ends and does not play a role in
providing compression, as such, we also question if the
LINKTM Cover is integral to the service furnished. We are
interested in additional information about these components of the
LINKTM External Fixator, including whether the components
are required to furnish or deliver the primary procedure with which it
is used and if the components can be substituted with other
commercially available products.
With respect to whether the LINKTM External Fixator
comes in contact with human tissue and is surgically inserted or
implanted, we note that, per the applicant, the LINKTM Bone
Pins (or other bone pins or wires) are the only components that come in
contact with human tissue and are surgically implanted or inserted into
the patient. Per the applicant, the LINKTM component remains
outside the body and acts like a spring on skin penetrating bone
fixation pins to reduce and provide continuous compression at the bone
healing interface. We further note that, according to the applicant,
the LINKTM Cover is a separate, removable cover that does
not come in contact with and is not surgically implanted or inserted
into the patient. Therefore, we believe the LINKTM and the
LINKTM Cover components of the LINKTM External
Fixator do not come into contact with human tissue and are not
surgically inserted or implanted as required by Sec. 419.66(b)(3).
We are inviting public comment on whether the LINKTM
External Fixator meets the eligibility criterion at Sec. 419.66(b)(3).
Regarding the eligibility criterion at Sec. 419.66(b)(4), based on
the applicant's description, we question whether the LINKTM
Bone Pins could be considered a supply furnished incident to a service.
First, we question the role of LINKTM Bone Pins in creating
surgical openings for access to bone to accomplish the fixation
provided by the LINKTM. In the CY 2001 OPPS interim final
rule (65 FR 67804 through 67805), we stated that we consider items used
to create incisions, such as scalpels, electrocautery units, biopsy
apparatuses, or other commonly used operating room instruments, to be
supplies or capital equipment not eligible for transitional pass-
through payments. Based on the information provided on the application,
we are unclear if the LINKTM Bone Pins (or other bone
fixation pins or wires) are placed through a previously created
surgical opening or if they are directly inserted through skin and soft
tissue to access bone. We would welcome information regarding whether,
when, and how an incision is created during placement of the
LINKTM External Fixator. Second, as discussed previously
with respect to criteria at Sec. 419.66(b)(3), we note that it is
unclear whether the LINKTM Bone Pins may be replaced with
other commercially available bone fixation pins or wires. We are
seeking clarification about whether the LINKTM Bone Pins can
be substituted with other commercially available products. We question
whether LINKTM Bone Pins may be considered a supply or
material furnished incident to a service and excluded from device pass-
through payment eligibility under Sec. 419.66(b)(4).
We are inviting public comment on whether the LINKTM
External Fixator meets the eligibility criterion at Sec. 419.66(b)(4).
Regarding the device category eligibility criterion at Sec.
419.66(c)(1), the applicant stated that the existing pass-through code
of C1713 (Anchor/screw for opposing bone-to-bone or soft tissue-to-bone
(implantable)) does not appropriately describe the LINKTM
External Fixator because the category does not include fixators with
the LINKTM's shape-changing, spring-like design that stores
elastic mechanical energy allowing it to provide continuous dynamic
compression, which pulls bones together and closes gaps formed by bone
resorption or inadvertent mechanical loading and stimulates mesenchymal
stem cells to differentiate along an osteogenic pathway to form bone
and cartilage. In contrast, the applicant stated that traditional
external fixators included in C1713 are static, and therefore, do not
readjust or impart compression or distraction forces to enhance bone
healing as the LINKTM does.
Based on the description the applicant provided, the
LINKTM External Fixator is an external fixator that attaches
to pins inserted into the bone principally with the intent to
facilitate stabilization or oppose bone-to-bone contact, and therefore,
could be appropriately described by C1713 (Anchor/screw for opposing
bone-to-bone or soft tissue-to-bone (implantable)). Further, C1713 does
not describe the type of fixation or specify the type of compression
created by the device. Specifically, we believe that the pass-through
payment category C1713 may appropriately describe the LINKTM
External Fixator because C1713
[[Page 41842]]
describes implantable pins and/or screws inserted or drilled into bone,
principally with the intent to facilitate stabilization or oppose bone-
to-bone contact, which is consistent with the LINKTM
External Fixator description. We note that we do not establish pass-
through device categories for the purpose of describing specific
devices, rather, device categories are intended to encompass all
devices that can be appropriately described by a given category. In
this context, we believe that the LINKTM External Fixator
may be appropriately described by C1713.
We are inviting public comment on whether the LINKTM
External Fixator meets the device category eligibility criterion at
Sec. 419.66(c)(1).
Regarding the substantial clinical improvement criterion at Sec.
419.66(c)(2), after reviewing the information provided by the
applicant, we have the following concerns regarding whether the
LINKTM External Fixator meets the substantial clinical
improvement criterion. Specifically, we are concerned that the
applicant did not (1) clearly identify the patient population that is
unresponsive to, or ineligible for, currently available treatments that
can only be treated with the LINKTM External Fixator and
provide corresponding supporting evidence; (2) provide sufficient
evidence of the LINKTM External Fixator's effect on recovery
time, adverse events, pain, or any other clinical outcomes; or (3)
submit evidence that the LINKTM External Fixator
substantially improves the diagnosis or treatment of an illness when
compared to other available treatments.
First, the applicant asserted that the LINKTM External
Fixator offers a treatment option for a patient population unresponsive
to, or ineligible for, currently available treatments, but did not
identify a patient population that can only be treated with the
LINKTM External Fixator. Instead, the applicant stated that
bone fixation for those who have infected sites, metal allergies,
anesthesia sensitivity, skin pathology, or other co-morbidities (such
as diabetes, neuropathy, or a compromised immune system) can be treated
with the LINK[Ocirc] External Fixator due to the minimally invasive
nature of bone fixation the nominated device provides. While, according
to the applicant, these patients can be treated with the
LINKTM External Fixator, the applicant did not explain why
other available devices, such as the nitinol bone staple, mini-rail
external fixator, and Genxfix External Fixation (the LINKTM
External Fixator's predicate device), would not be available treatment
options for this patient population. We welcome additional information
and supporting evidence regarding a patient population that can only be
treated with the LINK[Ocirc] External Fixator and not with another
existing device.
Further, we note that no evidence was provided to support the
applicant's claim that the LINKTM External Fixator
significantly improves clinical outcomes compared to currently
available treatments. We note that the applicant provided one document
that describes the LINKTM External Fixator's uses and
technical features and a second document that summarizes the principles
of minimizing surgical trauma, application of continuous dynamic
compression, and avoidance of permanent implants, which the applicant
asserted are benefits associated with the nominated device, but did not
provide any studies assessing the clinical outcomes of using the
LINKTM External Fixator. Additionally, while the
LINKTM External Fixation Independent Clinical Research
Support document provided with the application includes citations that
appear to represent studies related to internal and external fixation
approaches, we cannot evaluate sources that are cited but not included
as part of the application.
Moreover, we note that the applicant did not provide any evidence
comparing the LINKTM External Fixator's clinical outcomes to
those of other available treatment options, such as the Genxfix
External Fixator (the predicate device), nitinol bone staple, Mini-
RailTM External Fixator, Hoffman[supreg] External Fixator
System, or MaxFrameTM. Specifically, FDA determined that the
LINKTM External Fixator is substantially equivalent to a
legally marketed device, the Genxfix External Fixator (the
LINKTM External Fixator's predicate device), which received
510(k) clearance on December 28, 2016. The LINKTM External
Fixator's FDA 510(k) summary indicated that the two devices share
similar technological characteristics and that the LINKTM
External Fixator differs only in its fixator utilizing a shape-changing
spring rather than a shape-changing power screw and clamps to act on
pins and wires as the Genxfix External Fixator does. We believe that
further investigation with comparators would be helpful to determine
whether the device demonstrates substantial clinical improvement over
currently available treatments in the clinical setting where it is most
likely to be used. To demonstrate substantial clinical improvement over
currently available treatments, we consider supporting evidence,
preferably published, peer-reviewed clinical trials, that shows
improved clinical outcomes, such as reduction in mortality,
complications, subsequent interventions, future hospitalizations,
recovery time, pain, or a more rapid beneficial resolution of the
disease process compared to the standard of care.
We further note that dynamic digital external fixators made from
readily available hardware (such as k-wires and dental rubber bands)
have been in use for decades.\51\ Since these external fixators appear
to apply dynamic forces in the treatment of hand bone fractures, we
question whether these devices may treat some of the same conditions in
a similar manner and clinical setting as the LINKTM External
Fixator, and therefore, whether the LINKTM External Fixator
represents a substantial clinical improvement over these longstanding
treatment options.
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\51\ Chauhan, A., Sikora-Klak, J., & Abrams, R. (2018). Dynamic
``homemade'' digital external fixators for proximal interphalangeal
joint injuries: Surgical technique. The Journal of Hand Surgery,
43(9), 875.E1-875.E12. https://www.jhandsurg.org/article/S0363-5023(17)31675-1/fulltext/.
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We are inviting public comment on whether the LINKTM
External Fixator meets the substantial clinical improvement category
criterion at Sec. 419.66(c)(2).
We also are inviting public comment on whether the
LINKTM External Fixator meets the cost criterion at Sec.
419.66(d)(3).
After reviewing the information provided by the applicant, we are
unable to determine that the LINKTM External Fixator meets
the new device category eligibility criteria, and therefore, we propose
to deny transitional pass-through payment status for the
LINKTM External Fixator for CY 2027.
We are inviting public comments on our proposal to deny
transitional pass-through payment status for the LINKTM
External Fixator for CY 2027.
(c) SantrevaTM-ATK Endovascular Revascularization Catheter
AngioSafe[supreg], Inc. submitted an application for a new device
category for transitional pass-through payment status for the
SantrevaTM-ATK Endovascular Revascularization Catheter
(SantrevaTM-ATK Catheter) for CY 2027. According to the
applicant, the SantrevaTM-ATK Catheter is an energy and
wire-free platform for simultaneous intraplaque crossing and
revascularization of complex occlusive peripheral artery disease,
intended for facilitating intraluminal placement of guidewires beyond
stenotic lesions.
[[Page 41843]]
Table 42 provides an overview of the device category for the
transitional pass-through payment status application for the
SantrevaTM-ATK Catheter and CMS's preliminary assessment.
For additional details provided by the applicant, please refer to the
online application posting available at https://mearis.cms.gov/public/publications/device-ptp/DEP260302QH9AE.
BILLING CODE 4169-69-P
[GRAPHIC] [TIFF OMITTED] TP07JY26.067
[[Page 41844]]
BILLING CODE 4169-69-C
We are inviting public comment on whether the
SantrevaTM-ATK Catheter meets the newness criterion at Sec.
419.66(b)(1) and the eligibility criteria at Sec. 419.66(b)(3) and
(b)(4).
Regarding the device category eligibility criterion at Sec.
419.66(c)(1), per the applicant, the existing pass-through code C1887
(Catheter, guiding (may include infusion/perfusion capability)) does
not appropriately describe the SantrevaTM-ATK Catheter,
because C1887 does not reflect the full scope of the device's function
or the significant clinical improvement associated with the
SantrevaTM-ATK Catheter, which facilitates the placement of
guidewires beyond stenotic lesions by laterally cutting and then
compressing plaque, to form an intraluminal channel to restore blood
flow.
Based on the description the applicant provided, the
SantrevaTM-ATK Catheter is intended to facilitate the
intraluminal placement of guidewires beyond stenotic lesions, including
CTOs, in the femoropopliteal (arterial) peripheral vasculature, and
therefore, may be appropriately described by C1887 (Catheter, guiding
(may include infusion/perfusion capability)). Specifically, we believe
the pass-through payment category C1887 may describe the
SantrevaTM-ATK Catheter because the pass-through payment
category includes guiding catheters and the SantrevaTM-ATK
Catheter's primary function of crossing peripheral stenotic lesions to
establish a revascularization pathway appears to be the same function
performed by device described in C1887. In addition, per the applicant,
the SantrevaTM-ATK Catheter is introduced and removed prior
to final treatment, which is also consistent with the use of the
guiding catheters described in C1887. We note that we do not establish
pass-through device categories for the purpose of describing specific
devices; rather, device categories are intended to encompass all
devices that can be appropriately described by a given category. In
this context, we believe the SantrevaTM-ATK Catheter may be
appropriately described by C1887. We are inviting public comment on
whether the SantrevaTM-ATK Catheter meets the device
category eligibility criterion at Sec. 419.66(c)(1).
Regarding the substantial clinical improvement criterion at Sec.
419.66(c)(2), after reviewing the information provided by the
applicant, we have the following concerns regarding whether the
SantrevaTM-ATK Catheter meets the substantial clinical
improvement criterion. First, we note that the applicant submitted a
single study evaluating the SantrevaTM-ATK Catheter in
support of all eight substantial clinical improvement claims: Banerjee
et al. (2026) \52\. The applicant provided an additional study,
Saratzis et al. (2026),\53\ which we consider to be reference material
established by experts to define vessel preparation, core aims, and
usage. We therefore do not believe this evidence directly supports the
claims of improved mechanism compared to other existing devices or
techniques that facilitate wire crossing.
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\52\ Banerjee, S., Metzger, C., Thatipelli, M., Ramaiah, V.G.,
Sayfo, S., Das, T., Tsai, S., Hyder, O., Shammas, N. W., Bunte, M.,
Nseir, G., Thomas, A., Beasley, R., Bosarge, C., Gagne, P., Kwolek,
C., Rao, S., Novak, S., Pershad, A., Walker, C., & Soukas, P.
(2026). Safety and effectiveness of the Santreva\TM\-ATK
endovascular revascularization catheter in the RESTOR-1 peripheral
CTO crossing pivotal study. The American Journal of Cardiology.
Advance online publication. https://doi.org/10.1016/j.amjcard.2026.01.007.
\53\ Saratzis, A., Patrone, L., Secemsky, E.A., Dua, A., Zayed,
H., Torsello, G., Van Herzeele, I., Stavroulakis, K., & VPAD
collaborators (2026). Use of Vessel Preparation in Endovascular
Peripheral Arterial Disease (PAD) Interventions: A Global
Qualitative Analysis. Journal of endovascular therapy: an official
journal of the International Society of Endovascular Specialists,
15266028261424732. Advance online publication. https://doi.org/10.1177/15266028261424732.
---------------------------------------------------------------------------
The Banerjee et al. (2026) study analyzed the use of the
SantrevaTM-ATK Catheter in 74 patients with Rutherford class
2 through 5 peripheral arterial disease and de novo femoropopliteal
CTOs less than or equal to 30 centimeters in length. The primary
outcome of the study was clinical success, defined as device-
facilitated guidewire placement into the distal true lumen of the
femoropopliteal CTO without device-related major adverse events through
hospital discharge or within 24 hours post-procedure (whichever
occurred first). We have several concerns with this study.
First, we are concerned about the study's small sample size of 74
patients. Peripheral artery disease (with or without CTO) affects
approximately 12 million adults over the age of 40 in the U.S.\54\
Based on the small sample size compared to the disease prevalence, we
question whether the results of the study are generalizable to the
broader Medicare population. Also, the study is single-arm with no
comparator group, which limits the ability to assess whether the
SantrevaTM-ATK Catheter demonstrates improved outcomes
compared to other available technologies. In addition, we note that the
Banerjee et al. (2026) study included patients with Rutherford
classifications 2 (moderate claudication) through 5 (minor tissue
loss), a measure which represents clinically distinct disease
severities, but did not stratify outcomes by Rutherford class. As a
result, it is difficult to interpret performance across clinically
relevant severity subgroups, and to assess whether the
SantrevaTM-ATK Catheter substantially improved complex
lesion crossing, lumen gain while crossing complex lesions, and
clinical condition and quality of life of patients. Furthermore, we
note that the study's 30-day follow-up period limits our ability to
evaluate periprocedural injury, predominant intraplaque crossing and
recanalization, and clinical condition and quality of life of patients.
Specifically, the 30-day follow-up in Banerjee et al. (2026) is
insufficient to assess vessel wall integrity and recanalization
outcomes. These outcomes may require a minimum of 12 months of follow-
up to evaluate meaningfully as existing evidence demonstrates that
femoropopliteal CTO interventions are associated with higher rates of
reintervention at 12 months compared to non-CTO femoropopliteal
interventions, indicating that clinically meaningful vessel wall
outcomes continue to emerge beyond the 30-day periprocedural
period.\55\ Lastly, we are concerned that the study reports procedural
success, focusing on safety and effectiveness, but does not isolate the
contribution of simultaneous crossing from that of revascularization to
patient outcomes. This limits our ability to evaluate the claims of
improved mechanism of crossing and revascularization, improved safety
with no periprocedural injury and reduced need for adjunctive plaque
modification interventions with known adverse events, and improved
complex lesion crossing. We note that the SantrevaTM-ATK
Catheter is designed to facilitate the intraluminal placement of
guidewires beyond stenotic lesions, including CTOs, but requires a
subsequent intervention, such as stent placement, atherectomy, or
balloon angioplasty to achieve clinical improvement. Given that it is
only a step in a larger revascularization procedure, it is unclear how
the SantrevaTM-ATK Catheter
[[Page 41845]]
independently contributes to the clinical outcomes asserted.
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\54\ Cleveland Clinic. (n.d.). Peripheral artery disease (PAD).
Cleveland Clinic. https://my.clevelandclinic.org/health/diseases/17357-peripheral-artery-disease-pad .
\55\ Tsai, S., Liu, Y., Hoang, L., Vu, M., Lu, H., Ramanan, B.,
Fernandez Vazquez, D., Rosol, Z., Sayfo, S., Alaiti, M.A., Koutakis,
P., Brilakis, E.S., Shishehbor, M.H., & Banerjee, S. (2023).
Comparative outcomes of interventions for femoropopliteal chronic
total occlusion versus non-chronic total occlusion lesions from the
multicenter XLPAD registry. Journal of the American Heart
Association, 12(12), e028425. https://www.ahajournals.org/doi/10.1161/JAHA.122.028425.
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Additionally, we believe that the SantrevaTM-ATK
Catheter may not demonstrate that it substantially improves the
diagnosis or treatment of an illness when compared to other available
treatments. We note that there are currently available treatments for
facilitating the intraluminal placement of conventional guidewires
across stenotic lesions in the femoropopliteal peripheral vasculature,
including the CrosserTM Catheter S6 and the
VianceTM Crossing Catheter.\56\ While the applicant included
these existing treatments in comparator tables, the applicant did not
explain how the SantrevaTM-ATK Catheter's improves patient-
centered outcomes compared to other currently available CTO crossing
devices. In addition, the applicant submitted three articles as
comparator evidence, two publications on restenosis after directional
atherectomy for lower-extremity peripheral artery disease (Krishnan et
al., 2012; Tarricone, et al., 2015),57 58 and one report
evaluating FlowCardia's Crosser device for CTO recanalization in the
PATRIOT study (Endovascular Today, 2009).\59\ However, we believe the
Krishnan and Tarricone articles would be more appropriately
characterized as background literature as they do not establish a
performance benchmark against which the SantrevaTM-ATK
Catheter can be meaningfully compared. Furthermore, the source cited in
a trade magazine that references the PATRIOT study is not the actual
peer-reviewed study. As such, we believe that this evidence has limited
value for the purposes of comparison. We would welcome additional
information that includes longer follow-up periods and comparator
evidence that includes prospective studies of lesion-specific crossing
devices that establish a meaningful performance benchmark for crossing
success, safety, and durability.
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\56\ EV Today. (n.d.). CTO crossing devices. https://evtoday.com/device-guide/us/cto-crossing-devices.
\57\ Krishnan, P., Baber, U., Purushothaman, K.R.,
Purushothaman, M., Wiley, J., Tarricone, A., Mehran, R., Kovacic,
J., Kim, M., Moreno, P., Kini, A., Dangas, G., & Sharma, S. (2012).
Histopathologic evidence of adventitial cuts predicts restenosis
after directional atherectomy of lower extremity peripheral arterial
disease: Results from a randomized, open label, investigator
initiated trial comparing intravascular ultrasound guided
atherectomy to angiography guided atherectomy in peripheral vascular
interventions for TASC's A, B lesions (UTOPIA) pilot study
[Abstract]. Journal of the American College of Cardiology, 59(13),
E2083.
\58\ Tarricone, A., Ali, Z., Rajamanickam, A., Gujja, K., Kapur,
V., Purushothaman, K.R., Purushothaman, M., Vasquez, M., Zalewski,
A., Parides, M., Overbey, J., Wiley, J., & Krishnan, P. (2015).
Histopathological evidence of adventitial or medial injury is a
strong predictor of restenosis during directional atherectomy for
peripheral artery disease. Journal of Endovascular Therapy, 22(5),
712-715. https://doi.org/10.1177/1526602815597683/.
\59\ Endovascular Today. (2009, October 22). PATRIOT evaluates
FlowCardia's Crosser to mediate CTO recanalization. http://evtoday.com/2009/10/eNews102909_07.htmwhy.
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Additional information about how the SantrevaTM-ATK
Catheter leads to significantly improved patient-centered outcomes
compared with currently available CTO crossing devices would help our
assessment of whether the SantrevaTM-ATK Catheter
demonstrates substantial clinical improvement over existing
technologies. To demonstrate substantial clinical improvement over
existing technologies, we consider supporting evidence, preferably
published, peer-reviewed clinical trials, that shows improved clinical
outcomes, such as reduction in mortality, complications, subsequent
interventions, future hospitalizations, recovery time, pain, or more
rapid beneficial resolution of the disease process, compared to the
standard of care.
With regard to the second and third claims, the applicant provided
slide decks with comparative tables, however, the tables do not
identify the specific studies or datasets from which the comparator
values originated. Without access to the underlying sources, we are
unable to evaluate study methodologies, patient selection, lesion
characteristics, endpoint definitions, or follow-up duration, and
therefore cannot determine whether any observed differences reflect
true improvements attributable to the SantrevaTM-ATK
Catheter.
With respect to the fifth claim, the applicant asserted that the
SantrevaTM-ATK Catheter is a substantial clinical
improvement over current crossing devices and algorithms, which require
adjunct debulking or plaque modification devices for lumen gain.
However, all patients in Banerjee et al. (2026) subsequently underwent
a definitive revascularization procedure, making it difficult to
isolate the clinical contribution of luminal gain achieved during
crossing. Additionally, the supporting evidence does not demonstrate
how the reported luminal gain represents an improvement over, or
translates to better clinical outcomes than, other plaque modifying
devices or techniques that achieve comparable luminal gain.
Regarding the seventh claim that the SantrevaTM-ATK
Catheter substantially improves the clinical condition and quality of
life of patients, the applicant submitted the Banerjee et al. (2026)
study but provided no comparator data. We are concerned that the
submitted evidence does not differentiate device use outcomes from the
overall revascularization procedure outcomes. Specifically, the
SantrevaTM-ATK Catheter requires a subsequent intervention,
such as stent placement, atherectomy, or balloon angioplasty, to
achieve clinical improvement, and it is, therefore, unclear how the
SantrevaTM-ATK Catheter independently contributes to the
clinical outcomes asserted in this claim. We are also concerned that
the 30-day follow-up in Banerjee et al. (2026) may not be sufficient to
comprehensively assess clinical condition and quality of life outcomes,
which may require longer assessment. We would be interested in
additional information to determine whether the SantrevaTM-
ATK Catheter independently contributes to downstream, patient-level
clinical outcomes independent of the overall revascularization
procedure.
With regard to the eighth claim that the SantrevaTM-ATK
Catheter offers a substantial improvement for physicians in day-to-day
clinical practice, we note that this is a matter of physician workflow
rather than measurable clinical outcomes for patients. We therefore
question whether the evidence provided, which primarily focuses on the
lack of device-related major adverse events and lesion crossing time,
supports the applicant's claim of substantial clinical improvement, and
request clarification on how the evidence provided directly relates to
the applicant's claims of improved clinical outcomes.
We also note the applicant included supplemental information in
which the applicant described atheroplasty as a novel paradigm that
integrates intraplaque traversal, lateral plaque compression, channel
creation, and immediate distal perfusion. This information was not
linked to a specific claim of substantial clinical improvement. To the
extent the application includes materials that are not tied to a
specific substantial clinical improvement claim, we are unable to
evaluate that content under the substantial clinical improvement
criteria.
We are inviting public comment on whether the
SantrevaTM-ATK Catheter meets the device category criterion
at Sec. 419.66(c)(2).
We also are inviting public comment on whether the
SantrevaTM-ATK Catheter meets the cost criterion at Sec.
419.66(d)(3).
After reviewing the information provided by the applicant, we are
unable to determine that the
[[Page 41846]]
SantrevaTM-ATK Catheter meets the new device category
eligibility criteria; therefore, we propose to deny transitional pass-
through payment status for the SantrevaTM-ATK Catheter for
CY 2027.
We are inviting public comments on our proposal to deny
transitional pass-through payment status for the SantrevaTM-
ATK Catheter for CY 2027.
B. Device-Intensive Procedures
1. Background
Under the OPPS, prior to CY 2017, device-intensive status for
procedures was determined at the APC level for APCs with a device
offset percentage greater than 40 percent (79 FR 66795). Beginning in
CY 2017, CMS began determining device-intensive status at the HCPCS
code level. In assigning device-intensive status to an APC prior to CY
2017, the device costs of all the procedures within the APC were
calculated and the geometric mean device offset of all of the
procedures had to exceed 40 percent. Almost all of the procedures
assigned to device-intensive APCs utilized devices, and the device
costs for the associated HCPCS codes exceeded the 40 percent threshold.
The no cost/full credit and partial credit device policy (79 FR 66872
through 66873) applies to device-intensive procedures and is discussed
in detail in section IV.B.4. of the CY 2026 OPPS/ASC proposed rule. A
related device policy was the requirement that certain procedures
assigned to device-intensive APCs require the reporting of a device
code on the claim (80 FR 70422) and is discussed in detail in section
IV.B.3. of the CY 2026 OPPS/ASC proposed rule. For further background
information on the device-intensive APC policy, we refer readers to the
CY 2016 OPPS/ASC final rule with comment period (80 FR 70421 through
70426).
a. HCPCS Code-Level Device-Intensive Determination
As stated earlier, prior to CY 2017, under the device-intensive
methodology we assigned device-intensive status to all procedures
requiring the implantation of a device that were assigned to an APC
with a device offset greater than 40 percent and, beginning in CY 2015,
that met the three criteria as listed. Historically, the device-
intensive designation was at the APC level and applied to the
applicable procedures within that APC. In the CY 2017 OPPS/ASC final
rule with comment period (81 FR 79658), we changed our methodology to
assign device-intensive status at the individual HCPCS code level
rather than at the APC level. Under this policy, a procedure could be
assigned device-intensive status regardless of its APC assignment, and
device-intensive APC designations were no longer applied under the OPPS
or the ASC payment system.
We believe that a HCPCS code-level device offset is, in most cases,
a better representation of a procedure's device cost than an APC-wide
average device offset based on the average device offset of all of the
procedures assigned to an APC. Unlike a device offset calculated at the
APC level, which is a weighted average offset for all devices used in
all of the procedures assigned to an APC, a HCPCS code-level device
offset is calculated using only claims for a single HCPCS code. We
believe that this methodological change results in a more accurate
representation of the cost attributable to implantation of a high-cost
device, which ensures consistent device-intensive designation of
procedures with a significant device cost. Further, we believe a HCPCS
code-level device offset removes inappropriate device-intensive status
for procedures without a significant device cost that are granted such
status because of their APC assignment.
Under our existing policy, procedures that meet the criteria listed
in section IV.C.1.b. of this proposed rule are identified as device-
intensive procedures and are subject to all the policies applicable to
procedures assigned device-intensive- status under our established
methodology, including our policies on device edits and no cost/full
credit and partial credit devices discussed in sections IV.C.3. and
IV.C.4. of this proposed rule.
b. Use of the Three Criteria To Designate Device-Intensive Procedures
We clarified our established policy in the CY 2018 OPPS/ASC final
rule with comment period (82 FR 52474), where we explained that device-
intensive procedures require the implantation of a device and
additionally are subject to the following criteria:
All procedures must involve implantable devices that would
be reported if device insertion procedures were performed.
The required devices must be surgically inserted or
implanted devices that remain in the patient's body after the
conclusion of the procedure (at least temporarily); and
The device offset amount must be significant, which is
defined as exceeding 40 percent of the procedure's mean cost.
We changed our policy to apply these three criteria to determine
whether procedures qualify as device-intensive in the CY 2015 OPPS/ASC
final rule with comment period (79 FR 66926), where we stated that we
would apply the no cost/full credit and partial credit device policy--
which includes the three criteria listed previously--to all device-
intensive procedures beginning in CY 2015. We reiterated this position
in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70424),
where we explained that we were finalizing our proposal to continue
using the three criteria established in the CY 2007 OPPS/ASC final rule
with comment period for determining the APCs to which the CY 2016
device intensive policy will apply. Under the policies we adopted in
CYs 2015, 2016, and 2017, all procedures that require the implantation
of a device and meet the previously described criteria are assigned
device-intensive status, regardless of their APC placement.
2. Proposed Device-Intensive Procedure Policy
As part of our effort to better capture costs for procedures with
significant device costs, in the CY 2019 OPPS/ASC final rule with
comment period (83 FR 58944 through 58948), for CY 2019, we modified
our criteria for device-intensive procedures. We had heard from
interested parties that the criteria excluded some procedures that
interested parties believed should qualify as device-intensive
procedures. Specifically, we were persuaded by interested party
arguments that procedures requiring expensive surgically inserted or
implanted devices that are not capital equipment should qualify as
device-intensive procedures, regardless of whether the device remains
in the patient's body after the conclusion of the procedure. We agreed
that a broader definition of device-intensive procedures was warranted
and made two modifications to the criteria for CY 2019 (83 FR 58948).
First, we allowed procedures that involve surgically inserted or
implanted single-use devices that meet the device offset percentage
threshold to qualify as device-intensive procedures, regardless of
whether the device remains in the patient's body after the conclusion
of the procedure. We established this policy because we no longer
believe that whether a device remains in the patient's body should
affect a procedure's designation as a device-intensive procedure, as
such devices could, nonetheless, comprise a large portion of the cost
of the applicable procedure. Second, we modified our criteria to lower
the device offset percentage threshold from 40 percent to
[[Page 41847]]
30 percent, to allow a greater number of procedures to qualify as
device intensive. We stated that we believed allowing these additional
procedures to qualify for device-intensive status would help ensure
these procedures receive more appropriate payment in the ASC setting,
which would help encourage the provision of these services in the ASC
setting. In addition, we stated that this change would help to ensure
that more procedures containing relatively high-cost devices are
subject to the device edits, which leads to more correctly coded claims
and greater accuracy in our claims data. Specifically, for CY 2019 and
subsequent years, we finalized that device-intensive procedures will be
subject to the following criteria:
All procedures must involve implantable devices assigned a
CPT or HCPCS code;
The required devices (including single-use devices) must
be surgically inserted or implanted; and
The device offset amount must be significant, which is
defined as exceeding 30 percent of the procedure's mean cost (83 FR
58945).
In addition, to further align the device-intensive policy with the
criteria used for device pass-through payment status, we finalized, for
CY 2019 and subsequent years, that for purposes of satisfying the
device-intensive criteria, a device-intensive procedure must involve a
device that:
Has received FDA marketing authorization, or has received
an FDA IDE and has been classified as a Category B device by FDA in
accordance with Sec. Sec. 405.203 through 405.207 and 405.211 through
405.215, or meets another appropriate FDA exemption from premarket
review;
Is an integral part of the service furnished;
Is used for one patient only;
Comes in contact with human tissue;
Is surgically implanted or inserted (either permanently or
temporarily); and
Is not either of the following:
++ Equipment, an instrument, apparatus, implement, or item of the
type for which depreciation and financing expenses are recovered as
depreciable assets as defined in Chapter 1 of the Medicare Provider
Reimbursement Manual (CMS Pub. 15-1); or
++ A material or supply furnished incident to a service (for
example, a suture, customized surgical kit, scalpel, or clip, other
than a radiological site marker) (83 FR 58945).
In addition, for new HCPCS codes describing procedures requiring
the implantation of devices that do not yet have associated claims
data, in the CY 2017 OPPS/ASC final rule with comment period (81 FR
79658), we finalized a policy for CY 2017 to apply device-intensive
status with a default device offset set at 41 percent for new HCPCS
codes describing procedures requiring the implantation or insertion of
a device that did not yet have associated claims data until claims data
are available to establish the HCPCS code-level device offset for the
procedures. This default device offset amount of 41 percent was not
calculated from claims data; instead, it was applied as a default until
claims data were available upon which to calculate an actual device
offset for the new code. The purpose of applying the 41-percent default
device offset to new codes that describe procedures that implant or
insert devices was to ensure ASC access for new procedures until claims
data become available.
As discussed in the CY 2019 OPPS/ASC proposed rule and final rule
with comment period (83 FR 37108 through 37109 and 83 FR 58945 through
58946, respectively), in accordance with our policy stated previously
to lower the device offset percentage threshold for procedures to
qualify as device-intensive from greater than 40 percent to greater
than 30 percent, for CY 2019 and subsequent years, we modified this
policy to apply a 31-percent default device offset to new HCPCS codes
describing procedures requiring the implantation of a device that do
not yet have associated claims data until claims data are available to
establish the HCPCS code-level device offset for the procedures. In
conjunction with the policy to lower the default device offset from 41
percent to 31 percent, we continued our current policy of, in certain
rare instances (for example, in the case of a very expensive
implantable device), temporarily assigning a higher offset percentage
if warranted by additional information such as pricing data from a
device manufacturer (81 FR 79658). Once claims data are available for a
new procedure requiring the implantation or insertion of a device,
device-intensive status is applied to the code if the HCPCS code-level
device offset is greater than 30 percent, according to our policy of
determining device-intensive status by calculating the HCPCS code-level
device offset.
In addition, in the CY 2019 OPPS/ASC final rule with comment
period, we clarified that since the adoption of our policy in effect as
of CY 2018, the associated claims data used for purposes of determining
whether or not to apply the default device offset are the associated
claims data for either the new HCPCS code or any predecessor code, as
described by CPT coding guidance, for the new HCPCS code. Additionally,
for CY 2019 and subsequent years, in limited instances where a new
HCPCS code does not have a predecessor code as defined by CPT, but
describes a procedure that was previously described by an existing
code, we use clinical discretion to identify HCPCS codes that are
clinically related or similar to the new HCPCS code but are not
officially recognized as a predecessor code by CPT, and to use the
claims data of the clinically related or similar code(s) for purposes
of determining whether or not to apply the default device offset to the
new HCPCS code (83 FR 58946). Clinically related and similar procedures
for purposes of this policy are procedures that have few or no clinical
differences and use the same devices as the new HCPCS code. In
addition, clinically related and similar codes for purposes of this
policy are codes that either currently or previously describe the
procedure described by the new HCPCS code. Under this policy, claims
data from clinically related and similar codes are included as
associated claims data for a new code, and where an existing HCPCS code
is found to be clinically related or similar to a new HCPCS code, we
apply the device offset percentage derived from the existing clinically
related or similar HCPCS code's claims data to the new HCPCS code for
determining the device offset percentage. We stated that we believe
that claims data for HCPCS codes describing procedures that have minor
differences from the procedures described by new HCPCS codes will
provide an accurate depiction of the cost relationship between the
procedure and the device(s) that are used, and will be appropriate to
use to set a new code's device offset percentage, in the same way that
predecessor codes are used. If a new HCPCS code has multiple
predecessor codes, the claims data for the predecessor code that has
the highest individual HCPCS-level device offset percentage is used to
determine whether the new HCPCS code qualifies for device-intensive
status. Similarly, in the event that a new HCPCS code does not have a
predecessor code but has multiple clinically related or similar codes,
the claims data for the clinically related or similar code that has the
highest individual HCPCS level device offset percentage is used to
determine whether the new HCPCS code qualifies for device-intensive
status.
In the CY 2025 OPPS/ASC final rule with comment period (89 FR 94214
[[Page 41848]]
through 92419), we finalized a change to our methodology for applying
default device offset percentages for new device-intensive procedures.
Under our previous policy, if a new CPT/HCPCS code did not have
available claims data, either from the new HCPCS code or any
predecessor code or clinically-similar code that uses the same device,
and the CPT/HCPCS code otherwise met our criteria for device-intensive
status, we would apply a default device offset percentage of 31
percent. However, we were aware of certain situations where the default
device offset amount might not adequately reflect the existing device
portion of the procedure's costs when compared to the cost of similar
devices. A potential large difference between the default device offset
amount and the device portion of similar devices might impede our
ability to accurately remove device offset amounts from new device-
intensive procedures under the OPPS and to set payment rates for
device-intensive procedures under the ASC payment system. Therefore,
for CY 2025 and subsequent CYs, we finalized our proposal to modify our
default device offset percentage policy for new device-intensive
procedures. Specifically, for new CPT/HCPCS codes that both describe a
procedure that requires the surgical implantation or insertion of a
single-use device that exceeds 30 percent of the procedure's cost and
that meets our requirements of a device as described here and lack
claims data (from either the new HCPCS code or any predecessor code or
clinically-similar code that uses the same device), we would apply a
default device offset percentage that is the greater of 31 percent or
the device offset percentage of the APC to which the procedure has been
assigned. We stated that we still believe that a HCPCS code-level
device offset is, in most cases, a more accurate representation of a
procedure's device cost than an APC-wide average device offset based on
the average device offset of all the procedures assigned to an APC.
However, because newer device-intensive procedures lack claims data, we
believe the APC-wide average device offset percentage is, in many
cases, a better reflection of the estimated device costs of the
procedure than a default 31 percent offset. Additionally, there can be
instances where the typical device costs of procedures in an APC can be
significantly greater than the 31 percent default device offset. For
these reasons, we finalized our modification to our default device
offset percentage for new device-intensive procedures. This
methodological change was finalized for both the OPPS and ASC Payment
System for CY 2025 and subsequent CYs and applies to new procedures
assigned to clinical APCs, but not to new procedures assigned to New
Technology APCs.
Additionally, in the CY 2025 OPPS/ASC final rule with comment
period (89 FR 92414 through 92419), we stated that we were persuaded by
commenters that the lack of a device edit for device-intensive
procedures, particularly new technologies, might lead to an
underreporting of device costs and total procedure costs and
potentially impede beneficiary access to such new technologies over
time. Therefore, in addition to finalizing a modification to our device
edits policy for CY 2025, we finalized a modification to our device
offset percentage calculation. For procedures subject to our modified
device edits policy for CY 2025 that cannot report modifier ``CG'' to
bypass this claims processing edit, the device offset percentages
calculated (for the CPT/HCPCS code or its predecessor code) are based
on hospital claims that reported a device code. We stated that we
believed that hospital outpatient claims that report a device code with
such procedures provide, in general, a more accurate representation of
the procedures' total costs. We also finalized, for purposes of
determining device offset percentages, that we will not use claims data
from procedures that had a status indicator of ``E1'' during the
calendar year we are using for ratesetting and determining device
offset percentages. Lastly, we refined our process for applying device
offset percentages to use available claims data from predecessor codes
annually, rather than the first year of the successor code's activation
date, until we have available claims data from the successor code. In
the CY 2026 OPPS/ASC final rule with comment period (90 FR 53673
through 53679), we finalized our proposal to continue these policies
for CY 2026.
We propose to continue these policies for CY 2027. Specifically, we
propose to continue use of HCPCS code-level device-intensive
determination and three criteria to designate device-intensive
procedures, in accordance with existing policies. We also propose to
continue our device-intensive procedure policy, our proposed use of CY
2025 claims information for determining device offset percentages and
assigning device-intensive status, and our proposed default device
offset policy for determining device offset percentages in the absence
of claims data for device-intensive procedures. As we indicated in the
CY 2019 OPPS/ASC proposed rule and final rule with comment period,
additional information for our consideration of an offset percentage
higher than the default of 31 percent (or the APC-wide default offset
percentage) for new HCPCS codes describing procedures requiring the
implantation (or, in some cases, the insertion) of a device that do not
yet have associated claims data, such as pricing data or invoices from
a device manufacturer, should be directed to the Division of Outpatient
Care electronically at [email protected]. Additional
information can be submitted prior to issuance of an OPPS/ASC proposed
rule or as a public comment in response to an issued OPPS/ASC proposed
rule. Device offset percentages will be set in each year's final rule.
The full listing of the proposed CY 2027 device-intensive
procedures can be found in Addendum P to this proposed rule (which is
available via the internet on the CMS website). Further, our claims
accounting narrative contains a description of our device offset
percentage calculation. Our claims accounting narrative for this
proposed rule can be found under supporting documentation for the CY
2027 OPPS/ASC proposed rule on our website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.
3. Device Edit Policy
In the CY 2015 OPPS/ASC final rule with comment period (79 FR
66795), we finalized a policy and implemented claims processing edits
that require any of the device codes used in the previous device-to-
procedure edits to be present on the claim whenever a procedure code
assigned to any of the APCs listed in Table 5 of the CY 2015 OPPS/ASC
final rule with comment period (the CY 2015 device-dependent APCs) was
reported on the claim. In addition, in the CY 2016 OPPS/ASC final rule
with comment period (80 FR 70422), we modified our previously existing
policy and applied the device coding requirements exclusively to
procedures that require the implantation of a device assigned to a
device-intensive APC. In the CY 2016 OPPS/ASC final rule with comment
period, we also finalized our policy that the claims processing edits
are such that any device code, when reported on a claim with a
procedure assigned to a device-intensive APC (listed in Table 42 of the
CY 2016 OPPS/ASC final rule with comment period (80 FR 70422)), will
satisfy the edit.
In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79658
through 79659), we changed our policy
[[Page 41849]]
for CY 2017 and subsequent years to apply the CY 2016 device coding
requirements to the newly defined device-intensive procedures. For CY
2017 and subsequent years, we also specified that any device code, when
reported on a claim with a device-intensive procedure, will satisfy the
edit. In addition, we created HCPCS code C1889 to recognize devices
furnished during a device-intensive procedure that are not described by
a specific Level II HCPCS Category C-code. Reporting HCPCS code C1889
with a device-intensive procedure will satisfy the edit requiring a
device code to be reported on a claim with a device-intensive
procedure. In the CY 2019 OPPS/ASC final rule with comment period, we
revised the description of HCPCS code C1889 to remove the specific
applicability to device-intensive procedures (83 FR 58950). For CY 2019
and subsequent- years, the description of HCPCS code C1889 is
``Implantable/insertable device, not otherwise classified''.
In the CY 2024 OPPS/ASC final rule with comment period (88 FR 81758
through 81759), we finalized our proposal to establish a procedure-to-
device edit for the procedures assigned to APC 5496 (Level 6
Intraocular Procedures) and require hospitals to report the correct
device HCPCS codes when reporting any of the four procedures--CPT codes
0308T and 0616T, 0617T, and 0618T. (We note that CPT codes 0617T and
0618T were deleted effective January 1, 2025 and CPT code 0616T was
deleted effective January 1, 2025 and replaced with new CPT code
66683.) We have noted that interested parties have previously
recommended in past rulemaking that we reestablish all our previous
procedure-to-device edits, but we do not expect to extend this policy
beyond the procedures assigned to APC 5496 (Level 6 Intraocular
Procedures). This APC represents a unique situation--the APC (which was
the Level 5 Intraocular APC in previous years) had been a Low Volume
APC (fewer than 100 claims in a claims year) since we established our
Low Volume APC policy, the procedures associated with this APC have
significant procedure costs often greater than $15,000, and the
procedures associated with this APC require the implantation of a high-
cost intraocular device. In the CY 2025 OPPS/ASC final rule with
comment period, we finalized to continue this policy for APC 5496
(Level 6 Intraocular Procedures) for CY 2025 and subsequent years.
In the CY 2025 OPPS/ASC final rule with comment period (89 FR 92419
through 92422), we finalized a modification to our device edits policy.
While historically our device edits policy has only applied to
procedures that are device-intensive based on the most recent claims
data available, commenters had raised concerns about hospitals
underreporting device costs in years when certain device-intensive
procedures had lost device-intensive status because the device portion
of a procedure can fluctuate above and below our device-intensive
threshold of 30 percent. Commenters indicated to us that the presence
of the device edit requirement can have a significant impact on the
device portion and geometric mean cost of a procedure, particularly for
newer technologies. Therefore, for CY 2025 and subsequent CYs, we
finalized a policy to apply our device edits policy permanently once a
procedure is designated as a device-intensive procedure in a given
year. Additionally, we finalized a policy to reinstate our device edits
policy for procedures that have been device-intensive since we began
assigning device-intensive status at the HCPCS code level on January 1,
2017. We believed that by applying our device edit policy to procedures
that were device-intensive on or after January 1, 2017, we might
continue to receive device cost information for relatively new
procedures with limited claims data, which may have been impacted by
our policy to require that only existing device-intensive procedures be
subject to our device edits policy.
We are not proposing any changes to our device edit policy for CY
2027.
4. Adjustment to OPPS Payment for No Cost/Full Credit and Partial
Credit Devices
a. Background
To ensure equitable OPPS payment when a hospital receives a device
without cost or with full credit, in CY 2007, we implemented a policy
to reduce the payment for specified device-dependent APCs by the
estimated portion of the APC payment attributable to device costs (that
is, the device offset) when the hospital receives a specified device at
no cost or with full credit (71 FR 68071 through 68077). Hospitals were
instructed to report no cost/full credit device cases on the claim
using the ``FB'' modifier on the line with the procedure code in which
the no cost/full credit device is used. In cases in which the device is
furnished without cost or with full credit, hospitals were instructed
to report a token device charge of less than $1.01. In cases in which
the device being inserted is an upgrade (either of the same type of
device or to a different type of device) with a full credit for the
device being replaced, hospitals were instructed to report as the
device charge the difference between the hospital's usual charge for
the device being implanted and the hospital's usual charge for the
device for which it received full credit. In CY 2008, we expanded this
payment adjustment policy to include cases in which hospitals receive
partial credit of 50 percent or more of the cost of a specified device.
Hospitals were instructed to append the ``FC'' modifier to the
procedure code that reports the service provided to furnish the device
when they receive a partial credit of 50 percent or more of the cost of
the new device. We refer readers to the CY 2008 OPPS/ASC final rule
with comment period for more background information on the ``FB'' and
``FC'' modifiers payment adjustment policies (72 FR 66743 through
66749).
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005
through 75007), beginning in CY 2014, we modified our policy of
reducing OPPS payment for specified APCs when a hospital furnishes a
specified device without cost or with a full or partial credit. For CY
2013 and prior years, our policy had been to reduce OPPS payment by 100
percent of the device offset amount when a hospital furnishes a
specified device without cost or with a full credit and by 50 percent
of the device offset amount when the hospital receives partial credit
in the amount of 50 percent or more of the cost for the specified
device. For CY 2014, we reduced OPPS payment, for the applicable APCs,
by the full or partial credit a hospital receives for a replaced
device. Specifically, under this modified policy, hospitals are
required to report on the claim the amount of the credit in the amount
portion for value code ``FD'' (Credit Received from the Manufacturer
for a Replaced Device) when the hospital receives a credit for a
replaced device that is 50 percent or greater than the cost of the
device. For CY 2014, we also limited the OPPS payment deduction for the
applicable APCs to the total amount of the device offset when the
``FD'' value code appears on a claim. For CY 2015, we continued our
policy of reducing OPPS payment for specified APCs when a hospital
furnishes a specified device without cost or with a full or partial
credit and to use the three criteria established in the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68072 through 68077) for
determining
[[Page 41850]]
the APCs to which our CY 2015 policy will apply (79 FR 66872 through
66873). In the CY 2016 OPPS/ASC final rule with comment period (80 FR
70424), we finalized our policy to no longer specify a list of devices
to which the OPPS payment adjustment for no cost/full credit and
partial credit devices would apply and instead apply this APC payment
adjustment to all replaced devices furnished in conjunction with a
procedure assigned to a device-intensive APC when the hospital receives
a credit for a replaced specified device that is 50 percent or greater
than the cost of the device.
b. Policy for No Cost/Full Credit and Partial Credit Devices
In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79659
through 79660), for CY 2017 and subsequent years, we finalized a policy
to reduce OPPS payment for device-intensive procedures, by the full or
partial credit a provider receives for a replaced device, when a
hospital furnishes a specified device without cost or with a full or
partial credit. Under our current policy, hospitals continue to be
required to report on the claim the amount of the credit in the amount
portion for value code ``FD'' when the hospital receives a credit for a
replaced device that is 50 percent or greater than the cost of the
device.
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005
through 75007), we adopted a policy of reducing OPPS payment for
specified APCs when a hospital furnishes a specified device without
cost or with a full or partial credit by the lesser of the device
offset amount for the APC or the amount of the credit. We adopted this
change in policy in the preamble of the CY 2014 OPPS/ASC final rule
with comment period and discussed it in subregulatory guidance,
including chapter 4, section 61.3.6 of the Medicare Claims Processing
Manual. Further, in the CY 2021 OPPS/ASC final rule with comment period
(85 FR 86017 through 86018, 86302), we made conforming changes to our
regulations at Sec. 419.45(b)(1) and (2) that codified this policy.
We are not proposing any changes to our policies regarding payment
for no cost/full credit and partial credit devices for CY 2027.
V. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals
A. OPPS Transitional Pass-Through Payment for Additional Costs of
Drugs, Biologicals, and Radiopharmaceuticals
1. Background
Section 1833(t)(6) of the Act (42 U.S.C. 1395l(t)(6)) provides for
temporary additional payments or ``transitional pass-through payments''
for certain drugs and biologicals. A ``biological'' as used in this
proposed rule, and as codified at 42 CFR 414.802 and 414.902 includes a
``product licensed under section 351 of the PHS [Public Health Service]
Act''. As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999 (BBRA) (Pub. L. 106-113), this pass-through
payment provision requires the Secretary to make additional payments to
hospitals for: current orphan drugs for rare diseases and conditions,
as designated under section 526 of the Federal Food, Drug, and Cosmetic
Act; current drugs and biologicals and brachytherapy sources used in
cancer therapy; and current radiopharmaceutical drugs and biologicals.
``Current'' refers to those types of drugs or biologicals mentioned
above that are hospital outpatient services under Medicare Part B for
which transitional pass-through payment was made on the first date the
hospital OPPS was implemented.
Transitional pass-through payments also are provided for certain
``new'' drugs and biologicals that were not being paid for as a
Hospital Outpatient Department (HOPD) service as of December 31, 1996,
and whose cost is ``not insignificant'' in relation to the OPPS
payments for the procedures or services associated with the new drug or
biological. For pass-through payment purposes, radiopharmaceuticals are
included as ``drugs.'' As required by statute, transitional pass-
through payments for a drug or biological described in section
1833(t)(6)(C)(i)(II) of the Act can be made for a period of at least 2
years, but not more than 3 years, after the payment was first made for
the drug as a hospital outpatient service under Medicare Part B. Drugs
and biologicals pass-through applications are accepted and approved on
a quarterly basis in which pass-through payments for approved
applications could begin on the next available OPPS quarterly update.
Furthermore, our current policy, which was finalized in CY 2017 OPPS/
ASC final rule with comment period (81 FR 79662), is to allow for
quarterly expiration of pass-through payment status for drugs,
biologicals, and radiopharmaceuticals to afford a pass-through payment
period that is as close to a full 3 years as possible to allow, on a
prospective basis, for the maximum pass-through payment period without
exceeding the statutory limit of 3 years. Notice of drugs for which
pass-through payment status is ending during the calendar year is
included in the quarterly OPPS Change Request transmittals. Proposed CY
2027 pass-through drugs and biologicals and their designated APCs are
assigned status indicator ``G'' in Addenda A and B to this proposed
rule (which are available on the CMS website).\60\
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\60\ https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.
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Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through
payment amount, in the case of a drug or biological, is the amount by
which the amount determined under section 1842(o) of the Act (42 U.S.C.
1395u(o)) for the drug or biological exceeds the portion of the
otherwise applicable Medicare Outpatient Department (OPD) fee schedule
that the Secretary determines is associated with the drug or
biological. The regulations at 42 CFR 419.64(d) specify that the pass-
through payment equals the amount determined under section 1842(o) of
the Act minus the portion of the Ambulatory Payment Classification
(APC) payment that CMS determines is associated with the drug or
biological.
Section 1847A of the Act (42 U.S.C. 1395w-3a) establishes the
average sales price (ASP) methodology, which is used for payment for
drugs and biologicals described in section 1842(o)(1)(C) of the Act
furnished on or after January 1, 2005. The ASP methodology, as applied
under the OPPS, uses several sources of data as a basis for payment,
including the ASP, the wholesale acquisition cost (WAC), and the
average wholesale price (AWP). In this proposed rule, the term ``ASP
methodology'' and ``ASP-based'' are inclusive of all data sources and
methodologies described therein. Additional information on the ASP
methodology can be found on our website at https://www.cms.gov/medicare/payment/fee-for-service-providers/part-b-drugs/average-drug-sales-price.
The pass-through application \61\ and review process for drugs and
biologicals
[[Page 41851]]
is described on our website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/pass-through-payment-status-new-technology-ambulatory-payment-classification-apc.
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\61\ To apply for OPPS transitional Pass-Through Payment Status
and New Technology Ambulatory Payment Classification (APC),
applicants complete an application that is subject to the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.). This
information collection (CMS-10008) is currently approved under OMB
control number of 0938-0802 and has an expiration date of July 31,
2027.
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2. Drugs and Biologicals With Expiring Pass-Through Payment Status in
CY 2026
There are 49 drugs and biologicals for which pass-through payment
status expires by December 31, 2026, as listed in Table 43. These drugs
and biologicals will have received OPPS pass-through payment for 3
years during the period of April 1, 2023 through December 31, 2026. In
accordance with the policy finalized in the CY 2017 OPPS/ASC final rule
with comment period (81 FR 79662) and described earlier, pass-through
payment status for drugs and biologicals approved in CY 2017 and
subsequent years will expire on a quarterly basis, with a pass-through
payment period as close to 3 years as possible.
With the exception of those groups of drugs and biologicals that
are always packaged when they do not have pass-through payment status
(specifically, anesthesia drugs; drugs, biologicals, and
radiopharmaceuticals \62\ that function as supplies when used in a
diagnostic test or procedure; and drugs and biologicals that function
as supplies when used in a surgical procedure), our standard
methodology for providing payment for drugs and biologicals with
expiring pass-through payment status in an upcoming calendar year is to
determine the product's estimated per day cost and compare it with the
OPPS drug packaging threshold for that calendar year, which is proposed
to be $140 for CY 2027 for all drugs, biologicals, and therapeutic
radiopharmaceuticals (for high-cost diagnostic radiopharmaceuticals, we
would provide separate payment when their per day cost is greater than
the threshold we propose to adopt of $665). These policies are
discussed further in section V.B.1. of this proposed rule. If the
estimated per day cost for the drug or biological is less than or equal
to the applicable OPPS drug packaging threshold, we package payment for
the drug or biological into the payment for the associated procedure in
the upcoming calendar year. If the estimated per day cost of the drug
or biological is greater than the OPPS drug packaging threshold, we
provide separate payment at the applicable ASP methodology-based
payment amount (which is generally ASP plus 6 percent), as discussed
further in section V.B.2. of this proposed rule.
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\62\ In the CY 2025 OPPS/ASC final rule with comment period (89
FR 93948), we finalized the diagnostic radiopharmaceuticals policy
to separately pay those products when the per-day costs are greater
than a threshold. Please refer to section II.A.3.c. of the CY 2025
OPPS/ASC final rule with comment period for more information
regarding this policy.
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We welcome public comments on the status indicator for expiring
pass-through drugs and biologicals, in accordance with our existing
policies on packaged drugs, biologicals, and radiopharmaceuticals,
including the threshold packaging policy.
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3. Drugs, Biologicals, and Radiopharmaceuticals With Pass-Through
Payment Status Expiring in or Continuing Through CY 2027
We propose to end pass-through payment status in CY 2027 for 28
drugs and biologicals. These products, listed in Table 44, were
initially approved for pass-through payment status between April 1,
2024 and January 1, 2025. We also propose to continue pass-through
payment status through CY 2027 for 45 drugs and biologicals, listed in
Table 45, which were initially approved for pass-through payment status
between April 1, 2025 and April 1, 2026. The APCs and Healthcare Common
Procedure Coding System (HCPCS) codes for pass-through drugs and
biologicals are assigned status indicator ``G'' (Pass-Through Drugs and
Biologicals) in Addenda A and B to this proposed rule (which are
available on the CMS website).\63\ The APCs and HCPCS codes for these
drugs and biologicals are assigned status indicator ``G'' only for the
duration of their pass-through status.
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\63\ https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.
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Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through
payment for pass-through drugs and biologicals (the pass-through
payment amount) as the difference between the amount authorized under
section 1842(o) of the Act and the portion of the otherwise applicable
OPD fee schedule that the Secretary determines is associated with the
drug or biological. For CY 2027, we are continuing our policy to pay
for pass-through drugs and biologicals using the ASP methodology,
meaning a payment rate based on ASP, WAC, or AWP, as applicable. This
payment rate is generally ASP plus 6 percent, equivalent to the payment
rate these drugs and biologicals would receive in the physician's
office setting in CY 2027. We note that, under the OPD fee schedule,
separately payable drugs assigned to an APC are generally payable at
ASP plus 6 percent. Therefore, a $0 pass-through payment amount will
continue to be paid for pass-through drugs and biologicals under the CY
2027 OPPS because the difference between the amount authorized under
section 1842(o) of the Act, which is generally ASP plus 6 percent, and
the portion of the otherwise applicable OPD fee schedule that the
Secretary determines is appropriate, which is generally ASP plus 6
percent, is $0.
In the case of policy-packaged drugs (which include the following:
anesthesia drugs; drugs, biologicals, and radiopharmaceuticals \64\
below the applicable cost threshold that function as supplies when used
in a diagnostic test or procedure; and drugs and biologicals that
function as supplies when used in a surgical procedure), their pass-
through payment amount will continue to be equal to a payment rate
calculated using the ASP methodology, meaning a payment rate based on
ASP, WAC, or AWP. This payment rate will generally continue to be ASP
plus 6 percent for CY 2027, minus a payment offset for the portion of
the otherwise applicable OPPS payment that the Secretary determines is
associated with the drug or biological. We note that if not for the
pass-through payment status of these policy-packaged products, payment
for these products would be packaged into the associated procedure and
therefore, there are associated OPPS payment amounts for them.
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\64\ In the CY 2025 OPPS/ASC final rule with comment period (89
FR 93948), we finalized the diagnostic radiopharmaceuticals policy
to separately pay those products when the per-day costs are greater
than a threshold. Please refer to section II.A.3.c. of the CY 2025
OPPS/ASC final rule with comment period for more information
regarding this policy.
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We note that in the CY 2025 OPPS/ASC final rule with comment period
(89 FR 93948 through 93963), we modified the regulation text at 42 CFR
419.2(b)(15) to specify that only those diagnostic radiopharmaceuticals
with per-day costs at or below the per-day diagnostic
radiopharmaceutical packaging threshold for the applicable year are
policy-packaged. Meaning, for those diagnostic radiopharmaceuticals
that are below the diagnostic radiopharmaceutical packaging threshold,
for purposes of pass-through co-insurance calculations, they are
treated like policy packaged drugs. For those diagnostic
radiopharmaceuticals above the diagnostic radiopharmaceutical packaging
threshold, they are not packaged, and are not considered policy
packaged; therefore, for purposes of pass-through co-insurance
calculations, they are treated like separately payable drugs assigned
to an APC. Accordingly, a $0 pass-through payment amount is assigned
consistent with our policy described previously in this section for
separately payable drugs assigned to an APC.
We will continue our policy to update pass-through payment rates on
a quarterly basis on the CMS website during CY 2027 if later quarter
ASP submissions (or more recent WAC or AWP information, as applicable)
indicate that adjustments to the payment rates for these pass- through
payment drugs or biologicals are necessary. For a full description of
this policy, we refer readers to the CY 2006 OPPS/ASC final rule with
comment period (70 FR 68632 through 68635).
For CY 2027, consistent with our CY 2026 policy for diagnostic and
therapeutic radiopharmaceuticals, we will continue to provide payment
for both diagnostic and therapeutic
[[Page 41855]]
radiopharmaceuticals that are granted pass-through payment status based
on the ASP methodology. As stated earlier, for purposes of pass-through
payment, we consider radiopharmaceuticals to be drugs under the OPPS.
Therefore, if a diagnostic or therapeutic radiopharmaceutical receives
pass-through payment status during CY 2027, we will continue to follow
the standard ASP methodology to determine the pass-through payment rate
that drugs receive under section 1842(o) of the Act, which is generally
ASP plus 6 percent. If ASP data are not available for a
radiopharmaceutical, we will continue to provide pass-through payment
at WAC plus 3 or 6 percent, the equivalent payment provided for pass-
through drugs and biologicals without ASP information. Additional
detail on the WAC plus 3 or 6 percent payment policy can be found in
section V.B.2.a. of this proposed rule. If WAC information also is not
available, we will continue to provide payment for the pass-through
radiopharmaceutical at 95 percent of its most recent AWP.
We refer readers to Table 44 for the list of drugs and biologicals
with pass-through payment status expiring during CY 2027 and Table 45
for the list of drugs and biologicals with pass-through payment status
continuing through CY 2027.
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We welcome public comments on the status indicator for expiring
pass-through drugs and biologicals, in accordance with our existing
policies on
[[Page 41861]]
packaged drugs, biologicals, and radiopharmaceuticals, including the
threshold packaging policy.
B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals
Without Pass-Through Payment Status
1. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
a. Proposed Packaging Threshold
In accordance with section 1833(t)(16)(B) of the Act, the threshold
for establishing separate APCs for payment of drugs and biologicals was
set to $50 per administration during CYs 2005 and 2006. In CY 2007, we
used the four-quarter moving average Producer Price Index (PPI) levels
for Pharmaceutical Preparations (Prescription) to trend the $50
threshold forward from the third quarter of CY 2005 (when the Pub. L.
108173 mandated threshold became effective) to the third quarter of CY
2007. We then rounded the resulting dollar amount to the nearest $5
increment to determine the CY 2007 threshold amount of $55. Using the
same methodology as that used in CY 2007 (which is discussed in more
detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR
68085 through 68086), we set the packaging threshold for establishing
separate APCs for drugs and biologicals at $140 for CY 2026 (90 FR
53698).
Following the CY 2007 methodology, for the CY 2027 OPPS/ASC
proposed rule, we propose to use the most recently available four
quarter moving average PPI levels to trend the $50 threshold forward
from the third quarter of CY 2005 to the third quarter of CY 2027 and
round the resulting dollar amount ($142.40) to the nearest $5
increment, which yields a figure of $140. In performing this
calculation, we used the most recent forecast of the quarterly index
levels for the PPI for Pharmaceuticals for Human Use (Prescription)
(Bureau of Labor Statistics series code WPUSI07003) from IGI. IGI is a
nationally recognized economic and financial forecasting firm with
which CMS contracts to forecast various price indexes including the PPI
Pharmaceuticals for Human Use (Prescription). Based on these
calculations, we propose a packaging threshold for CY 2027 of $140 for
drugs, biologicals, and therapeutic radiopharmaceuticals. We also
propose that if more recent data subsequently become available after
the publication of the CY 2027 OPPS/ASC proposed rule, we would use
such updated data, if appropriate, to determine the final CY 2027 OPPS
drug packaging threshold amount in the CY 2027 OPPS/ASC final rule with
comment period.
We finalized in section II.A.3.c. of the CY 2025 OPPS/ASC final
rule with comment period (89 FR 94238 through 94241) to pay separately
for diagnostic radiopharmaceuticals with a per-day cost above the
packaging threshold for CY 2025 of $630. We also finalized that
starting in CY 2026 and subsequent years, we would update this
threshold by the PPI for Pharmaceuticals for Human Use (Prescription)
(Bureau of Labor Statistics series code WPUSI07003) from IHS Global,
Inc (IGI). For the diagnostic radiopharmaceutical packaging threshold,
we finalized using the same methodology as that used in CY 2007 (which
is discussed in more detail in the CY 2007 OPPS/ASC final rule with
comment period (71 FR 68085 and 68086)) to calculate the update to the
OPPS drug packaging threshold. Specifically, we finalized that,
starting with the CY 2026 rulemaking cycle, we would use the most
recently available four quarter moving average PPI levels to trend the
CY 2025 threshold amount forward from the third quarter of the data
year (CY 2024) to the third quarter of the payment year (CY 2025) and
round the resulting dollar amount to the nearest $5 increment. In the
CY 2026 OPPS/ASC final rule, we finalized a technical refinement to
this policy to use the most recently available four-quarter moving
average PPI levels to trend the CY 2025 threshold amount of $630
forward from the third quarter of CY 2025 to the third quarter of the
payment year (CY 2026) and round the resulting dollar amount to the
nearest $5 increment. We believed using the most recently available
forecast of the four quarter moving average PPI levels more
appropriately updates the packaging threshold amount from CY 2025 to
the current payment year moving forward. For this proposed rule, we
propose to use the most recently available four quarter moving average
PPI levels to trend the final CY 2025 $630 diagnostic
radiopharmaceutical packaging threshold forward from the third quarter
of CY 2025 to the third quarter of CY 2027 and round the resulting
dollar amount ($667.44) to the nearest $5 increment, which yields a
proposed radiopharmaceutical packaging threshold amount of $665 for CY
2027. We also propose that if more recent data subsequently become
available after the publication of the CY 2027 OPPS/ASC proposed rule,
we would use such updated data, if appropriate, to determine the final
CY 2027 diagnostic radiopharmaceutical packaging threshold amount in
the CY 2027 OPPS/ASC final rule with comment period.
b. Proposed Packaging of Payment for HCPCS Codes That Describe Certain
Drugs, Certain Biologicals, and Certain Radiopharmaceuticals Under the
Cost Thresholds
To determine the proposed CY 2027 packaging status for all nonpass-
through drugs, biologicals, diagnostic and therapeutic
radiopharmaceuticals that are not policy packaged, we calculated, on a
HCPCS code-specific basis, the per day cost of all drugs, biologicals,
and therapeutic radiopharmaceuticals that had a HCPCS code in CY 2025
and were paid (via packaged or separate payment) under the OPPS. We
used data from CY 2025 claims processed through December 31, 2025, for
this calculation. However, we did not perform this calculation for
those drugs and biologicals with multiple HCPCS codes that include
different dosages, as described in section V.B.1.d. of this proposed
rule, or for the following policy-packaged items that we propose to
continue to package in CY 2027: anesthesia drugs; drugs, biologicals,
and contrast agents and other drugs that function as supplies when used
in a diagnostic test or procedure; and drugs and biologicals that
function as supplies when used in a surgical procedure. Consistent with
our policy described in section V.B.5. of this proposed rule, in
situations where we have no claims data and must determine if these
products exceed the per-day cost threshold, we estimated the average
number of units of each product that would typically be furnished to a
patient during one day in the hospital outpatient setting and utilized
the ASP methodology to determine whether their payment will be packaged
as well as their payment status indicators.
To calculate the per day costs for drugs, biologicals, diagnostic
radiopharmaceuticals, and therapeutic radiopharmaceuticals to determine
their proposed packaging status for CY 2027, we used the methodology
that was described in detail in the CY 2006 OPPS proposed rule (70 FR
42723 through 42724) and finalized in the CY 2006 OPPS final rule with
comment period (70 FR 68636 through 68638). For each drug and
biological HCPCS code, we estimated payment rates for CY 2027 using the
ASP methodology, (ASP plus 6 percent, which is the payment rate we
proposed for separately payable drugs and biologicals), as discussed in
more detail in section V.A.1. and V.B.2. of this proposed rule to
calculate the proposed CY 2027 per day costs. We used the manufacturer-
submitted ASP
[[Page 41862]]
data from the fourth quarter of CY 2025 (data that were used for
payment purposes in the physician's office setting, effective April 1,
2026) to determine the proposed CY 2027 OPPS/ASC per day costs.
As is our standard methodology, for CY 2027, we propose to use
payment rates based on the ASP data from the fourth quarter of CY 2025
for budget neutrality estimates, packaging determinations, impact
analyses, and completion of Addenda A and B to this proposed rule
(which are available via the internet on the CMS website) because these
are the most recent data available for use at the time of development
of the CY 2027 OPPS/ASC proposed rule. These data also are the basis
for drug payments in the physician's office setting, effective April 1,
2026. Exceptions to our standard methodology include:
For therapeutic radiopharmaceuticals that do not have
pass-through status as of April 1, 2026, and do not have an ASP-based
payment rate, we did not use a payment rate based on WAC or AWP for
those items, consistent with our policy described in section V.B.3.a.
of this proposed rule. Instead, we used their arithmetic mean unit cost
derived from the CY 2025 hospital claims data to determine their per
day cost.
For diagnostic radiopharmaceuticals that do not have pass-
through status as of April 1, 2026, we used their arithmetic mean unit
cost derived from the CY 2025 hospital claims data to determine their
per day cost. We did not use an ASP-based, WAC-based, or AWP-based
payment rate for those items unless there was no arithmetic mean unit
cost reported for the product, consistent with our proposed policy
described in section V.B.3. of this proposed rule.
For items other than diagnostic or therapeutic
radiopharmaceuticals that did not have either an ASP-based payment
rate, a payment rate based on WAC, or a payment rate based on AWP, we
used the arithmetic mean unit cost of the items derived from the CY
2025 hospital claims data to determine their per day cost.
We propose to package drugs, biologicals, and therapeutic
radiopharmaceuticals with a per day cost less than or equal to $140 and
identify items with a per day cost greater than $140 as separately
payable unless they are policy packaged. For diagnostic
radiopharmaceuticals, we propose to package those items with a per day
cost less than or equal to $665 and identify items with a per day cost
greater than $665 as separately payable. Consistent with our past
practice (72 FR 667580), we cross-walked historical OPPS claims data
from the CY 2025 HCPCS codes that were reported to the CY 2024 HCPCS
codes that we display in Addendum B to this proposed rule (which is
available on the CMS website) \65\ for proposed payment in CY 2027.
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\65\ https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.
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Our policy during previous cycles of OPPS rulemaking has been to
use updated ASP and claims data to make final determinations of the
packaging status of HCPCS codes for drugs, biologicals, and therapeutic
radiopharmaceuticals for the OPPS/ASC final rule with comment period
(71 FR 68086; 78 FR75022; 89 FR 94238). We note that it is also our
policy to make an annual packaging determination for a HCPCS code only
when we develop the OPPS/ASC final rule with comment period for the
update year (71 FR 68086). Only HCPCS codes that are identified as
separately payable in the final rule with comment period are subject to
quarterly updates. For our calculation of per day costs of HCPCS codes
for drugs, biologicals, and radiopharmaceuticals in this proposed rule,
we propose to use ASP data from the fourth quarter of CY 2025, which is
the basis for calculating payment rates for drugs and biologicals in
the physician's office setting using the ASP methodology, effective
April 1, 2026, along with updated hospital claims data from CY 2025. We
note that we also propose to use these data for budget neutrality
estimates and impact analyses for this proposed rule.
We propose that payment rates for HCPCS codes for separately
payable drugs and biologicals included in Addenda A and B of the CY
2027 OPPS/ASC final rule with comment period would be based on ASP data
from the second quarter of CY 2026. These data are the basis for
calculating payment rates for drugs and biologicals in the physician's
office setting using the ASP methodology, effective October 1, 2026.
These payment rates would then be updated in the January 2027 OPPS
update, based on the most recent ASP data to be used for physicians'
office and OPPS payment as of January 1, 2027. For drugs and
biologicals that do not currently have a payment rate based on ASP,
WAC, or AWP, for therapeutic radiopharmaceuticals that do not currently
have an ASP payment rate, and for all diagnostic radiopharmaceuticals,
we will calculate their arithmetic mean unit cost from all of the CY
2025 claims data and updated cost report information available for the
CY 2027 final rule with comment period to determine their final per day
cost.
Consequently, the packaging status of some HCPCS codes for drugs,
biologicals, and radiopharmaceuticals in this proposed rule may be
different from the same drugs' HCPCS codes' packaging status determined
based on the data used for the CY 2027 OPPS/ASC final rule with comment
period. Under such circumstances, we propose to continue to follow the
established policies initially adopted for the CY 2005 OPPS final rule
with comment period (69 FR 65780) is in order to more equitably pay for
those drugs whose costs fluctuate relative to the proposed CY 2027 OPPS
drug packaging threshold and the drug's payment status (packaged or
separately payable) in CY 2027. These established policies have not
changed for many years and are the same as described in the CY 2016
OPPS/ASC final rule with comment period (80 FR 70434). Specifically,
for CY 2027 and subsequent years, consistent with our historical
practice, we propose to apply the following policies to those HCPCS
codes for drugs, biologicals, and therapeutic radiopharmaceuticals
whose relationship to the drug packaging threshold changes based on the
updated drug packaging threshold and on the final updated data:
HCPCS codes for drugs, biologicals, and
radiopharmaceuticals that were paid separately in CY 2026 and that are
proposed for separate payment in CY 2027, and that then have per day
costs equal to or less than the CY 2027 final rule drug packaging
threshold or diagnostic radiopharmaceutical packaging threshold, based
on the updated ASPs and hospital claims data used for the CY 2027 final
rule, would continue to receive separate payment in CY 2027.
HCPCS codes for drugs, biologicals, and
radiopharmaceuticals that were packaged in CY 2026 and that are
proposed for separate payment in CY 2027, and that then have per day
costs equal to or less than the CY 2027 final rule drug packaging
threshold or diagnostic radiopharmaceutical packaging threshold, based
on the updated ASPs and hospital claims data used for the CY 2027 final
rule with comment period, would remain packaged in CY 2027.
HCPCS codes for drugs, biologicals, and
radiopharmaceuticals for which we proposed packaged payment in CY 2027
but that then have per-day costs greater than the CY 2027 final rule
drug packaging threshold or diagnostic radiopharmaceutical packaging
threshold, based on the updated ASPs
[[Page 41863]]
and hospital claims data used for the CY 2027 final rule, would receive
separate payment in CY 2027.
c. Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals
As mentioned earlier in this section, under the OPPS, we package
several categories of nonpass-through drugs, biologicals, and
radiopharmaceuticals, regardless of the cost of the products. Because
the products are packaged according to the policies in 42 CFR 419.2(b),
we refer to these packaged drugs, biologicals, and radiopharmaceuticals
as ``policy-packaged'' drugs, biologicals, and radiopharmaceuticals.
These policies are either longstanding or based on longstanding
principles and inherent to the OPPS and are currently as follows:
Anesthesia, certain drugs, biologicals, and other
pharmaceuticals; medical and surgical supplies and equipment; surgical
dressings; and devices used for external reduction of fractures and
dislocations (Sec. 419.2(b)(4));
Intraoperative items and services (Sec. 419.2(b)(14));
Drugs, biologicals, and radiopharmaceuticals that function
as supplies when used in a diagnostic test or procedure (including but
not limited to, diagnostic radiopharmaceuticals with per-day costs at
or below the per-day diagnostic radiopharmaceutical packaging threshold
for the applicable year, contrast agents, and pharmacologic stress
agents) (Sec. 419.2(b)(15)); and
Drugs and biologicals that function as supplies when used
in a surgical procedure including, but not limited to products,
excluding skin substitutes, that aid wound healing; (Sec.
419.2(b)(16)).
The policy at Sec. 419.2(b)(16) is broader than the policy at
Sec. 419.2(b)(14). As we stated in the CY 2015 OPPS/ASC final rule
with comment period: ``We consider all items related to the surgical
outcome and provided during the hospital stay in which the surgery is
performed, including postsurgical pain management drugs, to be part of
the surgery for purposes of our drug and biological surgical supply
packaging policy'' (79 FR 66875). The category described by Sec.
419.2(b)(15) is large and includes diagnostic radiopharmaceuticals that
have a per day cost below the finalized diagnostic radiopharmaceutical
packaging threshold that we discuss in section II.A.3. of this proposed
rule, contrast agents, stress agents, and some other products. The
category described by Sec. 419.2(b)(16) currently includes skin
substitutes and some other products. We believe it is important to
reiterate that cost consideration is not a factor when determining
whether an item is a surgical supply (79 FR 66875).
d. Packaging Determination for HCPCS Codes That Describe the Same Drug
or Biological But Different Dosages
In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490
through 60491), we finalized a policy to make a single packaging
determination for a drug, rather than an individual HCPCS code, when a
drug has multiple HCPCS codes describing different dosages because we
believe that adopting the standard HCPCS code-specific packaging
determinations for these codes could lead to inappropriate payment
incentives for hospitals to report certain HCPCS codes instead of
others. We continue to believe that making packaging determinations on
a drug-specific basis eliminates payment incentives for hospitals to
report certain HCPCS codes for drugs and allows hospitals flexibility
in choosing to report all HCPCS codes for different dosages of the same
drug or only the lowest dosage HCPCS code. Therefore, we propose to
continue our policy to make packaging determinations on a drug-specific
basis, rather than a HCPCS code-specific basis, for those HCPCS codes
that describe the same drug or biological but different dosages in CY
2027.
To propose a packaging determination that is consistent across all
HCPCS codes that describe different dosages of the same drug or
biological, we aggregated both our CY 2025 claims data and our pricing
information, which is based on the ASP methodology, generally ASP plus
6 percent, across all of the HCPCS codes that describe each distinct
drug or biological in order to determine the mean units per day of the
drug or biological in terms of the HCPCS code with the lowest dosage
descriptor. The following drugs did not have pricing information
available for the ASP methodology for this proposed rule; and, as is
our current policy for determining the packaging status of other drugs,
we used the arithmetic mean unit cost available from the CY 2025 claims
data to make the proposed packaging determinations for them: HCPCS 3471
(injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up
to 999 usp units)); HCPCS code J3472 (Injection, hyaluronidase, ovine,
preservative free, per 1000 usp units); HCPCS code J7100 (Infusion,
dextran 40,500 ml); and HCPCS code J7110 (Infusion, dextran 75,500 ml).
For all other drugs and biologicals that have HCPCS codes
describing different doses, we then multiplied the proposed weighted
average ASP methodology based payment rate, which is generally ASP plus
6 percent, per-unit payment amount across all dosage levels of a
specific drug or biological by the estimated units per day for all
HCPCS codes that describe each drug or biological from our claims data
to determine if the estimated per day cost of each drug or biological
is less than or equal to the proposed CY 2027 drug packaging threshold
of $140 (in which case all HCPCS codes for the same drug or biological
would be packaged) or greater than the proposed CY 2027 drug packaging
threshold of $140 (in which case all HCPCS codes for the same drug or
biological would be separately payable). The proposed packaging status
of each drug and biological HCPCS code to which this methodology would
apply in CY 2027 is displayed in Table 46.
BILLING CODE 4169-69-P
[[Page 41864]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.147
BILLING CODE 4169-69-C
We propose that our policy to make packaging determinations on a
drug-specific basis, rather than a HCPCS code-specific basis, for those
HCPCS codes that describe the same drug or biological but different
dosages in CY 2027 would also apply to diagnostic radiopharmaceuticals.
This is because, as with drugs and biologicals, we believe that
adopting standard HCPCS code-specific packaging determinations for
radiopharmaceutical codes could lead to inappropriate payment
incentives for hospitals to report certain HCPCS codes instead of
others. To propose a packaging determination that is consistent across
all HCPCS codes that describe different dosages of the same diagnostic
radiopharmaceutical, we would aggregate our CY 2025 claims data across
all the HCPCS codes that describe each distinct diagnostic
radiopharmaceutical to determine the mean units per day of the
diagnostic radiopharmaceutical in terms of the HCPCS code with the
lowest dosage descriptor. We would then analyze the aggregate per day
cost of the diagnostic radiopharmaceutical to determine if the per day
cost is less than or equal to the proposed CY 2026 diagnostic
radiopharmaceutical packaging threshold of $665 (in which case all
HCPCS codes for the same diagnostic radiopharmaceutical would be
packaged) or greater than the proposed CY 2027 diagnostic
radiopharmaceutical packaging threshold of $665 (in which case all
HCPCS codes for the same diagnostic radiopharmaceutical would be
separately payable). There are currently no diagnostic
radiopharmaceuticals that this policy would apply to.
2. Proposed Payment for Drugs and Biologicals Without Pass-Through
Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and
Other Separately Payable Drugs and Biologicals
Section 1833(t)(14) of the Act defines certain separately payable
radiopharmaceuticals, drugs, and biologicals and mandates specific
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a
``specified covered outpatient drug'' (known as a SCOD) is defined as a
covered outpatient drug, as defined in section 1927(k)(2) of the Act,
for which a separate APC has been established and that either is a
radiopharmaceutical agent or a drug or biological for which payment was
made on a pass-through basis on or before December 31, 2002.
Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and
biologicals are designated as exceptions and are not included in the
definition of SCODs. These exceptions are--
A drug or biological for which payment is first made on or
after January 1, 2003, under the transitional pass-through payment
provision in section 1833(t)(6) of the Act.
A drug or biological for which a temporary HCPCS code has
not been assigned.
During CYs 2004 and 2005, an orphan drug (as designated by
the Secretary).
Section 1833(t)(14)(A)(iii) of the Act requires that payment for
SCODs in CY 2006 and subsequent years be equal to the average
acquisition cost for the drug for that year as determined by the
[[Page 41865]]
Secretary, subject to any adjustment for overhead costs and considering
the hospital acquisition cost survey data collected by the Government
Accountability Office (GAO) in CYs 2004 and 2005, and later periodic
surveys conducted by the Secretary as set forth in the statute. If
hospital acquisition cost data are not available, the law requires that
payment be equal to payment rates established under the methodology
described in section 1842(o), section 1847A, or section 1847B of the
Act, as calculated and adjusted by the Secretary as necessary for
purposes of paragraph (14) of the Act. We refer to this alternative
methodology as the ``statutory default''. Most physician Part B drugs
are paid at ASP plus 6 percent in accordance with section 1842(o) and
section 1847A of the Act.
Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in
OPPS payment rates for SCODs to consider overhead and related expenses,
such as pharmacy services and handling costs. Section 1833(t)(14)(E)(i)
of the Act required MedPAC to study pharmacy overhead and related
expenses and to make recommendations to the Secretary regarding
whether, and if so how, a payment adjustment should be made to
compensate hospitals for overhead and related expenses. Section
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the
weights for ambulatory procedure classifications for SCODs to consider
the findings of the MedPAC study.\66\
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\66\ Medicare Payment Advisory Committee. June 2005 Report to
the Congress. Chapter 6: Payment for pharmacy handling costs in
hospital outpatient departments. Available at https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/June05_ch6.pdf.
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It has been our policy since CY 2006 to apply the same treatment to
all separately payable drugs and biologicals, which include SCODs, and
drugs and biologicals that are not SCODs. Therefore, we apply the
payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs,
as required by statute, but we also apply it to separately payable
drugs and biologicals that are not SCODs, which is a policy
determination rather than a statutory requirement. For CY 2023 and
subsequent years, we finalized a policy to apply section
1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and
biologicals, including SCODs. Although we do not distinguish SCODs in
this discussion, we note that we are required to apply section
1833(t)(14)(A)(iii)(II) of the Act to SCODs; but we also are applying
this provision to other separately payable drugs and biologicals,
consistent with our history of using the same payment methodology for
all separately payable drugs and biologicals.
For a detailed discussion of our OPPS drug payment policies from CY
2006 to CY 2012, we refer readers to the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68383 through 68385). In the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68386 through 68389), we
first adopted the statutory default policy to pay for separately
payable drugs and biologicals at ASP plus 6 percent based on section
1833(t)(14)(A)(iii)(II) of the Act. We have continued this policy of
paying for separately payable drugs and biologicals at the statutory
default for CYs 2014 through 2025.
In the case of a drug or biological during an initial sales period
in which data on the prices for sales of the drug or biological are not
sufficiently available from the manufacturer, section 1847A(c)(4) of
the Act permits the Secretary to make payments that are based on WAC.
Under section 1833(t)(14)(A)(iii)(II) of the Act, the amount of payment
for a separately payable drug equals the average price for the drug for
the year established under, among other authorities, section 1847A of
the Act. As explained in greater detail in the CY 2019 PFS final rule,
under section 1847A(c)(4) of the Act, although payments may be based on
WAC, unlike section 1847A(b) of the Act (which specifies that payments
using ASP or WAC must be made with a 6 percent add-on), section
1847A(c)(4) of the Act does not require that a particular add-on amount
be applied to WAC-based pricing for this initial period when ASP data
are not available. Consistent with section 1847A(c)(4) of the Act, in
the CY 2019 PFS final rule (83 FR 59661 to 59666), we finalized a
policy that, effective January 1, 2019, WAC-based payments for Part B
drugs made under section 1847A(c)(4) of the Act will utilize a 3
percent add-on in place of the 6 percent add-on that was being used
according to our policy in effect as of CY 2018. For the CY 2019 OPPS,
we followed the same policy finalized in the CY 2019 PFS final rule (83
FR 59661 to 59666). Since CY 2020, we have continued to utilize a 3
percent add-on instead of a 6 percent add-on for drugs that are paid
based on WAC pursuant to our authority under section
1833(t)(14)(A)(iii)(II) of the Act (84 FR 61318 and 85 FR 86039), which
provides, in part, that the amount of payment for a SCOD is the average
price of the drug in the year established under section 1847A of the
Act. We also apply this provision to non-SCOD separately payable drugs,
biologicals, and certain radiopharmaceuticals. Because we establish the
average price for a drug paid based on WAC under section 1847A of the
Act as WAC plus 3 percent instead of WAC plus 6 percent, we believe it
is appropriate to price separately payable drugs paid based on WAC at
the same amount under the OPPS. Our policy to pay for drugs and
biologicals at WAC plus 3 percent, rather than WAC plus 6 percent,
applies whenever WAC-based pricing is used for a drug, biological, or
radiopharmaceutical under section 1847A(c)(4) of the Act. When WAC-
based pricing is used for a drug, biological, or radiopharmaceutical,
but not under section 1847A(c)(4) of the Act, the payment of WAC plus 6
percent would apply. We refer readers to the CY 2019 PFS final rule (83
FR 59661 to 59666) for additional background on this policy.
Consistent with our current policy, payments for separately payable
drugs, biologicals, and radiopharmaceuticals are included in the budget
neutrality adjustments, under the requirements in section 1833(t)(9)(B)
of the Act. Also, the budget neutral weight scalar is not applied in
determining payments for these separately payable drugs and
biologicals.
Separately payable drug, biological, and radiopharmaceutical
payment rates were listed in Addenda A and B to this proposed rule
(available on the CMS website).\67\ These addenda provide the proposed
CY 2027 payment rates based on the ASP methodology for separately
payable nonpass-through drugs, biologicals, and radiopharmaceuticals,
with exceptions for certain radiopharmaceuticals previously discussed,
and the ASP methodology for pass-through drugs, biologicals, and
radiopharmaceuticals. Except for proposed payment rates for certain
radiopharmaceuticals, these rates were based either on ASP information
that is the basis for calculating payment rates for drugs and
biologicals in the physician's office setting effective April 1, 2026,
or WAC, AWP, or the arithmetic mean unit cost from CY 2025 claims data
and updated cost report information available for the proposed rule.
For nonpass-through therapeutic radiopharmaceuticals, payment rates
were based on ASP data or the arithmetic mean unit cost. We propose to
pay separately at the arithmetic mean unit cost for diagnostic
radiopharmaceuticals with per day costs above the proposed threshold;
the
[[Page 41866]]
payment rates proposed for qualifying diagnostic radiopharmaceuticals
are entirely the arithmetic mean unit cost if available (see section
II.A.3.c.(3) of this proposed rule, regarding payment policy of
qualifying diagnostic radiopharmaceuticals). In general, these
published proposed payment rates will not be the same as the actual
January 2027 payment rates. This is because payment rates for drugs,
biologicals, and therapeutic radiopharmaceuticals with ASP information
for January 2027 will be determined through the standard quarterly
process where ASP data submitted by manufacturers for the third quarter
of CY 2026 (July 1, 2026, through September 30, 2026) will be used to
set the payment rates that are released for the quarter beginning in
January 2027 in December 2026. In addition, in Addenda A and B to this
proposed rule, payment rates for drugs, biologicals, and therapeutic
radiopharmaceuticals for which there was no ASP, WAC, or AWP
information available for April 2026, as well as all separately payable
diagnostic radiopharmaceuticals, were based on the arithmetic mean unit
cost in the available CY 2025 claims data.
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If new pricing information becomes available for payment for the
quarter beginning in January 2026, we will price payment for these
drugs, biologicals, therapeutic radiopharmaceuticals, and diagnostic
radiopharmaceuticals based on their newly available information.
Finally, there may be drugs, biologicals and therapeutic
radiopharmaceuticals that had ASP, WAC, or AWP information available
for the proposed rule (reflecting April 2026 ASP data) that do not have
ASP, WAC, or AWP information available for the quarter beginning in
January 2027. These drugs, biologicals and therapeutic
radiopharmaceuticals would then be paid based on the arithmetic mean
unit cost data derived from CY 2025 hospital claims. Therefore, the
proposed payment rates listed in Addenda A and B to this proposed rule
are not for January 2027 payment purposes and were only illustrative of
the CY 2027 OPPS payment methodology using the most recently available
information at the time of issuance of the CY 2027 OPPS/ASC proposed
rule.
We note that payment amounts for most drugs separately payable
under Medicare Part B are determined using the methodology in section
1847A of the Act, and in many cases, payment is based on the ASP plus a
statutorily mandated 6 percent add-on.
In CY 2025, we clarified that only ASP data or, if ASP data are not
available, the arithmetic mean unit cost data, would be used to set
payment rates for separately payable nonpass-through therapeutic
radiopharmaceuticals under the OPPS. For CY 2027, we are not proposing
any changes to our policies for payment for separately payable
therapeutic or diagnostic radiopharmaceuticals.
For CY 2027, we are not proposing any additional changes to our
policies for payment for separately payable drugs, biologicals, and
radiopharmaceuticals. We propose to continue our payment policy that
has been in effect since CY 2013 to pay for separately payable drugs
and biologicals in accordance with section 1833(t)(14)(A)(iii)(II) of
the Act (the statutory default).
b. Biosimilar Biological Products
In the CY 2024 OPPS/ASC final rule with comment period, we
finalized the exception of biosimilars from the OPPS threshold
packaging policy when their reference products are separately paid (88
FR 81783 through 81785). This policy allows for separate payment for
biosimilars even if the biosimilar's per-day cost is below the
packaging threshold if the biosimilar's reference product is separately
paid. This policy removes the financial incentive to use a more
expensive separately payable biological and promotes biosimilar use as
a lower cost alternative to higher cost reference products.
Payment rates for drugs and biologicals (including biosimilars)
under Medicare Part B are determined using the methodology in section
1847A of the Act, and in many cases, payment is based on the ASP plus a
statutorily mandated 6 percent add-on. Additionally, section 11403 of
the IRA requires that a qualifying biosimilar be paid at ASP plus 8
percent of the reference product's ASP rather than 6 percent during the
applicable 5-year period. Section 1847A(b)(8)(B)(ii) of the Act defines
the applicable 5-year period for a qualifying biosimilar for which
payment has been made using ASP (that is, payment under section
1847A(b)(8) of the Act) as of September 30, 2022, as the 5-year period
beginning on October 1, 2022. For a qualifying biosimilar for which
payment is first made using ASP during the period beginning October 1,
2022, and ending December 31, 2027, the statute defines the applicable
5-year period as the 5-year period beginning on the first day of such
calendar quarter of such payment (88 FR 81783). These payment rates are
published in the quarterly release of Addendum B or ASP pricing files.
c. Invoice Drug Pricing for CY 2027
In the CY 2025 OPPS/ASC final rule with comment period (89 FR 94243
to 94244), we finalized that, for separately payable drugs or
biologicals for which CMS does not provide a payment rate in Addendum
B, which would indicate to MACs that CMS does not have pricing
information (specifically, that ASP, WAC, AWP, and arithmetic mean unit
cost information is not available to determine a payment rate), MACs
would calculate the payment based on provider invoices. The drug or
biological invoice cost would be the net acquisition cost minus any
rebates, chargebacks, or post-sale concessions. Before calculating an
invoice-based payment amount, MACs would use the provider invoice to
determine that: (a) the drug is not policy packaged; and (b) the per-
day cost of the drug, biological, therapeutic radiopharmaceutical or
diagnostic radiopharmaceutical is above the threshold packaging amount,
as applicable. If both conditions are met, the MACs would use the
provider invoice amount to set a payment rate for the separately
payable drug, biological, or radiopharmaceutical until its payment
amount becomes available to CMS. We generally expect invoice pricing to
be temporary, lasting two to three quarters, for qualified drugs
required to report ASP under section 1847A of the Act. For drug
products that are not required to report ASP under section 1847A of the
Act (for example, radiopharmaceuticals), invoice pricing may be used on
a longer-term basis until an arithmetic mean unit cost (MUC) can be
calculated. We finalized the invoice pricing policy for drugs to be
effective January 1, 2026, with the intent to make technical updates to
outpatient hospital claims and to allow providers time to prepare for
any operational changes. We noted that the National Uniform Billing
Committee (NUBC) created a value code that would allow for the
reporting of invoice prices of drugs, biologicals, and
radiopharmaceuticals, effective January 2026 for the purpose of this
policy. The NUBC value code created is 92 (Drug/Biologic Invoice Cost),
with the definition of: ``Invoice Cost of drug/biologic. For use with
Revenue Category 0636 when required by federal regulation.'' In the CY
2026 OPPS/ASC final rule with comment period, we finalized a technical
clarification to this policy and clarified that CMS will determine
whether the drug is not policy packaged; however, the MAC will continue
to determine whether the per-day cost of the drug, biological,
therapeutic radiopharmaceutical or diagnostic radiopharmaceutical is
above
[[Page 41867]]
threshold packaging amount, as applicable (90 FR 53704). We reiterate
that the drug or biological invoice cost would be the net acquisition
cost minus any rebates, chargebacks, or post-sale concessions. We
acknowledge any rebates, chargebacks, or post-sale concessions may not
be immediately available after treatment but hospital providers have 12
months from date of service to submit claims for payment and allowing
providers to adjust submitted claims when the price concession is
available.
For CY 2027, we are not proposing any additional changes to our
invoice pricing policy for payment for separately payable drugs,
biologicals, and radiopharmaceuticals. We propose to continue our
payment policy if CMS does not have pricing information (specifically,
that ASP, WAC, AWP, and arithmetic mean unit cost information is not
available to determine a payment rate), MACs would calculate the
payment based on provider invoices.
3. Payment Policy for Radiopharmaceuticals
For a complete history of the OPPS payment policy for
radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule
with comment period (69 FR 65811), the CY 2006 OPPS final rule with
comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60524).
a. Payment Policy for Therapeutic Radiopharmaceuticals
In the CY 2023 OPPS/ASC final rule with comment period, we adopted
as final our proposal to continue our longstanding payment policy for
therapeutic radiopharmaceuticals for CY 2023 and subsequent years.
Accordingly, this payment policy for therapeutic radiopharmaceuticals
will continue to apply in CY 2027.
Specifically, our policy of paying for separately payable pass-
through therapeutic radiopharmaceuticals under the ASP methodology
adopted for separately payable drugs and biologicals described in
section V.A.1. of this proposed rule will continue to apply for CY
2027. We will pay for separately payable nonpass-through therapeutic
radiopharmaceuticals through a modified ASP methodology where we pay at
ASP plus 6 percent if ASP data are available. However, if ASP
information is unavailable for a separately payable nonpass-through
therapeutic radiopharmaceutical, we will continue to base the payment
rate on arithmetic mean unit cost data derived from hospital claims.
Our policy not to use WAC or AWP to establish payment for separately
payable nonpass-through therapeutic radiopharmaceuticals if ASP is not
available will continue for CY 2027. We explained our rationale in the
CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through
60525) when we first adopted our policy to apply the principles of
separately payable drug pricing to therapeutic radiopharmaceuticals.
For a full discussion of ASP-based payment for therapeutic
radiopharmaceuticals, we refer readers to the CY 2010 OPPS/ASC final
rule with comment period (74 FR 60520 through 60521). We will rely on
CY 2025 arithmetic mean unit cost data derived from hospital claims
data for payment rates for separately payable nonpass-through
therapeutic radiopharmaceuticals for which ASP data are unavailable and
update the payment rates for these products according to our usual
process for updating the payment rates for separately payable drugs and
biologicals on a quarterly basis if updated ASP information becomes
available.
The CY 2027 payment rates for separately payable nonpass-through
therapeutic radiopharmaceuticals are included in Addenda A and B of
this proposed rule (which are available on the CMS website).\68\
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b. Payment Policy for Diagnostic Radiopharmaceuticals Without Claims
Data
For CY 2025, we finalized, as described in the CY 2025 OPPS/ASC
final rule with comment period (89 FR 93948 through 93963), to pay
separately at arithmetic mean unit cost for diagnostic
radiopharmaceuticals with a per day cost above our diagnostic
radiopharmaceutical packaging threshold (proposed at $665 for CY 2027).
We also finalized our policy to pay for pass-through diagnostic
radiopharmaceuticals based on ASP, WAC, and AWP.
We continue to believe that paying for nonpass-through diagnostic
radiopharmaceuticals using the arithmetic mean unit cost would
appropriately pay for the average price of a nonpass-through separately
payable diagnostic radiopharmaceutical, as discussed in section
II.A.3.c. of this proposed rule. In our view, the arithmetic MUC is an
appropriate proxy for the average price for a diagnostic
radiopharmaceutical for a given year, as it is calculated based on the
average costs for a particular year and is directly reflective of the
actual cost data that hospitals submit to CMS. As we stated in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60523), we believe
that WAC or AWP is not an appropriate proxy to provide OPPS payment for
radiopharmaceuticals because these pricing methodologies do not include
discounts. Specifically, the absence of appropriate ASP reporting could
result in payment for a separately payable diagnostic
radiopharmaceutical based on WAC or AWP indefinitely, a result which we
believe would be inappropriate, as these pricing metrics do not capture
all of the pricing discounts that may be reflected in the ASP.
Additionally, in the CY 2025 OPPS/ASC final rule with comment
period (89 FR 93948 through 93963), we finalized to base the initial
payment for new diagnostic radiopharmaceuticals with HCPCS codes that
do not have pass-through status or claims data on ASP, and on the WAC
for these products if ASP data for these diagnostic
radiopharmaceuticals are not available. To further clarify, these
products will be paid based on ASP plus 6 percent, and at WAC plus 3 or
6 percent according to the policy in section V.B.2.a. of this proposed
rule if ASP data are not available.
If the WAC also is unavailable, we proposed to make payment for new
diagnostic radiopharmaceuticals at 95 percent of the products' most
recent AWP. We believe the volume of products in this category will
typically be very low; however, in these rare situations, we believe it
would be appropriate to use ASP, WAC, or AWP until an arithmetic MUC is
established for new diagnostic radiopharmaceuticals with HCPCS codes
that do not have passthrough status or claims data.
Please refer to section II.A.3.c. of this proposed rule for
information regarding our broader payment policies for diagnostic
radiopharmaceuticals, including our policy to pay for separately
payable diagnostic radiopharmaceuticals with claims data based on the
arithmetic mean unit cost data derived from hospital claims, and a list
of the proposed qualifying diagnostic radiopharmaceuticals with per day
costs exceeding the $665 threshold for CY 2027 in Table 4 of this
proposed rule. The proposed CY 2027 payment rates for separately
payable nonpass-through diagnostic radiopharmaceuticals are included in
Addenda A and B of this proposed rule (which are available on the CMS
website).
[[Page 41868]]
4. Proposed Payment for Blood Clotting Factors
For CY 2027, we propose to continue our established policy to
provide payment for blood clotting factors using the same methodology
as other separately payable drugs and biologicals under the OPPS and to
continue to pay a furnishing fee, authorized under section 1842(o)(5)
of the Act. For a full discussion of our established payment policy for
blood clotting factors, please refer to the CY 2023 OPPS/ASC final rule
with comment period (87 FR 71969 through 71970). In accordance with our
policy as finalized in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66765), we will announce the actual figure of the percent
change in the CPI for medical care for the 12-month period ending with
June of the previous year. The updated CY 2027 furnishing fee
calculation based on that figure through the applicable program
instructions will be posted on the CMS website at https://www.cms.gov/medicare/payment/part-b-drugs/asp-billing-resources.
5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims
Data
In the CY 2023 OPPS/ASC final rule with comment period, we adopted
as final our proposal to continue our longstanding payment policy for
nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS
codes but without OPPS hospital claims data for CY 2023 and subsequent
years. Therefore, for CY 2027, this policy will continue to apply. For
a detailed discussion of the payment policy and methodology, we refer
readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR
70442 through 70443). Consistent with our policy, because we have no
claims data and must determine if these products, drugs, biologicals,
therapeutic radiopharmaceuticals, and diagnostic radiopharmaceuticals,
exceed the per-day cost threshold, we estimated the average number of
units of each product that would typically be furnished to a patient
during one day in the hospital outpatient setting and utilized the
payment rate for the product, typically the ASP methodology, to
determine whether their payment will be packaged as well as their
payment status indicators.
6. CY 2027 Prospective Adjustment to Payments for Non-Drug Items and
Services To Offset the Increased Payments for Non-Drug Items and
Services Made in CY 2018 Through CY 2022 as a Result of the 340B
Payment Policy
a. Overview
Under the OPPS, we generally set payment rates for separately
payable drugs and biologicals (hereinafter referred to collectively as
``drugs'' in this section) under section 1833(t)(14)(A) of the Act.
Section 1833(t)(14)(A)(iii)(II) of the Act provides that, if hospital
acquisition cost data are not available, the payment amount is the
average price for the drug in a year established under sections
1842(o), 1847A, or 1847B of the Act, as the case may be. Payment rates
for drugs have usually been established under section 1847A of the Act,
which generally sets a default rate of the average sales price (ASP)
plus 6 percent. Section 1833(t)(14)(A)(iii)(II) of the Act also
provides that the average price for the drug in the year as established
under section 1847A of the Act, is calculated and adjusted by the
Secretary as necessary for purposes of paragraph (14).
In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353
through 59371), CMS reexamined the appropriateness of paying the ASP
plus 6 percent for drugs acquired through the 340B Drug Pricing Program
(hereinafter referred to as the ``340B Program''), a Health Resources
and Services Administration (HRSA)-administered program that allows
covered entities to purchase certain covered outpatient drugs at
discounted prices from drug manufacturers. Based on findings of the
Government Accountability Office (GAO),\69\ the HHS Office of the
Inspector General (OIG),\70\ and the Medicare Payment Advisory
Commission (MedPAC) \71\ that 340B hospitals were acquiring drugs at a
significant discount under the 340B Program, CMS adopted a policy
beginning in 2018 generally to pay an adjusted amount of ASP minus 22.5
percent for certain separately payable drugs or biologicals acquired
through the 340B Program. This adjustment amount was based on our
concurrence at the time with an analysis by MedPAC that concluded that
the estimated average minimum discount of 22.5 percent of ASP
adequately represented the average minimum discount that a 340B
participating hospital received for separately payable drugs under the
OPPS (82 FR 59354 through 59371). Our intent in implementing this
payment reduction was to reflect more accurately the actual costs
incurred by participating hospitals in acquiring 340B drugs. We stated
our belief that such changes would allow Medicare beneficiaries and the
Medicare program to pay a more appropriate amount when hospitals
participating in the 340B Program furnished drugs to Medicare
beneficiaries that were purchased under the 340B Program (82 FR 59353
through 59371).
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\69\ Government Accountability Office. ``Medicare Part B Drugs:
``Action Needed to Reduce Financial Incentives to Prescribe 340B
Drugs at Participating Hospitals.'' June 2015. Available at https://www.gao.gov/assets/gao-15-442.pdf.
\70\ Office of Inspector General. ``Part B Payment for 340B
Purchased Drugs. OEI-12-14-00030''. November 2015. Available at:
https://oig.hhs.gov/oei/reports/oei-12-14-00030.pdf.
\71\ Medicare Payment Advisory Commission. March 2016 Report to
the Congress: Medicare Payment Policy. March 2016. Available at
Medicare Payment Advisory Commission. March 2016 Report to the
Congress: Medicare Payment Policy. March 2016. Available at https://www.medpac.gov/document/http-www-medpac-gov-docs-default-source-reports-may-2015-report-to-the-congress-overview-of-the-340b-drug-pricing-program-pdf/.
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b. Payment for 340B Drugs and Biologicals in CYs 2018 Through 2022
From January 1, 2018 through September 27, 2022, under the OPPS we
generally paid for certain separately payable drugs acquired through
the 340B Program at ASP minus 22.5 percent. In the CY 2018 OPPS/ASC
final rule with comment period (82 FR 59369 through 59370), we
finalized our proposal to adjust the payment rate for separately
payable drugs (other than drugs with pass-through payment status and
vaccines) acquired under the 340B Program from ASP plus 6 percent to
ASP minus 22.5 percent. For ease of reference, the OPPS 340B drug
payment adjustment policy is hereinafter referred to as the ``340B
Payment Policy'' and refers both to the adjustments made to payment
rates for 340B-acquired drugs described here and the corresponding rate
adjustment for non-drug services and items described later in section
V.B.6.c. of this proposed rule. We note that rural sole community
hospitals, children's hospitals, and PPS-exempt cancer hospitals were
exempted from the adjustments made to payment rates for 340B-acquired
drugs primarily due to these hospitals receiving special payment
adjustments under the OPPS. In addition, as stated in the CY 2018 OPPS/
ASC final rule with comment period, this policy change did not apply to
drugs with pass-through payment status, which are required to be paid
based on the ASP methodology, or vaccines, which were excluded from the
340B Program. We also noted that
[[Page 41869]]
critical access hospitals are not paid under the OPPS and therefore
were not subject to the OPPS 340B drug payment adjustment policy.
Finally, in CY 2018, we did not initially apply the 340B Payment Policy
to 340B-acquired drugs furnished in non-excepted off-campus provider-
based departments (PBDs).
In the CY 2019 OPPS/ASC final rule with comment period (83 FR
58981), we continued the Medicare 340B payment policies that were
implemented in CY 2018 and made a series of refinements to the 340B
Payment Policy, including a policy to pay for non-pass-through 340B-
acquired biosimilars at ASP minus 22.5 percent of the biosimilar's ASP,
rather than minus 22.5 percent of the reference biological product's
ASP. Additionally, in the CY 2019 OPPS/ASC final rule with comment
period (83 FR 59015 through 59022), we finalized a policy to pay ASP
minus 22.5 percent for 340B-acquired drugs furnished in non-excepted
off-campus PBDs paid under the PFS. We adopted this payment policy for
CY 2019 and subsequent years.
During the CY 2019 OPPS/ASC rulemaking cycle, we also clarified
that the 340B payment adjustment applied to drugs priced using either
wholesale acquisition cost (WAC) or average wholesale price (AWP), and
since the policy was first adopted, we applied the 340B payment
adjustment to 340B-acquired drugs priced using these pricing
methodologies. We made this clarification because inquiries from
interested parties following the finalization of the 340B Payment
Policy in 2018 demonstrated that there was confusion as to whether
drugs receiving WAC or AWP pricing were subject to the 340B payment
adjustment (83 FR 33632). WAC is the drug manufacturer's list price for
wholesalers or direct purchasers in the U.S., not including prompt
payment or other discounts, rebates, or reductions in price, for the
most recent month for which information is available, as reported in
wholesale price guides or other publications of drug pricing data. AWP
is set using industry-recognized AWP reference sources.\72\ The 340B
payment adjustment for WAC-priced drugs was WAC minus 22.5 percent.
340B-acquired drugs that were priced using AWP were paid an adjusted
amount of 69.46 percent of AWP (83 FR 37125).\73\
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\72\ www.cms.gov/files/document/part-b-drug-payment-limits-overview.pdf.
\73\ The 69.46 percent of AWP was calculated by first dividing
the original 95 percent of AWP price by 6 percent to generate a
value that is similar to ASP or WAC with no percentage markup. Then
we applied the 22.5 percent reduction to ASP/WAC-similar AWP value
to obtain the 69.46 percent of AWP, which was similar to either ASP
minus 22.5 percent or WAC minus 22.5 percent.
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As discussed further in section V.B.6.f. of this proposed rule, the
results of this policy meant that hospitals received an estimated $10.6
billion less in 340B drug payments (including money that would have
been paid by Medicare and money that would have come from beneficiaries
as copayments) than they would have for drugs provided in CY 2018
through September 27th of 2022 had the 340B Payment Policy not been
implemented (88 FR 77162). These reduced payments are detailed in Table
47 and are derived from Addendum AAA \74\ published with the Final
Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years
2018-2022 final rule with comment period (hereinafter referred to as
the ``Final Remedy rule'') (88 FR 77150).
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\74\ https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices/cms-1793-f.
[GRAPHIC] [TIFF OMITTED] TP07JY26.076
For more detailed descriptions of our OPPS payment policy for drugs
acquired under the 340B Program during this timeframe, we refer readers
to the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353
through 59371); the CY 2019 OPPS/ASC final rule with comment period (83
FR 59015 through 59022); the CY 2020 OPPS/ASC final rule with comment
period (84 FR 61321 through 61327); the CY 2021 OPPS/ASC final rule
with comment period (85 FR 86042 through 86055); the CY 2022 OPPS/ASC
final rule with comment period (86 FR 63640 through 63649); the CY 2023
OPPS/ASC final rule with comment period (87 FR 71972 through 71973);
the CY 2024 OPPS/ASC final rule with comment period 88 FR 81789 through
81792; and the CY 2026 OPPS/ASC final rule with comment period (90 FR
53707 through 53722).
c. Payment for Non-Drug Items and Services in CY 2018 Through CY 2022
In the CY 2018 OPPS/ASC final rule with comment period (82 FR
59216, 59258), to comply with the statutory budget neutrality
requirements under sections 1833(t)(9)(B) and (t)(14)(H) of the Act, we
finalized our proposal to redistribute our original, estimated
reduction in payments for separately payable drugs as a result of the
340B Payment Policy by increasing the conversion factor used to
determine the payment amounts for non-drug items and services. As
further described in the CY 2018 OPPS/ASC final rule with comment
period, we used updated CY 2016 claims data and a list of 340B-eligible
providers to calculate an estimated impact of $1.6 billion based on the
final CY 2018 policy to pay for OPPS 340B-acquired drugs at a payment
rate of generally ASP minus 22.5 percent. To effectuate the budget
[[Page 41870]]
neutrality provisions of the OPPS for CY 2018, we redistributed an
estimated $1.6 billion in reduced drug payments from adoption of the
final 340B payment methodology to all hospitals paid under the OPPS by
increasing the payment rates by 3.19 percent for nondrug items and
services furnished by all hospitals paid under the OPPS for CY 2018. We
carried through this conversion factor adjustment from CYs 2019 through
2022, increasing payments for non-drug items and services in these CYs.
This resulted in approximately $7.769 billion, which for ease of
reference in this proposed rule we hereafter refer to as $7.8 billion,
in additional spending on non-drug items and services from CYs 2018
through 2022.
d. Litigation History of the 340B Payment Policy
The 340B Payment Policy was the subject of significant litigation.
See the Proposed Remedy for the 340B-Acquired Drug Payment Policy for
Calendar Years 2018-2022 (hereinafter referred to as the ``proposed
remedy rule'') for a more comprehensive summary of the litigation
history (88 FR 44079 through 44080).
On June 15, 2022, the Supreme Court held that because HHS had not
previously conducted a survey of hospitals' acquisition costs, we could
not vary the payment rates for outpatient prescription drugs by
hospital group. See Am. Hosp. Ass'n v. Becerra, 596 U.S. 724, 739
(2022). The Supreme Court declined to opine on the appropriate remedy,
see id., and on September 28, 2022, the district court vacated the
prospective portion of the CY 2022 reimbursement rate for 340B-acquired
drugs, see Am. Hosp. Ass'n v. Becerra, No. 1:18-cv-2084-RC, 2022 WL
4534617, at *5 (D.D.C.).\75\ On January 10, 2023, the district court
remanded without vacatur to give the agency the opportunity to
determine the proper remedy for the reduced payment amounts to 340B
hospitals under the payment rates in the final OPPS rules for CY 2018
through CY 2022. See Am. Hosp. Ass'n v. Becerra, No. 1:18-cv-2084-RC,
2023 WL 143337, at *6 (D.D.C.).\76\
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\75\ https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2084-79.
\76\ https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2084-86.
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e. Payment for 340B-Acquired Drug Claims for September 28, 2022 Through
CY 2026
The agency complied with the district court's September 28, 2022
decision by uploading revised OPPS drug files to pay the default rate
(generally ASP plus 6 percent) for all CY 2022 claims for 340B-acquired
drugs paid from September 28, 2022, through the end of CY 2022.
In the CY 2023 OPPS/ASC final rule with comment period (87 FR
71970), we finalized a policy reversing the 340B Payment Policy so that
going forward we would pay for 340B-acquired drugs no differently than
we pay for drugs that are not acquired through the 340B Program. To do
so, we first provided that drugs acquired through the 340B Program
would be paid at the statutory default rate (generally ASP plus 6
percent) for CY 2023. Second, to ensure budget neutrality for CY 2023
OPPS payment rates as required by statute, we finalized a reduction of
3.09 percent to the 2023 OPPS conversion factor. This one-time
adjustment to the conversion factor removed the effect of this aspect
of the 340B Payment Policy, as originally adopted in CY 2018, for CY
2023 and subsequent years. This adjustment reduced the conversion
factor to the conversion factor that would have been in place in CY
2023 if the 340B Payment Policy had never been implemented. For more
detail on the payment rate for drugs acquired under the 340B Program
for CY 2023 and the corresponding adjustment to the conversion factor
to maintain budget neutrality as a result of reversing the 340B
adjustment and paying for all separately payable drugs at ASP plus 6
percent (or WAC plus 3 or 6 percent or 95 percent of AWP), we refer
readers to the CY 2023 OPPS/ASC final rule with comment period (87 FR
71973 through 71976).
For CYs 2024 through 2026, consistent with our policy finalized for
CY 2023, we continued to pay the statutory default rate for 340B-
acquired drugs (88 FR 81789 through 81791).
f. Remedy Payment Adjustment for 340B-Acquired Drugs From CY 2018
Through September 27, 2022
The agency complied with the district court's January 10, 2023,
remand order by issuing the Final Remedy rule on November 8, 2023 (88
FR 81540). The purpose of this rule was to address the reduced payment
amounts to 340B hospitals under the reimbursement rates in effect for
CY 2018 through September 27, 2022 and to comply with the statutory
requirement to maintain budget neutrality under the OPPS.
To address the reduced payment amounts to 340B hospitals under the
reimbursement rates in effect for CY 2018 through September 27, 2022,
CMS made one-time lump sum payments to affected 340B covered entity
hospitals, calculated as the difference between what an affected 340B
covered entity hospital received for 340B-acquired drugs from CY 2018
through September 27, 2022 and what they would have received for those
drugs if the 340B adjustment had not been in place. These one-time lump
sum payments were issued in early 2024. For more information on the
calculation and distribution of the one-time lump sum payments, see the
Final Remedy rule (88 FR 77156 through 77170).
g. Prospective Adjustment to Payments for Non-Drug Items and Services
To Offset the Increased Payments for Non-Drug Items and Services Made
in CY 2018 Through CY 2022
As we described under section I.A.3. of the Final Remedy rule (88
FR 77151), to comply with statutory budget neutrality requirements, the
decreased payments made to 340B hospitals for drugs in CY 2018 through
September 27, 2022, were budget neutralized by corresponding increased
payments to all hospitals for non-drug items and services starting in
CY 2018 through CY 2022. When the past payments for these drugs were
subsequently increased through the one-time lump sum payments in 2024,
the same budget neutrality requirements obligated us to decrease the
non-drug item and services payments made from CY 2018 through CY 2022.
To reduce the burden on providers of immediately offsetting the
estimated $7.8 billion of increased non-drug item and services payments
made from CY 2018 through CY 2022, we finalized a policy to implement
the offset prospectively over the course of several years. As we
explained in the Final Remedy rule (88 FR 77172), this approach was
similar to the original budget neutrality adjustment in the 340B
Payment Policy that increased the payment for every non-drug item and
service for CY 2018 through CY 2022 to offset the downward adjustment
in the payment rate for drugs acquired under the 340B Program. We
finalized in the Final Remedy rule that, beginning in CY 2026, we would
reduce the conversion factor for non-drug items and services to all
OPPS providers--except any hospital that enrolled in Medicare after
January 1, 2018 (as described further below)--by 0.5 percent each year
until the total offset was reached (which we estimated would take
approximately 16 years (88 FR 77181)).
As we stated in the Final Remedy rule, we believed an annual
reduction in the conversion factor was appropriate because it balanced
the need to address the past payments for non-drug items
[[Page 41871]]
and services to ensure budget neutrality while also ensuring that the
offset was not immediately financially burdensome on impacted entities,
which we believed would be the case if we were to apply an adjustment
for the full offset amount in a single year (88 FR 77170).
Accordingly, the Final Remedy rule finalized changes to the
calculation of the OPPS conversion factor applicable to non-drug items
and services beginning in CY 2026. Specifically, we codified a 0.5
percent reduction in the OPPS conversion factor applicable to non-drug
items and services in the regulations as codified at Sec. 419.32
(b)(1)(iv)(B)(12). As currently implemented, this 0.5 percent reduction
remains in effect until the estimated payment reduction reaches $7.8
billion, which we estimated will occur in CY 2041. For a full
discussion of the CY 2026 adjustment to the conversion factor for non-
drug items and services, see the Final Remedy rule (88 FR 77156 through
77170).
In finalizing our policy to apply a prospective adjustment, we
recognized that any hospital that enrolled in Medicare after January 1,
2018 (hereinafter referred to as a ``new provider'') received less than
the full amount of the increased non-drug item and service payments
made during that time than they otherwise would have received if
enrolled prior to that date (88 FR 44080). We therefore exempted these
providers from the prospective rate reduction, which was predominantly
designed to account for non-drug item and service payments made during
CY 2018 through CY 2022. As we explained, that means we calculate
payment rates for new providers using the conversion factor before
applying the 0.5 percent annual reduction to the conversion factor for
non-drug items and services that apply to hospitals that are not ``new
providers'' for purposes of this policy. For the purpose of designating
a new provider, we define the date of enrollment in Medicare as the
provider's CMS certification number (CCN) effective date. We codified
the exclusion of these new providers from the prospective payment
adjustment to the conversion factor for the duration of its application
in the regulations by adding new paragraph (b)(1)(iv)(B)(12) to Sec.
419.32.
The providers that were determined to be subject to the payment
reduction based on our review of provider enrollment and OPPS billing
records were listed in Addendum R-340B Remedy Offset Providers to the
CY 2026 OPPS/ASC final rule with comment period. We indicated in the CY
2026 OPPS/ASC final rule with comment period that providers not
included on this list (providers that began billing Medicare under the
OPPS after January 1, 2018) would not be subject to the payment
reduction. For a complete discussion of our exclusion of new providers
from the prospective payment adjustment, we refer readers to the Final
Remedy rule (88 FR 77182 through 77185) and the CY 2026 final OPPS/ASC
rule with comment period (90 FR 53709 through 53710).
h. CY 2026 Prospective Payment Adjustment
In the CY 2026 OPPS/ASC proposed rule, we proposed to revise the
annual reduction to the OPPS conversion factor under Sec.
419.32(b)(1)(iv)(B)(12) used to determine the payment amounts for non-
drug items and services from 0.5 to 2 percent effective January 1, 2026
(90 33634). Under this revised rate, we expected it would take
approximately 6 years to reach the total offset of $7.8 billion. As we
explained in the CY 2026 OPPS/ASC proposed rule, while we continued to
believe that a reduction to the OPPS conversion factor was the best way
to effectuate budget neutrality, we questioned whether a 0.5 percentage
point annual reduction for approximately 16 years best achieved the
goal of the Final Remedy rule, which was to restore hospitals to as
close to the financial position they would have been in had the 340B
Payment Policy never been implemented as is reasonably feasible.
Specifically, we noted that the further away from CY 2018 through CY
2022 the conversion factor adjustments extend, the less likely it is
that hospitals' relative utilization patterns of non-drug items and
services would align with the relative utilization patterns of non-drug
items and services from CY 2018 through CY 2022.
Because applying an annual reduction to the conversion factor for
all non-drug items and services does not directly identify and recoup
the specific amount owed by each hospital, but rather seeks to recoup
the aggregate increased payments made to all hospitals for non-drug
items and services starting in CY 2018 through CY 2022, it is important
to apply the annual reduction to the OPPS conversion factor to the
payment for non-drug items and services furnished during calendar years
in which hospitals' utilization patterns for such non-drug items and
services most closely resemble their utilization patterns during CYs
2018 through 2022. Doing so helps to ensure that each hospital repays
an amount that best approximates the excess payments it received under
the 340B Payment Policy.
We explained in the CY 2026 OPPS/ASC proposed rule (90 FR 53710)
that a hospital's utilization of non-drug items and services would
likely diverge more from CY 2018 utilization in CY 2041 than it would
in CY 2031 or CY 2026. The longer the recovery timeframe, the more each
hospital's utilization of non-drug items and services will likely
diverge from what the hospital's utilization of non-drug items and
services was during the 2018-2022 timeframe the 340B Payment Policy was
in place. Consequently, under the current recovery timeframe, the
cumulative reduction applied to each hospital is less likely to reflect
the amount of payment the hospital received for increased non-drug
services from 2018 through 2022. As a result, it is less likely that
each hospital will be restored to the financial position it would have
occupied had the 340B Payment Policy in effect from 2018 to 2022 not
been implemented.
Another factor that caused us to question the appropriateness of a
16 year recovery timeframe was the fact that by beginning the decrease
to non-drug item and service payments in CY 2026, there was already an
8-year delay between the first year of the OPPS 340B Payment Policy and
the first year of the prospective offset. (90 FR 53710). Thus, we
observed, the longer it takes for us to fully recover the $7.8 billion,
the less suited the relative burden on hospitals from the adjustments
would be to the relevant benefits those hospitals previously received.
We also recognized the possibility that at least some hospitals that
benefited from the increased payments from CY 2018 through CY 2022
would leave the market before 2041, increasing the risk that the
remaining hospitals might ultimately account for a larger share of the
payment reductions than they would have if the annual reduction to the
OPPS conversion factor concluded sooner. We additionally noted that the
$7.8 billion dollar figure calculated in the Final Remedy rule (88 FR
77150) does not, and will not, account for inflation and does not
contain interest even though the prospective offset is occurring many
years after both the start of the 340B Payment Policy in CY 2018 as
well as the lump sum remedy payments made in CY 2024.
We acknowledged in the CY 2026 OPPS/ASC proposed rule (90 FR 33635)
that revising the annual reduction from 0.5 percent to 2 percent would
be a change to the approach we finalized in the Final Remedy rule and
that, at the time of the Final Remedy rule, we
[[Page 41872]]
considered but did not adopt a suggestion from a commenter requesting
that we recover the amount over a shorter timeframe than 16 years. (88
FR 77179.) We indicated that our basis for not accepting the suggestion
in the Final Remedy rule was that the 0.5 percent rate/16-year
timeframe ``properly reverses the increased payments for non-drug items
and services to comply with statutory budget neutrality requirements
while at the same time accounting for any reliance interests and
ensuring that the offset is not overly burdensome to impacted
entities'' (90 FR 33635). We stated in the CY 2026 OPPS/ASC proposed
rule that this balancing insufficiently accounted for the main premise
of the Final Remedy rule, which is to implement the budget neutrality
requirement in a manner that restores affected 340B covered entity
hospitals to the financial position they would have been in had the
340B Payment Policy not been implemented in 2018. We explained that,
for the reasons described above, we believed that a 6-year time frame
better achieved that main goal and better balanced that goal and our
budget neutrality obligations against hospital burden and reliance
interests. We noted that the 16-year timeframe was more than three
times longer than the 5-year period the 340B Payment Policy was in
place. The 6 years we expected that the revised policy would be in
effect, by contrast, would be closer to the timeframe the 340B Payment
Policy was in place, and that a 2 percent payment reduction was still
well below the 3.19 percent payment increase hospitals received for
that time period (82 FR 52624 through 52625). We also indicated that
because we proposed this policy in advance of CY 2026 and before any
rate reductions went into effect for OPPS and Medicare Fee for Service
payments, any reliance interests hospitals had in a policy that had not
been implemented yet for these payment systems would be minimal and
outweighed by the other considerations discussed in the CY 2026 OPPS/
ASC proposed rule (90 FR 33635).
We did not finalize our proposal to revise the annual reduction to
the OPPS conversion factor under Sec. 419.32(b)(1)(iv)(B)(12) in the
CY 2026 OPPS/ASC final rule and the 0.5 percent reduction in the OPPS
conversion factor applicable to non-drug items and services finalized
in the Final Remedy rule went into effect on January 1, 2026. The
decision not to finalize an increased reduction for CY 2026 was made in
response to concerns brought forth by some commenters. Specifically, we
said ``[w]hile we disagree with many of the arguments these commenters
raise, we are persuaded by the commenters to the extent that we will
not finalize in CY 2026 our proposal to increase to 2 percent the 0.5
percent adjustment in 42 CFR 419.32(b)(1)(iv)(B)(12). We currently
anticipate delaying a change for just 1 year. Thus, while we will
retain the original 0.5 percent adjustment in the conversion factor in
CY 2026, hospitals should anticipate that we will implement a larger
adjustment (such as 2 percent or other adjustment greater than 0.5
percent) beginning in CY 2027 . . . .--We do so based on the unique
circumstances here.'' (90 FR 53714).
i. CY 2027 Proposed Prospective Payment Adjustment
Effective January 1, 2027, we propose to increase the annual
reduction to the OPPS conversion factor under Sec.
419.32(b)(1)(iv)(B)(12) used to determine the payment amounts for non-
drug items and services from 0.5 percent to 3 percent. Specifically, we
propose to revise Sec. 419.32(b)(1)(iv)(B)(12) to limit the 0.5
percent reduction to CY 2026 and add a new paragraph (13) implementing
an annual 3.0 percent reduction (excluding new providers with a CMS
certification number (CCN) effective date of January 2, 2018, or later)
starting in CY 2027 and continuing until the estimated payment
reductions made in accordance with paragraphs (12) and (13) for all
applicable hospital outpatient items and service reaches $7.769
billion. Under this revised rate, we expect we will reach this total by
the end of CY 2029 (see Table 48). We recognize that this proposed
annual reduction is greater than the 2 percent annual reduction we
originally proposed for CY 2026. As further discussed below, we
considered the following in establishing this proposal:
First, a 3 percent reduction is necessary to achieve the outcome
for which we originally proposed the 2 percent annual reduction in CY
2026. That is, to implement the budget neutrality requirement in a
manner that restores affected 340B covered entity hospitals to the
financial position they would have been in had the 340B Payment Policy
not been implemented in 2018. By recovering the funds during a
timeframe that aligns with the period in which the funds were
originally paid out and applying the reduction in calendar years for
which a hospital's utilization of non-drug items and services is more
likely to align with its utilization during the period when the 340B
Payment Policy was in effect, CMS will better ensure that the reduction
in payments to each hospital approximates the amount by which that
hospital was overpaid. A total recoupment timeframe of roughly 6 years
after the 340B remedy payments were made in CY 2024 more closely aligns
with the 5 year timeframe the 340B Payment Policy was in place, as
compared to the 8 years from CY 2024 that we estimate a 2 percent
recoupment would require (see Table 48). Based on our analysis, we
believe that, as additional time elapses following the period during
which the 340B Payment Policy was in effect, hospitals' utilization of
non-drug items and services is increasingly likely to diverge from
their utilization patterns during that period. Since CMS is recouping
the increased payments made for nondrug items and services while the
340B Payment Policy was effective by applying a reduced conversion
factor to nondrug items and services furnished during the calendar
years following the 340B Payment Policy's end date, the farther out
these reductions apply, the less likely it is that the total recoupment
for each hospital will align with the amount each hospital was
overpaid. For example, if a hospital's utilization rate of non-drug
items and services is three times greater in 2030 than it was in 2020,
then a reduced conversion factor applied to the items and services
furnished in 2030 could result in CMS recouping more than what the
hospital was initially paid in 2020. Consequently, it is less likely
that the hospital would be restored to the financial position they
would have been in had the 340B Payment Policy never been in effect. A
total recoupment timeframe of 6 years would recover the funds in a
manner that limits this divergence in utilization while avoiding the
burden on providers that would result from a shorter recovery
timeframe.
Second, a 3 percent payment reduction is the most logical and
appropriate percentage to apply as it closely approximates the 3.19
percent payment increase hospitals received for non-drug items and
services from CYs 2018 through 2022 to budget neutralize the reduced
drug payments resulting from the 340B Payment Policy. This approach is
also consistent with the approach we adopted in CY 2023 (87 FR 71975)
to maintain budget neutrality when we returned to our policy of paying
ASP plus 6 percent for 340B acquired drugs.
With respect to implementing a 3 percent reduction in CY 2027
versus delaying implementation until a later CY to provide hospitals
with additional time to prepare, we determined that implementing this
payment reduction
[[Page 41873]]
starting CY 2027 would be appropriate. We have repeatedly emphasized
that shorter recoupment windows would be considered and/or proposed in
CY 2027. In the CY 2026/ASC final rule with comment period, we
expressly stated ``hospitals should anticipate that we will implement a
larger adjustment (such as 2 percent or other adjustment greater than
0.5 percent) beginning in CY 2027'' (90 FR 53714). Elsewhere in that
rule we stated that ``we anticipate implementing a larger adjustment
(such as 2 percent or other adjustment greater than 0.5 percent) in
next year's rulemaking'' (90 FR 53718). We communicated this same
message in the Medicare Fact Sheets and Press Releases for the CY 2026
OPPS/ASC final rule with comment period to ensure that hospitals were
aware of the likely increase in the offset percentage in CY 2027.\77\
Because hospitals have been aware that we would likely propose an
increased payment reduction in CY 2027 rulemaking, we do not believe
hospitals need additional time to prepare for this repayment schedule.
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\77\ https://www.cms.gov/newsroom/fact-sheets/calendar-year-2026-hospital-outpatient-prospective-payment-system-opps-ambulatory-surgical-center.
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We seek comment on our proposal to increase the annual percent
reduction to 3 percent. We also specifically seek comment on the
advisability of increasing the annual percent reduction to 2 percent.
[GRAPHIC] [TIFF OMITTED] TP07JY26.077
7. All-Inclusive Rate (AIR) Add-On Payment for High-Cost Drugs Provided
by Indian Health Service and Tribal Facilities
a. Background
In the CY 2000 OPPS final rule (65 FR 18434), CMS implemented the
PPS for hospital outpatient services furnished to Medicare
beneficiaries, as set forth in section 1833(t) of the Act. In the CY
2000 OPPS final rule, we noted that the OPPS applies to covered
hospital outpatient services furnished by all hospitals participating
in the Medicare program with a few exceptions. We identified one of
these exceptions as ``outpatient services provided by hospitals of the
Indian Health Service (IHS).'' We stated that these services would
``continue to be paid under separately established rates which are
published annually in the Federal Register'' and, in the CY 2002 OPPS/
ASC final rule (66 FR 59856), we finalized a revision to Sec. 419.20
(Hospitals subject to the hospital outpatient prospective payment
system) by adding paragraph (b)(4), which specifies that hospitals of
the IHS are excluded from the OPPS.
In the intervening years, IHS and tribal facilities have been paid
under the separately established All-Inclusive Rate (AIR). On an annual
basis, the IHS calculates and publishes, in the Federal Register,
calendar year reimbursement rates.\78\ Due to the higher cost of living
in Alaska, separate rates are calculated for Alaska and the lower 48
States. For CY 2026, the Medicare Outpatient per visit rate is $733 for
the lower 48 States (hereinafter referred to as ``the lower 48 AIR'')
and $1,233 for Alaska.\79\
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\78\ https://www.ihs.gov/BusinessOffice/reimbursement-rates/.
\79\ 91 FR 2787 (January 22, 2026); https://www.federalregister.gov/documents/2026/01/22/2026-01178/reimbursement-rates-for-calendar-year-2026.
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In the CY 2025 OPPS/ASC final rule with comment period (89 FR 94280
[[Page 41874]]
through 94286), we finalized a policy to separately pay IHS and tribal
hospitals for high-cost drugs, biologicals, and radiopharmaceuticals
(hereinafter referred to as ``drugs'' for the purpose of this section)
furnished in hospital outpatient departments through an add-on payment
in addition to the AIR using the authority under which the AIR is
calculated.\80\ We finalized a continuation of this policy, without
modification, in the CY 2026 OPPS/ASC final rule with comment period
(90 FR 53722 through 53723). We note that the AIR and the add-on
payment are paid out of the Part B trust fund and are not subject to
OPPS budget neutrality.
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\80\ Sections 321(a) and 322(b) of the Public Health Service Act
(42 U.S.C. 248(a) and 249(b)), Public Law 83-568 (42 U.S.C.
2001(a)), and the Indian Health Care Improvement Act (25 U.S.C. 1601
et seq.).
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We defined high cost drugs (that is, drugs qualifying for the add-
on payment) for the purpose of the policy as all drugs covered under
Medicare Part B and for which payment would otherwise be made under the
OPPS whose per day cost exceeds two times the lower 48 AIR amount in
effect at the time of the release of each year's OPPS/ASC final rule
with comment period. In the CY 2026 OPPS/ASC final rule with comment
period, this amount was identified as $1,436 (2 times the CY 2025 lower
48 AIR of $718).
To determine the calculated per day cost for each drug HCPCS code,
we employed a methodology similar to our longstanding methodology used
to calculate the per day cost of drugs for OPPS payment purposes.
Specifically, to calculate the per day cost for CY 2026, we used an
estimated payment rate based on the ASP methodology payment rate, which
for purposes of the policy was generally ASP plus 0 percent (which is
the payment rate for separately payable IHS drugs under the policy). We
then used the manufacturer-submitted ASP data from the fourth quarter
of CY 2024 to determine the per day cost. For drugs that did not have
either an ASP-based payment rate or a payment rate based on WAC, we
used arithmetic MUC of the items derived from the CY 2024 hospital
claims data to determine their per day cost. For HCPCS codes for drugs
that were proposed for separate payment in the CY 2026 OPPS/ASC
proposed rule with comment period but then had per day costs equal to
or less than $1,436 (2 times $718) in the CY 2026 OPPS/ASC final rule
with comment period, based on the updated ASPs and hospital claims data
used for the CY 2026 OPPS/ASC final rule with comment period, those
drugs received separate payment in CY 2026.
We finalized that the amount of the add-on payment for a high-cost
drug would be the ASP for the drug with no additional payment (that is,
ASP plus 0 percent). We note that this add-on payment was implemented
on a per-dose basis. In the event ASP pricing information was not
available for a particular drug, we paid the WAC plus 0 percent and if
WAC pricing information was not available, we paid 89.6 percent of AWP.
If AWP was not available, we paid the arithmetic MUC. We also adopted a
drug packaging threshold exception for biosimilars in which the add-on
payment is made for biosimilars whose per-day costs do not exceed the
threshold of two times the lower 48 AIR but whose reference products do
exceed the threshold.
To implement this policy, we finalized in the CY 2025 OPPS/ASC
final rule with comment period a recurring annual process in which the
lower 48 AIR in effect at the time of the release of each year's OPPS/
ASC final rule with comment period would be used to create a list of
drugs qualifying for the add-on payment for the following calendar
year. Once the drugs qualifying for the add-on payment were determined,
the payment rate for a unit of the drug would be determined in
accordance with the above described pricing hierarchy. The results of
that process for CY 2025 were displayed in Addendum Q to the CY 2025
OPPS/ASC final rule with comment period. We additionally finalized that
during the calendar year, the list of drugs would be modified on a
quarterly basis (January, April, July, October) to add new-to-market
drugs with per-day costs that exceeded two times the lower 48 AIR and
to update qualifying drugs' ASPs.
We finalized a continuation of this annual process, without
modification, in the CY 2026 OPPS/ASC final rule and the results of
that process for CY 2026 were displayed in Addendum Q to the CY 2026
OPPS/ASC final rule. For a full discussion of the AIR add-on payment
policy for high cost drugs provided by IHS and tribal hospitals, we
refer readers to the CY 2025 OPPS/ASC final rule with comment period
(89 FR 94280 through 94286) and the CY 2026 OPPS/ASC final rule with
comment period (90 FR 53722 through 53723).
b. AIR Add-On Payment for High-Cost Drugs Provided by IHS and Tribal
Facilities Policy for CY 2027
For CY 2027, we propose to continue the policy as described in the
CY 2025 and CY 2026 OPPS/ASC final rules.
Consequently, for CY 2027, we propose to continue to separately pay
IHS and tribal hospitals for high-cost drugs furnished in hospital
outpatient departments through an add-on payment in addition to the AIR
using the authorities under which the AIR is calculated.
We propose to continue to define high cost drugs (that is, drugs
qualifying for the add-on payment) for the purpose of the policy as any
drugs covered under Medicare Part B and for which payment would
otherwise be made under the OPPS which have per day costs exceeding two
times the lower 48 AIR amount in effect at the time of the release of
the CY 2027 OPPS/ASC final rule with comment period. For CY 2027, we
propose that if the CY 2026 lower 48 AIR amount is in effect at the
time of the release of the CY 2027 OPPS/ASC final rule with comment
period, this amount would be $1,466 (2 times the CY 2026 lower 48 AIR
of $733).
To determine the calculated per day cost for each drug HCPCS code,
we propose to continue using an estimated payment rate based on the ASP
methodology payment rate (generally ASP plus 0 percent) and then using
the manufacturer-submitted ASP data from the fourth quarter of CY 2025
to determine the per day cost. For drugs that do not have either an
ASP-based payment rate or a payment rate based on WAC, we propose to
continue to use the arithmetic MUC of the items derived from the CY
2025 hospital claims data to determine their per day cost.
We propose that the amount of the add-on payment for each dose of a
high-cost drug would continue to be the ASP for the drug with no
additional payment (that is, ASP plus 0 percent). In the event ASP
pricing information is not available for a particular drug, we propose
to continue to pay the wholesale acquisition cost (WAC) plus 0 percent.
If WAC pricing information is not available, we propose to continue to
pay 89.6 percent of AWP. If AWP pricing information is not available,
we propose to continue to pay the arithmetic MUC. Finally, we propose
to continue the drug packaging threshold exception for biosimilars in
which the add-on payment is made for biosimilars whose per-day costs do
not exceed the threshold of two times the lower 48 AIR but whose
reference products do exceed the threshold.
c. Proposed List of Drugs Qualifying for the Add-on Payment for CY 2027
Using two times the lower 48 AIR amount of $733 that is in effect
for CY 2026 and applying the above described per-day cost methodology
and pricing
[[Page 41875]]
hierarchy, we have included as proposed Addendum Q a preliminary list
of the drugs that would qualify for the proposed add-on payment and
their proposed add on payment rates for CY 2027.
We propose to create a final Addendum Q in the CY 2027 OPPS/ASC
final rule with comment period using the claims data (units used per
day) and ASPs, or pricing hierarchy, available at that time. We also
propose that for HCPCS codes for drugs that are proposed for separate
payment in CY 2027, but then have per day costs equal to or less than
$1,466 (2 times $733) in the CY 2027 OPPS/ASC final rule with comment
period, based on the updated ASPs and hospital claims data used for the
CY 2027 OPPS/ASC final rule with comment period, those drugs would
still receive separate payment in CY 2027.
Finally, as we did in CY 2025 and CY 2026, we propose to modify the
list on a quarterly basis (January, April, July, October) to add new-
to-market drugs with per-day costs that exceed two times the lower 48
AIR and to update qualifying drugs' ASPs.
8. Medicare OPPS Drugs Acquisition Cost Survey
a. Background
(1) Publication of Notice of Intent To Conduct Medicare OPPS Drugs
Acquisition Cost Survey
Section 1833(t)(14)(A)(iii) of the Act requires the Secretary to
set payment rates for specified covered outpatient drugs (SCODs) \81\
beginning in 2006 at the amount the Secretary determines to be the
average acquisition cost for the drug for that year, at least when
certain hospital acquisition cost survey data is available. To collect
the cost survey data for the Secretary to use for 2006 payment rates,
section 1833(t)(14)(D)(i)(I) of the Act required the Comptroller
General of the U.S. to conduct a survey in each of 2004 and 2005 to
determine the hospital acquisition cost for each SCOD. To inform
payment rates in later years, section 1833(t)(14)(D)(ii) of the Act
requires the Secretary periodically to conduct surveys of hospital
acquisition costs for each SCOD. In developing that survey, section
1833(t)(14)(D)(i)(II) of the Act requires the Secretary to take into
account certain recommendations from the Comptroller General regarding
frequency and methodology of subsequent surveys.
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\81\ For the definition of a SCOD, see section 1833(t)(14)(B) of
the Act at https://www.ssa.gov/OP_Home/ssact/title18/1833.htm.
---------------------------------------------------------------------------
The GAO conducted the required surveys in 2004 and 2005, and, in
reporting the results in 2006, recommended that the Secretary
thereafter validate, ``on an occasional basis--possibly every 5 or 10
years--ASP data that manufacturers report to CMS for developing SCOD
payment rates''.\82\ As noted in the CY 2026 OPPS/ASC proposed rule (90
FR 33653), in the years following the GAO's recommendation, CMS had not
yet conducted a survey of the acquisition costs for each SCOD for all
hospitals paid under the OPPS. Additionally, on April 18, 2025,
President Trump signed Executive Order (E.O.) 14273, ``Lowering Drug
Prices by Once Again Putting Americans First.'' \83\ Section 5 of the
E.O., ``Appropriately Accounting for Acquisition Costs of Drugs in
Medicare,'' directs the Secretary of HHS to publish in the Federal
Register a plan to conduct a survey under section 1833(t)(14)(D)(ii) of
the Act so he can determine the acquisition costs for SCODs at hospital
outpatient departments.
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\82\ https://www.gao.gov/assets/gao-06-372.pdf.
\83\ https://www.govinfo.gov/content/pkg/FR-2025-04-18/pdf/2025-06837.pdf.
---------------------------------------------------------------------------
Accordingly, in the CY 2026 OPPS/ASC proposed rule (90 FR 33653),
we announced that under section 1833(t)(14)(D)(ii) of the Act we would
be conducting a survey of the acquisition costs for each separately
payable drug acquired by all hospitals paid under the OPPS, including
SCODs, and drugs and biologicals CMS historically treats as SCODs. We
indicated that we intended for the survey to open starting at the end
of CY 2025 to early CY 2026. We also stated that we had reviewed and
taken into account the Comptroller General's recommendations regarding
the frequency and methodology of these surveys in developing our
proposed survey, and that we intended for the survey to be completed in
time for the survey results to be used to inform policy making
beginning with the CY 2027 OPPS/ASC proposed rule. We indicated that we
intended to propose and seek comment on any payment rates for SCODs
based on the survey results in CY 2027 rulemaking.
In the CY 2026 OPPS/ASC final rule (90 FR 53754 through 53766 and
54049 through 54052), after responding to public comments, including
those received through the proposed survey Paperwork Reduction Act
(PRA) submission process, we finalized our proposal outlining our
intent to conduct a required outpatient drug acquisition cost survey to
all hospitals paid under the OPPS, pending final approval from OMB. OMB
approval was granted on December 29, 2025 (OMB control number 0938-
1487, expires August 31, 2028).\84\
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\84\ https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202511-0938-014 and https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202512-0938-024.
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(2) OPPS Drug Acquisition Cost Survey Design and Implementation
(a) Study Population
We identified approximately 4,500 entities for inclusion in the
survey study population due to their submission of at least one
qualifying Fee-For-Service claim under the OPPS during the survey study
period (July 1, 2024 through June 30, 2025). Qualifying claims met all
defined criteria: (1) claim date of service (July 1, 2024 and June 30,
2025), (2) claim type (Part B outpatient), (3) facility type code (12
[hospital inpatient/home heath], 13 [hospital outpatient], 14 [hospital
other], and 76 [community mental health center]), (4) payment amount
(greater than zero), and (5) status indicator denoting separately
payable drugs or other relevant Part B outpatient services with status
indicators (G, H, J1, J2, K, Q1, Q2, Q3, Q4, R, S, T, U, OR V). We
removed all claims billed by hospital types that are not paid under the
OPPS.\85\ Finally, we ensured that each entity had valid Medicare
enrollment during the survey study period using the Provider
Enrollment, Chain, and Ownership System (PECOS). There was no sampling
as all OPPS hospitals were invited to participate in the survey and
provide the required data.
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\85\ As stated in 42 CFR 419.20(b), the following hospital types
are not paid under the OPPS: critical access hospitals; Maryland
waiver hospitals; hospitals located outside the 50 states, the
District of Columbia, and Puerto Rico; Indian Health Service
hospitals; and rural emergency hospitals. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-419/subpart-B/section-419.20.
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As described in the PRA approved by OMB, we expect to survey these
hospitals every four (4) years. We believe that this frequency will
appropriately balance the burden imposed on hospitals of completing the
survey with ensuring that we capture the required data to inform
payment rates as required under section 1833(t)(14)(D)(I)(ii) of the
Act. However, this frequency is an intention and could be revised.
(b) Survey Scope and Design
The guiding principle in the design of the survey was to collect
the data necessary to inform payment policy as required by statute in a
manner that imposed the least amount of burden to the extent
practicable on the hospitals providing the data. The survey collected
acquisition cost data for separately
[[Page 41876]]
payable outpatient drugs at the 11-digit National Drug Code (NDC) level
for 1,843 NDCs, which correspond to 519 drug HCPCS.\86\ We note that
more than one NDC may be associated with a given HCPCS code and vice
versa. These NDCs were identified by analyzing the drugs and
biologicals that were separately payable under the OPPS during the
survey period of July 1, 2024 through June 30, 2025 and for which there
was a payment made under the OPPS during that period. We excluded NDCs
with either an expiration date or a marketing end date prior to July 1,
2024, using FDA national drug code and structured product labeling data
elements (NSDE) data \87\ because these drugs would no longer be
available for purchase during the study survey period.\88\
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\86\ ODACS Acquisition Data Template: https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient-
pps/outpatient-prospective-payment-system-opps-drug-acquisition-
cost-survey.
\87\ https://www.fda.gov/industry/structured-product-labeling-resources/nsde.
\88\ The expiration date is the expiration date of the last lot
distributed. The marketing end date signifies that the drug is no
longer actively manufactured or promoted, or the company has
officially decided to stop commercializing it.
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(c) Acquisition Date Reporting and Data Elements
The survey captured acquisition data for drugs purchased between
July 1, 2024 and June 30, 2025. This 12-month time period aligns with
GAO's 12-month survey period for their original study of July 1, 2003
through June 30, 2004. This time period also provided a 6-month window
between the end of the survey period and the start of the survey
submission window to ensure adequate time for all rebates, discounts,
and price concessions to be finalized, so they could be incorporated
into the NDC acquisition cost submitted by hospitals.
The survey instructed hospitals to report 4 pieces of data for each
NDC purchased during the 1-year survey period:
Total Units Purchased--Non-340B
Total Net Acquisition Cost--Non-340B
Total Units Purchased--340B
Total Net Acquisition Cost--340B
Net acquisition cost was defined as the total amount paid by the
hospital inclusive of all discounts, rebates, and price concessions
applicable at the NDC level.
This design reflected our recognition that certain discounts may
apply depending on which provider furnished the drug and whether an
eligible patient received the drug (for example, for drugs acquired
through the 340B Program). Consequently, the survey asked hospitals to
separately list their acquisition costs for drug NDCs acquired through
the 340B Program and drug NDCs acquired outside of the 340B Program to
ensure that all discounts were accurately captured and represented the
hospital's acquisition costs.
(d) Treatment of Discounts and Price Concessions
The survey asked hospitals to incorporate all rebates and discounts
in their acquisition cost for each NDC. This included both discounts
able to be directly applied to each individual NDC and those discounts
that were not necessarily linked to a single NDC (e.g., invoice-level
discounts, wholesaler rebates, prompt pay discounts, and other
financial concessions, or other discounts). Respondents were also asked
to separately provide information about any non-NDC-specific discounts
or rebates received as a result of membership in a Group Purchasing
Organization (GPO) or other buying group.
(e) Data Collection Process
Data were collected through the CMS Fee-for-Service Data Collection
System (FFSDCS) via the Medicare OPPS Drug Acquisition Cost Survey
(hereinafter referred to as ``ODACS'') module. Hospitals first
designated a Hospital Point of Contact (POC) and a Submitter
responsible for data submission. Submitters then submitted data through
(1) uploading of a standardized Excel (.xlsx) file; or (2) manual data
entry through the FFSDCS via the ODACS module. Once the Submitter
uploaded or entered the required data, they then officially submitted
that data to CMS and attested to the validity, integrity, and
completeness of the data being submitted.
(f) Data Validation and Quality Assurance
The FFSDCS ODACS module included automated validation checks to
promote completeness, formatting accuracy, and logical consistency. For
uploaded data, errors and missing information were flagged on the
module upload page, accompanied by error explanations. For manually
entered data, the module provided hover-over tips for data entry fields
and was programmed to accept data only in specific formats. The system
alerted users if data was formatted incorrectly. Submitters were able
to correct and reupload data during the collection window prior to
final attestation.
(g) Survey Window
The ODACS module opened on January 1, 2026 and closed on April 7,
2026. The original survey window was January 1, 2026 through March 31,
2026; however, after the survey window opened we extended the window
for an additional week, through April 7, 2026, based on hospitals'
request for additional time to respond. We believe that approximately
14 weeks was sufficient for hospitals to respond to the survey,
particularly given the outreach and education that CMS engaged in prior
to and during the survey window.
(h) Outreach and Education
We engaged in extensive outreach and education to hospitals in
advance of the survey start date to ensure that respondents were aware
of the survey and how to complete it. CMS began reaching out to
hospitals using provider enrollment and other publicly available
contact information in September 2025. Specifically, CMS identified a
hospital POC from each hospital paid under the OPPS and reached out to
them to make them aware of the survey and provide them with
instructions on selecting a hospital representative (Submitter) to
register with the CMS Identity Management System (IDM) to access the
survey module and report the survey data. To walk respondents through
this process, a step-by-step registration guide was issued by CMS in
November 2025 and a data submission guide was provided on January 1,
2026.\89\ These guides were posted to a new ODACS-specific web page
\90\ that was created by CMS to serve as a central hub for information
and resources for hospitals. CMS also conducted two educational
webinars \91\ with hospitals in December 2025, which were recorded and
posted to the ODACS web page. To ensure that respondents had the
support they needed during the survey, CMS established a dedicated
email address and helpline to provide technical assistance. To address
frequently asked questions, CMS posted a FAQ document \92\ to the ODACS
web page and updated it during the survey to reflect additional
questions asked by respondents via email and the helpline as the survey
progressed. Finally, prior to and throughout the survey period,
[[Page 41877]]
CMS sent periodic communications to POCs to remind them of upcoming
deadlines and resources available for assistance.
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\89\ www.cms.gov/files/document/submitter-user-guide.pdf.
\90\ https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient-pps/outpatient-prospective-payment-
system-opps-drug-acquisition-cost-survey.
\91\ https://www.cms.gov/files/document/odacs-training-webinar.pdf.
\92\ https://www.cms.gov/files/document/odacs-faq.pdf.
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b. Data Analysis and Methodology
(1) Selection of a Methodology To Calculate Acquisition Cost Margins
In accordance with section 1833(t)(14)(D)(ii) of the Act, we took
into account GAO's recommendations and analyzed the survey data to
validate whether the manufacturers' reported drug ASP data
appropriately and accurately reflects hospitals' drug acquisition
costs. To do so, we compared hospitals' survey-reported acquisition
costs for all survey-eligible drugs to the equivalent ASP-based
Medicare payment amount for those drugs under the OPPS, less any drug-
specific payment rate add-ons. This comparison was constructed as a
percent difference between these two values, termed the acquisition
cost margin.
We calculated this acquisition cost margin by first finding the
difference between (1) the total acquisition costs reported for all
NDCs in the survey and (2) the volume-weighted sum of their
corresponding ASP payment rates, the latter of which was calculated by
multiplying the survey reported units purchased for each NDC by its
applicable ASP plus 0 rate.\93\ We then divided that difference by the
total ASP-based payment to find the percent margin between acquisition
costs and ASP. Negative values indicate that hospitals reported
acquisition costs below ASP and positive values indicate that hospitals
reported acquisition costs above ASP.
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\93\ ASP plus 0 is the ASP without any drug-specific payment
rate add-ons (ASP plus 6 percent for most drugs and biologicals, ASP
plus 8 percent for qualifying biosimilar products, or AMP plus 3
percent for select other drugs and biologicals).
---------------------------------------------------------------------------
We used the volume-weighted sum of all survey-eligible NDCs' ASP
payment rates in order to produce a representative estimate of
aggregate Medicare payments that would be comparable to hospitals'
aggregate acquisition costs reported for those NDCs. This approach is
consistent with longstanding OPPS principles of basing payment policy
on observed utilization and resource use. We believe it is appropriate
to compare hospitals' total acquisition costs to this weighted sum of
ASPs rather than compare average acquisition costs to ASP because total
acquisition costs encompass both the reported per-unit cost and the
reported purchase volume for each NDC. In the absence of weighting by
reported per-unit cost, drugs that encompass a very low percentage of
hospitals' total acquisition costs could exert a disproportionate
influence on the aggregate margin between acquisition costs and ASPs.
And in the absence of weighting by reported purchase volume, the ASPs
for drugs with relatively low reported volume but atypical acquisition
costs could exert a disproportionate influence on the aggregate margin.
By contrast, the volume-weighted approach ensures that the ASPs for the
drugs representing a larger share of total purchasing activity
contribute more significantly to the estimated margin. We will
illustrate using the following fictitious example:
Ten units of NDC 1 were purchased for $8 (average
acquisition cost of $0.80 per unit) and NDC 1 has an adjusted ASP \94\
of $1. The volume-weighted ASP is $10. NDC 1 was reported as purchased
with a margin of minus 20 percent, or 20 percent below ASP.
---------------------------------------------------------------------------
\94\ Since ASPs are reported by HCPCS billing unit, ASPs were
adjusted to the NDC package units where necessary using an NDC-HCPCS
adjustment factor.
---------------------------------------------------------------------------
One unit of NDC 2 was purchased for $14 (average
acquisition cost of $14 per unit) and NDC 2 has an adjusted ASP of $10.
The volume-weighted ASP is $10. NDC 2 was reported as purchased at a
margin of plus 40 percent, or 40 percent above ASP.
Aggregating the two above NDCs, the total acquisition cost is $22
($8 + $14) and the volume-weighted sum of ASPs is $20 ($10 + $10).
Calculating the percent difference yields a plus 10 percent margin,
calculated as 100 * (($22-$20)/$20). However, if no volume weighting
methodology was applied, the sum of ASPs would be $11, and calculating
the percent difference would yield a plus 100 percent margin,
calculated as 100 * (($22-$11)/$11).
We also considered weighting ASP payment rates for survey-eligible
drugs by outpatient claims volume for survey-relevant HCPCS codes. We
recognize the value of using OPPS claims data as it directly reflects
real-world utilization. However, we did not adopt this approach because
we believe it is appropriate to rely on a consistent survey-based
framework for both acquisition costs and volume measures. We believe
that weighting by survey-reported purchase volume avoids potential
inconsistencies between external claims data and survey responses,
ensures that the resulting margins are fully grounded in the reported
acquisition cost data, better reflects the distribution of hospital
drug purchasing activity as captured via the survey instrument, and is
consistent with the statutory objective of approximating average
acquisition cost in a manner that is both representative and
methodologically sound. However, we seek comment on this approach to
volume weight the average acquisition cost based on survey utilization
data rather than OPPS claims data utilization.
We performed this acquisition cost margin calculation separately
for non-340B and 340B drug purchases to analyze the data in the same
manner in which it was collected. We then calculated acquisition cost
margins using different ASP benchmarks, at different levels of data
aggregation, and across a variety of scenarios to detect specific
trends and variations in the submitted data. First, given that a drug's
ASP can vary by quarter, we calculated each margin using both the mean
ASP and median ASP across the four quarters of the specified time
period (Q3 of 2024 to Q2 of 2025). Determining acquisition costs
relative to both the median and mean ASP ensured that we properly
accounted for any fluctuations in payment rate over time while
mitigating the influence of any quarters with abnormal payment rates
and allowed us to assess any differences in the margins that resulted
from the two ASP benchmarks. Second, we calculated margins at the NDC
level as well as aggregated to the HCPCS level; in the latter,
acquisition costs were adjusted to the HCPCS level using the billing
units per NDC package. Third, we calculated margins stratified by drug
therapeutic class and hospital characteristics (340B participation
status, ODACS drug purchase volume, outpatient drug claims billing
volume, hospital size, rurality, geographic location, GPO membership,
GPO discount amount, and teaching status). These various analytic
scenarios were all undertaken to determine the differential between
reported acquisition costs and ASP along relevant stratifications and
characteristics as well as validate the robustness of the findings used
in this proposal.
(2) Selection of a Methodology To Identify and Trim Outliers
In analyzing the survey data, it is appropriate to mitigate the
influence of extreme and potentially anomalous observations that may
reflect atypical purchasing arrangements, data anomalies, or reporting
inconsistencies and could distort estimates of hospital drug
acquisition costs. Consistent with standard statistical practice and
our general approach under the OPPS to ensure that payment
methodologies are
[[Page 41878]]
based on representative data, we considered two different methods for
identifying and excluding anomalous survey responses from the dataset.
In both methods, the outlier identification and trimming process was
performed separately for 340B and non-340B drug acquisitions, producing
tailored outlier thresholds based on the unique data distribution for
each drug through each purchasing channel.
First, we considered a trimming approach that excludes all
observations with a per-unit acquisition cost more than three standard
deviations from the geometric mean per-unit cost for each NDC. This
approach is consistent with our standard methodology for processing
extreme outliers to develop policy under the OPPS.\95\ Application of
the geometric mean trimming methodology necessitated removal of NDCs
for which fewer than 10 survey respondents reported their purchase
because outlier values cannot be detected with nine or fewer
observations using this method.
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\95\ https://www.cms.gov/files/document/2026-nfrm-opps-claims-accounting.pdf.
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We also considered the Tukey interquartile range (IQR) method \96\
as an alternate outlier trimming approach and tested the impact of
excluding outliers using the geometric mean approach compared to the
IQR-based approach. Using the geometric mean approach to trim outliers
removed 2,051 survey records (defined as the unique combination of
hospital, NDC, and 340B or non-340B purchase from each survey
response), or 1.3 percent of the total 160,430 original records while
using the IQR approach to trim outliers removed 15,563 records, or 9.7
percent of the total 160,430 records. Upon manual review of the survey
responses that were trimmed using each outlier approach and the data
distribution for each NDC, we believe that the IQR approach erroneously
identified some records as outliers despite their per-unit acquisition
cost being generally in-line with the overall data distribution for
that NDC. This is likely due to the distributional characteristics of
the survey data, including evidence of skew in the distribution of
reported acquisition costs for some NDCs. It has been established that
the effectiveness of Tukey's IQR lessens when data are skewed and may
lead to overidentification of observations as
outliers.97 98 99 In addition, we are concerned about the
large number of survey records removed by the IQR trimming methodology,
as one of our goals in conducting this survey is to analyze survey-
reported drug acquisition costs using the largest amount of reasonable
data received from hospitals as possible. Consequently, we do not
propose to adopt the IQR-based outlier trimming methodology.
---------------------------------------------------------------------------
\96\ Under this approach, for each NDC, we would calculate the
first quartile (Q1) and third quartile (Q3) of per-unit acquisition
cost based on the empirical distribution of hospitals' reported
average acquisition cost values, and define the IQR as Q3 minus Q1.
We would then establish outlier thresholds as follows: (1) an upper
threshold equal to Q3 plus 1.5 times the IQR; and (2) a lower
threshold equal to Q1 minus 1.5 times the IQR. Observations with
per-unit acquisition costs that fall outside these thresholds are
identified as outliers. Application of the IQR-based trimming
methodology would necessitate removal of NDCs for which fewer than
four survey respondents reported their purchase because outlier
values cannot be detected with three or fewer observations using the
Tukey IQR method.
\97\ M. Hubert and E. Vandervieren, ``An adjusted boxplot for
skewed distributions,'' Computational Statistics & Data Analysis 52,
no. 12 (August 15, 2008): 5186-5201, https://doi.org/10.1016/j.csda.2007.11.008.
\98\ Neil C. Schwertman, Margaret Ann Owens, and Robiah Adnan,
``A simple more general boxplot method for identifying outliers,''
Computational Statistics & Data Analysis 47, no. 1 (August 1, 2004):
165-174, https://doi.org/10.1016/j.csda.2003.10.012.
\99\ Arefeh Mazarei et al., ``Online boxplot derived outlier
detection,'' International Journal of Data Science and Analytics 19
(2025): 83-97, https://doi.org/10.1007/s41060-024-00559-0.
---------------------------------------------------------------------------
Rather, we propose to use the geometric mean approach to exclude
identified outlier observations from the analyses used to estimate
acquisition cost relationships. Specifically, we propose to trim
records with per-unit acquisition costs more than three standard
deviations from either the 340B or non-340B geometric mean per-unit
acquisition cost for that NDC. We propose this approach to maintain
consistency with the standard OPPS outlier trimming methodology. It
also ensures that we retain the maximum number of responses with
nonextreme values to estimate acquisition cost relationships from the
survey data. By ensuring that the resulting estimates are based on data
that are representative of typical hospital acquisition costs and are
not unduly influenced by a small number of extreme observations, this
approach is consistent with our longstanding objective of analyzing
reliable and representative data to determine payment policy changes.
We seek comment on our proposal to trim records with per-unit
acquisition costs more than three standard deviations from either the
340B or non-340B geometric mean per-unit acquisition cost for that NDC.
(3) Application of Data Refinements To Remove Anomalous Data
Consistent with our general approach to ensuring that payment
methodologies are based on reliable and internally consistent data, we
reviewed the survey responses for values that are not plausible given
statutory requirements that covered entities cannot be required to pay
more than the 340B ceiling price for drugs acquired under the 340B
Program or that exhibit clear inconsistencies in reporting. We
identified five scenarios in which reported data displayed anomalous
values, which appear to be the result of data entry error,
miscalculation, or other respondent confusion. Below we detail each
identified scenario and the number of survey records that fall into
each. We propose to exclude these survey responses from the analyses
used to assess acquisition cost relationships to ensure that these
calculations are not unduly influenced by implausible values.
First, we identified instances in which respondents that were not
participating in the 340B Program during the relevant study time period
(as verified using the 340B Office of Pharmacy Affairs Information
System (340B OPAIS)) reported acquisition cost data in the 340B fields
of the survey. These observations likely reflected reporting errors,
given that these hospitals could not have accessed 340B discounts.
Therefore, we propose to exclude 340B acquisition cost data submitted
by non-340B hospitals from analyses of 340B acquisition cost to
maintain consistency with the survey design and statutory framework.
This proposed refinement removes 850 records out of the 160,430 records
received through the survey.
Second, we identified instances in which respondents reported
purchasing drugs through the 340B Program for 58 NDCs that did not have
a 340B ceiling price during the survey time period. These observations
may reflect reporting errors, such as reporting acquisition data for
the incorrect NDC within a drug that was intended, given that no 340B
agreement, or associated discount, was available for these NDCs. In
some cases, where these NDCs had 340B ceiling prices during other
quarters outside the survey time period, these observations may be the
result of respondent confusion over survey reporting period or the time
period when these NDCs had a 340B ceiling price in place.
Alternatively, hospitals may have acquired non-340B NDCs through the
340B Prime Vendor Platform (PVP) without receiving a 340B discount
price; \100\ while hospitals may have
[[Page 41879]]
considered these purchases to be 340B acquisitions for the purposes of
their survey reporting, evaluating these responses as part of 340B
margin calculations would provide an inaccurate picture of the
acquisition costs for NDCs with 340B discounts. We also did not elect
to evaluate these responses as part of non-340B margin calculations as
it was impossible to separate instances of reporting errors from non-
340B purchases made through the 340B PVP. Therefore, we propose to
exclude 340B survey responses for these NDCs without 340B ceiling
prices from analyses of both 340B and non-340B acquisition cost to
maintain consistency with the survey design and statutory framework.
This proposed refinement removes 839 records out of the 160,430 records
received through the survey.
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\100\ The 340B PVP website states that ``The [PVP] . . . works
with 155 manufacturers to obtain lower drug pricing for [340B
covered entities] on non-340B items, such as vaccines . . . .''
---------------------------------------------------------------------------
Third, we identified a small number of responses from hospital
subunits that submitted identical data to their parent unit. Hospital
subunits were identified as entities where the third digit of its CMS
Certification Number (CCN) is T (representing inpatient rehabilitation
units) or S (representing psychiatric units). Parent units were
identified as entities where all six digits of its CCN are
numeric.\101\ To identify a parent unit for each subunit, the T or S in
the third digit was replaced with the numeric digit associated with the
provider type of that subunit (either 0, 2, 3, or 4). If this
replacement yielded more than one possible parent unit, the subunit was
further matched with a parent unit based on CCN name and ZIP code.
Identical parent-subunit data were identified as survey responses with
the exact same number of total units and total net acquisition costs
reported for the exact same NDCs. These observations likely reflect
duplicative data reported by one submitter who was responsible for
multiple entities. Accordingly, we propose to exclude these duplicative
responses from subunits in favor of only retaining the equivalent
responses from the parent unit. We identified 27 subunits with
duplicative data to their parent unit, and this proposed refinement
removes 4,799 records out of the160,430 records received through the
survey.
---------------------------------------------------------------------------
\101\ Hospital type for each parent unit was identified based on
the final four digits of its CCN. Short-term (general and specialty)
hospitals were identified as those in the range 0001-0899; long-term
care hospitals were identified as those in the range 2000-2299;
rehabilitation hospitals were identified as those in the range 3025-
3099 children's hospitals were identified as those in the range
3300-3399; psychiatric hospitals were identified as those in the
range 4000-4499; and IPPS-exempt freestanding cancer hospitals were
identified as CCNs listed on the CMS website https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/pps-exempt-cancer-hospitals-pchs,.
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Fourth, we identified instances in which reported acquisition costs
for drugs purchased under the 340B Program exceeded the maximum
applicable 340B ceiling price during the survey time period. By
statute, covered entities cannot be required to pay more than the 340B
ceiling price for drugs acquired under the 340B Program. Such
observations are not representative of actual acquisition costs and are
likely attributable to reporting or data entry errors (for example,
miscalculations or incorrect decimal placement). Accordingly, we
propose to exclude 340B drug purchases with average acquisition costs
above the maximum ceiling price from our analysis. This proposed
refinement removes 4,667 records out of the 160,430 records received
through the survey.
Fifth, we observed that certain respondents reported units for
specific drugs, including clotting factors and certain respiratory
therapies, in international units (IU) or milligrams (MG) rather than
the required NDC-based units. IU is the HCPCS billing unit for the
clotting factors and MG is the HCPCS billing unit for the respiratory
therapies; \102\ however, because the survey requires reporting at the
NDC level, the use of IU- or MG-based units would result in substantial
distortions in calculated per-unit acquisition costs, typically
producing extremely high reported unit volumes and correspondingly low
per-unit costs. These observations are not comparable to properly
reported NDC-level data. To avoid possible selection bias that may
result from specifically excluding responses with units reported in IU
or MG, we therefore propose to exclude all survey responses for
affected NDCs with units reported in IU or MG from the analysis. This
proposed refinement removes 4,398 records out of the 160,430 records
received through the survey. We note, if CMS would have included this
data, the acquisition cost margins would have been significantly lower
than Medicare payment rates.
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\102\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/Downloads/ASP-Report-in-units-other-than-NDC.pdf.
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The exclusion of these anomalous observations, in conjunction with
the application of the outlier trimming methodology and other data
standardization approaches described above, improves the reliability
and validity of the resulting estimates of acquisition costs. In
particular, it ensures that the resulting estimates reflect plausible
and internally consistent acquisition costs while minimizing the
influence of erroneous or noncomparable data. Moreover, applying these
five proposed data refinement exclusions did not have a substantial
impact on the overall number of survey records included in analyses of
acquisition cost. Collectively, these five refinements removed 14,313
records out of the 160,430 records received through the survey. In
other words, after applying these five exclusions, there remained
146,117 survey records in the dataset, 91.1 percent of the total
160,430 original records we received from respondents. We note that
there are some overlaps in each individual exclusion of survey records,
where the same survey record was excluded for meeting more than one
exclusion criterion.
For each of the five scenarios discussed above, we propose to
exclude survey responses for values that are not plausible given
statutory requirements or that exhibit clear inconsistencies in
reporting. Specifically, we propose to exclude survey responses that
were identified as meeting at least one of the five scenarios listed
above based on our manual review of the data, ASP pricing files, Health
Resources and Services Administration (HRSA) 340B ceiling pricing
files, and relevant policy and billing guidance. We believe that this
approach represents the most appropriate and methodologically sound
means of estimating the typical margin in the survey data between
hospitals' survey-reported acquisition costs and ASP. We solicit
comment on our approach to identifying and excluding anomalous data, as
well as on the overall methodology used to evaluate the survey data for
purposes of this proposal.
c. OPPS Drug Acquisition Cost Survey Results
(1) Survey Response Rate and Respondent Characteristics
We first determined the response rate and hospital characteristics
of survey respondents to understand which entities had submitted a
survey response, then compared them to the characteristics of
nonrespondents and the survey-eligible population to assess their
representativeness relative to the overall population. We also applied
a methodology to refine the population of survey-eligible hospitals to
more precisely reflect those entities with meaningful outpatient
acquisition volume for drugs included in the survey.
[[Page 41880]]
Approximately 43.6 percent of the 4,494 entities eligible for OPPS
payment (hereinafter referred to as ``survey-eligible hospitals'')
submitted a survey response and approximately 29.8 percent of eligible
hospitals reported that they had acquisition costs during the survey
time period. We received a number of responses, many of which appeared
to be coordinated form letters, from eligible hospitals indicating that
they would not be providing their acquisition data and explaining their
reasons for not doing so. Before refining the population, approximately
34.9 percent of non-340B hospitals and approximately 23.1 percent of
340B hospitals responded to the survey and reported that they had
acquisition costs for survey-eligible drugs during the surveyed time
period (Table 49).
[GRAPHIC] [TIFF OMITTED] TP07JY26.078
However, claims analysis of the eligible hospital population
determined that a subset of entities that were included in the survey
had zero outpatient claims for survey-relevant HCPCS codes during the
survey study period. Many of these entities did not submit a survey
response, likely because they did not acquire any survey-relevant drugs
during the time period. Other entities were hospital subunits that did
not submit a survey response or submitted a response reporting zero
acquisition costs, but their parent unit submitted a survey response
reporting acquisition data.
Consequently, we applied population refinements to consolidate
subunits with their parent units and to remove entities from the survey
that neither reported acquisition costs nor had outpatient billing
volume for HCPCS codes corresponding to NDCs included in the survey
during the specified time period. These refinements resulted in a
slightly smaller population that may more appropriately reflect the
universe of eligible hospitals with meaningful and relevant outpatient
drug acquisition volume. This population is almost exclusively composed
of short-term acute care hospitals: 2,977 out of 3,147 total CCNs (94.6
percent) in the refined population are short-term acute care hospitals
as compared to 3,018 out of 4,494 total CCNs (67.2 percent) in the
original population. This change occurred for two reasons. First, by
consolidating subunits with their parent unit, all subunits (that is,
psychiatric units and inpatient rehabilitation units), which had
accounted for 742 (16.5 percent) in the original population no longer
appear in the population as distinct hospitals. Second, this refinement
also markedly reduced the number of psychiatric hospitals, long-term
care hospitals, and rehabilitation hospitals in the refined population
because the majority of these hospitals neither reported acquisition
costs nor billed any relevant outpatient claims.
Of this refined study population, approximately 41.4 percent of
hospitals responded to the survey and reported that they had
acquisition costs during the surveyed study period. Additionally,
approximately 53.3 percent of non-340B hospitals and approximately 28.6
percent of 340B hospitals in the refined population responded to the
survey and reported that they had acquisition costs during the surveyed
study period (Table 50). For discussion of analyses that we undertook
to confirm that this response rate is sufficiently large to yield a
statistically valid sample, we refer readers to the calculation of
confidence intervals in section (3) Population Weight Adjustment and
Statistical Validity.
[[Page 41881]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.079
Using the refined population, we then compared observable hospital
characteristics of survey respondents that reported acquisition costs
to the characteristics of the survey-eligible population (Table 51).
Compared to the overall survey-eligible population, hospitals that
responded to the survey and reported acquisition cost data were
slightly more likely to have lower claims billing volume, be smaller,
be located in a rural area, and not be major teaching hospitals.
Given these slight differences in hospital characteristics between
respondents and the overall population, we performed inverse
probability weighting (IPW) to confirm that respondents' data yielded
statistically representative estimates of hospital outpatient drug
acquisition costs. We refer readers to the discussion of IPW-adjusted
margins in section (3) Population Weight Adjustment and Statistical
Validity.
BILLING CODE 4169-69-P
[[Page 41882]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.080
[[Page 41883]]
BILLING CODE 4169-69-C
(2) Margins Between Survey-Reported Hospital Acquisition Costs and
Volume-Weighted ASP
Using the methodology, refinements, and processes discussed
throughout Section (2)(b) Data Analysis and Methodology, we evaluated
the received survey data to determine the difference between hospitals'
survey-reported acquisition costs and ASP-based Medicare payment
amounts. We first identified the percent margin between aggregate
acquisition costs and volume-weighted ASP for both non-340B and 340B
drug acquisitions, then performed an analogous calculation to identify
the margin between 340B ceiling prices and ASP as additional context
for the 340B acquisition cost margins. Next, we tested alternate
methodological specifications to evaluate whether these margins varied
depending on the methods used. Finally, we stratified margins by
individual therapeutic classes to identify possible variation in
acquisition costs relative to ASP along drug type.
The survey provides valuable information regarding hospitals' drug
acquisition costs. Following the GAO recommendation to validate
Medicare payment rates using hospital acquisition costs, we assessed
the survey data for trends where acquisition cost did not align with
Medicare payment. The most immediately evident difference was between
Medicare payment rates and acquisition cost data for 340B-acquired
drugs by 340B-participating hospitals. Based on the survey response
data and applying the methodologies discussed above, we found that for
drugs acquired through the 340B Program, hospitals' reported
acquisition costs during the specified time period were approximately
33.4 percent below both the mean and the median ASP. For drugs acquired
outside of the 340B Program, hospitals' survey-reported acquisition
costs during the specified time period were approximately 2.7 percent
above the mean ASP and 2.8 percent above the median ASP.
To help validate these findings, we compared aggregate 340B ceiling
prices from HRSA for drugs included in the survey during the
corresponding survey period to ASP amounts.\103\ Based on this
analysis, during the survey study period 340B ceiling prices were, in
aggregate, 28.0 percent below the mean ASP and 29.2 percent below the
median ASP, respectively. These findings help validate the survey
response data for 340B acquired drugs, as the ceiling price average
discount is generally representative of the maximum acquisition cost
and minimum discount, though hospitals can negotiate additional
discounts resulting in a sub-ceiling acquisition cost. This is
reflected in the survey results where the aggregate 340B acquisition
cost margin is approximately 33.4 percent below the mean ASP--several
percentage points lower than the aggregate ceiling price margin of 28.0
percent below the mean ASP.
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\103\ The 340B ceiling prices are the maximum statutory amounts
drug manufacturers can charge covered entities for outpatient
prescription drugs. They are calculated by subtracting the unit
rebate amount (URA) which is the Medicaid rebate manufacturers must
pay to the government from the average manufacture price (AMP) which
is the average price paid to the manufacturer by wholesalers for a
given drug.
---------------------------------------------------------------------------
We sought to ensure that the resulting margins precisely reflected
the relationship between hospitals' acquisition costs and ASP, and did
not manifest substantial changes under different methodological
specifications. To do so, we tested the impact of weighting acquisition
cost margins by OPPS claims volume and retaining 340B survey responses
above the maximum ceiling price (Table 52). Although we are not
proposing to adopt these alternative methodologies at this time for the
reasons outlined in the methodology section, calculating acquisition
cost margins with these specifications emphasizes two key points about
340B-acquired drugs. First, regardless of how one analyzes the data,
there are considerable differences between hospitals' acquisition costs
for 340B-acquired drugs and ASP-based payment amounts for 340B drugs.
Second, these alternate methodologies had minimal impact on the
acquisition cost margins for 340B-acquired drugs; regardless of
calculation methodology, hospitals' survey-reported acquisition costs
remained relatively consistent between approximately 29.9 percent and
33.4 percent below the average ASP and between 29.8 percent and 33.4
percent below the median ASP.
Application of different methodological specifications resulted in
slightly more variation in the estimated margin between hospitals'
survey-reported acquisition costs and mean or median ASP-based payments
for drugs acquired outside the 340B Program. This greater variability
could be attributed to wider distributional spread in the reported
acquisition costs for non-340B drugs; this, in turn, could cause the
non-340B margins to be more sensitive to application of different
weighting methodologies.
[GRAPHIC] [TIFF OMITTED] TP07JY26.081
[[Page 41884]]
To assess whether the magnitude of margins remained the same across
different drug categories, we also examined acquisition cost margins by
therapeutic class \104\ for both 340B acquired and non-340B-acquired
drugs . Hospitals' survey-reported 340B acquisition costs were at least
28.9 percent below the mean ASP--and for most therapeutic classes lower
than that--for drugs in all high-spending therapeutic classes (that is,
those with more than $100 million in reported acquisition costs) (Table
53). Again, this reinforces the significant, and consistent,
differences between hospitals' acquisition cost for 340B acquired drugs
and ASP for these drugs regardless of therapeutic class.
---------------------------------------------------------------------------
\104\ Therapeutic class assignments were based on the Medi-Span
Generic Product Identifier (GPI) classification system.
---------------------------------------------------------------------------
The margins for non-340B drugs displayed in greater variation
relative to the 340B drugs, which is likely attributable to greater
heterogeneity in drug mix, provider type, and purchasing arrangements
present outside the 340B Program. For instance, only certain drugs and
biologicals are able to be acquired through the 340B Program and only
certain types of hospitals can enroll as 340B participants. These
restrictions necessarily limit which drugs and hospitals can be
included in the 340B calculations, leading to a somewhat more
homogenous population. These restrictions do not play a role in the
non-340B calculations. Additionally, and perhaps most significantly,
certain types of 340B-participating hospitals have historically been
prohibited from purchasing covered outpatient drugs through GPO
arrangements,\105\ which limits the purchasing arrangements applicable
to 340B drugs, while non-340B drugs can be purchased under a variety of
GPO or other buying group arrangements.
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\105\ https://www.hrsa.gov/sites/default/files/hrsa/opa/prohibition-gpo-participation-02-07-13.pdf.
[GRAPHIC] [TIFF OMITTED] TP07JY26.082
(3) Application of Population Weight Adjustment and Calculation of
Confidence Intervals To Assess Statistical Validity
In accordance with section 1833(t)(14)(D)(iii) of the Act, after
completing initial analysis of survey respondents' acquisition costs,
we evaluated whether survey respondents comprised a large sample that
is sufficient to generate statistically significant and representative
estimates of hospitals' acquisition costs. To do so, we conducted
sensitivity analyses using inverse probability weighting (IPW) and
confidence intervals, which we believe support the statutory objective
of obtaining acquisition cost estimates from survey responses that are
accurate and representative of the outpatient drug acquisition costs
incurred by all hospitals paid under the OPPS.
(i) IPW Methodology
[[Page 41885]]
IPW is a widely used statistical technique in survey research
106 107 108 109 110 to ensure that sample data produce
estimates that accurately represent the population of interest. We
applied IPW to account for the potential underrepresentation or
overrepresentation of hospitals with particular characteristics among
survey respondents and to evaluate whether acquisition cost margins
derived from survey responses sufficiently reflected outpatient drug
acquisition costs for all OPPS hospitals.
---------------------------------------------------------------------------
\106\ ``Behavioral Risk Factor Surveillance System: Weighting
the Data (2011 Weighting Formula),'' U.S. Centers for Disease
Control and Prevention, last modified July 19, 2013, https://www.cdc.gov/brfss/annual_data/2011/2011_weighting.htm.
\107\ ``National Health and Nutrition Examination Survey--
Weighting,'' U.S. Centers for Disease Control and Prevention, n.d.,
https://wwwn.cdc.gov/nchs/nhanes/tutorials/weighting.aspx.
\108\ ``Weighting,'' U.S. Census Bureau, last modified January
12, 2022, https://www.census.gov/programs-surveys/cps/technical-documentation/methodology/weighting.html.
\109\ ``Weighting,'' U.S. Census Bureau, last modified August
19, 2022, https://www.census.gov/programs-surveys/sipp/methodology/weighting.html.
\110\ ``Consumer Expenditures and Income: Calculation,'' U.S.
Bureau of Labor Statistics, last modified September 12, 2022,
https://www.bls.gov/opub/hom/cex/calculation.htm.
---------------------------------------------------------------------------
For purposes of the IPW analysis, we constructed respondent and
nonrespondent populations that align with the refined hospital
population discussed in above in (1) Survey Response Rate and
Respondent Characteristics. We defined the respondent population as
hospitals that submitted a survey response reporting the purchase of at
least one surveyed NDC during the survey study period. We defined the
nonrespondent population as survey-eligible hospitals that did not
submit a survey response but billed at least one Fee-For-Service
outpatient claim associated with a survey-relevant HCPCS code during
the same period. Because acquisition cost margins were calculated
separately for drugs purchased through the 340B Program and drugs
purchased outside the 340B Program, we further stratified hospitals
based on evidence of 340B drug use. Hospitals were identified as 340B
participants using HRSA's 340B OPAIS enrollment information and claims
submitted with 340B modifiers. Hospitals that neither submitted an
ODACS response nor billed relevant outpatient claims during the survey
period were excluded from the IPW-adjusted population. Subunits were
collapsed with their corresponding parent unit prior to constructing
the respondent and nonrespondent populations.
After identifying the respondent and nonrespondent groups, we
calculated response propensity scores using logistic regression models
based on observed hospital characteristics, including number of beds,
teaching hospital status, geographic rurality, and Census division.
Propensity scores were estimated separately for hospitals purchasing
drugs outside the 340B Program and hospitals purchasing drugs through
the 340B Program. A higher propensity score means that the hospital was
more likely to submit a survey response; a lower propensity score means
that the hospital was less likely to submit a survey response.
We then calculated inverse probability weights equal to the inverse
of each hospital's estimated probability of responding to the survey.
Hospitals with a higher likelihood of responding received smaller
weights, while hospitals with a lower likelihood of responding received
larger weights. The weights were used to adjust for differential
representation of hospital characteristics between the respondent
sample and the broader population of survey-eligible hospitals. Down-
weighting hospitals with a high probability of response (which are
overrepresented in the received sample) while upweighting CCNs with a
low probability of response (which are underrepresented in the received
sample) accounted for the differential representation of hospital
characteristics in the sample as compared to the full population.
Finally, we calculated the IPW-adjusted acquisition cost margins by
first applying the calculated weights to hospitals' average acquisition
costs and corresponding ASP-based payment amounts, then recalculating
aggregate acquisition cost margins by finding the difference between
the IPW-adjusted acquisition costs and IPW-adjusted ASP-based payment
and then dividing that difference by the IPW-adjusted ASP-based
payment. We also applied the same methodology when calculating IPW-
adjusted margins between acquisition costs and 340B ceiling prices.
(ii) Confidence Intervals Methodology
To evaluate whether the number of survey responses was sufficient
to produce statistically valid estimates of hospitals' acquisition
costs, we calculated confidence intervals for both unadjusted and IPW-
adjusted acquisition cost margins. The confidence intervals provide
measures of whether the survey response rate adequately captures true
population-level results. When response rate is insufficiently low,
confidence intervals are very wide due to the high degree of
uncertainty regarding where the true result lies. Conversely, when
response rate is sufficient, confidence intervals become narrower as
uncertainty lessens.
We calculated confidence intervals using a bootstrap methodology.
Specifically, we repeatedly sampled with replacement from the original
survey dataset and recalculated acquisition cost margins for each
repeated sample. We repeated this process 10,000 times to generate
distributions of unadjusted and IPW-adjusted acquisition cost margin
estimates. We then identified the 95 percent confidence intervals for
each acquisition cost margin estimate using the 2.5th percentile as the
lower bound and the 97.5th percentile as the upper bound.
(iii) Results of Population Weight Adjustments and Confidence Intervals
From ODACS Data
Application of inverse probability weighting improved the alignment
between the distribution of respondent hospital characteristics and the
broader population of survey-eligible hospitals. We found that IPW-
adjusted respondent characteristics more closely resembled the full
population across measures such as rural/urban, teaching status, Census
division, and 340B participation (Table 54).
BILLING CODE 4169-69-P
[[Page 41886]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.083
BILLING CODE 4169-69-C
(iv) Weighted Adjusted Acquisition Cost Margins
We found that application of IPW had minimal impact on estimated
acquisition cost margins for either non-340B drugs or 340B-acquired
drugs. For drugs acquired outside the 340B Program, the analysis
conducted estimated that acquisition costs were approximately 2.7
percent above the mean ASP prior to IPW adjustment and approximately
2.8 percent above the mean ASP after IPW adjustment. For drugs acquired
through the 340B Program, the analysis estimated that acquisition costs
were approximately 33.4 percent below the mean ASP prior to IPW
adjustment and approximately 33.1 percent below the mean ASP after IPW
adjustment. The consistency between unadjusted and IPW-adjusted results
supports the robustness and representativeness of the acquisition
[[Page 41887]]
cost margins derived from survey responses (Table 55).
[GRAPHIC] [TIFF OMITTED] TP07JY26.084
The 95 percent confidence intervals for both unadjusted and IPW-
adjusted acquisition cost margins were not substantially different from
each other, indicating the weighting adjustment had minimal impact on
the resulting estimates. For non-340B drugs, the confidence intervals
ranged from approximately 3.8 percent below the mean ASP to 6.9 percent
above the mean ASP for unadjusted margin and between 1.6 percent below
the mean ASP to 6.5 percent above the mean ASP for the IPW-adjusted
margin. For 340B-acquired drugs, the confidence intervals were much
narrower and ranged from approximately 34.7 percent to 32.3 percent
below the mean ASP for the unadjusted margin and from 34.3 percent to
32.1 percent below the mean ASP for the IPW-adjusted margin (Table 55).
We believe the relatively narrow confidence intervals for 340B-
acquired drugs support the statistical validity of the survey results
on 340B drugs and indicate that the received sample is sufficiently
large to produce reliable estimates of hospital outpatient drug
acquisition costs for 340B drugs. We note that the confidence intervals
for the non-340B drugs span a wider range of potential acquisition cost
margins. This is expected given the greater distributional spread in
the survey data for non-340B drugs, as discussed in this section
V.B.2.8. of this proposed rule.
For an additional summary of our analysis of the survey results we
refer readers to the 2026 Outpatient Prospective Payment System Drug
Acquisition Cost Survey Technical Report which will be posted on the
Medicare Outpatient Prospective Payment System (OPPS) Drug Acquisition
Cost Survey website.\111\ We solicit comment on our process for how we
evaluated ODACS data to determine the magnitude of the margins between
hospitals' survey-reported acquisition costs and ASP-based Medicare
payment amounts.
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\111\ https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient-pps/outpatient-prospective-payment-
system-opps-drug-acquisition-cost-survey.
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C. CY 2027 OPPS Payment Methodology for 340B Purchased Drugs Based on
Survey Results
As described previously, section 1833(t)(14)(D)(ii) of the Act
requires the Secretary to conduct periodic surveys to determine the
hospital acquisition cost for each SCOD for use in setting the payment
rates for SCODs under section 1833(t)(14)(A) of the Act. Section
1833(t)(14)(A)(iii)(I) of the Act provides that the payment amount for
a SCOD for a year is equal to the average acquisition cost for the drug
(which at the option of the Secretary, may vary by hospital group) as
determined by the Secretary, taking into account the survey data
collected under subparagraph (D) of section 1833(t)(14) of the Act.
Based on our analysis of the survey data, the most immediately evident
and significant difference found between Medicare payment and
acquisition cost was for 340B drugs acquired by 340B-participating
hospitals, where the selected methodology shows that aggregate
acquisition costs are approximately ASP minus 33.4 percent. This
indicates average acquisition costs that are 37.2 percent lower than
the general OPPS payment rate (ASP plus six percent). These results
clearly demonstrate that ASP plus 6 percent is not an appropriate
payment proxy for hospitals that acquire drugs through the 340B
Program. Consequently, we propose to adjust the OPPS payment policy for
340B drugs to better align payment with the acquisition costs
demonstrated by the survey. Specifically, for CY 2027, as discussed
further in this section V.C. of this proposed rule, we propose to pay
for drugs acquired under the 340B Program at ASP minus 33.4 percent.
Conversely, for non-340B drugs, after taking into account the
survey data, we are proposing to maintain the current payment rate,
which is generally ASP plus 6 percent, under the authority at
1833(t)(14)(A)(iii)(I) of the Act. As displayed in Table 52, the
heterogeneity in acquisition costs for non-340B drugs is slightly
greater than for 340B drugs; this variation has led us to believe this
area warrants additional analysis by CMS and input from interested
parties. The results of the survey for non-340B drugs generally
indicate lower acquisition costs than current payment; however, the
discrepancy is not as clear and significant as with 340B drugs.
Therefore, we are continuing to analyze the data from this survey,
aligning those reported costs with hospital claims billing patterns, to
see if any additional significant trends exist that merit further
adjustments to OPPS payment policy in future years. We are also
assessing
[[Page 41888]]
billing patterns among those hospitals that did not respond. Finally,
we collected and analyzed information on non-NDC-specific GPO discounts
that hospitals receive and are still considering how these discounts
could be factored into future analysis and policymaking. We will
consider these issues for future rulemaking.
1. Statistically Significant Estimate
Under section 1833(t)(14)(D)(iii) of the Act, the periodic surveys
conducted by the Secretary under 1833(t)(14)(D)(i) and (ii) of the Act
must ``have a large sample of hospitals that is sufficient to generate
a statistically significant estimate of the average hospital
acquisition cost for each specified covered outpatient drug.'' Our
survey results meet this standard, particularly because hospital
acquisition cost is a price measure.\112\ Reliable price measures
require far less sampling than quantity or revenue measures because
markets tend to compress this distribution of prices across
transactions but do not compress the distribution of quantities or
expenditures.\113\ Hospitals can differ in their acquisition cost on a
340B drug by a factor of 1000. While hospital acquisition cost for a
branded drug would not be exactly equal across hospitals in the 340B
Program, it would not differ by a factor of 1000 and rarely even a
factor of 2. Because the standard errors of the 340B-hospital sample
mean and the non-340B-hospital sample mean are each proportional to the
standard deviation of the underlying population, a compressed price
distribution translates directly into small standard errors and high
statistical significance.\114\
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\112\ Hospital acquisition cost is the price paid in a business-
to-business market, particularly in transactions between hospitals
and wholesalers or distributors. Unlike revenue, hospital
acquisition cost is measured per unit quantity.
\113\ With some exaggeration, this is known in economics as the
``law of one price.'' The Chicago Price Theory textbook explains
with more nuance that ``Price is sometimes easier to measure than
quantity because price can be seen from a sample; just go to one of
the sellers in the market--say, a grocery store--and look at their
price for eggs. Quantity measurement can be more difficult--you have
to ask every seller what they sold; you'd need some kind of census
of sellers'' (Sonia Jaffe, Robert Minton, Casey B. Mulligan and
Kevin M. Murphy, Chicago Price Theory, 2019, p. 48).
\114\ Weighting observations by volume shares, as the CMS sample
does, further reduces standard errors and further increases
statistical significance.
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As discussed previously and shown in Table 54, the 95 percent
confidence intervals for 340B drugs were relatively narrow, ranging
from approximately 34.7 percent to 32.3 percent below ASP for the
unadjusted margin and from approximately 34.3 percent to 32.1 percent
below ASP for the IPW-adjusted margin. These results support the
statistical validity of the estimated acquisition cost margins and
indicate that the survey data provide reliable estimates of the
acquisition cost discounts realized by 340B hospitals relative to ASP.
These sampling requirements for price measurement are well known in
national accounting. For example, the Department of Labor's Bureau of
Labor Statistics measures prices for the Consumer Price Index (CPI)
using about 100,000 commodity-and-service price observations per month,
while the Producer Price Index (PPI) uses approximately 64,000 monthly
price quotations from about 16,000 establishments.\115\ These samples
are tiny relative to the transactions they are designed to represent:
the CPI commodity-and-service sample alone is less than 0.01 percent of
such payments.\116\
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\115\ Bureau of Labor Statistics, ``Handbook of Methods:
Consumer Price Index--Data Sources'' (last modified Jan. 30, 2025),
https://www.bls.gov/opub/hom/cpi/data.htm and Bureau of Labor
Statistics, ``Producer Price Index (PPI): Overview'' (last modified
Mar. 16, 2023), https://www.bls.gov/ppi/overview.htm.
\116\ As a back-of-the-envelope denominator for 100,000 CPI
observations, the Federal Reserve Bank of Atlanta's 2024 Survey and
Diary of Consumer Payment Choice reports that U.S. consumers made 48
payments per consumer per month on average. Multiplying 267 million
adults by 48 payments per month gives approximately 12.8 billion
consumer payments per month. This is a conservative comparison for
item-level CPI observations because a single consumer payment, such
as a grocery receipt, may cover multiple items.
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In our efforts to obtain data from a statistically significant
sample of hospitals paid under the OPPS, we initially included for
survey participation 100 percent of OPPS hospitals. From this, we
received replies from 53.3 percent of non-340B hospitals and 28.6
percent of 340B hospitals. These response rates are similar to past
surveys of health care providers as determined by a separate meta-
analysis \117\ and have resulted in sample sizes that show significant
differences in acquisition costs between the two hospital
categories.\118\ While we applied data cleaning to exclude specific
survey records with anomalous or implausible data, very few hospitals
were excluded from our population, only 27 subunits that reported
identical and duplicative data to their parent unit. Additionally,
while we applied refinements to narrow the population of hospitals to
only those who either responded to the survey or had OPPS claims for
survey-relevant HCPCS codes, these refinements did not remove any
hospital with relevant data from analysis. These efforts were
undertaken to maintain the largest possible pool of hospitals and data
to evaluate. It is our view based on efforts to sensitivity test the
responses and reweight the findings that the conclusion of statistical
difference in the average acquisition costs for 340B and non-340B
hospitals would likely not change.
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\117\ Vincent Maurice Meyer et al., ``Global Overview of
Response Rates in Patient and Health Care Professional Surveys in
Surgery: A Systematic Review,'' Annuals of Surgery 275, no. 1
(January 2022): e75-e81, https://pubmed.ncbi.nlm.nih.gov/32649458/
The Meyer et al. meta-analysis found an average response rate of
53.3% (24.5%) over 1,746 surveys of health care
professionals.
\118\ Vincent Maurice Meyer et al., ``Global Overview of
Response Rates in Patient and Health Care Professional Surveys in
Surgery: A Systematic Review,'' Annuals of Surgery 275, no. 1
(January 2022): e75-e81, https://pubmed.ncbi.nlm.nih.gov/32649458/.
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2. Grouping Hospitals by 340B Covered Entity Status
Section 1833(t)(14)(A)(iii)(I) of the Act authorizes the Secretary
to set the amount of payment for SCODs at an amount equal to the
average acquisition cost for the drug for that year (which, at the
option of the Secretary, may vary by hospital group (as defined by the
Secretary based on volume of covered OPD services or other relevant
characteristics)), as determined by the Secretary taking into account
the hospital acquisition cost survey data under subparagraph (D).
In accordance with this authority, we propose to vary the amount of
payment for 340B-acquired drugs by the group of hospitals that are
enrolled in the 340B Program as 340B covered entity hospitals because
their drug acquisition costs vary significantly from those not enrolled
in that program. The significant drug acquisition cost discounts that
340B covered entity hospitals receive for 340B-acquired drugs enable
these hospitals to acquire drugs at much lower costs than non-340B
hospitals incur for the same drugs. Accordingly, we propose to use 340B
covered entity status as a relevant characteristic to group hospitals
for purposes of payment based on average acquisition cost under section
1833(t)(14)(A)(iii)(I) of the Act. Therefore, for 340B drugs acquired
by 340B covered entity hospitals, we propose changes to better align
Medicare payment with average acquisition cost for the drug as
specified in statute.
As discussed in more detail below, for drugs not acquired through
the 340B Program, we propose that 340B and non-340B hospitals will
continue to receive payment at a payment rate that is generally ASP
plus 6 percent.
We acknowledge we could set a single payment rate for a drug for a
hospital group (such as 340B hospitals) regardless of whether the drug
was
[[Page 41889]]
acquired through the 340B Program, but that does not align with our
intent to more appropriately align payment with acquisition costs. As
such, we are only applying the reduced payment rate to drugs acquired
through the 340B Program by the hospital group defined as 340B
hospitals as this most appropriately aligns payment with acquisition
cost of drugs of this hospital group. For non-340B drugs acquired by
340B hospitals, we propose that payment will not be adjusted. We seek
comment on these proposals. Specifically, we seek comment on our
proposal to use 340B covered entity status as a relevant characteristic
to group hospitals for purposes of payment based on average acquisition
cost under section 1833(t)(14)(A)(iii)(I) of the Act and our proposal
to vary the amount of payment for 340B-acquired drugs by the group of
hospitals that are enrolled in the 340B Program to more appropriately
align payment with the average acquisition cost for the drug.
3. Applying a Single Reduction Amount to ASP for 340B-Acquired Drugs
Section 1833(t)(14)(A)(iii)(I) of the Act provides that the payment
amount for a SCOD for a year is equal to the average acquisition cost
for the drug ``as determined by the Secretary taking into account'' the
survey data collected under subparagraph (D). In accordance with this
authority, we propose to apply a single discount factor to ASP for
drugs acquired by 340B hospitals in lieu of calculating individual
acquisition cost amounts for 340B-acquired drugs. Applying a single
discount factor to ASP creates a standardized payment reduction.
Conversely, calculating individual acquisition costs links
reimbursement directly to the exact, variable purchase prices hospitals
pay for specific 340B drugs.
We considered calculating payment rates derived from individual
acquisition cost amounts for 340B drugs; however, given the dynamic
nature of drug pricing we concluded that it would be more appropriate
to apply a single discount factor to ASP. We believe this is more
appropriate as ASP is also dynamic in nature. ASP changes over time
(quarter to quarter), so tying the payment amount to an average
discount of ASP results in a more accurate payment amount, by quarter,
than if hospitals had to wait until the next survey cycle.
Each drug HCPCS code has its own specific payment rate calculated
that is unique to the drug described by the applicable HCPCS code. We
would apply an average discount, calculated as described previously
under V.B.9.b. and V.B.9.c.(2). of this proposed rule, to the drug
specific ASP amount. This makes our proposed payment rate specific to
the average acquisition cost for the drug. Applying the payment rate in
this manner also allows for this average discount to apply to newly
calculated ASPs as they are updated on a quarterly basis. It would not
be practical to calculate a drug specific payment rate for each NDC,
and each HCPCS code, based on the survey data, as the survey collected
data is based on a snapshot in time and would not reflect future
changes in average acquisition costs. Therefore, as drug prices change,
we believe it is appropriate and reasonable to continue to update the
calculated ASPs and then to reduce payments by an appropriate
percentage of ASP to better align payment with the average cost of the
drug.
As an alternative to establishing one aggregate discount amount
based on survey data, we are considering establishing one aggregate
discount amount based on 340B ceiling prices from HRSA.\119\ Under this
alternative, we would use HRSA's 340B ceiling price data, rather than
survey data, to calculate an average discount. As described previously,
when assessing the 340B ceiling price, we calculated an analogous
acquisition cost margin of ASP minus 28 percent for 340B drugs, which
was calculated as the difference between the 340B ceiling price for
each NDC in the survey and ASPs that were volume-weighted by 340B OPPS
claims data utilization during the duration of the survey. We believe
this could be a reasonable alternative to our proposal, as it is based
on objective data from HRSA, can be updated regularly (such as
quarterly or annually) with the release of new ceiling prices and new
claims utilization data, and significantly diminishes the discrepancy
between Medicare payment and hospital acquisition costs for these
drugs. We seek comment on this alternative to set OPPS payment for 340B
acquired drugs at ASP minus 28.0 percent, per the methodology described
to calculate this OPPS claims volume weighted mean margin of the 340B
ceiling price from ASP. We note this figure is volume weighted using
OPPS claims data for the duration of the survey, but we also solicit
comment on volume weighting this average based on the claims data
available for the applicable calendar year in which the policy would be
effective. For example, for the CY 2027 rule, this would be volume
weighting based on claims data available for that year's rule, which
would be claims data from CY 2025. At the end of this section, we also
provide estimated impacts of this alternative policy proposal of ASP
minus 28 percent based on the 340B ceiling price data, so interested
parties are aware of these impacts if CMS ultimately adopts this policy
for CY 2027.
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\119\ HRSA calculates the ceiling price for each covered
outpatient drug. The 340B ceiling price is the drug's average
manufacturer price (AMP) minus the unit rebate amount (URA), which
is a statutory formula that varies depending on whether the drug is
an innovator single source drug (no generic available), an innovator
multiple source drug (a brand drug with available generic(s)), or a
non-innovator multiple source (generic) drug. The 340B ceiling price
represents the maximum price a participating drug manufacturer can
charge a covered entity for the drug.
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We seek comment on our proposal to apply a single discount factor
to the ASP for 340B-acquired drugs in lieu of calculating individual
acquisition cost amounts for 340B-acquired drugs.
4. Add-on Payment for 340B Drugs
Under the OPPS, Medicare pays separately payable drugs at rates
that approximate their acquisition costs, such as at ASP or WAC. These
drugs may also receive an add-on payment. Under the OPPS, section
1833(t)(14)(E) of the Act authorizes, but does not require, the
Secretary to make an adjustment to payment rates for SCODs to take into
account overhead and related expenses, such as pharmacy services and
handling costs. Because we took a prudent approach in estimating the
average acquisition costs for 340B-acquired drugs, we do not believe
that it is necessary to establish an add-on for overhead and handling
as we believe that a conservative estimate may already account for the
costs of overhead. We also believe that hospitals will likely negotiate
additional discounts that will render an additional add-on payment
unnecessary. This approach also aligns with the requirement under
section 1833(t)(14)(A)(iii) of the Act to pay at the average
acquisition cost. Therefore, for CY 2027 and subsequent years, we
propose to pay for 340B drugs acquired under the 340B Program by 340B
hospitals at ASP minus 33.4 percent with no add-on payment. We solicit
comment on our proposal to not include an add-on payment.
5. 340B Payment Policy for Drugs for Which ASP Is Unavailable
Section 1847A of the Act establishes the average sales price (ASP)
methodology, which provides the amount payable for drugs and
biologicals described in section 1842(o)(1)(C) of the Act furnished on
or after January 1, 2005. Based on this, our historic policy has been
to pay for most drugs at ASP plus 6 percent. There are
[[Page 41890]]
some situations, however, where it is not possible to pay ASP because,
for example, a drug is sufficiently new so there is no sales data
available upon which to derive an average. In these situations, our
historic policy has been to pay for the drug according to the following
hierarchy: In general, if ASP information is not available, payment is
based on the WAC with WAC plus 6 percent. If WAC information also is
not available, then payment is based on AWP with 95 percent of AWP
being paid. If AWP is not available, then payment is based on Mean Unit
Cost (MUC) and if MUC is not available then payment is based on the
invoice price.
Consistent with this policy, starting in CY 2027, we propose that
payment for 340B drugs when ASP is unavailable mirrors CMS's historic
payment policies for drugs paid under OPPS. If ASP information is not
available, payment is based on the WAC, with WAC minus 33.4 percent. If
WAC information also is not available, we propose a payment rate of
59.69 \120\ percent of AWP. This percent was calculated by first
reducing the original 95 percent of AWP price by 6 percent to generate
a value that is similar to WAC with no percentage markup. Then we
applied the 33.4 percent reduction WAC-similar AWP value to obtain the
59.69 percent of AWP, which is similar to either ASP minus 33.4 percent
or WAC minus 33.4 percent. For 340B drugs paid based on MUC, we propose
to continue to pay them at 100 percent of MUC. These MUC based payments
are calculated based on hospital claims data, which already accounts
for hospital acquisition costs and does not need to be discounted
further. Similarly, we propose to continue to pay for invoice priced
340B drugs at the invoice amount as the invoice price amount should
already reflect the 340B discount. We seek comment on this proposal.
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\120\ Except for new drugs and biologicals that have not been
assigned a HCPCS code. Under section 1833(t)(15) of the Act, these
drugs and biologicals are required to be paid at 95 percent of AWP.
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6. Applicability
We propose to apply our proposed policy to pay for drugs acquired
under the 340B Program at ASP minus 33.4 percent to all separately
payable drugs, biologicals, biosimilars and radiopharmaceuticals
acquired under the 340B Program. This approach would establish a
uniform payment policy consistent with our historic OPPS payment policy
of paying the same payment rate for SCODs and non-SCODs. We note our
proposal to apply this policy to separately payable drugs and
biologicals that are not SCODs is a policy proposal rather than a
statutory requirement. We note that the survey included both SCODs and
drugs and biologicals that we have historically treated as SCODs for
payment purposes. We have treated non-SCOD drugs as SCODs for payment
purposes since CY 2006. We seek comment on this proposal.
The proposed payment policy would not apply to vaccines, as they
are excluded from the 340B Program; drugs with transitional pass-
through payment status, which are paid under 1833(t)(6)(D) of the Act;
and non-opioid pain management drugs as defined under section
1833(t)(16)(G) of the Act, as we believe reducing payment for those
drugs would be inconsistent with statutory instructions on payment
amount for those qualifying products.
As previously described in the OMB approved PRA, CMS may continue
to validate the results of this survey on a periodic basis; for
example, perhaps as often as every 4 years. We seek comment on this
proposal. Specifically, we seek comment on the proposal that the
proposed policy to pay for drugs acquired under the 340B Program at ASP
minus 33.4 percent would apply to all separately payable drugs,
biologicals, biosimilars and radiopharmaceuticals acquired under the
340B Program, and would not apply to vaccines, drugs with transitional
pass-through payment status and non-opioid pain management drug.
Additionally, as we propose to apply a single discount factor to
the ASP for 340B-acquired drugs in lieu of calculating individual
acquisition cost amounts for 340B-acquired drugs, we believe it is
appropriate to apply this payment adjustment using the single discount
factor to existing and new drugs that are paid under the OPPS.
7. Beneficiary Copayments
An important consequence of our proposed policy is that it will
reduce Medicare beneficiaries' copayments for Medicare Part B drugs.
Medicare beneficiaries are liable for a copayment that is typically
equal to 20 percent of the OPPS payment rate, which is currently
generally ASP plus 6 percent (regardless of the 340B purchase price for
the drug). As the survey demonstrates, in some cases, beneficiary
coinsurance alone exceeds the amount the hospital paid to acquire the
drug under the 340B Program. For example, Lupron Depot (NDC 00074-3663-
03) had a mean adjusted ASP of $4,690.08 compared to an average 340B
acquisition cost of $667.94, excluding outliers and responses above the
340B ceiling price, yielding an absolute margin of -$4,022.14 and a
percent margin of -85.8 percent. As the drug is paid at ASP plus 6
percent, the payment rate for one package of the NDC averaged
$4,971.49, of which a beneficiary would pay 20 percent, or $994.30.
Therefore, a beneficiary's copay would be over $300 above the average
hospital's 340B acquisition cost. During the ODACS study period, 3,544
beneficiaries had an OPPS claim for Lupron Depot, meaning that a
sizeable beneficiary population is affected by these high coinsurance
amounts. This is also not a small sample size aberration: 137 hospitals
reported purchasing this drug through 340B (after excluding outliers
and responses above the 340B ceiling price).
Additionally, sections 11101 and 11102 of the Inflation Reduction
Act of 2022 (IRA) (Pub. L. 117-169, enacted August 16, 2022)
established requirements under which drug manufacturers must pay
inflation rebates if they raise their prices for certain drugs payable
under Part B and/or covered under Part D faster than the rate of
inflation. Specifically, section 11101 of the IRA amended section 1847A
(i) of the Act which establishes a requirement for drug manufacturers
to pay rebates into the Federal Supplementary Medical Insurance Trust
Fund for Part B rebatable drugs for each calendar quarter beginning on
or after January 1, 2023, if the specified amount, as determined under
section 1847A(i)(3)(A)(ii) of the Act, exceeds the inflation-adjusted
payment amount, which is calculated as set forth in section
1847A(i)(3)(C) of the Act. Pursuant to section 1847A(i)(5) of the Act,
the IRA also provides for an adjustment to the beneficiary coinsurance
amount in cases where the price of a Part B rebatable drug increases
faster than the rate of inflation such that the beneficiary coinsurance
is calculated based on the lower inflation-adjusted payment amount
instead of the applicable payment amount.
Section 11101(b) of the IRA amended section 1833(t)(8) of the Act
by adding a new subparagraph (F) to modify OPPS copayments for Part B
rebatable drugs. In the CY 2024 OPPS/ASC final rule with comment
period, we codified the OPPS program payment and cost sharing amounts
for Part B rebatable drugs as required by section 1833(t)(8)(F) of the
Act by adding a new paragraph (e) to Sec. 419.41, which states in the
case of a rebatable drug (as defined in section 1847A(i)(2)(A) of the
Act), except if such drug does not have a copayment amount as a result
of application of section 1833(t)(8)(E) of
[[Page 41891]]
the Act, for which payment is not packaged into payment for a covered
OPD service (or group of services) furnished on or after April 1, 2023,
and the payment for such drug under the outpatient prospective payment
system is the same as the amount for a calendar quarter under section
1847A(i)(3)(A)(ii)(I) of the Act, in lieu of the calculation of the
copayment amount and the Medicare program payment amount otherwise
applicable under Sec. 419.41(d) (other than application of the
limitation described in paragraph Sec. 419.41(c)(4)(i)), the copayment
and Medicare program payment amounts determined under Sec. Sec.
410.152(m) and 489.30(b)(6) of this chapter shall apply. In the CY 2025
PFS final rule, we codified policies regarding the computation of the
inflation-adjusted beneficiary coinsurance, including Sec. 427.201,
which specifies that the methodology set forth in Sec. 427.201(b) will
be used to calculate the inflation-adjusted beneficiary coinsurance and
associated Medicare payment percentage for Part B rebatable drugs as
set forth in Sec. Sec. 410.152(m), 419.41(e), and 489.30(b)(6). The
methodology at Sec. 427.201(b) ensures that coinsurance adjustments
are not applied in a manner that would increase beneficiary
coinsurance. For additional details on this coinsurance policy, we
refer readers to the full discussion at 89 FR 98237 and 98238.
Under 1833(t)(8)(F) of the Act and current OPPS regulations at
Sec. 419.41(e), beneficiary coinsurance is adjusted for Part B
rebatable drugs paid under the OPPS only where a Part B rebatable drug
is paid the same as the amount for a calendar quarter under section
1847A(i)(3)(A)(ii)(I) of the Act--that is, for single source drugs and
biologicals, paid 106 percent of the lesser of ASP or WAC, and for
biosimilar biological products, paid the amount determined under
1847A(b)(8) of the Act. Because, as proposed, separately payable, non-
passthrough, 340B-acquired drugs would be paid an amount other than the
amount under section 1847A(i)(3)(A)(ii)(I) of the Act, the coinsurance
adjustment provisions of the Medicare Part B Inflation Rebate Program
would not apply to separately payable, non-pass-through, 340B-acquired
drugs under the proposed payment policy. We believe this is appropriate
and consistent with the statutory intent of the Medicare Part B
Inflation Rebate Program, as the coinsurance adjustment at 1847A(i)(5)
of the Act is intended to reduce the coinsurance amount to equal that
of 20 percent of the inflation-adjusted payment amount described at
1847A(i)(3)(C) of the Act, and we expect that the applicable
coinsurance under the payment proposal for 340B-acquired drugs would
likely be lower than 20 percent of such inflation-adjusted payment
amount. We seek comment on the interaction between coinsurance
adjustments under 1847A(i)(5) and the proposed policy to pay for drugs
acquired under the 340B Program at ASP minus 33.4 percent.
We anticipate that our proposed policy to pay for separately paid
drugs acquired under the 340B Program at ASP minus 33.4 percent will
collectively reduce beneficiary copayments by an estimated $1.15
billion for CY 2027.
8. 340B Payment Policy Exemptions
We propose to exempt children's hospitals and PPS-exempt cancer
hospitals from our proposed policy to adjust OPPS payments for drugs
acquired under the 340B Program. In accordance with section
1833(t)(7)(D)(ii) of the Act, we make transitional outpatient payments
(TOPs) to both children's and PPS-exempt cancer hospitals. This means
that these hospitals are permanently held harmless to their ``pre-BBA
amount,'' and they receive hold harmless payments to ensure that they
do not receive a payment that is lower in amount under the OPPS than
the payment amount they would have received before implementation of
the OPPS. Accordingly, if we were to reduce drug payments to these
hospitals on a per claim basis, it is very likely that the reduction in
payment would be paid back to these hospitals at cost report
settlement, given the TOPs structure. Consequently, we believe it is
appropriate to exempt children's and PPS-exempt cancer hospitals from
the alternative 340B drug payment methodology.
In addition to the children's and PPS-exempt cancer hospitals,
Medicare has long recognized the particularly unique needs of rural
communities and the financial challenges rural hospital providers face.
Across the various Medicare payment systems, CMS has established a
number of special payment provisions for rural providers to maintain
access to care and to deliver high quality care to beneficiaries in
rural areas. With respect to the OPPS, section 1833(t)(13) of the Act
provided the Secretary the authority to make an adjustment to OPPS
payments for rural hospitals, effective January 1, 2006, if justified
by a study of the difference in costs by APC between hospitals in rural
areas and hospitals in urban areas. Our analysis showed a difference in
costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a
payment adjustment for rural SCHs of 7.1 percent for all services and
procedures paid under the OPPS, excluding separately payable drugs and
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy, in accordance with section 1833(t)(13)(B) of
the Act. We have continued this 7.1 percent payment adjustment since
2006.
For CY 2027 and subsequent years, we propose that rural sole
community hospitals (as described under the regulations at 42 CFR
412.92 and designated as rural for Medicare purposes), children's
hospitals, and PPS-exempt cancer hospitals would be exempted from the
340B payment adjustment and that these hospitals would continue to
generally be paid ASP plus 6 percent for drugs. We may revisit our
policy to exempt rural SCHs, as well as other hospital designations for
exemption from the 340B drug payment reduction, in future rulemaking.
We note that hospitals listed under 42 CFR 419.20(b),\121\ such as
Critical Access Hospitals (CAHs) and Rural Emergency Hospitals (REHs),
would not be subject to our proposed payment adjustment for 340B-
acquired drugs.
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\121\ https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-419/subpart-B/section-419.20.
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We seek comment on our proposal to exempt children's hospitals,
PPS-exempt cancer hospitals and rural SCHs from the 340B drug payment
adjustment.
9. 340B Payment Policy for Drugs Furnished by Nonexcepted Off-Campus
Departments of a Hospital
In the CY 2017 OPPS/ASC final rule with comment period (81 FR
79699), we discussed implementation of section 603 of the Bipartisan
Budget Act of 2015 (Pub. L. 114-74), enacted on November 2, 2015, which
amended section 1833(t) of the Act. Specifically, this provision
amended section 1833(t) of the Act by amending paragraph (1)(B) and
adding a new paragraph (21). As a general matter, under sections
1833(t)(1)(B)(v) and (t)(21) of the Act, applicable items and services
furnished by certain off-campus outpatient departments of a provider on
or after January 1, 2017 are not considered covered OPD services as
defined under section 1833(t)(1)(B) of the Act for purposes of payment
under the OPPS and will instead be paid ``under the applicable payment
system'' under Medicare Part B if the requirements for such payment are
[[Page 41892]]
otherwise met. We indicated that, in order to be considered part of a
hospital, an off-campus department of a hospital must meet the
provider-based criteria established under 42 CFR 413.65. Accordingly,
we refer to an ``off-campus outpatient department of a provider,''
which is the term used in section 603 of the Bipartisan Budget Act of
2015, as an ``off-campus outpatient provider-based department'' or an
``off-campus PBD.'' For a detailed discussion of the legislative
history and statutory authority related to payments under section 603
of the Bipartisan Budget Act of 2015, we refer readers to the CY 2017
OPPS/ASC final rule with comment period (81 FR 79699 through 79719) and
interim final rule with comment period (81 FR 79720 through 79729).
To implement the amendments made by section 603 of Public Law 114-
74, we issued an interim final rule with comment period (81 FR 79720)
which accompanied the CY 2017 OPPS/ASC final rule with comment period
to establish the PFS as the ``applicable payment system'' that applies
in most cases, and we established payment rates under the PFS for those
nonexcepted items and services furnished by nonexcepted off-campus
PBDs. Specifically, we established a PFS relativity adjuster that is
applied to the OPPS rate for the billed nonexcepted items and services
furnished in a nonexcepted off-campus PBD to calculate payment rates
under the PFS. The PFS relativity adjuster reflects the estimated
overall difference between the payment that would otherwise be made to
a hospital under the OPPS for the nonexcepted items and services
furnished in nonexcepted off-campus PBDs and the resource-based payment
under the PFS for the technical aspect of those services with reference
to the difference between the facility and nonfacility (office) rates
and policies under the PFS. The current PFS relativity adjuster is set
at 40 percent of the amount that would have been paid under the OPPS
(90 FR 53770). These PFS rates incorporate the same packaging rules
that are unique to the hospital outpatient setting under the OPPS,
including the packaging of drugs that are unconditionally packaged
under the OPPS. This includes packaging certain drugs and biologicals
that would ordinarily be separately payable under the PFS when
furnished in the physician office setting. For a full discussion of our
initial implementation of section 603, we refer readers to the CY 2017
OPPS/ASC final rule with comment period (81 FR 79699 through 79719) and
the interim final rule with comment period (79720 through 79729). For a
detailed discussion of the current PFS Relativity Adjuster related to
payments under section 603, we refer readers to the CY 2018 OPPS/ASC
final rule with comment period (82 FR 52356 through 52637) and the CY
2019 PFS final rule with comment period (82 FR 59505 through 59513).
We note that, ordinarily, Medicare pays for drugs and biologicals
furnished in the physician's office setting at ASP plus 6 percent. This
is because section 1842(o)(1)(A) of the Act provides that if a
physician's, supplier's, or any other person's bill or request for
payment for services includes a charge for a drug or biological for
which payment may be made under Medicare Part B and the drug or
biological is not paid on a cost or prospective payment basis as
otherwise provided in this part, the amount for the drug or biological
is equal to the following: The amount provided under section 1847,
section 1847A, section 1847B, or section 1881(b)(13) of the Act, as the
case may be for the drug or biological.
Generally, in the hospital outpatient department setting, low-cost
drugs and biologicals are packaged into the payment for other services
billed under the OPPS. Separately payable drugs (1) have pass-through
payment status, (2) have a cost per day exceeding a threshold, or (3)
are not policy-packaged or packaged in a C-APC. As described in
sections V.A. and V.B. of this proposed rule, section 1847A of the Act
establishes the ASP methodology, which is used for payment for drugs
and biologicals described in section 1842(o)(1)(C) of the Act furnished
on or after January 1, 2005. The ASP methodology, as applied under the
OPPS, uses several sources of data as a basis for payment, including
the ASP, the WAC, and the AWP (90 FR 53682). As noted in section V.B.
of this proposed rule, since CY 2013, our policy has been to pay for
separately payable drugs and biologicals at ASP plus 6 percent in
accordance with section 1833(t)(14)(A)(iii)(II) of the Act (the
statutory default) (90 FR 53702). Consequently, in the case of services
furnished in a hospital outpatient department, Medicare has
historically paid ASP plus 6 percent for separately payable Part B
drugs and biologicals. For a detailed discussion of our current OPPS
drug payment policies, we refer readers to the CY 2026 OPPS/ASC final
rule with comment period (90 FR 53697 through 53766).
As a general matter, in the nonexcepted off-campus PBD setting, we
pay hospitals under the PFS for all drugs and biologicals that are
packaged under the OPPS based on a percentage of the OPPS payment rate,
which is determined using the PFS relativity adjuster. Because OPPS
packaging rules apply to the PFS payments to nonexcepted off-campus
PBDs, the PFS payment for some nonexcepted items and services that are
packaged includes payment for some drugs and biologicals that would be
separately billable under the PFS if a similar service had been
furnished in the office-based setting. As we noted in the CY 2017 final
rule with comment period, in analyzing the term ``applicable payment
system,'' we considered whether and how the requirements for payment
could be met under alternative payment systems in order to pay for
nonexcepted items and services, and considered several payment systems
under which payment is made for similar items and services (81 FR
79712). Because the PFS relativity adjuster that is applied to
calculate payment to hospitals for nonexcepted items and services
furnished in nonexcepted off-campus PBDs is based on a percentage (40
percent) of the amount determined under the OPPS for a particular item
or service, and the OPPS is a prospective payment system, we believe
that items and services furnished by nonexcepted off-campus PBDs paid
under the PFS are payable on a prospective payment basis. Therefore, we
believe we have flexibility to pay for separately-payable drugs and
biologicals furnished in nonexcepted off-campus PBDs at an amount other
than the amount dictated by sections 1842(o)(1)(C) and 1847A of the
Act.
As discussed previously, our proposal to adjust the payment rate
for separately payable drugs and biologicals (other than vaccines,
drugs on pass-through payment status and non-opioid pain management
drugs) acquired under the 340B Program from ASP plus 6 percent to ASP
minus 33.4 percent would apply to separately payable drugs and
biologicals paid under the OPPS. Under sections 1833(t)(1)(B)(v) and
(t)(21) of the Act, however, nonexcepted items and services furnished
by nonexcepted off-campus PBDs are not covered outpatient department
services and, therefore, are not payable under the OPPS. This means
that, absent our inclusion of them in our proposed policy, nonexcepted
off-campus PBDs would not be subject to the payment changes we propose.
Because hospitals can, in some cases, acquire drugs and biologicals
under the 340B Program for use in nonexcepted off-campus PBDs, we
believe that not adjusting payment for these departments would present
a
[[Page 41893]]
significant incongruity between the payment amounts for these drugs
depending upon where (for example, excepted or nonexcepted PBD) they
are furnished. This incongruity would distort the relative accuracy of
the resource-based payment amounts under the site-specific PFS rates
and could result in significant perverse incentives for hospitals to
acquire drugs, biologicals, biosimilars, and radiopharmaceuticals under
the 340B Program and avoid Medicare payment adjustments that account
for the discount by providing these drugs to patients predominantly in
nonexcepted off-campus PBDs. It would also undermine our goals of
reducing beneficiary cost-sharing for these drugs and biologicals and
moving towards site neutrality through the section 603 amendments to
section 1833(t) of the Act. To avoid such perverse incentives and the
resulting distortions, we propose for CY 2027 and subsequent years, to
pay an amount equal to ASP minus 33.4 percent, or equivalent, for
drugs, biologicals, biosimilars, and radiopharmaceuticals acquired
under the 340B Program that are furnished by nonexcepted off-campus
PBDs.
Consistent with the approach to budget neutrality we adopted when
we previously implemented a reduction for 340B acquired drugs furnished
by nonexcepted off-campus PBDs (83 FR 59021) and our approach to budget
neutrality for items and services provided by nonexcepted off-campus
PBDs generally (83 FR 58832), these adjusted payments would not be
budget neutralized. We expect that for CY 2027 this would result in
savings of approximately $735 million to the Medicare Part B Trust Fund
and would collectively reduce beneficiary copayments by an estimated
$185 million. These beneficiary savings are included in the $1.15
billion figure in section 7. Beneficiary Copayments.
10. Billing Modifiers
To effectuate the payment adjustment for 340B-acquired drugs, we
propose that, beginning January 1, 2027, providers who are not exempted
from the 340B payment adjustment would report modifier ``JG'' (Drug or
biological acquired with 340B Drug Pricing Program Discount) to
identify if a drug was acquired under the 340B Program. The phrase
``acquired under the 340B Program'' would include all drugs acquired
under the 340B Program or Prime Vendor Program, regardless of the level
of discount applied to the drug. Drugs that were not acquired under the
340B Program would not be reported with the modifier ``JG''. For
separately payable drugs (status indicator ``K''), application of
modifier ``JG'' would trigger a payment adjustment such that the 340B-
acquired drug is paid at ASP minus 33.4 percent.
We additionally propose that, beginning January 1, 2027, for drugs
or providers that are exempted from the 340B drug payment policy for CY
2027, which include pass-through drugs (SI ``G''), non-opioid treatment
for pain relief drugs authorized under section 4135 of the CAA, 2023
(SI ``K1''), rural SCHs, children's hospitals, and PPS-exempt cancer
hospitals, should not report modifier ''JG''. Instead, these exempted
providers should report the informational modifier ``TB'' (Drug or
Biological Acquired With 340B Drug Pricing Program Discount, Reported
for Informational Purposes) to identify OPPS separately payable drugs
purchased with a 340B discount. The informational modifier ``TB'' will
facilitate the collection and tracking of 340B claims data for OPPS
providers that are exempted from the payment adjustment in CY 2027.
However, use of modifier ``TB'' will not trigger a payment adjustment
and these providers will generally receive ASP plus 6 percent for
separately payable drugs furnished in CY 2027, even if such drugs were
acquired under the 340B Program.
We also propose that, beginning January 1, 2027, all providers
report a distinct modifier to identify drugs and biologicals that were
not acquired under the 340B Program. Specifically, we are establishing
a new modifier, ``XX'' (Drug or biological not acquired under the 340B
Drug Pricing Program), which we propose will be required to be reported
for all separately payable drugs that were purchased outside of the
340B Program. Note, ``XX'' is a placeholder modifier code that will be
updated in the CY 2027 OPPS/ASC final rule with comment period, if this
policy is finalized.
The requirement to use modifier ``XX'' would apply to all providers
paid under the OPPS, including excepted and non-excepted off campus
provider-based departments. Reporting the modifiers ``XX'', ``JG'', or
``TB'' for applicable drugs would ensure that all drug claims are
consistently categorized as either 340B-acquired or non-340B-acquired.
We believe that requiring the use of modifier ``XX'' for non-340B drugs
will improve the completeness and consistency of claims data,
facilitate program integrity and oversight, and enhance our ability to
monitor acquisition patterns across providers. The use of modifier
``XX'' would not trigger a payment adjustment and such drugs would
continue to be paid at the applicable OPPS rate (generally ASP plus 6
percent for separately payable drugs) consistent with existing policy.
In summary, we propose all separately paid drug claims reported under
the OPPS would be reported with a modifier of either ``JG,'' ``TB,'' or
``XX'' (Table 56). We solicit comment on our proposal to require all
separately paid drug claims to be reported with a modifier of either
``JG,'' ``TB,'' or ``XX''.
We believe the addition of this new modifier is consistent with the
decisions that hospitals are already making (is the drug a 340B-
acquired drug or a non-340B-acquired drug) when billing for these
drugs. As previously mentioned, we believe requiring the use of
modifier ``XX'' for non-340B drugs will improve the completeness and
consistency of claims data--this requirement could even decrease burden
on hospitals as it may improve the accuracy of billing, thus decreasing
the need for hospitals to reprocess claims that were billed
incorrectly. We request comment as to whether the addition of modifier
``XX'' would create additional burden for hospitals.
[[Page 41894]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.085
Additionally, we acknowledge this billing modifier proposal would
have implications for how we identify billing units of drugs acquired
through the 340B Program under the Medicare Part B Drug Inflation
Rebate Program. In the CY 2025 Physician Fee Schedule (PFS) final rule
(89 FR 98583), we codified at Sec. 427.303(b)(1)(iv) that we will
exclude from Part B rebate calculations separately payable billing
units in claim lines for institutional claims that are billed with the
``TB'' modifier for claims with dates of service on or after January 1,
2025. If we finalize our proposal to establish the requirement to use
the ``JG'' modifier, in addition to the requirement to use the ``TB''
modifier, then such 340B modifier changes would necessitate changes to
how we identify 340B units to exclude from Part B rebate calculations.
Consequently, we propose a conforming change at Sec.
427.303(b)(1)(iv) to reflect proposed changes to the requirements to
use billing modifiers for 340B-acquired drugs as described in section
V.B.10. of this proposed rule. Specifically, to account for these
billing modifier proposals, at Sec. 427.303(b)(1)(iv), we propose to
add ``or successor billing modifiers to identify 340B units''. This
means, for the purposes of Part B inflation rebate calculations, we
would exclude billing units acquired under the 340B Program as
identified through separately payable units in claim lines billed with
the ``TB'' modifier, or successor billing modifiers to identify 340B
units for 340B-acquired drugs, for claims with dates of service on or
after January 1, 2025. Therefore, as a matter of operations, effective
January 1, 2027, CMS would identify separately payable billing units in
claim lines billed with the ``TB'' modifier and proposed ``JG''
modifier. We recognize that policy amendments for the Medicare
Prescription Drug Inflation Rebate Program are typically proposed in
the PFS; however, we believe it is appropriate to propose an amendment
to Sec. 427.303(b)(1)(iv) in this OPPS/ASC proposed rule due to timing
differences in the publication of the CY 2027 PFS proposed rule
relative to the OPPS/ASC proposed rule and to ensure we are able to
appropriately exclude 340B units from Part B rebate calculations
starting January 1, 2027.
D. CY 2027 OPPS Payment Methodology for Non-340B Acquired Drugs Based
on ODACS
CMS analyzed acquisition cost data collected through the ODACS for
drugs acquired outside the 340B Program and evaluated several
methodologies for estimating the relationship between hospitals'
acquisition costs and ASP-based payment amounts as previously discussed
in this section.
Using our preferred proposed methodology, which calculates
acquisition cost margins using the geometric mean of survey-reported
acquisition costs, we estimate that hospitals' acquisition costs for
non-340B drugs were approximately 2.7 percent above ASP during the
survey period. However, we recognize that acquisition costs reported
through the survey may not fully reflect all manufacturer rebates,
chargebacks, administrative fees, or other post-purchase price
concessions received by hospitals, as we have not incorporated GPO
discounts into the ASP plus 2.7 percent figure. Therefore, even ASP
plus 2.7 percent, the reported acquisition costs, may overstate
hospitals' net acquisition
[[Page 41895]]
costs. As a result, the estimated margin of ASP plus 2.7 percent may,
in part, reflect differences in how manufacturer rebates and other
retrospective discounts were reported rather than solely the underlying
acquisition costs of the drugs.
The survey results for non-340B drugs exhibit greater variation
than the survey results for 340B-acquired drugs. As a result, the
confidence intervals for the estimated non-340B acquisition cost
margins span a slightly wider range of potential values. We believe
this finding is expected given the diversity of purchasing
arrangements, contracting structures, and acquisition channels
available to hospitals when acquiring drugs outside the 340B Program.
The broader distribution of survey-reported acquisition costs suggests
greater uncertainty regarding the precise average acquisition cost
margin for non-340B drugs relative to the margin observed for 340B-
acquired drugs.
Although the survey data suggest that hospitals' acquisition costs
for non-340B drugs may be lower on average from the current payment
rate of ASP plus 6 percent, the survey results are subject to slightly
greater variability and may be affected by differences in the reporting
of manufacturer rebates and other price concessions. Consequently, we
believe the survey data should be interpreted further as we assess the
need for a payment rate change for non-340B drugs.
Given the need to further consider the non-340B survey results for
the reasons mentioned, including the range of reasonable acquisition
cost estimates supported by the data, we are not proposing at this time
to establish a survey-based payment rate for non-340B drugs. Rather,
for CY 2027, after taking into account the survey results, we propose
to continue paying separately payable non-340B drugs, biologicals,
biosimilars, and radiopharmaceuticals as we do in CY 2026, which is
generally at a rate of ASP plus 6 percent. We believe this approach
appropriately considers the survey findings, including the uncertainty
associated with manufacturer rebate reporting and the broader
distribution of acquisition cost estimates, while maintaining stability
in payment rates and allowing CMS to continue evaluating acquisition
cost information obtained through its survey authority under section
1833(t)(14)(B)(iii) of the Act.
Under the same survey-based methodology proposed for determining
payment for 340B-acquired drugs, such an approach for non-340B drugs
would be based on the geometric mean acquisition cost estimate derived
from the survey data, resulting in a payment rate of approximately ASP
plus 2.7 percent. In the case of the 340B acquired drugs, the
discrepancy between acquisition cost and Medicare payment is
substantial and obviously apparent; however, the discrepancy between
acquisition cost and Medicare payment for non-340B acquired drugs is
much less significant. Therefore, we are proposing to continue paying
for non-340B acquired drugs at a rate of ASP plus 6 percent. We also
intend to continue evaluating the acquisition cost survey data for non-
340B acquired drugs and may consider the results of this analysis in
future rulemaking.
E. Summary
In summary, using the authority under section
1833(t)(14)(A)(iii)(I) of the Act, we propose for CY 2027 and
subsequent years to pay for drugs acquired under the 340B Program at
ASP minus 33.4 percent and for drugs acquired outside of the 340B
Program at ASP plus 6 percent. This proposal includes our previously
discussed methodology used to arrive at the proposed payment rate of
ASP minus 33.4 percent that we propose to apply to all drugs acquired
under the 340B Program. This methodology includes using the survey
volume-weighted estimate of the margin between total acquisition costs
and ASP-based payments, the longstanding OPPS geometric mean trimming
methodology to identify and exclude outliers and the five data
refinement exclusions to remove anomalous data. Our intent is that, if
finalized, this payment methodology would apply beginning January 1,
2027. We also propose that rural SCHs, PPS-exempt cancer hospitals and
children's hospitals would be exempted from the 340B Payment Policy for
CY 2027 and subsequent years. To effectuate the payment adjustment for
340B-acquired drugs, we propose that, effective January 1, 2027,
hospitals paid under the OPPS, other than a type of hospital excluded
from the OPPS (such as CAHs or REHs) or exempted from the 340B drug
payment policy for CY 2027, would be required to report modifier ``JG''
on the same claim line as the drug HCPCS code to identify a 340B-
acquired drug; the modifier ``TB'' for all pass-through drugs, non-
opioid treatment for pain relief drugs, and 340B-acquired drugs
reported by rural SCHs, children's hospitals and PPS-exempt cancer
hospitals for informational purpose; and the modifier ``XX'' for all
drugs that were not acquired through the 340B Program. We note these
payment proposals apply to both excepted and non-excepted provider-
based departments of a hospital. Finally, we propose a conforming
change to Sec. 427.303(b)(1)(iv) to ensure our process to identify
340B units for purposes of Part B inflation rebate calculations aligns
with our proposed 340B modifier billing requirements.
F. Budget Neutrality
As we propose the previously defined payment adjustments through
our authority under section 1833(t)(14)(A)(iii)(I) of the Act, we also
propose making this adjustment in a budget neutral manner. To maintain
budget neutrality within the OPPS, we have estimated that OPPS payment
for 340B acquired drugs will be reduced by approximately $4.85 billion
in CY 2027; however, these payments will be redistributed in an equal
offsetting amount to all hospitals paid under the OPPS through
increased payment rates for non-drug items and services furnished by
all hospitals paid under the OPPS. Specifically, the redistributed
dollars will increase the conversion factor for OPPS non-drug items and
services by 8.44 percent for CY 2027.
We also estimated the alternative methodology previously described
to pay 340B acquired drugs at ASP minus 28 percent, which is the
average acquisition cost calculated from the 340B ceiling prices and
volume weighted by OPPS utilization data. Through this method, we
estimate that OPPS payment for 340B acquired drugs would be reduced by
approximately $4.68 billion in CY 2027. Specifically, the redistributed
dollars will increase the conversion factor for OPPS non-drug items and
services by 8.14 percent for CY 2027.
For additional details on our proposed budget neutral
implementation of this policy, please see section II.B. of this
proposed rule.
F. Proposed Payment Rates for Skin Substitute APCs
In the CY 2026 OPPS/ASC final rule with comment period, we
finalized a policy to separately pay for skin substitute products as
incident-to supplies in the physician office, hospital outpatient, and
ambulatory surgical center settings effective January 1, 2026 (90 FR
53729 through 53748). As part of this final policy, we assigned sheet-
form skin substitute products to one of three clinical APCs we created
based on FDA regulatory categories: APC 6000 (PMA Skin Substitute
Products), APC 6001 (510(k) Skin Substitute Products), and APC 6002
(361 HCT/P Skin Substitute Products). For CY 2026, we set an initial
payment
[[Page 41896]]
rate of $127.14/cm\2\ for APCs 6000 (PMA Skin Substitute Products),
6001 (510(k) Skin Substitute Products), and 6002 (361 HCT/P Skin
Substitute Products). We stated we would update the payment rates for
skin substitute categories annually through rulemaking using the most
recently available calendar quarter of ASP data, when available, to set
the rates. In the event ASP data was not available for a particular
product, we stated we would use the outpatient hospital MUC data. If
MUC was not available, we stated we would use the product's WAC or 89.6
percent of AWP if WAC was also unavailable. We finalized a policy to
include all skin substitute products used across both settings as well
as the combined product utilization patterns and, as soon as data was
available that reflects the results of this policy, to determine a
weighted average per-unit cost by group to set the payment rates for
each of the three categories.
At this time, we do not believe we have sufficient data upon which
to propose a revised payment rate for all three skin substitute product
APCs. We also believe that updating the payment rates for CY 2027,
before the impacts of the payment policy are reflected in the CY 2026
claims that will be used for CY 2028 OPPS/ASC and PFS rulemaking, could
result in payment disruptions or introduce unnecessary volatility.
Because updated use patterns reflecting the CY 2026 policy changes are
not yet available, we propose for CY 2027 to continue the policy
finalized for CY 2026 in its entirety, which includes maintaining the
payment rate of $127.14/cm\2\ for APCs 6000 (PMA Skin Substitute
Products), 6001 (510(k) Skin Substitute Products), and 6002 (361 HCT/P
Skin Substitute Products).
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for
Drugs, Biologicals, Radiopharmaceuticals, and Devices
A. Amount of Additional Payment and Limit on Aggregate Annual
Adjustment
Section 1833(t)(6)(E) of the Act limits the total projected amount
of transitional pass-through payment for drugs, biologicals, and
categories of devices for a given year to an ``applicable percentage,''
currently not to exceed 2.0 percent of total program payments estimated
to be made for all covered services under the OPPS furnished for that
year. If we estimate before the beginning of the calendar year that the
total amount of pass-through payments in that year would exceed the
applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a
uniform prospective reduction in the amount of each of the transitional
pass-through payments made in that year to ensure that the limit is not
exceeded. We estimate the pass-through spending to determine whether
payments exceed the applicable percentage and the appropriate pro rata
reduction to the conversion factor for the projected level of pass-
through spending in the following year to ensure that total estimated
pass-through spending for the prospective payment year is budget
neutral, as required by section 1833(t)(6)(E) of the Act.
For devices, developing a proposed estimate of pass-through
spending in CY 2027 entails estimating spending for two groups of
items. The first group of items consists of device categories that are
currently eligible for pass-through payment and that will continue to
be eligible for pass-through payment in CY 2027. The CY 2008 OPPS/ASC
final rule with comment period (72 FR 66778) describes the methodology
we have used in previous years to develop the pass-through spending
estimate for known device categories continuing into the applicable
update year. The second group of items consists of devices that we know
are newly eligible, or project may be newly eligible, for device pass-
through payment in the remaining quarters of CY 2026 or beginning in CY
2027. The sum of the proposed CY 2027 pass-through spending estimates
for these two groups of device categories equals the proposed total CY
2027 pass-through spending estimate for device categories with pass-
through payment status. We determined the device pass-through estimated
payments for each device category based on the amount of payment as
required by section 1833(t)(6)(D)(ii) of the Act, and as outlined in
previous rules, including the CY 2026 OPPS/ASC final rule with comment
period (90 FR 53766 through 53769). We note that, beginning in CY 2010,
the pass-through evaluation process and pass-through payment
methodology for implantable biologicals newly approved for pass-through
payment beginning on or after January 1, 2010, that are surgically
inserted or implanted (through a surgical incision or a natural
orifice) use the device pass-through process and payment methodology
(74 FR 60476). As has been our past practice (76 FR 74335), we include
an estimate of any implantable biologicals eligible for pass-through
payment in our estimate of pass-through spending for devices.
Similarly, we finalized a policy in CY 2015 that applications for pass-
through payment for skin substitutes and similar products be evaluated
using the medical device pass-through process and payment methodology
(79 FR 66885 through 66888). In CY 2026, we finalized a policy to
consider skin substitutes with an approved Biologics License
Application (BLA) under transitional drug pass-through payment status
and skin substitutes with the Food and Drug Administration (FDA)
Premarket approval (PMA) or FDA 510(k) clearance continue to be
evaluated under transitional device pass-through payment status. (90 FR
53636). Therefore, for CY 2027, we also propose to include an estimate
of any skin substitutes and similar products with FDA PMA or FDA 510(k)
clearance in our estimate of pass-through spending for devices and skin
substitutes with an approved BLA under transitional drug pass-through
spending for drugs and biologicals.
For drugs and biologicals eligible for pass-through payment,
section 1833(t)(6)(D)(i) of the Act establishes the pass-through
payment amount as the amount by which the amount authorized under
section 1842(o) of the Act (or, if the drug or biological is covered
under a competitive acquisition contract under section 1847B of the
Act, an amount determined by the Secretary equal to the average price
for the drug or biological for all competitive acquisition areas and
year established under such section as calculated and adjusted by the
Secretary) exceeds the portion of the otherwise applicable fee schedule
amount that the Secretary determines is associated with the drug or
biological. Consistent with current policy, we propose to apply a rate
of ASP plus 6 percent to most drugs and biologicals for CY 2027, and
therefore our estimate of drug and biological pass-through payment for
CY 2027 for this group of items is $12.2 million.
Payment for certain drugs,\122\ specifically contrast agents
without pass-through payment status, is packaged into payment for the
associated procedures, and these products are not separately paid. In
addition, we policy-package non-pass-through drugs and biologicals that
function as supplies when used in a diagnostic test or procedure unless
a high-cost diagnostic radiopharmaceutical with a per-day cost greater
than the proposed per-day
[[Page 41897]]
threshold referenced in section II.A.3.c. of this proposed rule is used
for the test or procedure. We policy-package all drugs and biologicals
that function as supplies when used in a surgical procedure or for
anesthesia, and other categories of drugs and biologicals, as discussed
in section V.B.1.c. of this proposed rule. Consistent with current
policy, for CY 2027, we propose that policy-packaged drugs and
biologicals with pass-through payment status will be paid at ASP plus 6
percent, like other pass-through drugs and biologicals less the policy-
packaged drug APC offset amount described below. Our estimate of pass-
through payment for policy-packaged drugs and biologicals with pass-
through payment status approved prior to CY 2027 is not $0. This is
because the pass-through payment amount and the fee schedule amount
associated with the drug or biological will not be the same, unlike for
separately payable drugs and biologicals. In the CY 2024 OPPS/ASC final
rule with comment period (88 FR 81774 through 81776), we discussed our
policy to determine if the costs of certain policy-packaged drugs or
biologicals are already packaged into the existing APC structure. If we
determine that a policy-packaged drug or biological approved for pass-
through payment resembles predecessor drugs or biologicals already
included in the costs of the APCs that are associated with the drug
receiving pass-through payment, we offset the amount of pass-through
payment for the policy-packaged drug or biological. For these drugs or
biologicals, the APC offset amount is the portion of the APC payment
for the specific procedure performed with the pass-through drug or
biological, which we refer to as the policy-packaged drug APC offset
amount. Consistent with current policy described in section V.A.5. of
this proposed rule, if we determine that an offset is appropriate for a
specific policy-packaged drug or biological receiving pass-through
payment, we propose to reduce our estimate of pass-through payments for
these drugs or biologicals by the APC offset amount.
---------------------------------------------------------------------------
\122\ In the CY 2025 OPPS/ASC final rule with comment period, we
finalized the high-cost diagnostic radiopharmaceuticals policy to
separately pay those products when the per-day costs are greater
than a threshold. Please refer to section II.A.3.c. of this proposed
rule for more information regarding this policy.
---------------------------------------------------------------------------
Similar to pass-through spending estimates for devices, the first
group of drugs and biologicals requiring a pass-through payment
estimate consists of those products that were recently made eligible
for pass-through payment and that will continue to be eligible for
pass-through payment in CY 2027. The second group contains drugs and
biologicals that we know are newly eligible, or project will be newly
eligible, in CY 2027. The sum of the CY 2027 pass-through spending
estimates for these two groups of drugs and biologicals equals the
total CY 2027 pass-through spending estimate for drugs and biologicals
with pass-through payment status.
B. Proposed Estimate of Pass-Through Spending for CY 2027
For CY 2027, we propose to set the applicable pass-through payment
percentage limit at 2.0 percent of the total projected OPPS payments
for CY 2027, consistent with section 1833(t)(6)(E)(ii)(II) of the Act
and our OPPS policy from CY 2004 through CY 2026 (90 FR 53767). The
pass-through payment percentage limit is calculated using pass-through-
spending estimates for devices and for drugs and biologicals.
For the first group of devices, consisting of device categories
that are currently eligible for pass-through payment and will continue
to be eligible for pass-through payment in CY 2027, there are 15 active
categories for CY 2027. The active categories are described by HCPCS
codes C1605, C1606, C8000, C1735, C1736, C1737, C1738, C1739, C9610,
C1740, C1741, C1742, C1607, C1608, and C1743. Based on CY 2025 Medicare
hospital outpatient claims data available by the time of this proposed
rule and information from the device manufacturers provided in their
respective pass-through applications regarding the device cost and the
projected CY 2027 OPPS utilization, we estimated the CY 2027 pass-
through expenditures for each of the 15 device categories in Table
56A.\123\ Therefore, we propose an estimate for the first group of
devices of $177.6 million.
---------------------------------------------------------------------------
\123\ Estimated costs are updated to reflect the Medicare
hospital outpatient claims data for each HCPCS code as such data
becomes available. Prior to the availability of Medicare hospital
outpatient claims data, estimated costs are based on the device cost
and projected CY OPPS utilization provided by the device
manufacturer in the device pass-through application. As such, the
estimated pass-through costs for HCPCS codes C1605, C1606, C8000,
C1735, C1736, C1737, C1738, C1739, and C9610 are based on CY 2025
Medicare hospital outpatient claims data available for this proposed
rule. The estimated pass-through costs for HCPCS codes C1740, C1741,
C1742, C1607, C1608, and C1743 are based on information provided by
the device manufacturers in the respective device pass-through
applications regarding the device cost and the projected CY 2027
OPPS utilization.
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[[Page 41898]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.086
In estimating our proposed CY 2027 pass-through- spending for
device categories in the second group, we included the following: (1)
device categories that we assumed at the time of the development of the
proposed rule would be newly eligible for pass-through payment in CY
2027; (2) additional device categories that we estimated could be
approved for pass-through status after the development of this proposed
rule and before January 1, 2027; and (3) contingent projections for new
device categories established in the second through fourth quarters of
CY 2027. For CY 2027, we propose to use the general methodology
described in the CY 2008 OPPS/ASC final rule with comment period (72 FR
66778), while also taking into account recent OPPS experience in
approving new pass-through device categories. For this proposed rule,
we propose to deny six CY 2027 device pass-through applications. We
propose to continue device pass-through payment status for seven device
pass-through applications that were granted conditional approval in CY
2027.\124\ The proposed estimate of CY 2027 pass-through spending for
this second group of device categories is $5.6 million.
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\124\ As discussed in section IV.A.2. of this proposed rule: the
pass-through applications for MY01 Continuous Compartmental Pressure
Monitor, RemeOs\TM\ Screw LAG Solid, and WiSE[supreg] (Wireless
Stimulation of the Endocardium Technology) CRT System were
preliminarily approved for transitional pass-through payment under
the alternative pathway effective October 1, 2025; the pass-through
applications for SetPoint System and TOUCH[supreg] CMC 1 Prosthesis
were preliminarily approved for transitional pass-through payment
under the alternative pathway effective January 1, 2026; the pass-
through application for EspritTM BTK Everolimus Eluting
was preliminarily approved for transitional pass-through payment
under the alternative pathway effective April 1, 2026; and the pass-
through application for TOPSTM System was preliminarily
approved for transitional pass-through payment under the alternative
pathway effective July 1, 2026. Due to the timing of the preliminary
approvals, the CY 2027 spending estimate for MY01 Continuous
Compartmental Pressure Monitor, RemeOs\TM\ Screw LAG Solid,
WiSE[supreg], SetPoint System, TOUCH[supreg] CMC 1 Prosthesis, and
EspritTM BTK Everolimus Eluting is included in the CY
2027 spending estimate for the first group of devices, and the CY
2027 spending estimate for the TOPSTM System is included
in the CY 2027 spending estimate for the second group of devices.
---------------------------------------------------------------------------
To estimate proposed CY 2027 pass-through spending for drugs and
biologicals in the first group, specifically those drugs and
biologicals recently made eligible for pass-through payment and
continuing on pass-through payment status for at least one quarter in
CY 2027, we propose to use the CY 2025 Medicare hospital outpatient
claims data regarding their utilization, information provided in their
respective pass-through applications, other historical hospital claims
data, pharmaceutical industry information, and clinical information
regarding these drugs and biologicals to project the CY 2027 OPPS
utilization of the products.
For the known drugs and biologicals (excluding policy-packaged
contrast agents, drugs, biologicals, radiopharmaceuticals with per-day
costs at or below the packaging threshold that function as supplies
when used in a diagnostic test or procedure, and drugs and biologicals
that function as supplies when used in a surgical procedure) that will
be continuing on pass-through payment status in CY 2027, we estimated
the pass-through payment amount as the difference between the general
payment rate of ASP plus 6 percent and the payment rate for non-pass-
through drugs and biologicals that would be separately paid. Because we
propose to utilize a payment rate of ASP plus 6 percent for most
separately payable drugs and biologicals in this proposed rule, the
proposed payment rate difference between the pass-through payment
amount and the non-pass-through payment amount is $0 for this group of
drugs.
Because payment for policy-packaged drugs and biologicals is
packaged if the product is not paid separately due to its pass-through
payment status, we propose to include in the CY 2027 pass-
[[Page 41899]]
through estimate the difference between payment for the policy-packaged
drug or biological at ASP plus 6 percent (or wholesale acquisition cost
(WAC) plus 3 or 6 percent according to the policy in section V.B.2.a.
of this proposed rule, or 95 percent of average wholesale price (AWP),
if ASP or WAC information is not available) and the policy-packaged
drug APC offset amount, if we determine that the policy-packaged drug
or biological approved for pass-through payment resembles a predecessor
drug or biological already included in the costs of the APCs that are
associated with the drug receiving pass-through payment. Diagnostic
radiopharmaceuticals that currently have pass-through status, but would
likely be paid separately because of the policy initially established
in the CY 2025 OPPS/ASC final rule with comment period (89 FR 93953) to
separately pay for high-cost diagnostic radiopharmaceuticals with per-
day costs greater than the proposed per-day threshold and which we
propose to continue as discussed in section II.A.3.c. of this proposed
rule, are not considered to be policy-packaged and therefore are not
included in this group. For this first group of policy-packaged drugs
and biologicals, we estimated a pass-through spending for CY 2027 of
$2.2 million.
To estimate proposed CY 2027 pass-through spending for drugs and
biologicals in the second group (that is, drugs and biologicals that we
knew at the time of development of this proposed rule were newly
eligible or recently became eligible for pass-through payment in CY
2026, additional drugs and biologicals that we estimated could be
approved for pass-through status subsequent to the development of this
proposed rule and before January 1, 2027, and projections for new drugs
and biologicals that could be initially eligible for pass-through
payment in the second through fourth quarters of CY 2027), we propose
to use utilization estimates from pass-through applicants,
pharmaceutical industry data, clinical information, recent trends in
the per unit ASPs of hospital outpatient drugs, and projected annual
changes in service volume and intensity as our basis for making the CY
2027 pass-through payment estimate. We also propose to consider the
most recent OPPS experience in approving new pass-through drugs and
biologicals. Using our proposed methodology for estimating CY 2027
pass-through payments for this second group of drugs, we calculated a
proposed spending estimate for this second group of drugs and
biologicals of approximately $10 million.
We estimate for this proposed rule that the amount of pass-through
spending for the device categories and the drugs and biologicals that
are continuing to receive pass-through payment in CY 2027 and the
amount of pass-through spending for those device categories, drugs, and
biologicals that first become eligible for pass-through payment during
CY 2027 would be approximately $195.3 million (approximately $183.1
million for device categories and approximately $12.2 million for drugs
and biologicals), which represents only 0.18 percent of total projected
OPPS payments for CY 2027 (approximately $111 billion). Therefore, we
estimate that pass-through spending in CY 2027 will not exceed the 2.0
percent of total projected OPPS CY 2027 program spending limit provided
for in section 1833(t)(6)(E) of the Act.
VII. OPPS Payment for Hospital Outpatient Visits and Critical Care
Services
For CY 2027, we propose to continue our current clinic and
emergency department (ED) hospital outpatient visit payment policies.
For a description of these policies, we refer readers to the CY 2016
OPPS/ASC final rule with comment period (80 FR 70448 and 70449). We
also propose to continue our payment policy for critical care services
for CY 2027. For a description of this policy, we refer readers to the
CY 2016 OPPS/ASC final rule with comment period (80 FR 70449 through
70453), and for the history of this payment policy, we refer readers to
the CY 2014 OPPS/ASC final rule with comment period (78 FR 75043).
As we stated in the CY 2022 OPPS/ASC final rule with comment period
(86 FR 63663), the volume control method for clinic visits furnished by
excepted off-campus provider-based departments (PBDs) applies for CY
2022 and subsequent years. More specifically, we finalized a policy to
continue to utilize a PFS-equivalent payment rate for the hospital
outpatient clinic visit service described by HCPCS code G0463 when it
is furnished by these departments for CY 2022 and subsequent years (86
FR 63664). As stated in the CY 2018 PFS final rule (82 FR 53020 through
53024), the PFS-equivalent rate for CY 2018 and subsequent years is 40
percent of the proposed OPPS payment. Under this policy, these
departments will be paid 40 percent of the OPPS rate for the clinic
visit service in CY 2027.
In the CY 2023 OPPS/ASC final rule with comment period (87 FR 72047
through 72051), we finalized a policy for CY 2023 and subsequent years
that excepted off-campus PBDs (departments that bill the modifier
``PO'' on claim lines) of rural Sole Community Hospitals (SCHs), as
described under 42 CFR 412.92 and designated as rural for Medicare
payment purposes, are exempt from the clinic visit payment policy that
applies a PFS-equivalent payment rate for the clinic visit service, as
described by HCPCS code G0463, when provided at an off-campus PBD
excepted from section 1833(t)(21) of the Act. For the full discussion
of this policy, we refer readers to the CY 2023 OPPS/ASC final rule
with comment period (87 FR 72047 through 72051).
VIII. Payment for Partial Hospitalization and Intensive Outpatient
Services
This section discusses payment for partial hospitalization services
as well as intensive outpatient services. Since CY 2000, Medicare has
paid for partial hospitalization services under the OPPS. Beginning in
CY 2024, as authorized by section 4124 of the Consolidated
Appropriations Act (CAA), 2023 (Pub. L. 117-328), Medicare began paying
for intensive outpatient services furnished by hospital outpatient
departments, community mental health centers (CMHCs), Federally
qualified health centers, and rural health clinics in addition to
opioid treatment programs. Additional background on the partial
hospitalization and intensive outpatient benefits is included in the
following paragraphs.
A. Background
1. Partial Hospitalization
A partial hospitalization program (PHP) is an intensive outpatient
program of psychiatric services provided as an alternative to inpatient
psychiatric care for individuals who have an acute mental illness,
which includes, but is not limited to, conditions such as depression,
schizophrenia, and substance use disorders (SUD). Section 1861(ff)(1)
of the Act defines partial hospitalization services as the items and
services described in paragraph (2) prescribed by a physician and
provided under a program described in paragraph (3) under the
supervision of a physician pursuant to an individualized, written plan
of treatment established and periodically reviewed by a physician (in
consultation with appropriate staff participating in such program),
which sets forth the physician's diagnosis, the type, amount,
frequency, and duration
[[Page 41900]]
of the items and services provided under the plan, and the goals for
treatment under the plan.
Section 1861(ff)(2) of the Act describes the items and services
included in partial hospitalization services. Section 1861(ff)(3)(A) of
the Act specifies that a PHP is a program furnished by a hospital to
its outpatients or by a CMHC, as a distinct and organized intensive
ambulatory treatment service, offering less than 24-hour-daily care, in
a location other than an individual's home or inpatient or residential
setting. Section 1861(ff)(3)(B) of the Act defines a CMHC for purposes
of this benefit. We refer readers to sections 1833(t)(1)(B)(i),
1833(t)(2)(B), 1833(t)(2)(C), and 1833(t)(9)(A) of the Act and 42 CFR
419.21, for additional information regarding PHP.
PHP policies and payment have been addressed under OPPS since CY
2000. In CY 2008, we began efforts to strengthen the PHP benefit
through extensive data analysis, along with policy and payment changes,
by implementing two refinements to the methodology for computing the
PHP median. For a detailed discussion on these policies, we refer
readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR
66670 through 66676). In CY 2009, we implemented several regulatory,
policy, and payment changes. For a detailed discussion on these
policies, we refer readers to the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68688 through 68697). In CY 2010, we retained the
two-tier payment approach for partial hospitalization services and used
only hospital-based PHP data in computing the PHP Ambulatory Payment
Classification (APC) per diem costs, upon which PHP APC per diem
payment rates are based (74 FR 60556 through 60559). In CY 2011 (75 FR
71994), we established four separate PHP APC per diem payment rates:
two for CMHCs (APC 0172 and APC 0173) and two for hospital-based PHPs
(APC 0175 and APC 0176). We also instituted a 2-year transition period
for CMHCs to the CMHC APC per diem payment rates. For a detailed
discussion, we refer readers to section X.B. of the CY 2011 OPPS/ASC
final rule with comment period (75 FR 71991 through 71994). In CY 2012,
we determined the relative payment weights for partial hospitalization
services provided by CMHCs based on data derived solely from CMHCs and
the relative payment weights for partial hospitalization services
provided by hospital-based PHPs based exclusively on hospital data (76
FR 74348 through 74352). In the CY 2013 OPPS/ASC final rule with
comment period, we finalized our proposal to base the relative payment
weights that underpin the OPPS APCs, including the four PHP APCs (APCs
0172, 0173, 0175, and 0176), on geometric mean costs rather than on the
median costs. For a detailed discussion on this policy, we refer
readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR
68406 through 68412).
In the CY 2014 OPPS/ASC proposed rule (78 FR 43621 and 43622) and
CY 2015 OPPS/ASC final rule with comment period (79 FR 66902 through
66908), we continued to apply our established policies to calculate the
four PHP APC per diem payment rates based on geometric mean per diem
costs using the most recent claims data for each provider type. For a
detailed discussion on this policy, we refer readers to the CY 2014
OPPS/ASC final rule with comment period (78 FR 75047 through 75050). In
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70453
through 70467), we described our extensive analysis of the claims and
cost data and ratesetting methodology, corrected a cost inversion that
occurred in the final rule with comment period data with respect to
hospital-based PHP providers, and renumbered the PHP APCs. In the CY
2017 OPPS/ASC final rule with comment period (81 FR 79687 through
79691), we continued to apply our established policies to calculate the
PHP APC per diem payment rates based on geometric mean per diem costs
and finalized a policy to combine the Level 1 and Level 2 PHP APCs for
CMHCs and for hospital-based PHPs. We also implemented an 8-percent
outlier cap for CMHCs to mitigate potential outlier billing
vulnerabilities. For a comprehensive description of PHP payment policy,
including a detailed methodology for determining PHP per diem amounts,
we refer readers to the CY 2016 and CY 2017 OPPS/ASC final rules with
comment period (80 FR 70453 through 70455 and 81 FR 79678 through
79680, respectively).
In the CYs 2018 and 2019 OPPS/ASC final rules with comment period
(82 FR 59373 through 59381 and 83 FR 58983 through 58998,
respectively), we continued to apply our established policies to
calculate the PHP APC per diem payment rates based on geometric mean
per diem costs, designated a portion of the estimated 1.0 percent
hospital outpatient outlier threshold specifically for CMHCs, and
proposed updates to the PHP allowable HCPCS codes. We finalized these
proposals in the CY 2020 OPPS/ASC final rule with comment period (84 FR
61352).
In the CY 2020 OPPS/ASC final rule with comment period (84 FR 61339
through 61350), we finalized a proposal to use the calculated CY 2020
CMHC geometric mean per diem cost and the calculated CY 2020 hospital-
based PHP geometric mean per diem cost, but with a cost floor equal to
the CY 2019 final geometric mean per diem costs as the basis for
developing the CY 2020 PHP APC per diem rates. Also, we continued to
designate a portion of the estimated 1.0 percent hospital outpatient
outlier threshold specifically for CMHCs, consistent with the
percentage of projected payments to CMHCs under the OPPS, excluding
outlier payments.
In the April 30, 2020 interim final rule with comment (85 FR 27562
through 27566), effective as of March 1, 2020 and for the duration of
the COVID-19 Public Health Emergency (PHE), hospital and CMHC staff
were permitted to furnish certain outpatient therapy, counseling, and
educational services (including certain PHP services), incident to a
physician's services, to beneficiaries in temporary expansion
locations, including the beneficiary's home, as long as the location
met all conditions of participation to the extent not waived. A
hospital or CMHC could furnish such services using telecommunications
technology to a beneficiary in a temporary expansion location if that
beneficiary was registered as an outpatient. In the CY 2023 OPPS/ASC
final rule with comment period (87 FR 72247), we confirmed that these
provisions applied only for the duration of the COVID-19 PHE. On May
11, 2023, the COVID-19 PHE ended, and accordingly, these flexibilities
ended as well.
In the CY 2021 OPPS/ASC final rule with comment period (85 FR 86073
through 86080), we continued our current methodology to utilize cost
floors, as needed. In the CY 2022 OPPS/ASC final rule with comment
period (86 FR 63665 and 63666), as a result of the COVID-19 PHE, we
finalized our proposal to calculate the PHP per diem costs using the
year of claims consistent with the calculations that would be used for
other OPPS services, by using the CY 2019 claims and the cost reports
that were used for CY 2021 final rulemaking to calculate the CY 2022
PHP per diem costs. In addition, for CY 2022 and subsequent years, we
finalized our proposal to use cost and charge data from the Hospital
Cost Report Information System (HCRIS) as the source for the CMHC cost-
to-charge ratios (CCRs), instead of using the Outpatient Provider
Specific File (OPSF) (86 FR 63666).
[[Page 41901]]
In the CY 2023 OPPS/ASC final rule with comment period (87 FR
71995), we finalized our proposal to use the latest available CY 2021
claims but use the cost information from prior to the COVID-19 PHE for
calculating the CY 2023 CMHC and hospital-based PHP APC per diem costs.
The application of the OPPS standard methodology, including the effect
of budget neutralizing all other OPPS policy changes unique to CY 2023,
resulted in the final calculated CMHC PHP APC payment rate being
unexpectedly lower than the CY 2022 final CMHC PHP APC rate. Therefore,
we finalized utilizing the equitable adjustment authority of section
1833(t)(2)(E) of the Act to appropriately pay for CMHC PHP services at
the same payment rate as for CY 2022, that is, $142.70. In addition, we
clarified the payment under the OPPS for new HCPCS codes that designate
non-PHP services provided for the purposes of diagnosis, evaluation, or
treatment of a mental health disorder and are furnished to
beneficiaries in their homes by clinical staff of the hospital that
would not be recognized as PHP services; however, none of the PHP
regulations would preclude a patient that is under a PHP plan of care
from receiving other reasonable and medically necessary non-PHP
services from a hospital (87 FR 72001 and 72002).
In the CY 2024 OPPS/ASC final rule with comment period (88 FR
81811), we revised the regulation at Sec. 424.24(e)(1)(i) to require
the physician certification for PHP services to include a certification
that the patient requires such services for a minimum of 20 hours per
week, as required by section 1861(ff)(1) of the Act, as amended by
section 4124(a) of Division FF of the CAA, 2023. In addition, we
modified the regulations for PHP at Sec. 410.43 to include references
to SUD. In the same CY 2024 OPPS/ASC final rule with comment period, we
also established separate payment rates for PHP days with 3 services
and days with 4 or more services. Accordingly, we established four
separate PHP APC per diem payment rates: one for CMHCs for 3-service
days and another for CMHCs for 4-service days (APC 5853 and APC 5854,
respectively), and one for hospital-based PHPs for 3-service days and
another for hospital-based PHPs for 4-service days (APC 5863 and APC
5864, respectively). We also finalized a policy to utilize the separate
CMHC rates for 3-service and 4-service PHP days as the Medicare
Physician Fee Schedule (MPFS) rates, depending upon whether a
nonexcepted off-campus hospital outpatient department furnishes three
or four PHP services in a day. Lastly, we finalized several changes
beginning in CY 2024 to align coding, billing, and payment between PHPs
and intensive outpatient programs.
In the 2026 OPPS/ASC final rule with comment period (90 FR 53770
through 53780), we modified the payment rate methodology for
calculation of CMHC costs for PHP. We applied the 40 percent MPFS
Relativity Adjuster to the hospital-based PHP costs to determine the
CMHC costs for PHP.
2. Intensive Outpatient Program Services
Section 4124(b) of the CAA, 2023, amended section 1861(ff) of the
Act, establishing Medicare coverage for intensive outpatient services
effective for items and services furnished on or after January 1, 2024.
An intensive outpatient program (IOP) is a distinct and organized
program of psychiatric services for individuals who have an acute
mental illness, which includes, but is not limited to, conditions such
as depression, schizophrenia, and SUD. Intensive outpatient services
are not required to be provided in lieu of inpatient hospitalization.
Section 1861(ff)(4) of the Act defines intensive outpatient services as
the items and services described in section 1861(ff)(2) of the Act
prescribed by a physician for an individual determined (not less
frequently than every other month) by a physician to have a need for
such services for a minimum of 9 hours per week and provided under a
program described in paragraph (3) under the supervision of a physician
pursuant to an individualized, written plan of treatment established
and periodically reviewed by a physician (in consultation with
appropriate staff participating in such program), which plan sets forth
the physician's diagnosis, the type, amount, frequency, and duration of
the items and services provided under the plan, and the goals for
treatment under the plan. Section 1861(ff)(2) of the Act describes the
items and services included in intensive outpatient services. Section
1861(ff)(4)(C) of the Act specifies that an IOP is a program furnished
by a hospital to its outpatients, by a CMHC, by a Federally qualified
health center (FQHC), or by a rural health clinic (RHC) as distinct and
organized intensive ambulatory treatment service, offering less than
24-hour-daily care, in a location other than an individual's home or
inpatient or residential setting. Section 1861(ff)(3)(B) of the Act
defines a CMHC for purposes of this benefit. We refer readers to
sections 1833(t)(1)(B)(i), 1833(t)(2)(B), 1833(t)(2)(C), and
1833(t)(9)(A) of the Act and 42 CFR 419.21, for additional information
regarding IOP.
In the CY 2024 OPPS/ASC final rule with comment period (88 FR 81812
through 81857), we established payment and program requirements for the
IOP benefit furnished by a hospital to its outpatients, or by a CMHC,
an FQHC, or an RHC. In addition, we established Medicare Part B
coverage for IOP services provided by Opioid Treatment Programs (OTPs)
for the treatment of opioid use disorder (OUD).
Consistent with the statutory definition of intensive outpatient
services under section 1861(ff)(4) of the Act, we finalized regulations
at 42 CFR 410.44 to set forth the conditions and exclusions applicable
for intensive outpatient services, and at Sec. 424.24 to set forth the
content of the certification and plan of treatment requirements for
intensive outpatient services. We also revised certain existing
regulations at Sec. Sec. 410.2, 410.3, 410.10, 410.27, 410.150, and
419.21 to add a regulatory definition of intensive outpatient services
and to include intensive outpatient services in the regulations for
medical and other health services paid for under Medicare Part B, and
in the case of Sec. 419.21, under the OPPS. Additionally, we created
regulations at Sec. 410.111 to establish the requirements for coverage
of IOP services furnished in CMHCs, and at Sec. 410.173 to establish
conditions of payment for IOP services furnished in CMHCs. Lastly, we
revised Sec. 410.155 to exclude IOP services from the outpatient
mental health treatment limitation, consistent with the statutory
requirement of section 1833(c)(2) of the Act, as amended by section
4124(b)(3) of the CAA, 2023.
In addition, as discussed in greater detail in the following
sections, we established coding, billing, and payment policies for IOP
that align with the policies established for PHP provided in the same
settings. Specifically, we established four separate IOP APC per diem
payment rates at the same rates we proposed for the PHP APCs: one for
CMHCs for 3-service days and another for CMHCs for 4-service days (APC
5851 and APC 5852, respectively), and one for hospital-based IOPs for
3-service days and another for hospital-based IOPs for 4-service days
(APC 5861 and APC 5862, respectively). Similar to the policy finalized
for PHP, we finalized a policy to utilize the CMHC rates for 3-service
and 4-service IOP days as the MPFS rates, depending upon whether a
nonexcepted hospital outpatient department furnishes three or four IOP
services in a day.
[[Page 41902]]
For IOP services provided by an RHC or FQHC, we established a
three-service per day payment rate based on the same rate as APC 5861,
which is the three-service hospital-based IOP rate (Sec. 405.2462(j)).
In the CY 2025 PFS final rule, we established a four or more services
per day payment rate for an IOP provided by an RHC or FQHC based on the
same rate as APC 5862, which is the four or more services hospital-
based IOP rate (89 FR 98017 and 98018). Information regarding payment
policies for IOP services furnished by FQHCs and RHCs, including
information regarding proposed CY 2027 policies for those settings, can
be found in the CY 2027 PFS proposed rule, which is published elsewhere
in the Federal Register.
Furthermore, in the CY 2024 OPPS/ASC final rule with comment
period, we established a payment adjustment for IOPs provided by an OTP
based on three times the payment rate for APC 5861 beginning in CY 2024
(Sec. 410.67(d)(4)(i)(F)). We finalized regulations at Sec.
410.67(d)(4)(ii) to add that the payment amount for OTP intensive
outpatient services will be geographically adjusted using the
Geographic Adjustment Factor (GAF) described in Sec. 414.26. Lastly,
we amended Sec. 410.67(d)(4)(iii) to add that payment for OTP
intensive outpatient services is updated annually using the Medicare
Economic Index described in Sec. 405.504(d). Payment rates for IOP
provided in the OTP setting are updated as part of the OTP fee schedule
and are not addressed in this proposed rule.
In the 2026 OPPS/ASC final rule with comment period (90 FR 53770
through 53780), we modified the payment rate methodology for
calculation of CMHC costs for IOP. We applied the 40 percent MPFS
Relativity Adjuster to the hospital-based IOP costs to determine the
CMHC costs for IOP.
B. Coding and Billing for PHP and IOP Services Under the OPPS
In the CY 2024 OPPS/ASC final rule with comment period, we
finalized a billing requirement that all providers use condition code
41 to indicate that a claim is for partial hospitalization services and
use condition code 92 to identify intensive outpatient claims,
effective January 1, 2024. Since the statutory definitions of both IOP
and PHP generally include the same types of items and services covered,
we stated in the CY 2024 OPPS/ASC final rule with comment period that
we believe it is appropriate to align the programs using a consistent
list of services, so that level of intensity would be the only
differentiating factor between partial hospitalization services and
intensive outpatient services. The use of condition codes 41 for PHP
claims and 92 for IOP claims allows us to differentiate between these
services for billing purposes.
We recognize that the level of intensity of mental health services
that a patient requires may vary over time; therefore, we believe
utilizing a consolidated list of HCPCS codes to identify services under
both the IOP and PHP benefits supports a smooth transition for patients
when a change in the intensity of their services is necessary to best
meet their needs. For example, a patient receiving IOP services may
experience an acute mental health need that necessitates more intense
services through a PHP. Alternatively, an IOP patient that no longer
requires the level of intensity provided by the IOP can access less
intense mental health services, such as individual mental health
services. The full list of HCPCs codes recognized under the PHP and IOP
benefits can be found in the Medicare Claims Processing internet Only
Manual, Chapter 4, sections 260.1 and 261.1, respectively, and their
subsections, available at https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c04.pdf.
To qualify for payment for the IOP APC (5851, 5852, 5861, or 5862)
or the PHP APC (5853, 5854, 5863, or 5864), one service provided that
day must be from the Partial Hospitalization and Intensive Outpatient
Primary list. We refer readers to the CY 2024 OPPS/ASC final rule with
comment period for further discussion regarding our expectation that at
least one of the services on the PHP and IOP Primary list will be
indicated per day for patients who need the level of care offered by a
PHP or IOP program. The PHP and IOP Primary List can be found in the CY
2024 OPPS/ASC final rule with comment period at 88 FR 81821.
Beginning in CY 2024, we recognized caregiver training services and
Principal Illness Navigation (PIN) services as PHP and IOP services. We
explained that the reported costs associated with providing such
services are included when we calculate the PHP and IOP payment rates;
however, these services do not count toward the determination of
whether a PHP or IOP day is paid at the 3-service or 4-service rate. We
refer readers to the CY 2024 OPPS/ASC final rule with comment period
for a detailed discussion of this policy (88 FR 81823 through 81825).
As finalized in the CY 2024 OPPS/ASC final rule with comment period
(88 FR 81821 and 81822), if new codes are established that represent
the PHP and IOP services described under Sec. Sec. 410.43(a)(4) and
410.44(a)(4), respectively, such codes are added to the list of codes
recognized for payment for PHP or IOP through sub-regulatory guidance.
We note that coding updates frequently occur outside of the standard
rulemaking timeline. We adopted this sub-regulatory process to pay
expeditiously when new codes are created that describe any of the
services enumerated at Sec. Sec. 410.43(a)(4) and 410.44(a)(4), which
PHPs and IOPs, respectively, would provide. We explained that this
policy applies to new codes that are cross walked to a previously
included code, or whose code descriptor is substantially similar to a
descriptor for a code on the list or describes a service on the list.
We stated that any additional services not described at Sec.
410.43(a)(4) or Sec. 410.44(a)(4) would be added to the lists in
regulation through notice and comment rulemaking.
In the CY 2025 OPPS/ASC final rule with comment period (89 FR 94266
through 94268) and CY 2026 OPPS/ASC final rule with comment period (90
FR 53770 through 53780), we did not add any new services not described
at Sec. 410.43(a)(4) or Sec. 410.44(a)(4) to the list of PHP and IOP
services.
C. Proposed CY 2027 Payment Rates for PHP and IOP
For CY 2027, we propose to maintain the current payment rate
methodology that we use for calculating PHP and IOP payment rates for
hospital-based providers. It has been our longstanding policy since CY
2011 to pay separate PHP APC per diem payment rates for CMHCs and
hospital-based PHPs (75 FR 71992). As we explained in the CY 2026 OPPS/
ASC final rule with comment period, beginning in CY 2024, we applied
this payment structure to IOP because we expected (and subsequently
have observed) differences in resource use between CMHCs and hospital
OPDs for the provision of both PHP and IOP services (90 FR 53777).
As finalized in the CY 2026 OPPS/ASC final rule with comment period
(90 FR 53775 and 53776), we would apply the 40 percent MPFS Relativity
Adjuster to calculate PHP and IOP payment rates for CMHCs.
Specifically, we would multiply the CY 2027 rates for the hospital-
based PHP and IOP APCs by 0.4 to calculate the payment rates for the
CMHC PHP and IOP APCs.
1. Background
Beginning in CY 2024, we established four separate PHP APC per diem
payment rates: one for CMHCs for 3-
[[Page 41903]]
service days and another for CMHCs for 4-service days (APC 5853 and APC
5854, respectively), and one for hospital-based PHPs for 3-service days
and another for hospital-based PHPs for 4-service days (APC 5863 and
APC 5864, respectively). In addition, for hospital-based PHPs, we
finalized a policy to calculate payment rates using the broader OPPS
data set, instead of using hospital-based PHP data only. We explained
that using the broader OPPS data set allows CMS to capture data from
claims not identified as PHP, but that also include the service codes
and intensity required for a PHP day. Because we established consistent
coding and payment between the PHP and IOP benefits, we considered all
OPPS data for PHP days and non-PHP days that include three or more of
the same service codes. We established four separate IOP APC per diem
payment rates at the same rates we proposed for the PHP APCs: one for
CMHCs for 3-service days and another for CMHCs for 4-service days (APC
5851 and APC 5852, respectively), and one for hospital-based IOPs for
3-service days and another for hospital-based IOPs for 4-service days
(APC 5861 and APC 5862, respectively).
In the CY 2024 OPPS/ASC final rule with comment period (88 FR 81829
and 81830), we noted that the standard PHP day is typically four
services or more per day. We explained that we have historically
provided payment for three services a day for extenuating circumstances
when a beneficiary would be unable to complete a full day of PHP
treatment. As we stated in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66672), it was never our intention that days with only
three units of service should represent the number of services provided
in a typical PHP day. Our intention was to cover days that consisted of
three units of service only in certain limited circumstances. For
example, as we noted in the CY 2009 OPPS/ASC proposed rule (73 FR
41513), we believe 3-service days may be appropriate when a patient is
transitioning towards discharge (or days when a patient is at the
beginning of his or her PHP stay). Another example of when it may be
appropriate for a program to provide only three units of service in a
day is when a patient is required to leave the PHP early for the day
due to an unexpected medical appointment.
In the same CY 2024 OPPS/ASC final rule with comment period, we
also explained that prior to CY 2024, we historically prepared the data
by first applying PHP-specific trims and data exclusions and assessing
CCRs. We direct the reader to the CY 2016 OPPS/ASC final rule with
comment period (80 FR 70463 through 70465) for a more complete
discussion of these trims, data exclusions, and CCR adjustments. In
prior rules, we typically included a discussion of PHP-specific data
trims, exclusions, and CCR adjustments; we did not include that
discussion in the CY 2024 OPPS/ASC proposed rule or final rule with
comment period. We stated that these PHP-specific data trims and
exclusions addressed limitations as well as anomalies in the PHP data.
However, as noted earlier, we finalized a methodology for CY 2024 to
calculate hospital-based PHP payment rates for three services per day
and four services per day based on cost per day using the broader OPPS
data set. Accordingly, we did not apply PHP-specific trims and data
exclusions, but rather we applied the same trims and data exclusions
consistent with the OPPS.
We stated in the CY 2024 OPPS/ASC final rule with comment period
(88 FR 81830) that while no IOP benefit existed prior to the CAA, 2023,
the types of items and services included in IOP had been, and were,
paid for by Medicare either as part of the PHP benefit or under the
OPPS more generally. Additionally, we stated that prior to the CAA,
2023, CMS had begun gathering information from interested parties on
IOP under Medicare. In the CY 2023 OPPS/ASC proposed rule (87 FR
44679), we issued a comment solicitation on intensive outpatient mental
health treatment, including SUD treatment furnished by IOPs, to collect
information regarding whether there are any gaps in coding that may be
limiting access to needed levels of care for treatment of mental health
disorders or SUDs for Medicare beneficiaries, and specific information
about IOP services, such as the settings of care in which these
programs typically furnish services, the range of services typically
offered, and the range of practitioner types that typically furnish
these services.
In addition, in the same CY 2024 OPPS/ASC final rule with comment
period, we explained that along with the requirements for IOP mandated
by the CAA, 2023, we took into consideration the information we
received from the comment solicitation to construct an appropriate data
set to develop proposed rates for IOP. Since IOPs furnish the same
types of services as PHP, just at a lower intensity, we stated that we
believe it was appropriate to use the same data and methodology for
calculating payment rates for both PHP and IOP for CY 2024. We
explained that although PHP claims can be specifically identified,
there was no specific identifier or billing code to indicate IOP
services that may have been provided before CY 2024. However, we noted
that hospitals have been permitted to furnish and bill for many of
these services as outpatient services under the OPPS. Thus, we analyzed
a broader set of data that included both PHP and non-PHP days with
three or more services in order to calculate proposed payment for PHP
services. To establish consistent payment between PHP and IOP, we set
IOP payment rates at the same rates as PHP. We stated that the primary
goal in developing the payment rate methodology for IOP and PHP
services was to pay providers an appropriate amount relative to the
patients' needs, and to avoid cost inversion in future years. We stated
that setting the IOP payment rates equal to the PHP payment rates was
appropriate because IOP was a newly established benefit, and we did not
have definitive data on utilization. However, we explained that both
programs utilize the same services, but furnish them at different
levels of intensity, with different numbers of services furnished per
day and per week, depending on the program. Therefore, we stated that
we expect it would be appropriate to pay the same per diem rates for
IOP and PHP services unless future data analysis supports calculating
rates independently.
In the CY 2024 OPPS/ASC final rule with comment period (88 FR
81833) we established a policy of applying the 4-service day payment
rate (that is, payment for PHP APCs 5854 for CMHCs and 5864 for
hospitals, and IOP APCs 5852 for CMHCs and 5862 for hospitals) for days
with four or more services. For days with three or fewer services, we
apply the 3-service day payment rate (that is, payment for PHP APCs
5853 for CMHCs and 5863 for hospitals, and IOP APCs 5851 for CMHCs and
5861 for hospitals). As we noted in the CY 2024 OPPS/ASC final rule
with comment period, we expect days with fewer than three services
would be very infrequent, and we intend to monitor the provision of
these days among providers and individual patients.
In the CY 2025 OPPS/ASC final rule with comment period (89 FR
94269), for beneficiaries in a PHP or IOP, we maintained the payment
rate methodology finalized in the CY 2024 OPPS/ASC final rule with
comment period.
In the CY 2026 OPPS/ASC final rule with comment period (90 FR 53774
and 53775), we explained that the calculated CY 2026 geometric mean per
diem cost for CMHC PHP and IOP providers would result in an inversion
(that is, the
[[Page 41904]]
CMHC three-service geometric mean per diem costs were greater than the
CMHC four-service geometric mean per diem costs). We stated that we
believed the inverted geometric mean per diem costs were influenced by
the small number of CMHCs that bill Medicare for PHP and IOP services,
as well as CMHCs with low costs that first began billing Medicare for
services in CY 2024. We remedied this cost inversion and preserved our
longstanding payment policy of appropriately reflecting the observed
cost differences between the CMHC and hospital settings by applying the
40 percent MPFS Relativity Adjuster to the hospital-based PHP and IOP
costs to calculate the PHP and IOP payment rates for CMHCs.
2. CY 2027 Payment Rate Methodology for PHP and IOP
For CY 2027, we propose to maintain our current methodology of
calculating separate rates for hospitals and CMHCs. For the four
hospital-based PHP and IOP APCs (that is, APCs 5861, 5862, 5863, and
5864), we propose using the latest available cost information, from
cost reports beginning three fiscal years prior to the year that is the
subject of the rulemaking, and CY 2025 OPPS claims to update the
payment rates. This proposal is consistent with the overall proposed
use of cost data for the OPPS, which is discussed in section II.A.1.a.
of this proposed rule.
In accordance with the methodology finalized in the CY 2024 OPPS/
ASC final rule with comment period, we propose to base the payment rate
for each hospital-based PHP APC on the geometric mean per diem cost for
days with three services and four or more services. We propose to use
the broader set of OPPS data to calculate the geometric mean costs for
hospital outpatient departments, and we propose to apply the same trims
and exclusions consistent with the OPPS. We also propose to set the
payment rates for the hospital-based IOP APCs based on the geometric
mean per diem cost for PHP days with three services and four or more
services.
For the four CMHC PHP and IOP APCs (that is, APCs 5851, 5852, 5853,
and 5854), we propose to calculate the CY 2027 geometric mean per diem
costs based on 40 percent of the corresponding hospital-based PHP and
IOP APCs (APCs 5861, 5862, 5863, and 5864, respectively), in keeping
with the methodology established in the CY 2026 OPPS/ASC final rule
with comment period (90 FR 53775 and 53776). We implemented this change
in methodology for calculating the four CMHC PHP and IOP APCs to avoid
possible future cost inversions (that is, the cost for 3-service days
being greater than the cost for 4-service days). We believe this
methodology would continue to be generally appropriate for estimating
CMHC costs and aligns with the methodology that is used for other
nonexcepted OPPS services furnished by a nonexcepted off-campus
hospital outpatient department. For additional information on our
analyses of the data used for setting the PHP and IOP payments rates
for CY 2026 and application of the 40 percent MPFS Relativity Adjuster,
we refer readers to sections VIII.C.2. and VIII.C.3. of the CY 2026
OPPS/ASC final rule with comment period (90 FR 53774 through 53779).
Lastly, we propose that if more recent hospital cost data
subsequently become available after the publication of this proposed
rule, we would consider using such updated data as appropriate to
determine the CY 2027 payment rates for the four hospital-based PHP and
IOP APCs.
Table 57 shows the proposed calculated geometric mean per diem
costs for hospital-based PHP and IOP APCs, and the proposed geometric
mean per diem costs for CMHC PHP and IOP APCs with application of the
40 percent MPFS Relativity Adjuster for this CY 2027 OPPS/ASC proposed
rule. Additional information about the data trims, data exclusions, and
CCR adjustments applicable to the data used for this proposed rule can
be found online at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.\2\
[GRAPHIC] [TIFF OMITTED] TP07JY26.087
D. Proposed Outlier Policy for CMHCs
For CY 2027, we propose to maintain the calculations of the CMHC
outlier percentage, cutoff point and percentage payment amount, outlier
reconciliation, outlier payment cap, and fixed dollar threshold
according to previously established policies to include PHP and IOP
services. We refer readers to the CY 2024 OPPS/ASC final rule with
comment period (88 FR 81834 through 81836) for more details on CMHC
outlier policies, and to section II.G. of this proposed rule for our
general policies for hospital outpatient outlier payments.
[[Page 41905]]
1. Background
As discussed in the CY 2004 OPPS/ASC final rule with comment period
(68 FR 63469 and 63470), we created a separate outlier policy specific
to the estimated costs and OPPS payments provided to CMHCs. We
designated a portion of the estimated OPPS outlier threshold
specifically for CMHCs, consistent with the percentage of projected
payments to CMHCs under the OPPS each year, excluding outlier payments,
and established a separate outlier threshold for CMHCs.
2. CMHC Outlier Percentage
In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59267
and 59268), we described the current outlier policy for hospital
outpatient payments and CMHCs. We note that we also discussed our
outlier policy for CMHCs in more detail in section VIII.C. of that same
final rule with comment period (82 FR 59381). We set our projected
target for all OPPS aggregate outlier payments at 1.0 percent of the
estimated aggregate total payments under the OPPS (82 FR 59267). This
same policy was also reiterated in the CY 2019 OPPS/ASC final rule with
comment period (83 FR 58996), the CY 2020 OPPS/ASC final rule with
comment period (84 FR 61350), and the CY 2021 OPPS/ASC final rule with
comment period (85 FR 86082). We are not proposing any changes to the
CMHC outlier percentage policy for CY 2027.
3. Cutoff Point and Percentage Payment Amount
Also described in the CY 2018 OPPS/ASC final rule with comment
period (82 FR 59381), our policy has been to pay CMHCs for outliers if
the estimated cost of the day exceeds a cutoff point. In CY 2006, we
set the cutoff point for outlier payments at 3.4 times the highest CMHC
PHP APC payment rate implemented for that calendar year (70 FR 68551).
For CY 2018, the highest CMHC PHP APC payment rate was the payment rate
for CMHC PHP APC 5853. In addition, in CY 2002, the final OPPS outlier
payment percentage for costs above the multiplier threshold was set at
50 percent (66 FR 59889). In CY 2018, we continued to apply the same 50
percent outlier payment percentage that applies to hospitals to CMHCs
and continued to use the existing cutoff point (82 FR 59381).
Therefore, for CY 2018, we continued to pay for partial hospitalization
services that exceeded 3.4 times the CMHC PHP APC payment rate at 50
percent of the amount of CMHC PHP APC geometric mean per diem costs
over the cutoff point. This same policy was also reiterated in the CY
2019 OPPS/ASC final rule with comment period (83 FR 58996 and 58997),
the CY 2020 OPPS/ASC final rule with comment period (84 FR 61351), the
CY 2021 OPPS/ASC final rule with comment period (85 FR 86082 and
86083), the CY 2022 OPPS/ASC final rule with comment period (86 FR
63670), the CY 2023 OPPS/ASC final rule with comment period (87 FR
72004), and the CY 2024 OPPS/ASC final rule with comment period (88 FR
81835). In the CY 2024 OPPS/ASC final rule with comment period, we
extended this policy to intensive outpatient services. We are not
proposing any changes to the cutoff point and payment amount policy for
CY 2027.
4. Outlier Reconciliation
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594
through 68599), we established an outlier reconciliation policy to
address charging aberrations related to OPPS outlier payments. We
addressed vulnerabilities in the OPPS outlier payment system that led
to differences between billed charges and charges included in the
overall CCR, which are used to estimate cost and apply to all hospitals
and CMHCs paid under the OPPS. We initiated steps to ensure that
outlier payments appropriately account for the financial risk when
providing an extraordinarily costly and complex service but are only
being made for services that legitimately qualify for the additional
payment.
For a comprehensive description of outlier reconciliation, we refer
readers to the CY 2023 OPPS/ASC and CY 2019 OPPS/ASC final rules with
comment period (83 FR 58874 and 58875 and 81 FR 79678 through 79680,
respectively). We are not proposing any changes to the outlier
reconciliation policy for CY 2027.
5. Outlier Payment Cap
In the CY 2017 OPPS/ASC final rule with comment period, we
implemented a CMHC outlier payment cap to be applied at the provider
level, such that in any given year, an individual CMHC will receive no
more than a set percentage of its CMHC total per diem payments in
outlier payments (81 FR 79692 through 79695). Our analysis of CY 2014
claims data found that CMHC outlier payments began to increase
similarly to the way they had prior to CY 2004. This was due to
inflated costs from three CMHCs that accounted for 98 percent of all
CMHC outlier payments that year and received outlier payments that
ranged from 104 percent to 713 percent of their total per diem
payments. To balance our concern about disadvantaging CMHCs with our
interest in protecting the benefit from excessive outlier payments and
to mitigate potential inappropriate outlier billing vulnerabilities, we
finalized the CMHC outlier payment cap at 8 percent of the CMHC's total
per diem payments (81 FR 79694 and 79695) to limit the impact of
inflated CMHC charges on outlier payments. This cap was established
after detailed analysis of claims data, which showed that a cap set at
8 percent would effectively address excessive outlier payments while
minimally impacting CMHCs with legitimate high-cost cases. The cap
applies to each CMHC's total per diem payments, which include both the
Medicare payment portion and the beneficiary cost-sharing amount. The 8
percent cap continues to be calculated and applied on a calendar year
basis, with outlier payments monitored throughout the year to ensure
compliance with the cap.
This outlier payment cap only affects CMHCs; it does not affect
other provider types (that is, hospital-based PHPs) and is in addition
to and separate from the current outlier policy and reconciliation
policy in effect. We are not proposing any changes to the outlier
payment cap for CY 2027.
6. Fixed-Dollar Threshold
In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59267
and 59268), for the hospital outpatient outlier payment policy, we set
a fixed-dollar threshold in addition to an APC multiplier threshold.
Fixed-dollar thresholds are typically used to drive outlier payments
for very costly items or services, such as cardiac pacemaker
insertions. Currently, for CY 2026, CMHC PHP APCs (5853 or 5854) and
IOP APCs (5851 or 5852) are the only APCs for which CMHCs may receive
payment under the OPPS, and these APCs are for providing a defined set
of services that are relatively low cost when compared to other OPPS
services. Because of the relatively low cost of CMHC services that are
used to comprise the structure of CMHC PHP APCs (5853 or 5854) and IOP
APCs (5851 or 5852), it is not necessary to also impose a fixed-dollar
threshold on CMHCs. Therefore, in the CY 2018 OPPS/ASC final rule with
comment period, we did not set a fixed-dollar threshold for CMHC
outlier payments (82 FR 59381). This same policy was also reiterated in
the CY 2020 OPPS/ASC final rule with comment period (84 FR 61351), the
CY 2021 OPPS/ASC final rule with comment period (85 FR 86083), the CY
2022 OPPS/ASC final rule with comment period (86 FR
[[Page 41906]]
63508), the CY 2023 OPPS/ASC final rule with comment period (87 FR
72004), the CY 2024 OPPS/ASC final rule with comment period (88 FR
81836), the CY 2025 OPPS/ASC final rule with comment period (89 FR
94271), and the CY 2026 OPPS/ASC final rule with comment period (90 FR
53780). We are not proposing any changes to the fixed-dollar threshold
policy for CY 2027.
IX. Services That Will Be Paid Only as Inpatient Services
A. Background
The Inpatient Only (IPO) list was established in rulemaking as part
of the initial implementation of the Outpatient Prospective Payment
System (OPPS) in 2000, pursuant to the Secretary's authority under
section 1833(t)(1)(B)(i) of the Act (65 FR 18455) to determine the
services covered and paid for under the OPPS. The IPO list was created
to identify services excluded from payment under the OPPS by
designating certain procedures as ``inpatient only'' and therefore
payable only when furnished in the inpatient hospital setting under
Medicare Part A (65 FR 18442). Services included on the IPO list were
those determined to require inpatient care because of the invasive
nature of the procedures, the underlying physical condition of the
Medicare patient, or the need for at least 24 hours of postoperative
recovery time or monitoring before the patient can be safely discharged
(70 FR 68695). The creation of the IPO list was based on the premise
(rooted in the practice of medicine at that time) that Medicare should
not pay for procedures furnished as outpatient services when those
procedures were being performed on an inpatient basis virtually all of
the time for the Medicare population because performing these
procedures on an outpatient basis was not safe or appropriate, and
therefore not reasonable and necessary under Medicare rules (86 FR
63671; 63 FR 47571). Designation of a service as inpatient only does
not preclude the service from being furnished in a hospital outpatient
setting but means that Medicare will not make payment for the service
if it is furnished to a Medicare beneficiary in the hospital outpatient
setting (65 FR 18443). Conversely, the absence of a procedure from the
list should not be interpreted as identifying that procedure as
appropriately performed only in the hospital outpatient setting (70 FR
68696). Rather, from the beginning, we have emphasized our expectation
that, in every case, the physician or surgeon and hospital will
exercise their professional judgment and assess the risk of the
procedure or service to the individual patient, taking into account the
site of service and act in that patient's best interest (65 FR 18456).
We have also previously stated that for procedures that are not
included on the inpatient list, we rely on the practitioner's judgment
to determine on a patient-by-patient basis whether or not a particular
procedure would be most appropriately performed in the inpatient
setting (70 FR 68698).
In the CY 2021 OPPS/ASC final rule with comment period (85 FR 86084
through 86088), we finalized a policy to eliminate the IPO list over
the course of 3 years (85 FR 86093). We revised our regulation at 42
CFR 419.22(n) to state that, effective January 1, 2021, the Secretary
shall eliminate the list of services and procedures designated as
requiring inpatient care through a 3-year transition. As part of the
first phase of this elimination of the IPO list, we removed 298 codes,
including 266 musculoskeletal-related services, from the list beginning
in CY 2021.
In the 2022 OPPS/ASC final rule with comment period, we halted the
elimination of the IPO list and, after clinical review of the services
removed from the IPO list in CY 2021 as part of the first phase of
eliminating the IPO list, we returned most services removed from the
IPO list in 2021 back to the IPO list beginning in CY 2022 (86 FR 63671
through 63736). We amended the regulation at Sec. 419.22(n) to remove
the reference to the elimination of the list of services and procedures
designated as requiring inpatient care through a 3-year transition (86
FR 63676). We also finalized our proposal to codify the following five
longstanding criteria for determining whether a service or procedure
should be removed from the IPO list in the regulation at Sec. 419.23
(86 FR 63672):
Most outpatient departments are equipped to provide the
service or procedure to the Medicare population.
The simplest service or procedure described by the code
may be performed in most outpatient departments.
The service or procedure is related to codes that CMS has
already removed from the Inpatient Only list.
CMS determines that the service or procedure is being
performed in numerous hospitals on an outpatient basis.
CMS determines that the service or procedure can be
appropriately and safely performed in an ambulatory surgical center,
and is specified as a covered ambulatory surgical procedure, or CMS has
proposed to specify it as a covered ambulatory surgical procedure.
For CY 2023 through CY 2025, we maintained the IPO list and
continued to evaluate services brought forth by interested parties for
removal using the five longstanding criteria (87 FR 72004 through
72012; 88 FR 81858 through 81863; and 89 FR 94271 through 94275).
In the CY 2026 OPPS/ASC final rule with comment period, we again
finalized a policy to eliminate the IPO list over the course of three
years, beginning by removing 285 mostly musculoskeletal procedures for
CY 2026 (90 FR 53780 through 53802). As we stated in that rule, since
the creation of the IPO list, there have been many new technologies and
advances in surgical techniques and surgical care protocols, including
the use of minimally invasive surgical procedures such as laparoscopy,
improved perioperative anesthesia, expedited rehabilitation protocols,
as well as significant enhancements to postoperative processes such as
improvements in pain management, that have reduced the inpatient length
of stay and the need for postoperative care following a surgical
service. We also recognize that since we previously considered
elimination of the IPO list in the CY 2021 OPPS/ASC final rule with
comment period, there have also been other innovations in the practice
of medicine; for example, innovations in infection control spurred by
the COVID-19 PHE. Additionally, we believe that there are a number of
safety mechanisms that will continue to ensure the safety of our
beneficiaries and the quality of care, including physician judgment,
State and local regulations, accreditation requirements, medical
malpractice laws, hospital conditions of participation, and other CMS
initiatives (90 FR 53857). Given the significant number of services on
the list and that we would establish new reimbursement rates for those
services under the OPPS, we recognized that interested parties may need
time to adjust to the removal of procedures from the list. Providers
may need time to prepare to furnish newly removed procedures on an
outpatient basis, update their billing systems, and gain experience
with newly removed procedures eligible to be paid under either the IPPS
or OPPS. Therefore, we finalized our proposal to transition services
off the IPO list over a 3-year period (90 FR 53783). We also refer
readers to the CY 2026 OPPS/ASC final rule with comment period for
further discussion on operational and beneficiary considerations,
including the continuation of 2-midnight exemptions for services
removed from
[[Page 41907]]
the IPO list, effects on beneficiary cost-sharing, and implications on
the 3-day stay requirement for skilled nursing facilities (90 FR 53786
through 53788). After consideration of the comments received and the
issues discussed, in the CY 2026 OPPS/ASC final rule with comment
period, we finalized our proposal eliminating the criteria for removing
procedures from the IPO list as it was then codified at Sec. 419.23
and amended Sec. 419.22(n) to state that, effective on January 1,
2026, the Secretary shall eliminate the list of services and procedures
designated as requiring inpatient care through a 3-year transition
period, with the list eliminated in its entirety by January 1, 2029 (90
FR 53788 to 53789 and 53086; 91 FR 8384). For further discussion on the
elimination of the IPO list, please refer to section IX. of the CY 2026
OPPS/ASC final rule with comment period (90 FR 53780 through 53802).
B. Proposed CY 2027 Changes to IPO List
Currently, there are 1,438 services remaining on the IPO list. For
CY 2027, we propose to remove approximately half of the remaining IPO
services as the second phase of the elimination of the IPO list.
Therefore, we propose to remove 637 services from the following
clinical families: auditory, digestive, endocrine, female genital,
hemic and lymphatic systems, integumentary, male genital, maternity
care and delivery, mediastinum and diaphragm, respiratory, and urinary.
If we finalize our proposal to remove these services for CY 2027, the
majority of remaining services are more complicated in nature, and we
believe the services in these clinical families may require a lengthier
review process and potential changes to our current APCs in order to
determine an appropriate APC assignment. For example, some of the
remaining procedures for removal in CY 2028 would be from the
neurological family, cardiovascular family, solid organ, intestinal,
and islet cell transplants and related services. We believe these
services require additional considerations due to their complex
clinical nature and resources required. We expect that these remaining
clinical families and services would be removed from the IPO list for
CY 2028, during the third and final phase of the elimination.
The clinical families proposed for the second phase of the
elimination of the IPO list were selected based on stakeholder feedback
and concerns regarding proper APC placement. In the CY 2026 OPPS/ASC
proposed rule, we solicited comment on the order of removal of
additional clinical families of services, and/or specific services, for
each of the CY 2027 and CY 2028 rulemaking cycles (90 FR 33669). We
received comments requesting that we wait to remove certain invasive
procedures involving craniectomy, craniotomy, and/or burr holes and
cardiovascular procedures until the last phase, and we stated we would
take the suggestions into consideration in future rulemaking (90 FR
53788). After further consideration, we agree with the commenters that
we should wait to remove these more clinically complex and unique
procedures, including the neurological and cardiovascular procedures,
until the final phase. We believe that the complicated nature of the
services in these clinical families may require a lengthier review
process and potential changes to our current APCs in order to determine
an appropriate APC assignment. Additionally, the clinical families
listed above and proposed for removal in CY 2027 include multiple
procedures that have been previously recommended by interested parties
for removal from the IPO list. Based on our review, we also believe
that the procedures in these clinical families require less adjustment
to existing APCs compared to those clinical families we propose to
remove in CY 2028, including the neurological and cardiovascular
clinical families, meaning, they have clinical similarities and
resource needs similar to that of existing procedures payable under the
OPPS. As these groups of services are the next most clinically similar
families, they are the natural next step in the phase out of the IPO.
Therefore, we propose to remove selected less-complex services in the
auditory, digestive, endocrine, female genital, hemic and lymphatic
systems, integumentary, male genital, maternity care and delivery,
mediastinum and diaphragm, respiratory, and urinary clinical families
from the IPO list for CY 2027 and are maintaining the remaining
clinical families for CY 2027. If we finalize our policy as proposed,
we expect to address all of the remaining clinical families and their
removal during CY 2028 rulemaking.
As we have previously stated, when removing a service from the IPO
list, we assign the service to an APC and include it as a payable
procedure under the OPPS (67 FR 66740). As stated in previous
rulemaking, services that are no longer included on the IPO list are
payable in either the inpatient or hospital outpatient setting subject
to the general coverage rules requiring that any procedure be
reasonable and necessary, and payment should be made pursuant to the
otherwise applicable payment policies (86 FR 63675). We determined the
APC assignment for services removed from the IPO list by evaluating the
clinical similarity and resource costs of the service compared to other
services paid under the OPPS and reviewing the Medicare Severity
Diagnosis Related Groups (MS-DRG) rate for the service under the IPPS.
It should be noted, however, that we would generally expect the cost to
provide a service in the outpatient setting to be less than the cost to
provide the service in the inpatient setting (67 FR 66740).
Additionally, we are continuing to seek comments on whether we should
restructure or create any new APCs or C-APCs to allow for efficient
OPPS payment for services that are removed from the IPO list to account
for this significant increase in services that will now be eligible for
OPPS payment.
In summary, we propose to remove 637 services from the IPO list for
CY 2027 as the second phase of the elimination of the IPO list. These
services and their proposed status indicators and APC assignments (if
applicable) are listed in the public use file titled ``Proposed
Procedures for Removal from the IPO List for CY 2027'', which is
available on the CMS website. The services proposed for removal from
the IPO list for CY 2027 and their proposed status indicators and APC
assignments (if applicable) are also included in Addendum B of this
proposed rule. The complete list of codes that describe services that
are proposed to be paid by Medicare in CY 2027 as Inpatient Only
services is included as Addendum E to this proposed rule.
X. Nonrecurring Policy Changes
A. Method To Control Unnecessary Increases in the Volume of Outpatient
Services Furnished in Excepted Off-Campus Provider-Based Departments
(PBDs)
1. Background
In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59004
through 59015), we adopted a method to control unnecessary increases in
the volume of clinic visit services furnished in excepted off-campus
provider-based departments (PBDs). We refer readers to the CY 2019
OPPS/ASC final rule with comment period for a detailed discussion of
the background, legislative provisions, and payment policies we
developed to address unnecessary increases in the volume of covered
outpatient department (OPD) services. Below we discuss the policy we
[[Page 41908]]
finalized in the CY 2019 OPPS/ASC final rule with comment period and
its expanded application under the OPPS in subsequent years.
In the CY 2019 OPPS/ASC final rule with comment period, we
finalized a policy to use our authority under section 1833(t)(2)(F) of
the Act to adopt a method to control unnecessary increases in the
volume of covered OPD services. We applied an amount equal to the site-
specific Medicare Physician Fee Schedule (PFS) payment rate for
nonexcepted items and services furnished by a nonexcepted off-campus
PBD (the PFS payment rate) for the clinic visit service, as described
by HCPCS code G0463, when provided at an off-campus PBD excepted from
section 1833(t)(21) of the Act (departments that bill the modifier
``PO'' on claim lines). However, we phased in the application of the
reduction in payment for the clinic visit service described by HCPCS
code G0463 in the excepted provider-based department setting over 2
years. For CY 2019, the payment reduction was phased-in by applying 50
percent of the total reduction in payment that would have applied if
these departments were paid the site-specific PFS rate for the clinic
visit service. The PFS-equivalent rate was 40 percent of the OPPS
payment for CY 2019 (that is, 60 percent less than the OPPS rate). We
provided for a 2-year phase-in of this policy under which one-half of
the total 60 percent payment reduction (a 30 percent reduction) was
applied in CY 2019. These departments were paid approximately 70
percent of the OPPS rate (100 percent of the OPPS rate minus the 30
percent payment reduction that was applied in CY 2019) for the clinic
visit service in CY 2019.
For CY 2020, the second year of the 2-year phase-in, we stated that
we would apply the total reduction in payment that is applied if these
departments (departments that bill the modifier ``PO'' on claim lines)
are paid the site-specific PFS rate for the clinic visit service
described by HCPCS code G0463. For CY 2020 and subsequent years, the
PFS-equivalent rate was 40 percent of the proposed OPPS payment (that
is, 60 percent less than the OPPS rate).
In addition, as we stated in the CY 2019 OPPS/ASC final rule with
comment period (83 FR 59013), we implemented this policy in a non-
budget neutral manner. We did so to ensure that our method for
controlling the unnecessary growth in the volume of clinic visits
furnished by excepted off-campus PBDs did not simply increase other
unnecessary expenditures within the OPPS, thus driving different
utilization-distorting decisions.
In the CY 2023 OPPS/ASC final rule with comment period (87 FR
71748), we finalized a policy which provided that off-campus PBDs
(departments that bill the modifier ``PO'' on claim lines) of rural
Sole Community Hospitals (SCHs), as described under 42 CFR 412.92 and
designated as rural for Medicare payment purposes, are exempt from the
clinic visit payment policy that applies a PFS-equivalent payment rate
for the clinic visit service, as described by HCPCS code G0463, when
provided at an off-campus PBD excepted from section 1833(t)(21) of the
Act. For the full discussion of this policy, we refer readers to the CY
2023 OPPS/ASC final rule with comment period (87 FR 72047 through
72051). For CY 2024 and subsequent years, we continued to exempt
excepted off-campus PBDs of rural SCHs from the clinic visit payment
policy.
In the CY 2026 OPPS/ASC final rule with comment period (90 FR
53448), we finalized a policy to use our authority under section
1833(t)(2)(F) of the Act to adopt a method to control unnecessary
increases in the volume of covered OPD services for additional
services. We finalized a policy for CY 2026 and subsequent years to
apply an amount equal to the site-specific PFS payment rate for
nonexcepted items and services furnished by a non-excepted off-campus
PBD (the PFS payment rate) for any HCPCs codes assigned to the drug
administration services APCs, when provided at an off-campus PBD
excepted from section 1833(t)(21) of the Act (departments that bill the
modifier ``PO'' on claim lines) (90 FR 53821). In the CY 2026 OPPS/ASC
final rule with comment period (90 FR 53824), we also finalized a
policy which provided that off-campus PBDs (departments that bill the
modifier ``PO'' on claim lines) of rural SCHs, as described under 42
CFR 412.92 and designated as rural for Medicare payment purposes, are
exempt from the volume control method policy for drug administration
services that applies a PFS-equivalent payment rate for the drug
administration services APCs (5691-5694), when provided at an off-
campus PBD excepted from section 1833(t)(21) of the Act. For the full
discussion of both policies, we refer readers to the CY 2026 OPPS/ASC
final rule with comment period (90 FR 53802 through 53824).
We noted in the CY 2026 OPPS/ASC final rule with comment period (90
FR 53810 through 53812) that section 1833(t)(2)(F) of the Act provides
authority to implement this policy. The U.S. Court of Appeals for the
District of Columbia Circuit held in American Hospital Ass'n v. Azar
that a service-specific, non-budget-neutral reduction of the
reimbursement rate for OPD services ``qualifies as a `method for
controlling unnecessary increases in the volume of covered [outpatient]
services'' under that provision. 964 F.3d 1230, 1245 (D.C. Cir. 2020)
(quoting section 1833(t)(2)(F) of the Act, 42 U.S.C. 1395l(t)(2)(F)).
The D.C. Circuit reasoned in part that ``[t]he lower the reimbursement
rate for a service, the less the incentive to provide it, all else
being equal[,]'' and ``[r]educing the reimbursement rate . . . is
naturally suited to addressing unnecessary increases in the overall
volume of a service provided by hospitals.'' Id. at 1241. It ultimately
concluded that the policy ``falls comfortably within the plain text''
of section 1833(t)(2)(F) of the Act, id. at 1241, ``and `fits the
design of the statute as a whole . . . and its object and policy,'' id.
at 1245 (quoting Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 418
(1993)). We noted in the CY 2026 OPPS/ASC final rule with comment
period (90 FR 53810) that we continue to believe that our
interpretation of the Act is the best one, and that this policy falls
well within the Act's delegation to the Secretary to ``develop a method
for controlling unnecessary increases in the volume of covered OPD
services''.
2. Expanding the Method To Control Unnecessary Increases in the Volume
of Outpatient Services Furnished in Excepted Off-Campus Provider-Based
Departments
As described in the CY 2019 OPPS/ASC final rule with comment
period, we found that earlier rulemaking efforts were insufficient to
control the unnecessary growth of certain covered OPD services and as a
result we implemented a method to control for unnecessary growth in
covered OPD services by adjusting the payment rate for clinic visits in
excepted off-campus PBDs to the PFS-equivalent rate rather than the
higher OPPS rate. While this regulatory change has had a positive
impact, we noted in CY 2026 OPPS/ASC proposed rule that there is
evidence of continued unnecessary growth in the volume of OPD services
driven by site-of-service payment differentials rather than clinical
need for other service families.
We continue to be concerned that beneficiaries are being driven
into higher cost settings of care because of financial incentives when
they could safely receive care in a lower cost setting. This creates
greater financial burden both for Medicare and for
[[Page 41909]]
beneficiaries in the form of increased coinsurance. Volume increases
that seek to take advantage of financial incentives created by payment
policy rather than clinical need are unnecessary and therefore warrant
policy changes to address these increases. As the D.C. Circuit
explained, ``[i]t is reasonable to think that Congress . . . would have
wanted the agency to avoid causing unnecessary volume growth with its
own reimbursement practices.'' Am. Hosp. Ass'n v. Azar, 964 F.3d at
1245. Accordingly, for CY 2026, we finalized a policy to remove this
differential for drug administration services delivered in excepted
PBDs. We are continuing to study and identify services that we believe
have experienced unnecessary growth in volume driven by site-of-service
payment differentials rather than clinical need.
In the CY 2026 OPPS/ASC proposed and final rules, we indicated we
are particularly concerned about the services within the imaging
without contrast APCs (APCs 5521-5524).
Imaging without contrast services are often high-volume, low-
intensity services that can be provided in OPDs or freestanding
offices. In the CY 2026 OPPS/ASC proposed rule, we stated that we are
concerned that these services have experienced unnecessary growth and
that a volume control method may be appropriate to apply in the future
(90 FR 33690). Additionally, we solicited comments on whether it might
be appropriate to apply a volume control method to the imaging without
contrast APCs in the future.
Many healthcare services can be performed in multiple settings.
Even when there is little variation in the service provided across
settings, the Federal Supplementary Medical Insurance Trust Fund and
Medicare beneficiaries typically pay more when that service is
performed in an OPD than when the same service is performed in a
physician office. That payment differential creates an incentive for
providers to shift the care of beneficiaries to an OPD rather than a
physician office or ASC, even if the services can be safely performed
in the physician office or an ASC. Generally, 20 percent of any
increased payment is the responsibility of the beneficiary in the form
of coinsurance. Taking into account that any payment differential
occurs across millions of claims for a variety of services each year,
this threatens to create a significant source of unnecessary spending
both by Medicare beneficiaries in the form of unnecessarily high
copayments and by Medicare in the form of unnecessarily high Medicare
payments for services that are being performed in an OPD because of the
site-of-care payment difference.
In the CY 2019 OPPS/ASC final rule with comment period, we
discussed vertical consolidation and the practice of hospitals
purchasing freestanding physician practices and converting the billing
from the PFS to higher paying OPD visits. These conversions shift
market share from freestanding physician offices to OPDs. We stated
that we believed there was a correlation among the increasing volume of
OPD clinic visits, vertical integration, and the higher OPPS payment
rates for clinic visits. More favorable reimbursement for hospital-
owned sites compared to physician-owned sites has been shown to
encourage hospitals' acquisition of physician
practices.125 126 Once a practice is acquired and designated
as an OPD, physician services can be billed at higher hospital-based
rates. This type of consolidation has been associated with higher
Medicare spending and more intense treatment
patterns.127 128 129
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\125\ https://www.healthaffairs.org/doi/10.1377/hlthaff.2016.0830.
\126\ https://onlinelibrary.wiley.com/doi/10.1111/1475-6773.13613.
\127\ https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2463591.
\128\ https://www.healthaffairs.org/doi/10.377/hlthaff.2020.01183.
\129\ https://onlinelibrary.wiley.com/doi/10.1111/1475-6773.14172.
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The impact of vertical integration and the increases in volume of
outpatient services extends to multiple clinic families. Studies have
shown that, after vertical integration, the number of imaging tests
performed in hospital sites of care increased while the number of
procedures performed in nonhospital sites of care decreased.\130\
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\130\ https://pmc.ncbi.nlm.nih.gov/articles/PMC9924392/.
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Our policy in the CY 2019 OPPS/ASC final rule with comment period
to pay for clinic visits in excepted off-campus PBDs at the PFS-
equivalent rate addressed the financial incentive for only one type of
service in one outpatient setting. However, the share of other
ambulatory services billed under the OPPS has continued to increase. We
built upon this policy in the CY 2026 OPPS/ASC proposed rule to address
the unnecessary growth in drug administration services. Like with
clinic visit and drug administration services, we believe the
difference in payment between OPDs and freestanding offices creates a
strong incentive for providers to shift imaging without contrast
services to the higher-cost setting.
For CY 2027, we have examined the growth in imaging without
contrast services provided in excepted PBDs. Imaging without contrast
services are diagnostic imaging procedures that do not require the
administration of contrast agents and instead rely on standard imaging
modalities such as X-ray, ultrasound, computed tomography (CT),
magnetic resonance imaging (MRI), and dual-energy X-ray absorptiometry
scans (DXA) to produce clinically meaningful images. These services are
generally low- to moderate-complexity and are routinely used to
evaluate a wide range of conditions, including musculoskeletal
injuries, organ structure, and disease screening. Imaging without
contrast services can be safely and effectively furnished in multiple
settings, including freestanding physician offices and hospital OPDs,
without compromising diagnostic quality or patient safety.
For example, in 2023, for transthoracic echocardiograms (HCPCS
93306), a high-volume imaging without contrast service frequently
provided in OPDs and freestanding physician offices, Medicare paid 294
percent more in an OPD than in a freestanding office.\131\ HCPCS code
77080, which describes a DXA scan measuring bone density at the axial
skeleton (hips, pelvis, spine), is the most frequently billed imaging
without contrast code in excepted PBDs. In 2025, this service had a
physician office payment rate of around $30 and an OPPS payment rate of
approximately $106, making the same scan more than three times as
expensive in the OPD than in the physician office. Based on our claims
data analysis, the volume of this service has grown by over 55 percent
in excepted PBDs between 2016 and 2025. Conversely, from 2016 through
2024, the volume of HCPCS code 77080 has only grown by 2 percent in the
freestanding physician office setting. This service can be and
routinely is safely performed in either setting, but there is a clear
financial incentive to perform this service in excepted PBDs due to
substantially higher payment in the outpatient setting compared to the
physician office setting.
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\131\ https://www.medpac.gov/wp-content/uploads/2023/06/Jun23_Ch8_MedPAC_Report_To_Congress_SEC.pdf.
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We estimate that 70 HCPCS codes account for over 95 percent of the
volume of imaging without contrast services provided in excepted PBDs.
These codes comprise the overwhelming majority of imaging without
contrast services provided in excepted PBDs. From 2016 to 2025, the
provision of these services grew over 38 percent. From 2016 to 2025,
these increases in volume have resulted in a
[[Page 41910]]
33 percent increase in spending, corresponding to approximately $126
million in additional spending in CY 2025. This growth in the volume of
imaging without contrast services in excepted PBDs can largely be
attributed to the financial incentive to furnish low-complexity imaging
services in OPDs rather than physician offices.
We considered whether other factors, such as coding changes,
updates to clinical practice guidelines, or shifts in beneficiary case
mix, might explain this growth. However, we believe these alternative
explanations are unlikely to account for the observed patterns. Our
analysis focuses on a stable set of high-volume HCPCS codes that
consistently represent the vast majority of imaging without contrast
services over time, limiting the likelihood that coding changes are
driving the increase. In addition, we are not aware of any broad
changes in clinical guidelines during this period that would warrant
substantial increases in the use of routine, low- to moderate-
complexity imaging services across these modalities. Finally, although
there may be some variation in beneficiary characteristics over time,
the magnitude of the growth in utilization, particularly when
considered alongside declining fee-for-service enrollment and
relatively stable or modest volume growth in physician offices,
suggests that changes in case mix are not the primary driver of growth
in excepted PBDs. Taken together, these considerations support the
conclusion that site-of-service payment differentials, rather than
clinical or coding factors, are a principal contributor to the observed
increases in volume.
We stated in the CY 2026 OPPS/ASC proposed rule that we believe
that financial incentives have driven volume from the office setting to
the higher paying OPD setting, creating unnecessary increases in the
volume of OPD services. We also stated that we believe that this
problem is pervasive and exists across a number of service families.
Section 1833(t)(2)(F) of the Act directs the Secretary to develop a
method for controlling unnecessary increases in the volume of covered
OPD services, and CMS has previously interpreted this provision to
permit payment adjustments that address financial incentives
contributing to such increases. Consistent with this authority, CMS may
implement a volume control method for imaging without contrast services
furnished in excepted off-campus PBDs, where evidence demonstrates
increases in utilization and that increase is disproportionately
concentrated in higher-paid hospital outpatient settings. Because these
services are commonly furnished in physician offices and do not
generally require hospital-level resources, higher OPPS payment rates
may incentivize shifts in site of care and increased utilization that
are not clinically driven. As CMS established in the CY 2019 OPPS/ASC
final rule with comment period and reaffirmed in subsequent rulemaking,
including the CY 2026 OPPS/ASC final rule with comment period, and as
the D.C. Circuit held in American Hospital Ass'n v. Azar, 964 F.3d 1230
(D.C. Cir. 2020), aligning payment rates across settings for clinically
comparable services is an appropriate ``method'' to mitigate these
incentives. Accordingly, applying a PFS-equivalent payment rate to
imaging without contrast services in excepted PBDs represents a
reasonable approach to controlling unnecessary increases in OPD service
volume.
Any time a service is provided in the higher cost OPD when it could
be provided safely in the physician office but is not because of
financial incentives, it potentially represents unnecessary utilization
of the OPD setting. In CY 2019, we started by addressing a pervasive
problem with the clinic visit provided in excepted PBDs. In that case,
it was practical to address only a single code, G0463, the clinic
visit. For CY 2026, we finalized a policy to address drug
administration services provided at excepted PBDs. We chose to address
payment for these services across the APC family, meaning all codes
assigned to these APCs, as we believe this volume control method should
apply to all drug administration services at excepted PBDs. For CY
2027, we again propose addressing services across an APC family.
Our authority under section 1833(t)(2)(F) of the Act to adopt a
method to control unnecessary increases in the volume of covered OPD
services authorizes us to address real world effects of these payment
inequalities. Given these continued disparities, we believe it is
necessary to further examine and refine our volume control method by
identifying additional covered OPD services that we believe are being
shifted to the hospital setting based on financial incentives rather
than medical necessity. We conducted an analysis of imaging without
contrast services paid under the OPPS and present our findings on the
utilization and payment of these services in the sections below.
3. Utilization of Imaging Without Contrast Services
The high volume of imaging without contrast services and the
magnitude of rate differences between the physician office and OPD
settings make it a family of services likely to migrate to a higher
paying setting of care. Imaging without contrast services can be
performed in either physician offices or OPDs. In the OPPS, imaging
without contrast services are categorized into four levels of
complexity. Payments are set at a category level, called an Ambulatory
Payment Classification (APC). The APCs for imaging without contrast
service are 5521 (Level 1 Imaging Without Contrast), 5522 (Level 2
Imaging Without Contrast), 5523 (Level 3 Imaging Without Contrast), and
(Level 4 Imaging Without Contrast) 5524. For 2026, 337 Healthcare
Common Procedure Coding System (HCPCS) codes make up the four levels of
the imaging without contrast APCs. Although there are 337 HCPCS codes
in the four imaging without contrast APCs, we estimate that 70 HCPCS
codes account for over 95 percent of the volume of imaging without
contrast services provided in excepted PBDs. This trend extends to non-
excepted PBDs, where 70 HCPCS codes also make up over 95 percent of
claims volume. There is an approximate 90 percent overlap of the top 70
most frequently billed imaging without contrast codes in excepted and
non-excepted PBDs. HCPCS codes that are similar in terms of cost and
clinical attributes are placed in the same APC. All HCPCS codes in the
same APC have the same OPPS payment rate. The individual HCPCS and APC
assignments are available in Addendum B to this proposed rule.
We evaluated the growth in volume and spending for multiple
families of APCs in OPDs across multiple years of claims data. Should
commenters wish to replicate any of our analyses, the CMS website
includes information about obtaining the ``Limited Data Set,'' https://www.cms.gov/data-research/files-for-order/data-disclosures-and-data-use-agreements-duas/limited-data-set-lds through which OPPS claims data
are available for purchase. Additionally, we will make publicly
available a file containing the 70 HCPCS codes that we estimate account
for more than 95 percent of the volume of imaging without contrast
services provided in excepted PBDs.
The PO modifier was established to identify services furnished in
off-campus PBDs and became mandatory following implementation of
section 603 of the Bipartisan Budget Act of 2015.
[[Page 41911]]
CMS finalized this requirement in the CY 2016 OPPS/ASC final rule with
comment period, requiring hospitals to report the PO modifier for
services provided in excepted off-campus PBDs beginning January 1,
2016. We subsequently established the PN modifier to identify services
furnished in nonexcepted off-campus PBDs, which are paid under the PFS-
equivalent rate rather than the full OPPS rate. Hospitals were required
to begin reporting the PN modifier starting January 1, 2017. The
mandatory use of the PO and PN modifiers has enabled CMS, MedPAC, and
the hospital industry to track utilization patterns.
We found that there has been an increase in the volume of services
paid through the imaging without contrast APCs (5521-5524) over time,
which indicates that there has been migration of these services to the
OPD setting. From 2016 to 2025, the volume of the 70 HCPCS codes which
account for over 95 percent of imaging without contrast services
provided in excepted PBDs grew over 38 percent. From 2016 to 2025,
these increases in volume have resulted in a 33 percent increase in
spending, corresponding to approximately $126 million in additional
spending in CY 2025. This growth persisted even with the introduction
of the PFS-equivalent rate for PBDs subject to section 603 of the
Bipartisan Budget Act of 2015 starting in 2017. The COVID-19 Public
Health Emergency (PHE) did impact utilization across the OPPS, but we
have seen the volume of imaging without contrast services rebound and
return to this pattern of unnecessary volume growth. Between 2016 and
2025 we have seen increases in the volume of imaging without contrast
services provided in OPDs utilized per beneficiary.\132\ Between 2016
and 2025, for the top 70 most frequently billed imaging without
contrast HCPCs codes provided in excepted PBDs, there has been an over
67 percent increase in utilization per beneficiary. This upward trend
persists despite a declining Part B FFS population. During this same
time, for example, FFS enrollment decreased by approximately 17
percent, indicating that imaging services are being used more
frequently on a per-beneficiary basis rather than growth being driven
by enrollment.
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\132\ Based on our analysis of claims data and Medicare FFS
enrollment.
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In addition to looking at the growth in volume and spending at the
APC level for imaging without contrast services provided at excepted
PBDs, we also examined the growth in volume at the HCPCS code level.
Analysis of HCPCS-level utilization trends from 2016 through 2025
indicates that several imaging without contrast services experienced
particularly pronounced growth in volume, with increases far exceeding
overall Medicare enrollment growth. Several codes experienced growth in
the excepted PBDs that outpaced growth in the physician office setting.
HCPCS code 77080, which describes a DXA scan measuring bone density
at the axial skeleton (hips, pelvis, spine), is the most frequently
billed imaging without contrast code in excepted PBDs. In 2025, this
service had a physician office payment rate of around $30 and an OPPS
payment rate of approximately $106, making the same scan more than
three times as expensive in the OPD compared to the physician office.
Based on our claims data analysis, the volume of this service has grown
by over 55 percent in excepted PBDs between 2016 and 2025. In contrast,
from 2016 to 2025, utilization of this code in the physician office
setting decreased modestly, by less than half a percent. HCPCS code
71045, which describes a simple chest x-ray, was created in 2018 as
part of the 2018 CPT/HCPCS code restructuring for chest radiography. In
2025, this service had a physician office payment rate of around $17
and an OPPS payment rate of approximately $88, making the same scan 417
percent more expensive in the OPD than in the physician office. Based
on our claims data analysis, the volume of this service has grown by
over 92 percent in excepted PBDs between 2018 and 2025. From 2018 to
2025, this code decreased in volume by 33 percent in the physician
office setting.
The volume for HCPCS 71250, which describes a CT scan of the chest
performed without contrast dye, increased roughly 72 percent in the
excepted PBD setting between 2016 and 2025. In contrast, the physician
office setting experienced a comparatively modest increase of 33
percent over the same time period. In 2025, this service has a
physician office payment rate of around $83 and an OPPS payment rate of
approximately $106, making the same CT scan 27 percent more expensive
in the OPD than in the physician office.
Similarly, HCPCS 70551, which describes an MRI scan of the brain,
including the brainstem, performed without contrast material grew by 41
percent between 2016 and 2025 at excepted PBDs. From 2016 to 2025, this
code only grew by 14 percent in the physician office setting. In 2025,
this service had a physician office payment rate of around $127 and an
OPPS payment rate of approximately $243, making the same scan 91
percent more expensive in the OPD than in the physician office.
HCPCS 76536, which describes an ultrasound of the head and neck,
had excepted PBD volume increase 48 percent from 2016 to 2025. The same
code only experienced a 4 percent increase in volume in the physician
office setting during the same time period. In 2025, this service had a
physician office payment rate of around $82 and an OPPS payment rate of
approximately $106, making the same scan 29 percent more expensive in
the OPD than in the physician office.
Breast imaging services also demonstrated substantial increases,
with the volume of ultrasound breast complete (HCPCS 76641) increasing
52 percent in the excepted PBD setting from 2016 to 2025. From 2016 to
2025, this code decreased in volume by 25 percent in the physician
office setting. In 2025, this service had a physician office payment
rate of around $66 and an OPPS payment rate of approximately $106,
making the same scan 60 percent more expensive in the OPD than in the
physician office.
These services are generally low- to moderate-complexity imaging
procedures that can be safely performed in multiple settings, and their
growth in volume in excepted PBDs suggests increased utilization
intensity beyond what would be expected based solely on growth in the
Medicare population. We believe that the financial incentives created
by payment policy rather than clinical need are a significant factor in
shifting these services to OPDs. If there was not a material difference
in payment rates, we believe fewer of these services would have shifted
to OPDs and the corresponding increase in Medicare payments and
beneficiary cost-sharing would not have occurred.
We also examined trends across excepted and non-excepted PBDs,
alongside the physician office setting. There are approximately four
times as many providers billing with the PN modifier (nonexcepted PBDs)
as compared to the PO modifier (excepted PBDs). This substantial
difference suggests that non-excepted PBD services are distributed
across a much broader provider base, while volume in excepted PBDs
remains concentrated among a smaller group of providers.
Excepted PBDs continue to account for the overwhelming share of
imaging without contrast volume, even as non-excepted PBDs have grown
steadily in recent years. Across the highest-volume services, the gap
remains substantial: in 2025, excepted PBDs furnished roughly
[[Page 41912]]
4 to 5 times the volume of non-excepted PBDs for key services,
accounting for about 75-82 percent of total combined PBD volume. For
example, excepted PBDs represent approximately 81 percent of volume for
HCPCS 77080 (DXA bone density scan), 79 percent for HCPCS 71046 (chest
x-ray, 2 views), 79 percent for HCPCS 93306 (complete transthoracic
echocardiography), and 83 percent for HCPCS 71250 (CT thorax without
contrast). In the physician office setting, by contrast, these same
services show relatively stable or modest growth over time rather than
rapid expansion. Importantly, these are routine imaging services that
rely on widely available equipment and standardized protocols and they
are clinically comparable regardless of setting, meaning they can be
safely and effectively performed in physician offices, non-excepted
PBDs, or excepted PBDs without meaningful differences in patient acuity
or quality.
For example, in its 2023 report, MedPAC examined APCs where such
potentially unnecessary payment differentials exist.\133\ To identify
appropriate APCs, MedPAC compared the volume of services in each APC
that was provided in OPDs, ASCs, and freestanding offices over the
period of 2016 through 2021, but omitted 2020 because the coronavirus
pandemic affected the volume of care in ambulatory settings. If
freestanding offices had the highest volume for an APC, MedPAC
concluded that the services in that APC could be provided safely in
freestanding offices for most beneficiaries and that beneficiaries
would be able to access the services in that APC. Therefore, for those
services, it would be reasonable to align the OPPS payment rates with
the PFS payment rates. MedPAC found that all four of the imaging
without contrast APCs had higher volume in freestanding facilities than
in OPDs, indicating that these services can be safely provided to
beneficiaries in a lower cost setting of care.
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\133\ www.medpac.gov/wp-content/uploads/2023/06/Jun23_Ch8_MedPAC_Report_To_Congress_SEC.pdf.
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We believe MedPAC's analysis aligns well with the rationale CMS
adopted in the CY 2019 OPPS/ASC final rule with comment period: we
consider OPPS utilization potentially unnecessary if the beneficiary
can safely receive the same services in a lower cost setting but
instead receives care in the hospital outpatient setting because of
site-of-service payment differentials.
In our review of the utilization of imaging without contrast
services in excepted PBDs, we found increases in the volume of services
over time, increases in the volume of services provided per
beneficiary, and significant volume growth for some individual HCPCS
codes within the imaging without contrast APC family. We believe that
these changes represent unnecessary increases in the volume of covered
OPD imaging without contrast services and, therefore, we propose to
apply our volume control method to these services under section
1833(t)(2)(F) of the Act.
4. Payment for Imaging Without Contrast Services at PBDs
As discussed in the CY 2017 OPPS/ASC interim final rule with
comment period (81 FR 79726), we established a Medicare PFS relativity
adjuster that is applied to the OPPS rate for the billed non-excepted
items and services furnished in a non-excepted off-campus PBD to
calculate payment rates under the PFS. The PFS relativity adjuster
reflects the estimated overall difference between the payment that
would otherwise be made to a hospital under the OPPS for the non-
excepted items and services furnished in non-excepted off-campus PBDs
and the resource-based payment under the PFS for the technical aspect
of those services with reference to the difference between the facility
and nonfacility (office) rates and policies under the PFS. The PFS
relativity adjuster, as discussed in the CY 2018 PFS final rule, is set
at 40 percent of the amount that would have been paid under the OPPS
(82 FR 53028). Non-excepted PBDs are required to use the modifier
``PN'' so that the PFS relativity adjuster is applied to the payment of
their claim. Excepted PBDs use the modifier ``PO'' on their claims to
indicate that the service was provided at an excepted off-campus PBD
and that payment should generally be made at the OPPS rate.
In the CY 2019 OPPS/ASC final rule with comment period, we stated
that we consider the shift of services from the physician office to the
hospital OPD unnecessary if the beneficiary can safely receive the same
services in a lower cost setting but is instead receiving services in
the higher paid setting (83 FR 59006). To better understand the
migration of services to off-campus OPDs, we analyzed claims data for
imaging without contrast services to assess whether increases in volume
and spending could be driven by payment incentives. We examined the top
70 most frequently billed HCPCS codes in the imaging without contrast
APC family at both excepted and non-excepted off-campus PBDs. These 70
HCPCS codes account for over 95 percent of the volume of imaging
without contrast services in off-campus PBDs. We found that over 90
percent of these codes in the imaging without contrast APCs were in the
top 70 most frequently billed codes at both excepted and non-excepted
off-campus PBDs with slight variations in the order based on volume. We
therefore concluded that the majority of HCPCS codes in the imaging
without contrast APCs were being billed with both the ``PO'' and ``PN''
modifiers, indicating that these imaging without contrast services were
safely being provided in both excepted and non-excepted PBDs.
We also compared OPPS and PFS payment rates by using PFS payment
rates for the most frequently billed imaging without contrast HCPCS
codes by excepted PBDs (departments that bill the modifier ``PO'' on
claim lines) and volume-weighing them to create a PFS proxy average APC
payment rate for all imaging without contrast services. Using this
approach, we found that, on average, OPPS payment rates for excepted
off-campus PBDs are approximately 2.5 times higher than PFS rates,
while non-excepted PBD rates are closely aligned with the PFS. At the
APC level, PFS payments range from about 31 percent to 54 percent of
OPPS payments, confirming a substantial and consistent payment
differential. A similar pattern is observed for beneficiary cost-
sharing, where average cost-sharing in excepted PBDs is more than
double that in freestanding physician offices, while cost-sharing for
services provided in non-excepted PBDs is closely aligned with cost-
sharing in physician offices.
We presently believe that the differential in our payment rates has
created a payment incentive that has led to unnecessary growth for the
services in the imaging without contrast APCs. We consider the shift of
services from the physician office to the hospital OPD unnecessary if
the beneficiary can safely receive the same services in a lower cost
setting but is instead receiving services in the higher paid setting
due to payment incentives. We presently believe the OPPS payment rate
for the imaging without contrast APCs being several times greater than
the PFS rate creates such a payment incentive and that the growth in
imaging without contrast services at excepted PBDs is therefore
unnecessary.
We do not believe that the imaging payment limitation established
under section 5102 of the Deficit Reduction Act (DRA) of 2005 (Pub. L.
109-171), codified at section 1848 of the Act), constrains our ability
to implement a
[[Page 41913]]
volume control method for imaging without contrast services furnished
in excepted off-campus PBDs. The DRA provision applies specifically to
services paid under the PFS and limits payment to the lesser of the PFS
or OPPS amount, but it does not directly affect payment for services
furnished in PBDs. The DRA functions as a ceiling on PFS payments,
ensuring they do not exceed OPPS rates, while the PFS relativity
adjuster is used to scale payments appropriately when applied in the
PBD setting. As a result, using PFS-equivalent rates for imaging
without contrast services in excepted PBDs aligns excepted PBD payment
rates under the OPPS with payment rates for these services under the
PFS and therefore would not conflict with the DRA.
5. Patient Severity and Cost of Care
In comments to the CY 2019 OPPS/ASC proposed rule and subsequent
rulemaking, we heard from commenters that the higher payments for
services in hospital outpatient settings are justified by the level of
care patients need, the higher costs of providing care in hospitals,
and the costs of maintaining emergency care and standby capacity. We
recognize that OPDs serve unique patient populations and provide
services to medically complex beneficiaries; however, we presently
believe that there is no evidence to demonstrate the need for higher
payment for services provided in OPDs that could also be provided in
lower-cost settings. This is particularly relevant for imaging without
contrast services, which are generally low- to moderate-complexity
diagnostic procedures, such as standard CT, MRI, ultrasound,
radiography, and bone density testing, that do not require the
administration of contrast agents or the associated monitoring and
infrastructure. These services can be safely and effectively furnished
in multiple settings, including physician offices, without compromising
quality or patient safety.
In general, despite marked differences in payment rates for a range
of services, identical services are being delivered to very similar
patients across physicians' offices, hospital OPDs, and
ASCs.134 135 Moreover, a 2023 literature review found no
peer-reviewed evidence that shows differences in the quality of
services delivered across hospital OPDs and physicians' offices.\136\
In their 2023 report, MedPAC evaluated risk scores from the CMS
hierarchical condition category (CMS-HCC) risk-adjustment model to
compare the medical complexity of OPD patients with patients in
freestanding offices. They found that, on average, OPD patients have
higher risk scores, which suggests that OPD patients are potentially
more medically complex than those in physician offices. However, they
also found substantial overlap in the CMS-HCC risk scores of patients
in these two settings, which suggests that the difference in patient
severity between settings is small. Their analysis showed that the
effects of patient severity on cost of care for the aligned services is
not statistically significant as the services, like imaging without
contrast services, are generally of low complexity. In addition, if
there is a need to bill for more complex cases, under the OPPS
providers can often bill separately for additional services that a
patient might need such as prolonged observation, emergency
medications, or additional diagnostic testing furnished in response to
a complication or change in the patient's condition during the
outpatient encounter. Accordingly, we continue to believe that higher
OPPS payment rates for imaging without contrast services are not
justified by differences in patient complexity or resource needs and
may instead contribute to unnecessary increases in utilization in
higher-cost settings.
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\134\ https://tobin.yale.edu/sites/default/files/2023-10/Site-Neutral%20Payment%20Literature%20Review%2010302023.pdf.
\135\ https://www.medpac.gov/wp-content/uploads/2023/06/Jun23_Ch8_MedPAC_Report_To_Congress_SEC.pdf.
\136\ https://tobin.yale.edu/sites/default/files/2023-10/Site-Neutral%20Payment%20Literature%20Review%2010302023.pdf.
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6. Impact of Unnecessary Increases in Volume on the OPPS
Our concern with unnecessary increases in the volume of imaging
without contrast services is tied to the health and sustainability of
the OPPS. As described in table 51 in the CY 2019 OPPS/ASC final rule
with comment period, we found that the mean and median annual increases
in the volume and intensity of hospital outpatient services were about
5.5 percent and 5.4 percent, respectively, from 2011 to 2019. Over that
period, the estimated increase in aggregate annual hospital incurred
payments through Medicare FFS Part B was $28.2 billion.\137\
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\137\ Available in Table IV.B6. at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2019.pdf.
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More recent data indicates that this trend has persisted and
accelerated. As shown in Table 58, from 2019 through 2027, hospital
outpatient costs per FFS enrollee are projected to grow at a mean
annual rate of approximately 7.7 percent and a median annual rate of
9.2 percent.\138\ After a temporary decline in 2020, annual growth
rebounded sharply to 19.7 percent in 2021. From 2022 through 2027, the
projected year-over-year annual growth rates are expected to range from
4.7 percent to 9.5 percent annually. As seen in Table 59, over this
period outpatient hospital spending per FFS enrollee is projected to
increase from $1,738 in 2019 to $3,238 in 2027, an increase of about 86
percent.\139\ This translates to an increase of approximately $35
billion in aggregate annual incurred reimbursements for hospital
outpatient services between 2019 and 2027. This level of growth exceeds
that observed in other categories of Part B services in dollar terms
and occurs despite relatively stable or declining FFS enrollment over
much of the period.
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\138\ https://www.cms.gov/oact/tr/2025.
\139\ https://www.cms.gov/oact/tr/2025.
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When looking at this time period it is important to note that the
COVID-19 Public Health Emergency (PHE) likely contributed significantly
to the increase in claims volume in 2021. During the acute phase of the
pandemic in 2020, many outpatient services were delayed or deferred as
beneficiaries postponed routine care and providers limited non-urgent
services. As these restrictions eased in 2021, utilization rebounded
sharply as providers worked through substantial backlogs of postponed
services and beneficiaries returned for deferred evaluations and
treatment. This pent-up demand for outpatient care likely contributed
to the pronounced increase in year-over-year outpatient hospital cost
growth observed in 2021.
[[Page 41914]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.088
[GRAPHIC] [TIFF OMITTED] TP07JY26.089
Taken \141\ together, the sustained acceleration in per-enrollee
spending and aggregate expenditures suggests that factors beyond
underlying beneficiary need, such as increases in service volume and
intensity, are contributing to spending growth in the hospital
outpatient setting. Continued increases in the volume of imaging
without contrast services raise concerns about potentially unnecessary
utilization. Such trends have implications for beneficiary exposure to
low-value care as well as for the financial sustainability of the OPPS.
As we stated in the CY 2019 OPPS/ASC final rule with comment period
(83 FR 59018), there is evidence that increased volume and intensity of
certain covered OPD services is likely driven by financial incentives
to furnish services in hospitals in order to receive higher
reimbursement, rather than making site-of-service decisions based on
medical necessity. We continue to be concerned with the rate of
increase in program expenditures under the OPPS for several reasons.
The OPPS was originally designed to manage Medicare spending growth by
replacing a cost-based system with a prospective payment system.
Contrary to this Congressional purpose, the OPPS has continued to be
one of the fastest growing sectors of Medicare payments out of all
payment systems under Medicare Parts A and B.\142\ Furthermore, we are
concerned that the persisting rate of growth relative to other payment
systems suggests that payment incentives, rather than patient acuity or
medical necessity, continue to affect site-of-service decision-making.
This site-of-service selection has an impact on not only the Medicare
program, but also on Medicare beneficiary out-of-pocket spending. Our
authority to implement volume control methods is an important tool in
combating unnecessary OPPS utilization. We have seen success in
stemming unnecessary growth in the volume of clinic visits at excepted
PBDs. Since 2019, when we began phasing in our volume control method,
there has been a 25 percent decrease in the volume of clinic visit
services performed in excepted PBDs. Since 2023, the volume of clinic
visit services at excepted PBDs has stayed relatively steady. We
believe that imaging without contrast services provided at excepted
PBDs are in need of similar treatment.
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\142\ https://www.gpo.gov/fdsys/pkg/FR-2018-11-21/pdf/2018-24243.pdf.
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7. Multiple Procedure Discounts
In the CY 2009 OPPS/ASC final rule with comment period (73 FR68559
through 86569), we finalized a policy that, effective January 1, 2009,
we make a single payment each time a hospital submits a claim for more
than one imaging procedure within an imaging family on the same date of
service, to reflect and promote the efficiencies hospitals can achieve
when performing multiple imaging procedures during a single session. We
utilize three imaging families based on imaging modality for purposes
of this methodology: (1) ultrasound; (2) computed tomography (CT) and
computed tomographic angiography (CTA); and (3) magnetic resonance
imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes
subject to the multiple imaging composite policy and their respective
families are listed in Table 3 of this proposed rule.
While there are three imaging families, there are five multiple
imaging composite APCs due to the statutory requirement under section
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging
services provided with and without contrast. While the ultrasound
procedures included under the policy do not involve contrast, both CT/
CTA and MRI/MRA scans can be provided either with or without contrast.
The five multiple imaging composite APCs established in CY 2009 are:
APC 8004 (Ultrasound Composite);
APC 8005 (CT and CTA without Contrast Composite);
APC 8006 (CT and CTA with Contrast Composite);
[[Page 41915]]
APC 8007 (MRI and MRA without Contrast Composite); and
APC 8008 (MRI and MRA with Contrast Composite).
We make a single payment for those imaging procedures that qualify
for payment based on the composite APC payment rate, which includes any
packaged services furnished on the same date of service. The standard
(non-composite) APC assignments continue to apply for single imaging
procedures and multiple imaging procedures performed across families.
As discussed in section XX of this proposed rule, for CY 2027 we
propose to continue to pay for all multiple imaging procedures within
an imaging family performed on the same date of service using the
multiple imaging composite APC payment methodology.
The multiple imaging composite APC policy reflects the efficiencies
that hospitals can achieve when furnishing multiple imaging procedures
within the same imaging family during a single session. A similar
principle underlies the multiple procedure payment reduction (MPPR)
policy for diagnostic imaging services under the PFS. Under the MPPR
policy, when multiple diagnostic imaging procedures are furnished to
the same patient in the same session, payment for the technical
component of the subsequent procedures is reduced to reflect
efficiencies associated with the preparation of the patient,
positioning, and other clinical and administrative activities that do
not need to be repeated for each additional imaging procedure. Both the
OPPS multiple imaging composite APC policy and the PFS MPPR policy
recognize that furnishing multiple imaging services during the same
encounter generally requires fewer resources than furnishing those
services separately. Consistent with other services furnished in non-
excepted PBDs, when multiple imaging procedures are performed at a non-
excepted PBD and paid through one of the multiple imaging composite
APCs, providers are required to report modifier ``PN,'' and the PFS
relativity adjuster is applied to the composite APC payment.
As discussed later in this section, we propose to apply our volume
control methodology to the imaging without contrast APCs (5521-5524).
We believe it is also appropriate to apply the volume control
methodology to APCs 8004 (Ultrasound Composite), 8005 (CT and CTA
without Contrast Composite), and 8007 (MRI and MRA without Contrast
Composite). APCs 8004, 8005, and 8007 are comprised of HCPCS codes
assigned to the imaging without contrast APCs that would be subject to
the volume control methodology when paid separately. In other words,
the underlying imaging without contrast services that qualify a claim
for payment under APCs 8004, 8005, and 8007 are the same imaging
procedures for which we propose to apply the volume control methodology
under the standard APC payment structure.
Accordingly, excluding APCs 8004, 8005, and 8007 from the volume
control methodology would result in different payment treatment for the
same underlying imaging procedures based solely on whether those
procedures were paid separately or through a multiple imaging composite
APC. We do not believe such differential treatment would be
appropriate. Moreover, because APCs 8004, 8005, and 8007 are comprised
of HCPCS codes assigned to the imaging without contrast APCs that would
be subject to the volume control methodology when paid separately,
excluding these composite APCs would allow a portion of the same
imaging services that contribute to the volume concerns identified
above to be paid outside the volume control methodology when furnished
in excepted PBDs. Further, because these composite APCs are already
subject to the PFS relativity adjuster when furnished at non-excepted
PBDs, excluding them from the volume control methodology in excepted
PBDs could create inconsistent payment incentives across settings and
undermine the effectiveness of the volume control methodology.
Therefore, we propose to apply the volume control methodology to APCs
8004, 8005, and 8007.
8. Payment for Imaging Without Contrast Services for CY 2027 and
Subsequent Years
As we stated in the CY 2019 OPPS/ASC final rule with comment
period, we consider the shift of services from the physician office to
the hospital OPD unnecessary if the beneficiary can safely receive the
same services in a lower cost setting but is instead receiving services
in the higher paid setting due to payment incentives (83 FR 59006). We
believe the increase in the volume of imaging without contrast services
is due to the payment incentive that exists to provide this service in
the higher cost setting. Because these services could generally be
safely provided in a lower cost setting, we believe that the growth in
imaging without contrast services paid under the OPPS is unnecessary.
Further, we believe that paying for imaging without contrast services
provided at excepted off-campus PBDs at the PFS-equivalent rate could
be an effective method to control the volume of these unnecessary
services because the payment differential that is driving the site-of-
service decision will be removed. We believe this method will control
unnecessary volume increases both in terms of the number of covered OPD
services furnished and costs associated with those services.
Therefore, given the unnecessary increases in the volume of imaging
without contrast services in hospital OPDs, we propose to apply the
PFS-equivalent payment rate to HCPCS codes assigned to the imaging
without contrast APCs and to services paid through APCs 8004
(Ultrasound Composite), 8005 (CT and CTA without Contrast Composite),
and 8007 (MRI and MRA without Contrast Composite) when furnished at an
off-campus PBD excepted from section 1833(t)(21) of the Act
(departments that bill modifier ``PO'' on claim lines). Under our
authority in section 1833(t)(2)(F) of the Act, we would implement this
proposal by applying an amount equal to the site-specific PFS payment
rate for non-excepted items and services furnished by a non-excepted
off-campus PBD (the PFS-equivalent payment rate). Table 60 shows the
specific APCs that we would identify for this proposal, which are APCs
5521 through 5524, 8004, 8005, and 8007. Off-campus PBDs that are not
excepted from section 603 (departments that bill the modifier ``PN'')
already receive a PFS-equivalent payment rate for any HCPCS codes
assigned to the imaging without contrast APCs.
[[Page 41916]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.091
In the CY 2019 OPPS/ASC final rule with comment period (83 FR
59013), we finalized our method to address the unnecessary increases in
utilization of clinic visits in the OPD setting in a non-budget neutral
manner. In the CY 2026 OPPS/ASC final rule with comment period (90 FR
53448), we likewise finalized an expansion of our method to address the
unnecessary increases in utilization of drug administration services in
the OPD setting in a non-budget neutral manner. For CY 2027, we propose
to implement this proposed method to address the unnecessary increases
in utilization of imaging without contrast services in the OPD setting
in a non-budget neutral manner. We continue to believe that, while
section 1833(t)(9)(B) of the Act requires that certain changes made
under the OPPS be made in a budget neutral manner, this section does
not apply to the volume control method under section 1833(t)(2)(F) of
the Act. In particular, section 1833(t)(9)(A) of the Act, titled
``Periodic review,'' provides, in part, that the Secretary must
annually review and revise the groups, ``the relative payment weights,
and the wage and other adjustments described in paragraph (2) to take
into account changes in medical practice, changes in technology, the
addition of new services, new cost data, and other relevant information
and factors'' (emphasis added). Section 1833(t)(9)(B) of the Act,
titled ``Budget neutrality adjustment'' provides that if ``the
Secretary makes adjustments under subparagraph (A), then the
adjustments for a year may not cause the estimated amount of
expenditures under this part for the year to increase or decrease from
the estimated amount of expenditures under this part that would have
been made if the adjustments had not been made'' (emphasis added).
However, a volume-control method under section 1833(t)(2)(F) of the Act
is not an ``adjustment'' under paragraph (2). Unlike the wage
adjustment under section 1833(t)(2)(D) of the Act and the outlier,
transitional pass-through, and equitable adjustments under section
1833(t)(2)(E) of the Act, section 1833(t)(2)(F) of the Act refers to a
``method'' for controlling unnecessary increases in the volume of
covered OPD services, not an ``adjustment.'' Likewise, sections
1833(t)(2)(D) and (E) of the Act also explicitly require the
adjustments authorized by those subparagraphs to be budget neutral,
while the volume control method authority at section 1833(t)(2)(F) of
the Act does not. Therefore, the volume control method proposed under
section 1833(t)(2)(F) of the Act is not one of the adjustments under
section 1833(t)(2) of the Act that is referenced under section
1833(t)(9)(A) of the Act that must be included in the budget neutrality
adjustment under section 1833(t)(9)(B) of the Act. Moreover, section
1833(t)(9)(C) of the Act specifies that if the Secretary determines
under methodologies described in subparagraph (2)(F) that the volume of
services paid for under this subsection increased beyond amounts
established through those methodologies, the Secretary may
appropriately adjust the update to the conversion factor otherwise
applicable in a subsequent year. We therefore continue to interpret
this provision to mean that the Secretary can implement a volume
control method under section 1833(t)(2)(F) of the Act in a non-budget
neutral manner in the year in which the method is implemented, and that
the Secretary may then make further adjustments to the conversion
factor in a subsequent year to account for volume increases that are
beyond the amounts estimated by the Secretary under the volume control
method (see 83 FR 59009).
We stated in the CY 2019 OPPS/ASC final rule with comment period
(83 FR 59010) that we believe implementing a volume control method in a
budget neutral manner would not appropriately reduce the overall
unnecessary volume of covered OPD services, and instead would simply
shift the movement of the volume within the OPPS system in the
aggregate, a concern similar to the one we discussed in the CY 2008
OPPS/ASC final rule with comment period (72 FR 66613). We believe that
concern applies to imaging without contrast services just the same. The
estimated payment impact for various provider classifications is
displayed in Table 88: Estimated Impact of the Proposed CY 2027 Update
to the ASC Payment System on Aggregate CY 2026 Medicare Program
Payments by Surgical Specialty or Ancillary Items and Services Group of
this proposed rule. For CY 2027, the estimated savings are $260
million, with $190 million of the savings accruing to Medicare, and $70
million saved by Medicare beneficiaries in the form of reduced
beneficiary coinsurance. And beginning in 2028, the savings from this
proposed policy begin to flow into the baseline for Medicare Advantage
rates, thus resulting in a significant increase in savings in
subsequent years. For 2027, the Medicare Advantage rates have already
been calculated at the time of this proposed rule and thus the 2027
Medicare Advantage rates are not impacted by this proposed policy. From
2027-2036 we estimate that this policy will lower net Part B spending
by $7.2 billion. To effectively establish a method for controlling the
unnecessary growth in the volume of imaging without contrast services
furnished by excepted off-campus PBDs that does not simply reallocate
expenditures that are unnecessary within the OPPS, we believe that this
method must be adopted in a non-budget neutral manner. The impact
associated with this proposal is further described in section XXVI. of
this proposed rule.
While we are refining our method to control for unnecessary
increases in the volume of hospital OPD services, we continue to
recognize the importance of not impeding development or beneficiary
access to new innovations. We solicit public comments on other ways or
other services for which we should exercise the Secretary's statutory
[[Page 41917]]
authority under section 1833(t)(2)(F) of the Act.
9. Exemption for Rural Sole Community Hospitals
As stated above, we propose to expand our method to control
unnecessary increases in the volume of covered OPD services by paying a
PFS-equivalent payment rate for imaging without contrast services
furnished in excepted off-campus PBDs. We believe that this policy is
an appropriate method for controlling unnecessary volume of imaging
without contrast services in excepted off-campus PBDs because
beneficiaries can generally safely receive these same services in a
lower cost setting but instead may receive care in a higher cost
setting due to payment incentives. In these cases, we maintain that,
similar to the clinic visit volume control policy established in the CY
2019 OPPS/ASC final rule with comment period (83 FR 59004 through
59015) and the drug administration volume control policy established in
the CY 2026 OPPS/ASC final rule with comment period (90 FR 53806
through 53821), to the extent similar services can be safely provided
in more than one setting, we do not believe it is appropriate for the
Medicare program to pay more for these services in one setting than
another. We continue to believe the difference in payment for these
services is a significant factor in the shift in services from the
physician's office setting to the hospital OPD.
In the CY 2023 OPPS/ASC final rule with comment period (87 FR 72047
through 72051) and the CY 2026 OPPS/ASC final rule with comment period
(90 FR 53821 through 53824), we finalized exemptions to our clinic
visit and drug administration volume control policies for PBDs of rural
SCHs. Under these exemptions, we pay the full OPPS payment rate, rather
than the PFS-equivalent rate, when the clinic visit or drug
administration service is furnished in excepted PBDs of rural SCHs. In
those rules, we explained that rural SCHs have historically received
special payment treatment to account for their higher costs and the
disproportionately harmful impact that payment reductions could have on
them. Because we propose a volume control payment policy for imaging
without contrast services, we have additionally considered whether a
similar policy for rural SCHs or other provider types would be
appropriate.
a. Special Payment Treatment for Rural SCHs
Across the various Medicare payment systems, CMS has established
several special payment provisions for rural providers to ensure access
to high quality care for beneficiaries in rural areas. CMS administers
five statutory hospital payment designations in which rural or isolated
hospitals that meet specified eligibility criteria receive higher
reimbursement for hospital services than they otherwise would receive
under Medicare's standard payment methodologies. A rural hospital may
qualify as a Critical Access Hospital (CAH),\143\ Sole Community
Hospital (SCH),\144\ Rural Emergency Hospital (REH),\145\ or Medicare
Dependent Hospital \146\--each of which has different eligibility
criteria and payment methodologies. With the exception of CAHs, rural
hospitals may also qualify as Low Volume Hospitals \147\ and Rural
Referral Centers (RRCs),\148\ which qualify these hospitals for
additional payments or exemptions. Not all rural or isolated hospitals
receive special payment treatment under the OPPS. For instance, CAHs
are not paid under the OPPS and are reimbursed at 101 percent of
reasonable costs for outpatient services.
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\143\ 42 CFR 485.601 through 485.647.
\144\ 42 CFR 412.92.
\145\ 42 CFR 419.91.
\146\ 42 CFR 412.108.
\147\ 42 CFR 412.101.
\148\ 42 CFR 412.96.
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Rural SCHs are a hospital type that has received special payment
treatment under the OPPS to account for their higher costs and the
disproportionately harmful impact that payment reductions could have on
them. In the CY 2006 OPPS final rule with comment period (70 FR 68556
through 68561), we finalized a payment increase for rural SCHs of 7.1
percent for all services and procedures paid under the OPPS, excluding
separately payable drugs and biologicals, items paid at charges reduced
to costs, and devices paid under the pass-through payment policy. This
policy was adopted under section 1833(t)(13)(B) of the Act, which
required the Secretary, by January 1, 2006, to provide for an
appropriate adjustment under subparagraph (t)(2)(E) to reflect the
higher costs of hospitals in rural areas if the Secretary determined,
pursuant to a study required by section 1833(t)(13)(A) of the Act, that
the costs to rural hospitals by APC exceeded those costs for hospitals
in urban areas. Our analysis revealed that rural SCHs had significantly
higher costs per unit than urban hospitals. We have continued to adjust
payments for rural SCHs by 7.1 percent each year since 2006. As
discussed in section II.E. of this proposed rule, for CY 2027 we
propose to continue the current policy of utilizing a 7.1 percent
payment adjustment for rural SCHs.
As noted above, in the CY 2023 OPPS/ASC final rule with comment
period, we finalized an exemption for clinic visits to our policy to
pay the PFS-equivalent rate for the clinic visit service at excepted
off-campus PBDs to control unnecessary increases in the volume of
covered OPD services. Commenters were generally supportive of this
proposal and noted that rural SCHs are typically the chief, if not
sole, source of community outpatient care for rural residents and
stated that this exemption would be vital to ensuring continued access
to the care they need. Some commenters stated that the exemption should
be extended to other types of hospitals, including urban SCHs. In that
rule, we explained that our analysis did not find that urban SCHs had
the additional resource costs for covered OPD services that rural SCHs
have and only finalized applying the clinic visit policy exemption to
rural SCHs (87 FR 72049).
Similarly, in the CY 2026 OPPS/ASC final rule with comment period,
we finalized an exemption for rural SCHs to our policy to pay the PFS-
equivalent rate for drug administration services at excepted off-campus
PBDs to control unnecessary increases in the volume of covered OPD
services. Commenters were again generally supportive of the proposal
and emphasized that rural SCHs have higher costs and are important for
access in rural areas. Some commenters suggested extending the
exemption to other types of hospitals such as urban SCHs, Medicare
Dependent Hospitals (MDHs), urban and rural safety-net hospitals, REHs,
FQHCs, and all rural hospitals. However, because our historical
analysis did not demonstrate that these hospitals had the additional
resource costs that rural SCHs do, we did not finalize any exemptions
beyond our exception for rural SCHs (90 FR 53823).
b. Exemption to Volume Control Payment Policy for Imaging Without
Contrast Services Furnished in Off-Campus Provider-Based Departments of
Rural SCHs
Earlier in this section, where we propose the volume control method
policy for imaging without contrast services, we state that to the
extent there are lower-cost sites of service available beneficiaries
and the physicians treating them should be able to choose the
[[Page 41918]]
appropriate care setting and not be encouraged to receive or provide
care in settings for which payment rates are higher solely for
financial reasons. However, as we have previously noted, many rural
providers, and rural SCHs in particular, are often the only source of
care in their communities,\149\ which means beneficiaries and providers
are not choosing between a higher paying off-campus PBD of a hospital
and a lower paying physicians' office setting. The closure of inpatient
departments of hospitals and the shortage of primary care providers in
rural areas likely further drives utilization to off-campus PBDs in
areas where rural SCHs are located.
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\149\ https://www.shepscenter.unc.edu/wp-content/uploads/dlm_uploads/2017/11/SCHs_Differences_in_Community_Characteristics.pdf.
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As with clinic visits and drug administration services, we do not
believe that rural SCH site-of-service decisions for imaging without
contrast services are being driven by differences in payment rates. As
we have previously observed, rural areas often experience lower
availability of health care professionals and hospitals than urban
areas.\150\ Hospital closures in rural communities are associated with
lower access to health care and worse health outcomes.\151\ Access to
outpatient services, particularly in rural areas, is vital to keeping
beneficiaries from being admitted as an inpatient because beneficiaries
in rural settings face unique challenges that impact their health. In
the CY 2023 OPPS/ASC final rule with comment period, we explained that
we believe that exempting rural SCHs from the clinic visit policy would
help to maintain access to care in rural areas by ensuring rural
providers are paid for clinic visit services provided at off-campus
PBDs at rates comparable to those paid at on-campus departments (87 FR
72049). We extended this exemption to drug administration in the CY
2026 OPPS/ASC final rule with comment period on the same basis (90 FR
53822), and we propose to extend it to our proposed imaging without
contrast policy for similar reasons. Specifically, we propose to exempt
rural SCHs from payment of the site-specific PFS-equivalent payment for
imaging without contrast services, as described by APCs 5521 through
5524, 8004, 8005, and 8007, when furnished at an off-campus PBD
exempted from section 1833(t)(21) of the Act (departments that bill the
modifier ``PO'' on claim lines). Under this proposed policy, a rural
SCH would continue to bill services in APCs 5521 through 5524, 8004,
8005, and 8007 with the ``PO'' modifier for CY 2027 and the payment
rate for such services would continue to be the full OPPS payment
without the PFS relativity adjuster.
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\150\ https://www.gao.gov/assets/gao-21-93.pdf.
\151\ Mills CA, Yeager VA, Unroe KT, Holmes A, Blackburn J. The
impact of rural general hospital closures on communities--A
systematic review of the literature. J Rural Health. 2024; 40:238-
248. https://doi.org/10.1111/jrh.12810.
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This exemption, should it be finalized, would result in higher
payments to excepted off-campus PBDs of rural SCHs compared to if it
were not finalized and rural SCHs were subject to the proposed volume
control method. By exempting rural SCHs, the Medicare payments for
these services would remain at the OPPS level. We note, however, that
these figures do not represent increases in costs to Medicare or the
beneficiaries above the current policy, as our proposed exemption would
maintain current payment rates at excepted off-campus PBDs of rural
SCHs of 107.1 percent of the OPPS payment rate for these services.
These figures are solely for the purpose of comparing potential savings
should we implement a method to control unnecessary volume in imaging
without contrast services without such an exemption. We invite comments
on all aspects of the proposed exemption for rural SCHs from the method
to control unnecessary volume of imaging without contrast services.
Specifically, we request comments on whether such an exemption is
appropriate for rural SCHs; what the impact on SCHs would be, should we
finalize the method without an exemption for rural SCHs; and whether we
should consider any other hospital types for an exemption to any of the
three policies to control unnecessary volume of outpatient services at
off-campus PBDs. Additionally, we request comments on whether the
current exemptions for rural SCHs from the method to control
unnecessary volume of clinic visit and drug administration services
remain appropriate
B. OPPS Payments for SaMS Diagnostic Services
1. Payment for Software as a Medical Service (SaMS)
In recent years, there have been rapid developments in the use of
software-based technologies with novel functionalities, including
artificial intelligence, to support clinical decision-making in the
outpatient and physician office settings. New clinical software, which
includes clinical decision support software, clinical risk modeling,
and computer aided detection (CAD), is becoming increasingly available
to providers. These technologies often perform data analysis of
diagnostic images from patients, relying on complex algorithms or
statistical predictive modeling to aid in the diagnosis or treatment
planning of a patient's condition. In previous rulemaking, we have
referred to these algorithm-driven services that assist practitioners
in making clinical assessments or diagnoses as Software as a Service
(SaaS). Some of the software functions that are used in these services
are FDA-regulated medical devices. Unlike prescription digital
therapeutics (PDTs), for example PDTs that provide cognitive behavioral
therapy to treat substance disorders or chronic insomnia, SaaS
technologies do not currently treat illnesses or patient injuries. SaaS
is also separate from remote patient monitoring (RPM) and remote
therapeutic monitoring (RTM), which are digital healthcare tools for
tracking patient data outside traditional office settings (90 FR
49394). For CY 2027, we propose a change in terminology. We now
understand that in other industries, the existing SaaS terminology is
used for general cloud-based computing service models outside of a
health care context, which may cause confusion as we are using it to
describe specific services that provide a medical function for purposes
of OPPS/ASC Medicare payment policy. To dispel any ambiguity and
clarify that distinction, we propose to change our terminology from
SaaS to Software as a Medical Service (SaMS) to refer to software-based
technologies that support clinical decision making through algorithmic
analysis, including those that provide clinical or diagnostic
functionality. We welcome public comments on the proposed change in
terminology.
CMS has been evaluating how to develop a comprehensive and
consistent approach to SaMS payment for several years with the novel
and evolving nature of these technologies. We have sought public input
through two comment solicitations (87 FR 72035 through 87 FR 72036, 89
FR 94129 through 89 FR 94131) and expressed our objective to seek a
payment strategy that aligns with our agency's mission to increase
quality, improve health, reduce costs, and strengthen the healthcare
system. However, questions remain regarding how best to structure
payment for these services. One challenge is that current Medicare Part
B payment systems for SaMS, including in the OPPS, are primarily
designed to pay for services that rely on material resources,
[[Page 41919]]
rather than technologies whose value is driven by proprietary
algorithms and scalable, non-material costs. This creates difficulties
in establishing appropriate valuation methodologies, as the current
cost-based system often offers only limited transparency into
underlying costs and may not effectively constrain pricing. Another
challenge is determining how to account for the various ways in which
these technologies are acquired and billed by hospital OPDs,
particularly in cases with subscription- or license-based arrangements,
as well as per-use or ``per-click'' fees, which raises concerns
regarding program integrity.
As coding for SaMS continues to rapidly increase and technologies
evolve, establishing a consistent and timely payment methodology for
these services is a priority. New SaMS technologies are continuing to
be introduced to the market, each often accompanied by unique CPT codes
reflecting their proprietary algorithms or specific characteristics.
Interested parties are frequently seeking Medicare payment and coding
for SaMS technologies through the new technology APC process or
requesting clinical APC assignments. As a result, CMS is continuously
assessing and evaluating payment for SaMS through different pathways.
As we consider this policy, we want to ensure that we are moving toward
a more standardized approach that reduces payment rate variation across
similar technologies.
Given the growing need for a comprehensive and tailored payment
methodology, as we work to gather additional data to better understand
and more fully address the inherent payment challenges in this area, we
propose an interim payment policy for SaMS for CY 2027 while we examine
a range of approaches to payment for these kinds of technologies.
Specifically, we propose to assign SaMS technologies to new technology
APCs for CY 2027. We propose to designate 36 HCPCS codes as SaMS
services and reassign the proposed designated SaMS services that are
currently paid separately (assigned to status indicator ``S'') under
clinical APCs, to new technology APCs that closely align with their
current CY 2026 payment rates. We propose to assign the separately paid
SaMS technologies to new technology APCs because we believe that the
existing clinical APC structure does not adequately accommodate SaMS.
We believe that the new technology APCs are more appropriate to
accommodate SaMS on a temporary basis, as there have historically been
placements under the OPPS that allow us to provide consistent payment
for new procedures that are not yet reflected in our claims data or for
which we lack sufficient clinical information and cost data until we
can identify an appropriate clinical APC. In certain circumstances, we
have also assigned some services to new technology APCs through
rulemaking, even when they have not met the specific regulatory
criteria (66 FR 59897 through 59903) or have not applied for new
technology APC assignment through the subregulatory process. For
example, we have assigned certain services to new technology APCs in
special cases where an appropriate clinical APC to which to assign the
service does not exist. In the CY 2026 OPPS/ASC final rule with comment
period, we maintained the new technology APC assignment for HCPCS codes
G2082 and G2083 because we did not believe there was an appropriate
clinical APC to which to assign the service (90 FR 53551). This
proposed approach of assigning SaMS services to the same APC series
would allow CMS to take the first step towards standardization and
applying a consistent payment methodology across these services as we
consider more comprehensive long-term approaches, including those that
may better align payment with clinical outcomes.
We also believe it is important to distinguish SaMS technologies
from other services that are assigned to new technology APCs because
not all new services assigned to new technology APCs are SaMS
technologies. Therefore, we propose to create a new status indicator
under OPPS specifically for SaMS technologies. For CY 2027, we propose
to create status indicator ``O1'' (Software as a Medical Service, Paid
under OPPS; separate APC payment) and assign all services that we
propose to designate as SaMS to status indicator ``O1.'' Functionally,
we propose for status indicator ``O1'' to have the same payment
specifications as status indicator ``S,'' to allow for separate
payment. We request public comment on this proposal. We also request
public comment regarding whether a new status indicator with the same
specification as status indicator ``T'' (Procedure or service subject
to multiple procedure discounting) would provide more appropriate
payment for these services while addressing any potential program
integrity concerns.
For CY 2027, we propose to designate the HCPCS codes listed in
Table 61 as SaMS technologies. Of these, we propose to assign 21 HCPCS
codes to new technology APCs from clinical APCs, maintaining
approximate payment rate continuity with CY 2026 payment, and status
indicator ``O1''. Table 61 provides the list of HCPCS codes and
proposed new technology APC and status indicator assignments for CY
2027. For SaMS that are already assigned to new technology APCs for CY
2026, we propose to continue to assign these services to new technology
APCs for CY 2027 while proposing to update the status indicator
assignment to ``O1'' to designate these technologies as SaMS. We refer
readers to section III.C. of this proposed rule for a discussion on our
proposals for SaMS technologies that are currently assigned to new
technology APCs for CY 2026.
We note that there are a small number of technologies we consider
to be SaMS that are currently paid under the OPPS and assigned to an
OPPS status indicator of ``Q1'' (STV-Packaged Codes; Paid under OPPS),
indicating that the service is conditionally packaged. Services
assigned to an OPPS status indicator of ``Q1'' will receive packaged
payment when furnished with a significant procedure but will be
separately paid when the service appears on the claim without a
significant procedure. Because services assigned to new technology APCs
are exempt from C-APC packaging policies, we do not believe it would be
appropriate to propose to assign SaMS HCPCS codes that are currently
conditionally packaged for CY 2026 to new technology APCs with status
indicator ``S'' (Procedure or Service, Not Discounted When Multiple) to
indicate separate payment. As an alternative, we considered
unconditionally packaging SaMS services that are currently assigned to
status indicator ``Q1'' by proposing to assign the services a status
indicator of ``N'' (Items and Services Packaged into APC Rates).
However, we believe proposing to unconditionally package payment for CY
2027 for SaMS technologies that are currently conditionally packaged
under the OPPS may result in interruptions to patient access. Given
that we intend for this policy to be a first step towards more
comprehensive payment policy changes and seek to minimize disruption,
we believe it is more appropriate to propose to maintain the clinical
APC and status indicator assignments for these codes. Therefore, for CY
2027, we propose to maintain the clinical APC and status indicator
assignments for SaMS that are currently conditionally packaged under
the OPPS.
Similarly, there are other HCPCS codes that describe SaMS that are
assigned to status indicator ``E1'' (Items, codes, and services not
covered by any Medicare outpatient benefit category; statutorily
excluded; not reasonable and
[[Page 41920]]
necessary), status indicator ``N'' (Items or services packaged into APC
rates), or status indicator ``M'' (Items and services not billable to
the FI or MAC). Since these are not separately paid services under the
OPPS for CY 2026, for CY 2027, we propose to maintain the OPPS status
indicators to which they are currently assigned.
The various SaMS HCPCS codes that are impacted by our proposals in
this section are listed in Table 61. Table 61 provides the current APC
assignments, and the proposed CY 2027 APC and status indicator
assignments for codes we propose to designate as SaMS services and that
are currently assigned to clinical APCs or are not separately paid
under the OPPS for CY 2026. We refer readers to section III.C. of this
proposed rule for a discussion on the proposed CY 2027 payment rates
for SaMS codes that are currently assigned to new technology APCs for
CY 2026. In addition, we refer readers to Addendum B for proposed CY
2027 OPPS payment rates and status indicators for HCPCS codes that we
propose to designate as SaMS. We request comment on our proposals,
including the list of HCPCS codes we propose to designate as SaMS and
that we propose to reassign to new technology APCs for CY 2027,
including whether there are any additional HCPCS codes we should
consider.
BILLING CODE 4169-69-P
[[Page 41921]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.092
[[Page 41922]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.093
[[Page 41923]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.094
[[Page 41924]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.095
[[Page 41925]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.096
BILLING CODE 4169-69-C
2. SaMS Analyses Performed on Laboratory Tests
In recent years, we have seen an increase in laboratory tests that
combine laboratory analyses, such as genomic sequencing or
immunoassays, with computer algorithms to produce a clinical test
result. The AMA CPT Editorial Panel created a category called Multi-
Analyte Assays with Algorithmic Analysis, to categorize test codes that
combined laboratory analyses with computer algorithms to generate
clinical information. More recently, however, we are seeing the
development of distinct algorithmic analyses alone.
For example, when the genomic sequencing of an individual is
performed, this sequencing will likely only need to be performed once.
However, once the genomic sequence has been generated, the subsequent
algorithmic analyses of that sequence data can be performed an infinite
number of times to produce a wide range of results and/or diagnostic or
risk-related information. These secondary analyses of original genomic
sequences can be proprietary and unique to a single laboratory, but
could also be conducted at a range of settings. For purposes of this
proposal, we are referring to subsequent stand-alone algorithmic
analyses that are separate from a CLIA certified laboratory's
examination of human material, as defined by 42 CFR 493.21, as ``SaMS
laboratory analyses performed on laboratory tests ''.
Currently, certain SaMS analyses performed on laboratory tests are
treated as clinical diagnostic laboratory tests (CDLTs) and paid under
the Clinical Laboratory Fee Schedule (CLFS). Section 1861(s) of the Act
specifies items and services included as ``medical and other health
services'' under Part B, including diagnostic X-ray tests, diagnostic
laboratory tests, and other diagnostic tests as described in section
1861(s)(3) of the Act. Section 1861(s)(17) of the Act states that no
diagnostic tests performed in any laboratory shall be included within
paragraph (3) unless such laboratory meets CLIA certification
requirements under section 353 of the Public Health Service Act, among
other requirements. Sections 1833(h) and 1834A of the Act and the
implementing regulations at 42 CFR part 414, subpart G, set forth the
CLFS ratesetting methodologies for CDLTs. We do not believe it is
appropriate to consider these secondary algorithmic analyses to be
CDLTs or establish CLFS payment rates for these analyses because these
secondary algorithmic analyses do not require laboratory services or
entities, regulated by CLIA, to perform them. Referring to the example
above, while an individual's genomic sequence must be performed by a
CLIA certified laboratory entity to allow for Medicare payment under
the CLFS, the subsequent algorithmic analyses of the sequence data as
part of the SaMS analyses performed on laboratory tests can be
performed by any non-regulated entity with the computer software needed
to perform the analyses. Our position is that the secondary analyses
are ``other diagnostic tests'' under section 1861(s)(3) of the Act as
opposed to ``diagnostic laboratory tests.'' As noted
[[Page 41926]]
previously, Medicare will not pay for CDLTs on the CLFS unless they are
furnished by laboratories that meet applicable CLIA certification
requirements. Tests that examine materials derived from the human body
are assigned to and paid under the CLFS only when furnished by such
certified laboratories in accordance with 42 CFR 410.32(d). Because
SaMS analyses performed on laboratory tests are downstream evaluations
of the data generated by a prior laboratory test, an entity that
performs only algorithmic analyses of previously sequenced data may not
qualify as a CLFS laboratory under 42 CFR 493.2 or require CLIA
certification. We believe SaMS that evaluate data generated by a prior
laboratory test should not be treated as CDLTs for Medicare payment
purposes.
We are also concerned that paying for these analyses based on
existing CLFS payment methodologies may create significant
vulnerabilities for the Medicare program, due to the lack of data
transparency and CDLTs not being subject to beneficiary cost-sharing or
budget neutrality. 42 CFR 414.508 outlines the ratesetting
methodologies CMS uses to set payment rates for new tests on the CLFS.
Under Sec. 414.508(b), CMS determines the payment amount based on
either crosswalking or gapfilling methodologies until applicable
information is available to establish a payment amount under the
methodology described in Sec. 414.507(b). Crosswalking is used if it
is determined that a new CDLT is comparable to an existing test,
multiple existing test codes, or a portion of an existing test code.
Gapfilling is used when no comparable existing CDLT is available.
Public consultation for payment for a new clinical diagnostic
laboratory tests is required in determining payment amounts, receiving
public comments and recommendations (and data on which the
recommendations are based) as well as recommendations from the Advisory
Panel on CDLTs per 414.506. A significant challenge to the ratesetting
process for CMS is the lack of transparent data received from
laboratories outlining resource costs of a test, particularly for the
algorithmic portions of tests that are combined with other analytes. In
the past, laboratories have explained to CMS that the algorithmic
components of laboratory tests are highly proprietary and details
cannot be shared. Thus, CMS has worked with the limited information
available on the details of methods or resources for the algorithmic
portions of tests or analyses, and has thus far relied on other
laboratory methods provided in the CPT descriptor (i.e. NGS sequencing,
RT-PCR, or DNA methylation analysis). As CMS has gathered more
information on SaMS analyses performed on laboratory tests, we now
believe that since these analyses are entirely computer-based,
comparison based on laboratory methodologies is not appropriate.
Additionally, in contrast to the OPPS, the CLFS generally does not
include beneficiary cost-sharing or budget neutrality adjustments,
which limits transparency regarding pricing and creates challenges for
ensuring appropriate valuation of these services.
Finally, CMS has an interest in ensuring that services that are
fundamentally similar are paid for and treated in the same way,
regardless of the setting of care in which the service is furnished.
Since SaMS analyses performed on laboratory tests do not require
performance by a CLIA-certified laboratory, and like many other SaMS
analyses discussed in this section, perform algorithmic analyses on
previously generated data, we believe SaMS analyses performed on
laboratory tests are substantively similar to other SaMS technologies
that are currently paid under the OPPS. Accordingly, we believe that
whether the SaMS performs algorithmic analyses of an imaging test (e.g.
CT scan) or whether it performs an algorithmic analysis on data
generated from a laboratory test, all algorithmic analyses should be
treated consistently. We believe that this uniform approach for SaMS
technologies would promote stability and predictability in payment for
similar services.
Therefore, for CY 2027, we propose to assign 10 HCPCS codes
describing various SaMS analysis performed on laboratory tests to new
technology APCs under the OPPS, using the latest available CLFS data to
crosswalk to new technology APCs with payment rates that closely
approximate the current CY 2026 CLFS payment rates for these codes. The
proposed payment rates for SaMS performed on prior laboratory tests
cannot be expected to align exactly with current CLFS payment rates
because assignment to new technology APCs is based on established cost
bands rather than individual test-specific payment amounts. For
example, if a HCPCS code is currently paid $430.17 under the CLFS, the
appropriate new technology APC assignment under this proposal would be
APC 1506 (New Technology--Level 6 ($401-$500)), which has a
standardized payment rate of $450.50, rather than receiving a payment
rate that exactly matches the current CLFS amount. We note that, under
this proposal, SaMS analyses performed on laboratory tests would be
paid separately by being assigned to new technology APCs with the newly
proposed status indicator ``O1'' (Software as a Medical Service, Paid
under OPPS; separate APC payment) for CY 2027. Table 62 shows the list
of currently payable SaMS analyses performed on laboratory tests under
the CLFS with proposed new technology APC assignments under the OPPS
for CY 2027. These 10 HCPCS codes were identified based on the CPT
descriptor for the code. If there were no laboratory methods included
in the code descriptor, and only an algorithmic analysis was described,
we identified the code as a SaMS laboratory analysis. We would
appreciate public comment on this proposed list and any other similar
analyses that should be removed from the CLFS and paid under the OPPS.
In addition, for CY 2027 and subsequent years, we propose to assign
any new SaMS analyses performed on laboratory test codes to new
technology APCs for payment under the OPPS. We request public comment
on these proposals, including the list of 10 HCPCS codes that we
identified as SaMS analyses performed on laboratory tests and any
additional HCPCS codes that we should designate as SaMS and pay under
the OPPS rather than the CLFS. CMS may finalize a policy that includes
such payment for additional HCPCS codes in the final rule based on
public comment.
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C. Adjustment for Cost-of-Living in Alaska and Hawaii
We have heard from a variety of interested parties about the
particularly difficult cost environment facing hospitals located in
Alaska and Hawaii. These challenges stem from the unique circumstances
of those geographies, including dependency on outside goods and
components, remote locations and transportation challenges, and other
factors inherent to providing healthcare in these non-contiguous
States.
A review of the available cost report data used in OPPS ratesetting
highlights these issues. We observe a number of hospitals in Alaska and
Hawaii with payment-to-cost ratios (PCRs) that range from 0.6 to 0.7,
significantly below the average PCR for OPPS hospitals of 0.89 used as
an initial target for the cancer
[[Page 41928]]
hospital adjustment discussed in section II.F. of this proposed rule.
In addition, the overall ancillary cost-to-charge ratios for several
hospitals located in these States are higher than average, indicating
that there are higher costs relative to what those hospitals are able
to charge for the outpatient services they provide compared to other
OPPS hospitals.
Under the IPPS, 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. To account for
higher non-labor-related costs for these two States in the IPPS, we
apply an adjustment factor to the nonlabor-related portion of the
standardized amount for hospitals in Alaska and Hawaii. 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 https://www.opm.gov/policy-data-oversight/pay-leave/pay-systems/nonforeign-areas/#url=COLA-Rates to update this
nonlabor portion.
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 U.S. 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 the existing IPPS 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).
As discussed in the FY 2027 IPPS/LTCH PPS proposed rule, effective
for FY 2027, we propose to adjust non-labor related costs for hospitals
located in Alaska and Hawaii, using the Overseas Cost-of-Living
Allowance (OCOLA) data published by the Department of Defense (DOD).
Starting with the FY 2027 payment year, we also propose to no longer
cap the IPPS COLA factors at 25 percent. We refer readers to the FY
2027 IPPS/LTCH PPS proposed rule for further discussion of the proposed
changes to the methodology for calculating the IPPS COLA factors for FY
2027 (91 FR 19813 through 19814).
While higher labor-related costs for these two States are taken
into account under the OPPS through the adoption of the IPPS hospital
wage index and associated wage index policies, the nonlabor portion of
OPPS payment is not currently adjusted to address higher nonlabor costs
in these States as is addressed in the IPPS through the COLA policy. We
have historically adopted the IPPS wage index and wage index policies
under the OPPS, most recently in the CY 2026 OPPS/ASC final rule with
comment period (90 FR 53494 through 53498). As discussed in section
II.C of this proposed rule, we propose to continue to adopt the IPPS
wage index and wage index policies under the CY 2027 OPPS and also
continue to believe that using the IPPS wage index as the source of an
adjustment factor for the OPPS is reasonable and logical, given the
inseparable, subordinate status of the HOPD within the hospital
overall. We think this same logic would apply to adopting the IPPS COLA
policy for hospital outpatient services in Alaska and Hawaii, as
additional nonlabor costs that apply to hospital inpatient services
provided in these States likely also apply to hospital outpatient
services in these States. Further, not addressing the discrepancy
between the IPPS and OPPS adjustment to account for nonlabor related
costs would potentially continue a disincentive to provide services in
the hospital outpatient setting due to the adjustment only applying to
inpatient services.
Based on our review of the costs of providing outpatient services
in these States and our general practice of applying consistent
policies across the inpatient and outpatient hospital settings where
possible, we propose to use the equitable adjustment authority provided
by section 1833(t)(2)(E) of the Act to propose to apply the IPPS COLA
factors to the nonlabor share of OPPS payment amounts for hospitals
located in Alaska and Hawaii for CY 2027 and future years. We note that
for OPPS payments for which there is no wage adjustable portion, we
propose to apply the COLA to the full OPPS payment, as would be the
case for status indicator assignments of ``G,'' ``H,'' ``K,'' ``R,''
and ``U''.
As noted earlier in this section, in the FY 2027 IPPS/LTCH PPS
proposed rule we proposed several changes to the current COLA
methodology including using the OCOLA data published by the DOD for the
FY 2027 factors as well as to remove the cap of 25 percent (91 FR 19813
through 19814). Consistent with our historical practice of aligning
OPPS payment methodologies with those of the IPPS where appropriate, we
propose to adopt the IPPS COLA factors as finalized in the FY 2027
IPPS/LTCH PPS final rule as the CY 2027 OPPS COLA factors for hospitals
located in Alaska and Hawaii.
Under the OPPS, section 1833(t)(2)(E) of the Act grants the
Secretary the authority to establish equitable adjustments as
necessary, and we propose to use that authority to establish a COLA for
outpatient hospital services provided in Alaska and Hawaii that mirrors
the COLA provided for inpatient hospital services provided in these
States. Associated with this proposed policy, we also propose to add
conforming regulation text changes by adding subsection (l) to Sec.
419.43. This new subsection describes the cost-of-living adjustment to
the nonlabor portion of the OPPS payment amounts for hospitals located
in Alaska and Hawaii. Finally, we note that under our authority at
section 1833(t)(2)(E) of the Act this adjustment would be budget
neutral, and the associated budget neutrality adjustment is discussed
in section II.B. of this proposed rule.
[[Page 41929]]
D. Provision of Cardiac Rehabilitation (CR), Intensive Cardiac
Rehabilitation (ICR) and Pulmonary Rehabilitation (PR) Services to
Hospital Outpatients in Their Homes Via Audio and Video Real-Time
Communications Technology
Section 6211(a) of the Consolidated Appropriations Act, 2026 (CAA,
2026) (Pub. L. 119-75, February 3, 2026), amended section
1861(eee)(2)(A)(ii) of the Act to allow for the provision of cardiac
rehabilitation (CR), intensive cardiac rehabilitation (ICR) and
pulmonary rehabilitation (PR) services to hospital outpatients in their
homes via audio and video real-time communications technology
(excluding audio-only), through December 31, 2027.
Section 6211(b) of CAA, 2026, authorizes the Secretary to implement
the amendment made by section 6211(a) via program instruction or
otherwise. Consistent with that authority, we have issued sub-
regulatory guidance relating to the provision of CR, ICR and PR
services to hospital outpatients in their homes via audio and video
real-time communications technology. This guidance is available at
https://www.cms.gov/medicare/coverage/telehealth.
XI. Proposed CY 2027 OPPS Payment Status and Comment Indicators
A. Proposed CY 2027 OPPS Payment Status Indicator Definitions
Payment status indicators (SIs) that we assign to HCPCS codes and
APCs serve an important role in determining payment for services under
the OPPS. They indicate whether a service represented by a HCPCS code
is payable under the OPPS or another payment system and whether
particular OPPS policies apply to the code.
For CY 2027 and subsequent years, we propose to create a new status
indicator for software as a medical service that is paid separately
under the OPPS. Under the OPPS, software as a medical service that is
paid separately would be assigned a status indicator of ``O1''--
(Software as a Medical Service, paid under OPPS; separate APC payment).
Further discussion of the proposed payment policy for SaMS can be found
in section X.B of the CY 2027 OPPS/ASC proposed rule. The proposed
definition and payment status of proposed status indicator ``O1'' can
be found in Table 63.
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For CY 2027 and subsequent years, we also propose to revise the
current definition of status indicator ``E2'' to comply with the drug
invoice policy. Further discussion of the proposed drug invoice payment
policy can be found in section V.2.c of this proposed rule. The
proposed revised definition of status indicator ``E2'' can be found in
Table 63.
We do not propose to make any other changes to the existing
definitions of status indicators that are listed in Addendum D1 to this
proposed rule which is available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices.
The complete list of proposed CY 2027 payment status indicators and
their definitions is displayed in Addendum D1 to this proposed rule,
which is available on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices. The proposed CY 2027 payment status indicator assignments for
APCs and HCPCS codes are shown in Addendum A and Addendum B,
respectively, to this proposed rule, which are available on the CMS
website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices.
We solicit public comments on the proposed definitions of the OPPS
payment status indicators for CY 2027.
B. Proposed CY 2027 Comment Indicator Definitions
We propose to use four comment indicators for the CY 2027 OPPS.
These comment indicators, ``CH'', ``NC'', ``NI'', and ``NP'', are in
effect for CY 2026; and we propose to continue their use in CY 2027.
The proposed CY 2027 OPPS comment indicators are as follows:
``CH''--Active HCPCS code in current and next calendar
year, status indicator and/or APC assignment has changed; or active
HCPCS code that will be discontinued at the end of the current calendar
year.
``NC''--New code for the next calendar year or existing
code with substantial revision to its code descriptor in the next
calendar year, as compared to current calendar year for which we
requested comments in the CY 2026 OPPS/ASC proposed rule; final APC
assignment; comments will not be accepted on the final APC assignment
for the new code.
``NI''--New code for the next calendar year or existing
code with substantial revision to its code descriptor in the next
calendar year, as compared to current calendar year, interim APC
assignment; comments will be accepted on the interim APC assignment for
the new code.
``NP''--New code for the next calendar year or existing
code with substantial revision to its code descriptor in the next
calendar year, as compared to current calendar year, proposed APC
assignment; comments
[[Page 41930]]
will be accepted on the proposed APC assignment for the new code.
The definitions of the proposed OPPS comment indicators for CY 2027
are listed in Addendum D2 to this proposed rule, which is available on
the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices.
We solicit public comments on our proposed definitions of the OPPS
comment indicators for CY 2027.
XII. MedPAC Recommendations
The Medicare Payment Advisory Commission (MedPAC) was established
under section 1805 of the Act in large part to advise the U.S. Congress
on issues affecting the Medicare program. As required under the
statute, MedPAC submits reports to the Congress no later than March and
June of each year that present its Medicare payment policy
recommendations. The March report typically provides discussion of
Medicare payment policy across different payment systems and the June
report typically discusses selected Medicare issues. We are including
this section to make interested parties aware of certain MedPAC
recommendations for the OPPS and ASC payment systems as discussed in
its March 2026 report.
A. OPPS Payment Rates Update
The March 2026 MedPAC ``Report to the Congress: Medicare Payment
Policy'', recommended that the Congress update Medicare OPPS payment
rates by the amount specified in current law. We refer readers to the
March 2026 report for a complete discussion of this
recommendation.\152\ We appreciate MedPAC's recommendation and, as
discussed further in section II.B. of this proposed rule, we propose to
increase the OPPS payment rates by the amount specified in current law.
---------------------------------------------------------------------------
\152\ Medicare Payment Advisory Committee. March 2026 Report to
the Congress. Chapter 3: Hospital inpatient and outpatient services,
pp.61-96. Available at https://www.medpac.gov.
---------------------------------------------------------------------------
B. Medicare Safety Net Index
In the March 2026 MedPAC ``Report to the Congress: Medicare Payment
Policy'', MedPAC stated that their recommended update to IPPS and OPPS
payment rates under current law may not be sufficient to ensure the
financial viability of some Medicare safety-net hospitals with a poor
payer mix. MedPAC recommended we redistribute 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 recommended adding $1 billion
to this MSNI pool of funds to help maintain the financial viability of
Medicare safety-net hospitals and recommended to the Congress
transitional approaches for an MSNI policy. The FY 2027 IPPS/LTCH
proposed rule (91 FR 19312) provides additional information regarding
statutory requirements for disproportionate share hospital and
uncompensated care payments. We look forward to working with the
Congress on these matters.
XIII. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment
System
A. Background, Legislative History, Statutory Authority, and Prior
Rulemaking for the ASC Payment System
For a detailed discussion of the legislative history and statutory
authority related to payments to ASCs under Medicare, we refer readers
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74377
through 74378) and the June 12, 1998 proposed rule (63 FR 32291 through
32292). For a discussion of prior rulemaking on the ASC payment system,
we refer readers to the CYs 2012 to 2026 OPPS/ASC final rules with
comment period (76 FR 74378 through 74379; 77 FR 68434 through 68467;
78 FR 75064 through 75090; 79 FR 66915 through 66940; 80 FR 70474
through 70502; 81 FR 79732 through 79753; 82 FR 59401 through 59424; 83
FR 59028 through 59080; 84 FR 61370 through 61410; 85 FR 86121 through
86179; 86 FR 63761 through 63815; 87 FR 72054 through 72096; 88 FR
81900 through 81961; 89 FR 94309 through 94367; and 90 FR 53834 through
53916).
B. Proposed ASC Treatment of New and Revised Codes
1. Background on Process for New and Revised HCPCS Codes
We update the lists and payment rates for covered surgical
procedures and covered ancillary services in ASCs in conjunction with
the annual proposed and final rulemaking process to update the OPPS and
the ASC payment systems (Sec. 416.173; 72 FR 42535). We base ASC
payment and policies for most covered surgical procedures, drugs,
biologicals, and certain other covered ancillary services on the OPPS
payment policies, and we use quarterly change requests (CRs) to update
services paid for under the OPPS. We also provide quarterly update CRs
for ASC covered surgical procedures and covered ancillary services
throughout the year (January, April, July, and October). We release new
and revised Level II HCPCS codes and recognize the release of new and
revised CPT codes by the American Medical Association (AMA) and make
these codes effective (that is, the codes are recognized on Medicare
claims) via these ASC quarterly update CRs. We recognize the release of
new and revised Category III CPT codes in the July and January CRs.
These updates implement newly created and revised Level II HCPCS and
Category III CPT codes for ASC payments and update the payment rates
for separately paid drugs and biologicals based on the most recently
submitted ASP data. New and revised Category I CPT codes, except
vaccine codes, are released only once a year, and are implemented only
through the January quarterly CR update. New and revised Category I CPT
vaccine codes are released twice a year and are implemented through the
January and July quarterly CR updates. We refer readers to Table 41 in
the CY 2012 OPPS/ASC proposed rule for an example of how this process
is used to update HCPCS and CPT codes, which we finalized in the CY
2012 OPPS/ASC final rule with comment period (76 FR 42291; 76 FR 74380
through 74384).
In our annual updates to the ASC list of covered surgical
procedures and covered ancillary services, we undertake a review of
excluded surgical procedures, new codes, and codes with revised
descriptors, to identify any that we believe meet the criteria for
designation as ASC covered surgical procedures or covered ancillary
services. Updating the lists of ASC covered surgical procedures and
covered ancillary services, as well as their payment rates, in
association with the annual OPPS rulemaking cycle, is particularly
important because the OPPS relative payment weights and, in some cases,
payment rates, are used as the basis for the payment of many covered
surgical procedures and covered ancillary services under the revised
ASC payment system. This joint update process ensures that the ASC
updates occur in a regular, predictable, and timely manner.
Payment for ASC procedures, services, and items are generally based
on medical billing codes, specifically, HCPCS codes, that are reported
on ASC claims. The HCPCS is divided into two principal subsystems,
referred to as Level I and Level II. Level I is comprised of CPT
(Current Procedural Terminology) codes, a numeric and alphanumeric
coding system maintained by the AMA, and includes
[[Page 41931]]
Category I, II, and III CPT codes. Level II of the HCPCS, which is
maintained by CMS, is a standardized coding system that is used
primarily to identify products, supplies, and services not included in
the CPT codes. Together, Level I and II HCPCS codes are used to report
procedures, services, items, and supplies under the ASC payment system.
Specifically, we recognize the following codes on ASC claims:
Category I CPT codes, which describe surgical procedures,
diagnostic and therapeutic services, and vaccine codes;
Category III CPT codes, which describe new and emerging
technologies, services, and procedures; and
Level II HCPCS codes (also known as alpha-numeric codes),
which are used primarily to identify drugs, devices, supplies,
temporary procedures, and services not described by CPT codes.
We finalized a policy in the August 2, 2007 ASC final rule (72 FR
42533 through 42535) to evaluate each year all new and revised Category
I and Category III CPT codes and Level II HCPCS codes that describe
surgical procedures, and to make preliminary determinations during the
annual OPPS/ASC rulemaking process regarding whether or not they meet
the criteria for payment in the ASC setting as covered surgical
procedures and, if so, whether or not they are office-based procedures.
In addition, we identify new and revised codes as ASC covered ancillary
services based upon the final payment policies of the revised ASC
payment system. In prior rulemakings, we refer to this process as
recognizing new codes. However, this process has always involved the
recognition of new and revised codes. We consider revised codes to be
new when they have substantial revision to their code descriptors that
necessitate a change in the current ASC payment indicator. To clarify,
we refer to these codes as new and revised in this proposed rule.
We have separated our discussion below based on when the codes are
released and whether we propose to solicit public comments in the
proposed rule (and respond to those comments in the CY 2027 OPPS/ASC
final rule with comment period) or whether we will be soliciting public
comments in the CY 2027 OPPS/ASC final rule with comment period (and
responding to those comments in the CY 2028 OPPS/ASC final rule with
comment period).
2. April 2026 HCPCS Codes Proposed Rule Comment Solicitation
For the April 2026 update, there were no new CPT codes; however,
there were several new Level II HCPCS codes. In the April 2026 ASC
quarterly update (Transmittal 13704, dated April 7, 2026, CR 14445), we
added several new Level II HCPCS codes to the list of covered ancillary
services. Table 64 (New Level II HCPCS Codes for ASC Covered Surgical
Procedures and Ancillary Services Effective April 1, 2026) of this
proposed rule, lists the new Level II HCPCS codes that were implemented
April 1, 2026. The proposed comment indicators, payment indicators and
payment rates, where applicable, for these April codes can be found in
Addendum BB to this proposed rule. The list of ASC payment indicators
and corresponding definitions can be found in Addendum DD1 to this
proposed rule. These new codes that are effective April 1, 2026, are
assigned to comment indicator ``NP'' in Addendum BB to this proposed
rule to indicate that the codes are assigned to an interim APC
assignment and that comments will be accepted on their interim APC
assignments. The list of comment indicators and definitions used under
the ASC payment system can be found in Addendum DD2 to this proposed
rule. We note that the following ASC addenda and OPPS Addendum O are
available via the internet on the CMS website.
ASC Addendum AA: Proposed ASC Covered Surgical Procedures
for CY 2027 (Including Surgical Procedures for Which Payment is
Packaged),
ASC Addendum BB: Proposed ASC Covered Ancillary Services
Integral to Covered Surgical Procedures for CY 2027 (Including
Ancillary Services for Which Payment is Packaged),
ASC Addendum DD1: Proposed ASC Payment Indicators (PI) for
CY 2027,
ASC Addendum DD2: Proposed ASC Comment Indicators (CI) for
CY 2027,
ASC Addendum EE: Proposed Surgical Procedures to be
Excluded from Payment in ASC for CY 2027, and
ASC Addendum FF: Proposed ASC Device Offset Percentages
for CY 2027, and
Addendum O: Long Descriptors for New Category I CPT Codes,
Category III CPT Codes, C-codes, and G-Codes Effective January 1, 2027.
We invite public comments on the proposed payment indicators for
the new HCPCS codes that were recognized as ASC covered ancillary
services in April 2026 through the quarterly update CRs, as listed in
Table 64 (New Level II HCPCS Codes for ASC Covered Surgical Procedures
and Ancillary Services Effective April 1, 2026) of this proposed rule.
We propose to finalize their payment indicators in the CY 2027 OPPS/ASC
final rule with comment period.
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3. July 2026 HCPCS Codes Proposed Rule Comment Solicitation
In the July 2026 ASC quarterly update (Transmittal R13836, Change
Request 14522, June 24, 2026), we added several separately payable CPT
and Level II HCPCS codes to the list of covered surgical procedures and
covered ancillary services. Table 65 (New HCPCS Codes for ASC Covered
Surgical Procedures and Ancillary Services Effective July 1, 2026) of
this proposed rule, lists the new HCPCS codes that are effective July
1, 2026. The proposed comment indicators, payment indicators, and
payment rates for the codes can be found in Addendum AA and Addendum BB
to this proposed rule. The list of ASC payment indicators and
corresponding definitions can be found in Addendum DD1 to this proposed
rule. These new codes that are effective July 1, 2026, are assigned to
comment indicator ``NP'' in Addendum AA and BB to this proposed rule to
indicate that the codes are assigned to an interim APC assignment and
that comments will be accepted on their
[[Page 41934]]
interim APC assignments. The list of comment indicators and definitions
used under the ASC payment system can be found in Addendum DD2 to this
proposed rule. We note that ASC Addenda AA, BB, DD1, and DD2 are
available via the internet on the CMS website.
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We invite public comments on the proposed payment indicators for
the new HCPCS codes newly recognized as ASC covered surgical procedures
and covered ancillary services effective April 1, 2026 and July 1,
2026, through the quarterly update CRs, as listed in Tables 64 and 65.
We propose to finalize the payment indicators in the CY 2027 OPPS/ASC
final rule with comment period.
4. October 2026 HCPCS Codes Final Rule Comment Solicitation
For CY 2027, consistent with our established policy, we propose
that the Level II HCPCS codes that will be effective October 1, 2026,
would be ``NI'' in Addendum BB to the CY 2027 OPPS/ASC final rule with
comment period to indicate that we have assigned the codes an interim
ASC payment status for CY 2026. We will invite public comments in the
CY 2027 OPPS/ASC final rule with comment period on the interim payment
indicators, which would then be finalized in the CY 2028 OPPS/ASC final
rule with comment period.
5. January 2027 HCPCS Codes
a. New Level II HCPCS Codes Final Rule Comment Solicitation
As has been our practice in the past, we incorporate those new
Level II HCPCS codes that are effective January 1 in the final rule
with comment period, thereby updating the ASC payment system for the
calendar year. We note that unlike the CPT codes that are effective
January 1 and are included in the OPPS/ASC proposed rules, and except
for the G-codes listed in Addendum O to this proposed rule, most Level
II HCPCS codes are not released until sometime around November to be
effective January 1. Because these codes are not available until
November, we are unable to include them in the OPPS/ASC proposed rules.
Therefore, these Level II HCPCS codes will be released to the public
through the CY 2027 OPPS/ASC
[[Page 41935]]
final rule with comment period, January 2027 ASC Update CR, and the CMS
HCPCS website.
In addition, for CY 2027, we propose to continue our established
policy of assigning comment indicator ``NI'' in Addendum AA and
Addendum BB to the CY 2027 OPPS/ASC final rule with comment period to
the new Level II HCPCS codes that will be effective January 1, 2027, to
indicate that we are assigning them an interim payment indicator, which
is subject to public comment. We will be inviting public comments in
the CY 2027 OPPS/ASC final rule with comment period on the payment
indicator assignments, which would then be finalized in the CY 2028
OPPS/ASC final rule with comment period.
b. CPT Codes Proposed Rule Comment Solicitation
For the CY 2027 ASC update, we received the CPT codes that will be
effective January 1, 2027, from the AMA in time to be included in this
proposed rule. The new, revised, and deleted CPT codes can be found in
ASC Addendum AA and Addendum BB to this proposed rule (which are
available via the internet on the CMS website). We note that the new
and revised CPT codes are assigned to comment indicator ``NP'' in ASC
Addendum AA and Addendum BB of this proposed rule to indicate that the
code is new for the next calendar year, or the code is an existing code
with substantial revision to its code descriptor in the next calendar
year as compared to the current calendar year with a proposed payment
indicator assignment. We will accept comments and finalize the payment
indicators in the CY 2027 OPPS/ASC final rule with comment period.
Further, we remind readers that the CPT code descriptors that appeared
in Addendum AA and Addendum BB are short descriptors and do not
describe the complete procedure, service, or item described by the CPT
code. Therefore, we included the 5-digit placeholder codes and their
long descriptors for the new CY 2027 CPT codes in Addendum O to this
proposed rule (which is available via the internet on the CMS website)
so that the public can comment on our proposed payment indicator
assignments. The 5-digit placeholder codes can be found in Addendum O
to this proposed rule, specifically under the column labeled ``CY 2027
OPPS/ASC Proposed Rule 5- Digit Placeholder Code''. We intend to
include the final CPT code numbers in the CY 2027 OPPS/ASC final rule
with comment period.
In summary, we solicit public comments on the proposed CY 2027
payment indicators for the new Category I and III CPT codes that will
be effective January 1, 2027. Because these codes are listed in
Addendum AA and Addendum BB with short descriptors only, we are listing
them again in Addendum O with the long descriptors. We also propose to
finalize the payment indicator for these codes (with their final CPT
code numbers) in the CY 2027 OPPS/ASC final rule with comment period.
The proposed payment indicators and comment indicators for these codes
can be found in Addendum AA and BB to this proposed rule. The list of
ASC payment indicators and corresponding definitions can be found in
Addendum DD1 to this proposed rule. The new CPT codes that will be
effective January 1, 2027, are assigned to comment indicator ``NP'' in
Addendum AA and BB to this proposed rule to indicate that the codes are
assigned to an interim payment indicator and that comments will be
accepted on their interim payment ASC payment assignments. The list of
comment indicators and definitions used under the ASC payment system
can be found in Addendum DD2 to this proposed rule. We note that ASC
Addenda AA, BB, DD1, and DD2 are available via the internet on the CMS
website.
Finally, in Table 66, we summarize our process for updating codes
through our ASC quarterly update CRs, seeking public comments, and
finalizing the treatment of these new codes under the ASC payment
system.
[[Page 41936]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.102
6. Proposed ASC Payment and Comment Indicators
a. Background
In addition to the payment indicators that we introduced in the
August 2, 2007 ASC final rule, we created final comment indicators for
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66855). We created Addendum DD1 to define ASC payment
indicators that we use in Addenda AA and BB to provide payment
information regarding covered surgical procedures and covered ancillary
services, respectively, under the revised ASC payment system. The ASC
payment indicators in Addendum DD1 are intended to capture policy-
relevant characteristics of HCPCS codes that may receive packaged or
separate payment in ASCs, such as whether they were on the ASC CPL
prior to CY 2008; payment designation, such as device-intensive or
office-based, and the corresponding ASC payment methodology; and their
classification as separately payable ancillary services, including
radiology services, brachytherapy sources, OPPS pass-through devices,
corneal tissue acquisition services, drugs or biologicals, NTIOLs, or
qualifying nonopioid devices. We also created Addendum DD2 that lists
the ASC comment indicators. The ASC comment indicators included in
Addenda AA and BB to the proposed rules and final rules with comment
period serve to identify, for the revised ASC payment system, the
status of a specific HCPCS code and its payment indicator with respect
to the timeframe when comments will be accepted. The comment indicator
``NI'' is used in the OPPS/ASC final rule with comment period to
indicate new codes for the next calendar year for which the interim
payment indicator assigned is subject to comment. The comment indicator
``NI'' also is assigned to existing codes with substantial revisions to
their descriptors such that we consider them to be describing new
services, and the interim payment indicator assigned is subject to
comment, as discussed in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60622). The comment indicator ``NP'' is used in the OPPS/
ASC proposed rule to indicate new codes for the next calendar year for
which the proposed payment indicator assigned is subject to comment.
The comment indicator ``NP'' also is assigned to existing codes with
substantial revisions to their descriptors, such that we consider them
to be describing new services, and the proposed payment indicator
assigned is subject to comment, as discussed in the CY 2016 OPPS/ASC
final rule with comment period (80 FR 70497). The ``CH'' comment
indicator is used in Addenda AA and BB to the proposed rule (these
addenda are available via the internet on the CMS website) to indicate
that the payment indicator assignment has changed for an active HCPCS
code in the current year and the next calendar year, for example, if an
active HCPCS code is newly recognized as payable in ASCs or an active
HCPCS code is discontinued at the end of the current calendar year. The
``CH'' comment indicators that are published in the final rule with
comment period are provided to alert readers that a change has been
made from one calendar year to the next, but do not indicate that the
change is subject to comment. In the CY 2021 OPPS/ASC final rule with
comment period, we finalized the addition of ASC payment indicator
``K5''--Items, Codes, and Services for which pricing information and
claims data are not available. No payment made--to ASC Addendum DD1
(which is available via the internet on the CMS website) to indicate
those services and procedures that CMS anticipates will become payable
when claims data or payment information becomes available. In CY 2024
OPPS/ASC final rule with comment period, we finalized the addition of
two ASC payment indicators, ``D1''--``Ancillary dental service/item; no
separate payment made'' and ``D2''--``Non office-based dental procedure
added in CY 2024 or later'', for new dental codes for CY 2024 and
subsequent calendar years to indicate potentially payable dental
services and procedures in the ASC setting (88 FR 81907). We added
these two codes to Addendum DD1 (which is available via the internet on
the CMS website). In CY 2025 OPPS/ASC final rule with comment period,
we finalized the modification of the descriptor of ASC payment
indicator ``L6'' to ``Special payment; New Technology Intraocular Lens
(NTIOL) or qualifying non-opioid devices'', to account for non-opioid
devices paid for under the ASC payment system pursuant to section 4135
of the CAA, 2023 (89 FR 94317).
[[Page 41937]]
We added this code to Addendum DD1 (which is available via the internet
on the CMS website). In CY 2026 OPPS/ASC final rule with comment
period, we finalized the addition of one payment indicator, ``S2''--
``Skin substitute supply group; paid separately when provided integral
to a surgical procedure on ASC list; payment based on OPPS rate”
to describe skin substitute products paid separately in an ASC (90 FR
53843). We added this code to Addendum DD1 (which is available via the
internet on the CMS website).
b. Proposed ASC Payment and Comment Indicators for CY 2027
For CY 2027, we propose new and revised Category I and III CPT
codes as well as new and revised Level II HCPCS codes. Proposed
Category I and III CPT codes that are new and revised for CY 2027 and
any new and existing Level II HCPCS codes with substantial revisions to
the code descriptors for CY 2027, compared to the CY 2026 descriptors,
are included in ASC Addenda AA and BB to this proposed rule and labeled
with comment indicator ``NP'' to indicate that these CPT and Level II
HCPCS codes are open for comment as part of this proposed rule.
We will respond to public comments on ASC payment and comment
indicators and finalize their ASC assignment in the CY 2027 OPPS/ASC
final rule with comment period. We refer readers to Addenda DD1 and DD2
of this proposed rule (which are available via the internet on the CMS
website) for the complete list of ASC payment and comment indicators
proposed for the CY 2027 update. Addenda DD1 and DD2 to this proposed
rule (which are available via the internet on the CMS website) contain
the complete list of ASC payment and comment indicators for CY 2027.
C. Proposed Payment Policies Under the ASC Payment System
1. Proposed ASC Payment for Covered Surgical Procedures
a. Background
Our ASC payment policies for covered surgical procedures under the
revised ASC payment system are described in the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66828 through 66831). Under our
established policy, we use the ASC standard ratesetting methodology of
multiplying the ASC relative payment weight for the procedure by the
ASC conversion factor for that same year to calculate the national
unadjusted payment rates for procedures with payment indicators ``G2''
and ``A2.'' Payment indicator ``A2'' was developed to identify
procedures that were included on the list of ASC covered surgical
procedures in CY 2007 and, therefore, were subject to transitional
payment prior to CY 2011. Although the 4-year transitional period has
ended and payment indicator ``A2'' is no longer required to identify
surgical procedures subject to transitional payment, we have retained
payment indicator ``A2'' because it is used to identify procedures that
are exempted from the application of the office-based designation.
Payment rates for office-based procedures (payment indicators
``P2,'' ``P3,'' and ``R2'') are the lower of the PFS nonfacility PE
RVU-based amount or the amount calculated using the ASC standard rate
setting methodology for the procedure. As detailed in section
XIII.C.3.b. of this proposed rule, we update the payment amounts for
office-based procedures (payment indicators ``P2,'' ``P3'', and ``R2'')
using the most recent available PFS and OPPS data. We compare the
estimated current year rate for each of the office-based procedures,
calculated according to the ASC standard rate setting methodology, to
the PFS nonfacility PE RVU-based amount to determine which is lower
and, therefore, would be the current year payment rate for the
procedure under our final policy for the revised ASC payment system
(Sec. 416.171(d)).
The rate calculation established for device-intensive procedures
(payment indicator ``J8'') is structured so only the service (non-
device) portion of the rate is subject to the ASC conversion factor. We
update the payment rates for device-intensive procedures to incorporate
the most recent device offset percentages calculated under the ASC
standard ratesetting methodology, as discussed in section XIII.C.4. of
this proposed rule.
In the CY 2014 OPPS/ASC final rule with comment period (78 FR
75081), we finalized our proposal to calculate the CY 2014 payment
rates for ASC covered surgical procedures according to our established
methodologies, with the exception of device removal procedures. For CY
2014, we finalized a policy to conditionally package payment for device
removal procedures under the OPPS. Under the OPPS, a conditionally
packaged procedure (status indicators ``Q1'' and ``Q2'') describes a
HCPCS code where the payment is packaged when it is provided with a
significant procedure but is separately paid when the service appears
on the claim without a significant procedure. Because ASC services
always include a covered surgical procedure, HCPCS codes that are
conditionally packaged under the OPPS are generally packaged (payment
indicator ``N1'') under the ASC payment system. Under the OPPS, device
removal procedures are conditionally packaged and, therefore, would be
packaged under the ASC payment system. There is no Medicare payment
made when a device removal procedure is performed in an ASC without
another surgical procedure included on the claim; therefore, no
Medicare payment would be made if a device was removed but not
replaced. To ensure that the ASC payment system provides separate
payment for surgical procedures that only involve device removal--
conditionally packaged in the OPPS (status indicator ``Q2'')--we have
continued to provide separate payment since CY 2014 and assign the
current ASC payment indicators associated with these procedures.
b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2027
We propose to update ASC payment rates for CY 2027 and subsequent
years using the established rate calculation methodologies under Sec.
416.171 and using our definition of device-intensive procedures, as
discussed in section XIII.C.4. of this proposed rule. As the proposed
OPPS relative payment weights are generally based on geometric mean
costs, we propose that the ASC payment system will generally use the
geometric mean cost to determine proposed relative payment weights
under the ASC standard methodology. We propose to continue to use the
amount calculated under the ASC standard ratesetting methodology for
procedures assigned payment indicators ``A2'' and ``G2''.
We propose to calculate payment rates for office-based procedures
(payment indicators ``P2'', ``P3'', and ``R2'') and device-intensive
procedures (payment indicator ``J8'') according to our established
policies and to identify device-intensive procedures using the
methodology discussed in section XIII.C.4. of this proposed rule.
Therefore, we propose to update the payment amount for the service
portion (the non-device portion) of the device-intensive procedures
using the standard ASC ratesetting methodology and the payment amount
for the device portion based on the proposed CY 2027 device offset
percentages that have been calculated using the standard OPPS APC
ratesetting methodology. We propose that payment for office-based
procedures would be at the lesser of the proposed CY 2027 PFS
nonfacility PE RVU-based amount or the proposed CY 2027 ASC payment
amount calculated
[[Page 41938]]
according to the ASC standard ratesetting methodology.
As we did for CYs 2014 through 2026, for CY 2027, we propose to
continue our policy for device removal procedures, such that device
removal procedures that are conditionally packaged in the OPPS (status
indicators ``Q1'' and ``Q2'') will be assigned the current ASC payment
indicators associated with those procedures and will continue to be
paid separately under the ASC payment system.
c. Proposed Payment for ASC Add-On Procedures Eligible for Complexity
Adjustments under the OPPS
In this section, we discuss the policy to provide increased payment
under the ASC payment system for combinations of certain ``J1'' service
codes and add-on procedure codes that are eligible for a complexity
adjustment under the OPPS.
(1) OPPS C-APC Complexity Adjustment Policy
Under the OPPS, complexity adjustments are utilized to provide
increased payment for certain comprehensive services. As discussed in
section II.A.2.b. of this proposed rule, we apply a complexity
adjustment by promoting qualifying paired ``J1'' service code
combinations or paired code combinations of ``J1'' services and add-on
codes from the originating Comprehensive APC (C-APC) (the C-APC to
which the designated primary service is first assigned) to the next
higher paying C-APC in the same clinical family of C-APCs. A ``J1''
status indicator refers to a hospital outpatient service paid through a
C-APC. We package payment for all add-on codes, which are codes that
describe a procedure or service always performed in addition to a
primary service or procedure, into the payment for the C-APC. However,
certain combinations of primary service codes and add-on codes may
qualify for a complexity adjustment.
We apply complexity adjustments when the paired code combination
represents a complex, costly form or version of the primary service
when the frequency and cost thresholds are met. The frequency threshold
is met when there are 25 or more claims reporting the code combination,
and the cost threshold is met when there is a violation of the 2 times
rule, as specified in section 1833(t)(2) of the Act and described in
section III.A.2.b. of this proposed rule, in the originating C-APC.
These paired code combinations that meet the frequency and cost
threshold criteria represent those that exhibit materially greater
resource requirements than the primary service. After designating a
single primary service for a claim, we evaluate that service in
combination with each of the other procedure codes reported on the
claim that are either assigned to status indicator ``J1'' or add-on
codes to determine if there are paired code combinations that meet the
complexity adjustment criteria. Once we have determined that a
particular combination of ``J1'' services, or combinations of a ``J1''
service and add-on code, represents a complex version of the primary
service because it is sufficiently costly, frequent, and a subset of
the primary comprehensive service overall according to the criteria
described previously, we promote the claim to the next higher cost C-
APC within the clinical family unless the primary service is already
assigned to the highest cost APC within the C-APC clinical family or
assigned to the only C-APC in a clinical family. We do not create new
C-APCs with a comprehensive geometric mean cost that is higher than the
highest geometric mean cost (or only) C-APC in a clinical family just
to accommodate potential complexity adjustments. Therefore, the highest
payment for any claim including a code combination for services
assigned to a C-APC would be the highest paying C-APC in the clinical
family (79 FR 66802).
As previously stated, we package payment for add-on codes into the
C-APC payment rate. If any add-on code reported in conjunction with the
``J1'' primary service code does not qualify for a complexity
adjustment, payment for the add-on service continues to be packaged
into the payment for the primary service and the primary service code
reported with the add-on code is not reassigned to the next higher cost
C-APC. We list the proposed complexity adjustments for ``J1'' and add-
on code combinations for CY 2027, along with all of the other proposed
complexity adjustments, in Addendum J to this proposed rule (which is
available via the internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices).
(2) CY 2027 ASC Special Payment Policy Proposal for OPPS Complexity-
Adjusted C-APCs
For CY 2027, we propose to continue the special payment policy and
methodology for OPPS complexity-adjusted C-APCs that was finalized in
the CY 2023 OPPS/ASC final rule with comment period (87 FR 72078
through 72080). We also propose to make a minor change to the long
descriptor of ASC complexity adjustment code C7570.
For those ASC complexity adjustment codes for which we have claims
data, we propose to use the claims data to calculate the code
combination utilization and estimated payments for the ASC payment
system budget neutrality calculations for CY 2027. Any ASC complexity
adjustment budget neutrality calculations are discussed further in
section XIII.H.2.a. of this proposed rule. The full list of the
proposed ASC complexity adjustment codes, inactive ASC complexity
adjustment codes, their short descriptors, long descriptors, and
proposed ASC payment indicators for CY 2027 can be found in the CY 2027
proposed ASC CPX supplemental policy file, which also includes both the
existing ASC complexity adjustment codes and proposed additions. ASC
Addendum AA also includes our proposed active ASC complexity adjustment
codes and their ASC payment rates. Both files are published on the CMS
website at https://www.cms.gov/medicare/medicare-fee-for-service-payment/ascpayment/asc-regulations-and-notices. Since the complexity
adjustment assignments change each year under the OPPS, the proposed
list of ASC complexity adjustment codes eligible for the proposed
payment policy changed slightly from the previous year. Additionally,
since complexity adjustment assignments may change between the proposed
rule and final rule under the OPPS, the final list of ASC complexity
adjustment codes eligible for this payment policy may be slightly
different than the proposed list of ASC complexity adjustment codes.
d. Proposed Low Volume APCs and Limit on ASC Payment Rates for
Procedures Assigned to Low Volume APCs
As stated in section XIII.D.1.b. of this proposed rule, the ASC
payment system generally uses OPPS geometric mean costs under the
standard methodology to determine proposed relative payment weights
under the standard ASC ratesetting methodology.
In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63743
through 63747), we adopted a universal Low Volume APC policy for CY
2022 and subsequent calendar years. Under our policy, we expanded the
low volume adjustment policy that is applied to procedures assigned to
New Technology APCs to also apply to clinical and brachytherapy APCs.
Specifically, a clinical APC or brachytherapy APC with fewer than 100
[[Page 41939]]
claims per year would be designated as a Low Volume APC. For items or
services assigned to a Low Volume APC, we use up to 4 years of claims
data to establish a payment rate for the APC as we currently do for low
volume services assigned to New Technology APCs. The payment rate for a
Low Volume APC or a low volume New Technology procedure would be based
on the highest of the median cost, arithmetic mean cost, or geometric
mean cost calculated using multiple years of claims data.
Based on claims data available for the CY 2027 OPPS/ASC proposed
rule, we propose to designate five brachytherapy APCs and four clinical
APCs as Low Volume APCs under the ASC payment system. The four clinical
APCs and five brachytherapy APCs met our criteria of having fewer than
100 single claims in the relevant claims year (CY 2025 for the CY 2027
OPPS/ASC proposed rule) and therefore, we propose that they would be
subject to our universal Low Volume APC policy and the APC cost metric
would be based on the greater of the median cost, arithmetic mean cost,
or geometric mean cost using up to 4 years of claims data. Eight of the
nine APCs were designated as Low Volume APCs in CY 2026. Based on data
for the CY 2027 OPPS/ASC proposed rule, APC 2645 (Brachytx, non-
stranded, gold-198) had 87 single claims and now meets our criteria to
be designated as a Low Volume APC.
Table 67 includes the CY 2025 claims available for ratesetting for
each of the APCs we propose to be designated as a Low Volume APCs for
CY 2027. The cost statistics for our Low Volume APCs, such as the
median, arithmetic mean, and geometric mean costs, are available for
download with this proposed rule on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/ambulatory-surgical-center-asc/ascregulations-and-notices; click on the relevant
regulation to download the Low Volume APC cost statistics under the
standard (ASC) ratesetting methodology in the ``Downloads'' section of
the web page.
[GRAPHIC] [TIFF OMITTED] TP07JY26.103
2. Proposed Payment for Covered Ancillary Services
a. Background
Our payment policies under the ASC payment system for covered
ancillary services generally vary according to the particular type of
service and its payment policy under the OPPS. Our overall policy
provides separate ASC payment for certain ancillary items and services
integrally related to the provision of ASC covered surgical procedures
that are paid separately under the OPPS and provides packaged ASC
payment for other ancillary items and services that are packaged or
conditionally packaged (status indicators ``N,'' ``Q1,'' and ``Q2'')
under the OPPS.
In the CY 2013 OPPS/ASC rulemaking (77 FR 45169 and 77 FR 68457
through 68458), we further clarified our policy regarding the payment
indicator assignment for procedures that are conditionally packaged in
the OPPS (status indicators ``Q1'' and ``Q2''). Under the OPPS, a
conditionally packaged procedure describes a HCPCS code where the
payment is packaged when it is provided with a significant procedure
but is separately paid when the service appears on the claim without a
significant procedure. Because ASC services always include a surgical
procedure, HCPCS codes that are conditionally packaged under the OPPS
are generally packaged (payment indicator ``N1'') under the ASC payment
system (except for device removal procedures, as discussed in the CY
2022 OPPS/ASC proposed rule (86 FR 42083)). Thus, our policy generally
aligns ASC payment bundles with those under the OPPS (72 FR 42495). In
all cases, for ancillary items and services also to be paid, the
ancillary items and services must be provided integral to the
performance of ASC covered surgical procedures for which the ASC bills
Medicare.
Our ASC payment policies generally provide separate payment for
drugs and biologicals that are separately paid under the OPPS at the
OPPS rates and package payment for drugs and biologicals for which
payment is packaged under the OPPS. However, as discussed in the CY
2022 OPPS/ASC final rule with comment period, for CY 2022, we finalized
a policy to unpackage and pay separately at ASP plus 6 percent for the
cost of non-opioid pain management drugs and biologicals that function
as a supply when used in a surgical procedure as determined by CMS
under Sec. 416.174 (86 FR 63483).
We generally pay for separately payable radiology services at the
lower of the PFS nonfacility PE RVU-based (or technical component)
amount or the rate calculated according to the ASC standard ratesetting
methodology (72 FR 42497). However, as finalized in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 72050), payment indicators
for all nuclear
[[Page 41940]]
medicine procedures (defined as CPT codes in the range of 78000 through
78999) that are designated as radiology services that are paid
separately when provided integral to a surgical procedure on the ASC
list are set to ``Z2'' so that payment is made based on the ASC
standard ratesetting methodology rather than the PFS nonfacility PE RVU
amount (``Z3''), regardless of which is lower (Sec. 416.171(d)(1)).
Similarly, we also finalized our policy to set the payment
indicator to ``Z2'' for radiology services that use contrast agents so
that payment for these procedures will be based on the OPPS relative
payment weight using the ASC standard ratesetting methodology and,
therefore, will include the cost for the contrast agent (Sec.
416.171(d)(2)).
ASC payment policy for brachytherapy sources mirrors the payment
policy under the OPPS. ASCs are paid for brachytherapy sources provided
integral to ASC covered surgical procedures at prospective rates
adopted under the OPPS or, if OPPS rates are unavailable, at
contractor-priced rates (72 FR 42499). Since December 31, 2009, ASCs
have been paid for brachytherapy sources provided integral to ASC
covered surgical procedures at prospective rates adopted under the
OPPS.
Our ASC policies also provide separate payment for: (1) certain
items and services that CMS designates as contractor-priced, including,
but not limited to, the procurement of corneal tissue; and (2) certain
implantable items that have pass-through payment status under the OPPS.
These categories do not have prospectively established ASC payment
rates according to ASC payment system policies (72 FR 42502 and 42508
through 42509; Sec. 416.164(b)). Under the ASC payment system, we have
designated corneal tissue acquisition and hepatitis B vaccines as
contractor-priced. Corneal tissue acquisition is contractor-priced
based on the invoice costs for acquiring the corneal tissue for
transplantation. Hepatitis B vaccines are contractor-priced based on
invoiced costs for the vaccine.
Devices that are eligible for pass-through payment under the OPPS
are separately paid under the ASC payment system and are contractor-
priced. Under the revised ASC payment system (72 FR 42502), payment for
the surgical procedure associated with the pass-through device is made
according to our standard methodology for the ASC payment system, based
on only the service (non-device) portion of the procedure's OPPS
relative payment weight if the APC weight for the procedure includes
other packaged device costs. We also refer to this methodology as
applying a ``device offset'' to the ASC payment for the associated
surgical procedure. This ensures that duplicate payment is not provided
for any portion of an implanted device with OPPS pass-through payment
status.
In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66933
through 66934), we finalized that, beginning in CY 2015, certain
diagnostic tests within the medicine range of CPT codes for which
separate payment is allowed under the OPPS are covered ancillary
services when they are integral to an ASC covered surgical procedure.
We finalized that diagnostic tests within the medicine range of CPT
codes include all Category I CPT codes in the medicine range
established by CPT, from 90000 to 99999, and Category III CPT codes and
Level II HCPCS codes that describe diagnostic tests that crosswalk or
are clinically similar to procedures in the medicine range established
by CPT. In the CY 2015 OPPS/ASC final rule with comment period, we also
finalized our policy to pay for these tests at the lower of the PFS
nonfacility PE RVU-based (or technical component) amount or the rate
calculated according to the ASC standard ratesetting methodology (79 FR
66933 through 66934). We finalized that the diagnostic tests for which
the payment is based on the ASC standard ratesetting methodology be
assigned to payment indicator ``Z2'' and revised the definition of
payment indicator ``Z2'' to include a reference to diagnostic services
and those for which the payment is based on the PFS nonfacility PE RVU-
based amount be assigned payment indicator ``Z3'', and revised the
definition of payment indicator ``Z3'' to include a reference to
diagnostic services.
In the CY 2026 OPPS/ASC final rule with comment period (90 FR 53887
through 53888), we finalized our policy to unpackage and pay separately
for certain skin substitute supplies when provided integral to a
covered surgical procedure under the ASC payment system in conjunction
with our policy to unpackage and pay separately for the same such items
under the OPPS. We finalized the addition of a new ASC payment
indicator ``S2''--``Skin substitute supply group; paid separately when
provided integral to a surgical procedure on ASC list; payment based on
OPPS rate'' to indicate a separately payable ancillary skin substitute
supply when provided integral to a separately payable ASC covered
surgical procedure. We finalized that payment for separately payable
skin substitute supplies under the ASC payment system would be made at
the same rate as is provided under the OPPS.
b. Proposed Payment for Covered Ancillary Items and Services for CY
2027
We propose to update the ASC payment rates and to make changes to
ASC payment indicators, as necessary, to maintain consistency between
the OPPS and ASC payment system regarding the packaged or separately
payable status of services and the proposed CY 2027 OPPS and ASC
payment rates and subsequent years' payment rates. We propose to
continue to set the proposed CY 2027 ASC payment rates and subsequent
years' payment rates for brachytherapy sources and separately payable
drugs, biologicals, and skin substitute supplies equal to the OPPS
payment rates for CY 2027 and subsequent years' payment rates.
Covered ancillary services and their proposed payment indicators
for CY 2027 are listed in Addendum BB of this proposed rule (which is
available via the internet on the CMS website). For those covered
ancillary services where the payment rate is the lower of the rate
under the ASC standard rate setting methodology and the PFS proposed
rates (similar to our office-based payment policy), the proposed
payment indicators and rates set forth in this proposed rule are based
on a comparison using the proposed PFS rates effective January 1, 2027.
For a discussion of the PFS rates, we refer readers to the CY 2027 PFS
proposed rule with comment period which is available on the CMS website
at https://www.cms.gov/medicare/payment/fee-schedules/physician/federal-regulation-notices.
3. Covered Surgical Procedures Designated as Office-Based Procedures
a. Background
In the August 2, 2007 ASC final rule, we finalized our policy to
designate as ``office-based'' those procedures that are added to the
ASC Covered Procedures List (CPL) in CY 2008 or later years that we
determine are furnished predominantly (more than 50 percent of the
time) in physicians' offices based on consideration of the most
recently available volume and utilization data for each individual
procedure code and/or, if appropriate, the clinical characteristics,
utilization, and volume of related codes. In that final rule, we also
finalized our policy to exempt all
[[Page 41941]]
procedures on the CY 2007 ASC list from application of the office-based
classification (72 FR 42512). The procedures that were added to the ASC
CPL beginning in CY 2008 that we determined were office-based were
identified in Addendum AA to that final rule with payment indicator
``P2'' (Office-based surgical procedure added to ASC list in CY 2008 or
later with PFS nonfacility PE RVUs; payment based on OPPS relative
payment weight); ``P3'' (Office-based surgical procedures added to ASC
list in CY 2008 or later with PFS nonfacility PE RVUs; payment based on
PFS nonfacility PE RVUs); or ``R2'' (Office-based surgical procedure
added to ASC list in CY 2008 or later without PFS nonfacility PE RVUs;
payment based on OPPS relative payment weight), depending on whether we
estimated the procedure would be paid according to the ASC standard
ratesetting methodology based on its OPPS relative payment weight or at
the PFS nonfacility PE RVU-based amount.
Consistent with our final policy to annually review and update the
ASC CPL to include all covered surgical procedures eligible for payment
in ASCs, each year we identify covered surgical procedures as either
temporarily office-based (these are new procedure codes with little or
no utilization data that we have determined are clinically similar to
other procedures that are permanently office-based), permanently
office-based, or nonoffice-based, after taking into account updated
volume and utilization data.
b. CY 2027 Proposed Office-Based Procedures
In developing the CY 2027 OPPS/ASC proposed rule, we followed our
policy to annually review and update the covered surgical procedures
for which ASC payment is made and to identify new procedures that may
be appropriate for ASC payment, including their potential designation
as office-based. Historically, we also review the most recent claims
volume and utilization data (CY 2025 claims) and the clinical
characteristics for all covered surgical procedures that are currently
assigned a payment indicator in CY 2026 of ``G2'' (Non office-based
surgical procedure added in CY 2008 or later; payment based on OPPS
relative payment weight) as well as for those procedures assigned one
of the temporary office-based payment indicators, specifically ``P2,''
``P3'', or ``R2'' in the CY 2026 OPPS/ASC final rule with comment
period (89 FR 94322 through 94326).
Our review of the CY 2025 volume and utilization data of covered
surgical procedures currently assigned a payment indicator of ``G2''
(Non office-based surgical procedure added in CY 2008 or later; payment
based on OPPS relative payment weight) resulted in the identification
of two surgical procedures--CPT code 0102T (Extracorporeal shock wave
performed by a physician, requiring anesthesia other than local, and
involving the lateral humeral epicondyle) and 60660 (Ablation of 1 or
more thyroid nodule(s), one lobe or the isthmus, percutaneous,
including imaging guidance, radiofrequency)--that we believe meet the
criteria for designation as permanently office-based. The data indicate
that these procedures are performed more than 50 percent of the time in
physicians' offices, and the services are of a level of complexity
consistent with other procedures performed routinely in physicians'
offices. We have included CPT codes 0102T and 60660 in our list of
surgical procedures we propose to permanently designate as office-based
for CY 2027 in Table 68.
[GRAPHIC] [TIFF OMITTED] TP07JY26.104
As discussed in the August 2, 2007 ASC final rule (72 FR 42533
through 42535), we finalized our policy to designate certain new
surgical procedures as temporarily office-based until adequate claims
data are available to assess their predominant sites of service,
whereupon if we confirm their office-based nature, the procedures are
permanently assigned to the list of office-based procedures. In the
absence of claims data, we use other available information, including
our clinical advisors' judgment, predecessor CPT and Level II HCPCS
codes, information submitted by representatives of specialty societies
and professional associations, and information submitted by commenters
during the public comment period.
In Table 130 of the CY 2026 OPPS/ASC final rule with comment
period, we finalized assigning temporary office-based designations to
four surgical procedures for CY 2026 (90 FR 53850). We reviewed CY 2025
volume and utilization data for the four surgical procedures designated
as temporarily office-based in the CY 2026 OPPS/ASC final rule with
comment period. As shown in Table 69 of this proposed rule, for one of
the four surgical procedures--CPT code 53866 (Catheterization with
[[Page 41942]]
removal of temporary device for ischemic remodeling (ie, pressure
necrosis) of bladder neck and prostate)--there are greater than 50
claims available and the volume and utilization indicated this
procedure was not performed predominantly in the office setting based
on CY 2025 claims data. Therefore, we propose to no longer designate
this procedure as temporarily office-based and to designate this
procedure a payment indicator of ``G2''--`` 'Non office-based surgical
procedure added in CY 2008 or later; payment based on OPPS relative
payment weight.'' for CY 2027.
[GRAPHIC] [TIFF OMITTED] TP07JY26.105
For the remaining three procedures that were designated as
temporarily office-based in the CY 2026 OPPS/ASC final rule with
comment period and temporarily assigned one of the office-based payment
indicators, specifically ``P2'', ``P3'', or ``R2,'' there were fewer
than 50 claims; therefore, there was an insufficient number of claims
to determine if the office setting was the predominant setting of care
for these procedures. Therefore, as shown in Table 70, we propose to
continue to designate such procedures as temporarily office-based for
CY 2027 and assign one of the office-based payment indicators.
Additionally, for CY 2027, we did not propose to designate any new CY
2027 CPT codes for ASC covered surgical procedures as temporarily
office-based.
The procedures for which the proposed office-based designation for
CY 2027 is temporary are also indicated by an asterisk in Addendum AA
to this proposed rule (which is available via the internet on the CMS
website at https://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ASCPayment/ASCRegulations-and-Notices).
[[Page 41943]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.106
4. Proposed Device-Intensive ASC Covered Surgical Procedures
a. Background
We refer readers to the CY 2019 OPPS/ASC final rule with comment
period (83 FR 59040 through 59041), for a summary of our existing
policies regarding ASC covered surgical procedures that are designated
as device-intensive.
In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59040
through 59043), we modified our criteria for device-intensive
procedures to better capture costs for procedures with significant
device costs. We adopted a policy to allow procedures that involve
surgically inserted or implanted, high-cost, single-use devices to
qualify as device-intensive procedures. In addition, we modified our
criteria to lower the device offset percentage threshold from 40
percent to 30 percent. The device offset percentage is the percentage
of device costs within a procedure's total costs. Specifically, for CY
2019 and subsequent years, we adopted a policy that device-intensive
procedures would be subject to the following criteria:
All procedures must involve implantable or insertable
devices assigned a CPT or HCPCS code;
The required devices (including single-use devices) must
be surgically inserted or implanted; and
The device offset amount must be significant, which is
defined as exceeding 30 percent of the procedure's mean cost.
Corresponding to this change in the cost criterion, we adopted a policy
that the default device offset for new codes that describe procedures
that involve the implantation of medical devices will be 31 percent
beginning in CY 2019. For new codes describing procedures that are
payable when furnished in an ASC and involve the implantation of a
medical device, we adopted a policy that the default device offset
would be applied in the same manner as the policy we adopted in section
IV.B.2. of the CY 2019 OPPS/ASC final rule with comment period (83 FR
58944 through 58948). We amended Sec. 416.171(b)(2) of the regulations
to reflect these new device criteria.
In addition, as also adopted in section IV.B.2. of the CY 2019
OPPS/ASC final rule with comment period, to further align the device-
intensive policy with the criteria used for device pass-through status,
we specified, for CY 2019 and subsequent years, that for purposes of
satisfying the device-intensive criteria, a device-intensive procedure
must involve a device that:
Has received FDA marketing authorization, has received an
FDA IDE and has been classified as a Category B device by FDA in
accordance with 42 CFR 405.203 through 405.207 and 405.211 through
405.215, or meets another appropriate FDA exemption from premarket
review;
Is an integral part of the service furnished;
Is used for one patient only;
Comes in contact with human tissue;
Is surgically implanted or inserted (either permanently or
temporarily); and
Is not any of the following:
++ Equipment, an instrument, apparatus, implement, or item of this
type for which depreciation and financing expenses are recovered as
depreciable assets as defined in Chapter 1 of the Medicare Provider
Reimbursement Manual (CMS Pub. 15-1); or
++ A material or supply furnished incident to a service (for
example, a suture, customized surgical kit, scalpel, or clip, other
than a radiological site marker).
[[Page 41944]]
In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63773
through 63775), we modified our approach to assigning device-intensive
status to surgical procedures under the ASC payment system. First, we
adopted a policy of assigning device-intensive status to procedures
that involve surgically inserted or implanted, high-cost, single-use
devices if their device offset percentage exceeds 30 percent under the
ASC standard ratesetting methodology, even if the procedure is not
designated as device-intensive under the OPPS. Second, we adopted a
policy that if a procedure is assigned device-intensive status under
the OPPS, but has a device offset percentage below the device-intensive
threshold under the standard ASC ratesetting methodology, the procedure
will be assigned device-intensive status under the ASC payment system
with a default device offset percentage of 31 percent. The policies
were adopted to provide consistency between the OPPS and ASC payment
system and provide a more appropriate payment rate for surgical
procedures with significant device costs under the ASC payment system.
In the CY 2023 OPPS/ASC final rule with comment period (87 FR 72078
through 72080), we finalized our policy to create certain C-codes, or
ASC complexity adjustment codes that describe certain combinations of a
primary covered surgical procedure as well as a packaged (payment
indicator = ``N1'') procedure that are otherwise eligible for a
complexity adjustment under the OPPS (as listed in Addendum J). Each
ASC complexity adjustment code's APC assignment is based on its
corresponding OPPS complexity adjustment code's APC assignment. In the
CY 2023 OPPS/ASC final rule with comment period, we stated our belief
that it would be appropriate for these ASC complexity adjustment codes
to qualify for device-intensive status under the ASC payment system if
the primary procedure of the code was also designated as device-
intensive. Under our current policy, the ASC complexity adjustment code
retains the device portion of the primary procedure (also called the
``device offset amount'') and not the device offset percentage.
Therefore, for device-intensive ASC complexity adjustment codes, we set
the device portion of the combined procedure equal to the device
portion of the primary procedure and calculate the device offset
percentage by dividing the device portion by the ASC complexity
adjustment code's APC payment rate. Further, we apply our standard ASC
payment system ratesetting methodology to the non-device portion of the
ASC complexity adjustment code's APC payment rate; that is, we multiply
the OPPS relative weight by the ASC budget neutrality adjustment and
the ASC conversion factor and sum that amount with the device portion
to calculate the ASC payment rate.
In the CY 2025 OPPS/ASC final rule with comment period, we
finalized a modification to our policy regarding default device offset
percentages for new codes that meet our criteria for device-intensive
status. Under both the OPPS and ASC payment system, for new device-
intensive procedures that lack claims data, or lack claims data from a
predecessor code or a clinically-similar code that uses the same
device, we apply the greater of the APC-wide device offset percentage
or 31 percent (the previous default device offset percentage). We
believe that an APC-wide average device offset percentage is, in most
cases, a better reflection of device costs when the typical device
costs of procedures assigned to such APC are significantly greater than
31 percent. This policy does not apply to new device-intensive
procedures assigned to New Technology APCs.
In the CY 2026 OPPS/ASC final rule with comment period, we
discussed the implementation of the Final Remedy for the 340B-Acquired
Drug Payment Policy for Calendar Years 2018-2022 rule and the impact of
the OPPS conversion factor on the ASC payment system. Since most ASC
payment rates for surgical procedures are constructed from OPPS
relative weights or the PFS unadjusted nonfacility PE RVU-based amount,
the remedy's proposed prospective offset to the OPPS conversion has a
very limited impact on the ASC payment system. The only impact of the
proposed reduction to the OPPS conversion factor is the payment rate
for device-intensive procedures under the ASC payment system. Since the
ASC payment system holds device portions constant between the two
settings, the device portion is the device offset percentage multiplied
by the OPPS payment rate. As we stated in that rule, we believed it
would be inaccurate and inappropriate to use OPPS payment rates that
have been reduced by the remedy's prospective offset since this could
accumulate to have a potentially noticeable impact on ASC payment rates
for certain device-intensive procedures over time. Therefore, we
finalized our policy that the OPPS payment rates used for ratesetting
under the ASC payment system for CY 2026 and subsequent years would not
incorporate the prospective offset to the OPPS conversion factor as a
result of the 340B remedy offset that we proposed to implement in the
CY 2026 OPPS/ASC proposed rule.
As discussed in section XIII.G.2.a. of this proposed rule,
historically, the device portions of device-intensive procedures have
not been scaled so that payment for device portions would remain
constant between the OPPS and ASC payment system. However, due to
increased utilization of orthopedic procedures in the ASC setting, ASC
expenditures on device portions of device-intensive procedures
represent a substantially larger share of total ASC expenditures than
in prior years. For this proposed rule, we estimate a proposed large
increase in the device portions for device-intensive procedures as a
result of the proposed 340B drug payment policy which results in a
large decrease in the ASC weight scaler. We solicit comment on whether
our device-intensive calculation methodology should continue to exclude
device portions from the ASC weight scaler, or alternatively, whether
these device portions should be included in the expenditures subject to
scaling through the ASC weight scaler. If we were to include device
portions as subject to scaling, ASC payment rates for device-intensive
procedures would decrease and ASC payment rates for non-device
intensive procedures would increase. We estimate that treating device
expenditures for device-intensive procedures as scalable prospective
expenditures would increase the proposed ASC weight scaler from 0.809
to 0.865 in CY 2027 but would decrease the ASC payment for the device
portion of device intensive procedures by approximately 14 percent.
We are not proposing any changes to our device-intensive procedure
policies under the ASC payment system for CY 2027, but we are
soliciting comment on whether our device-intensive calculation
methodology should continue to exclude device portions from the ASC
weight scaler or whether device portions should represent scalable
prospective expenditures. For the proposed CY 2027 device offset
percentages, which include device offset percentages based on CY 2025
claims processed through March 31, 2026, we refer readers to Addendum
FF of the CY 2027 OPPS/ASC proposed rule. Final CY 2027 device offset
percentages may differ from the proposed percentages as we rely on the
most recently available claims data for the CY 2027 OPPS/ASC final rule
with comment period (CY 2025 claims data processed through June 30,
2026).
[[Page 41945]]
c. Adjustment to ASC Payments for No Cost/Full Credit and Partial
Credit Devices
Our ASC payment policy for costly devices implanted or inserted in
ASCs at no cost/full credit or partial credit is set forth in Sec.
416.179 of our regulations and is consistent with the OPPS policy that
was in effect until CY 2014. We refer readers to the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66845 through 66848) for a full
discussion of the ASC payment adjustment policy for no cost/full credit
and partial credit devices. ASC payment is reduced by 100 percent of
the device offset amount when a hospital furnishes a specified device
without cost or with a full credit and by 50 percent of the device
offset amount when the hospital receives partial credit in the amount
of 50 percent or more of the cost for the specified device.
Effective CY 2014, under the OPPS, we finalized our proposal to
reduce OPPS payment for applicable APCs by the full or partial credit a
provider receives for a device, capped at the device offset amount.
Although we finalized our proposal to modify the policy of reducing
payments when a hospital furnishes a specified device without cost or
with full or partial credit under the OPPS, in the CY 2014 OPPS/ASC
final rule with comment period (78 FR 75076 through 75080), we
finalized our proposal to maintain our ASC policy for reducing payments
to ASCs for specified device-intensive procedures when the ASC
furnishes a device without cost or with full or partial credit. Unlike
the OPPS, there is currently no mechanism within the ASC claims
processing system for ASCs to submit to CMS the amount of the actual
credit received when furnishing a specified device at full or partial
credit. Therefore, under the ASC payment system, we finalized our
proposal for CY 2014 to continue to reduce ASC payments by 100 percent
or 50 percent of the device offset amount when an ASC furnishes a
device without cost or with full or partial credit, respectively.
Under current ASC policy, all ASC device-intensive covered surgical
procedures are subject to the no cost/full credit and partial credit
device adjustment policy. Specifically, when a device-intensive
procedure is performed to implant or insert a device that is furnished
at no cost or with full credit from the manufacturer, the ASC appends
the HCPCS ``FB'' modifier on the line in the claim with the procedure
to implant or insert the device. The contractor reduces payment to the
ASC by the device offset amount that we estimate represents the cost of
the device when the necessary device is furnished without cost or with
full credit to the ASC. We continue to believe that the reduction of
ASC payment in these circumstances is necessary to pay appropriately
for the covered surgical procedure furnished by the ASC.
In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59043
through 59044) we adopted a policy to reduce the payment for a device-
intensive procedure for which the ASC receives partial credit by one-
half of the device offset amount that would be applied if a device was
provided at no cost or with full credit if the credit to the ASC is 50
percent or more (but less than 100 percent) of the cost of the new
device. The ASC will append the HCPCS ``FC'' modifier to the HCPCS code
for the device-intensive surgical procedure when the facility receives
a partial credit of 50 percent or more (but less than 100 percent) of
the cost of a device. To report that the ASC received a partial credit
of 50 percent or more (but less than 100 percent) of the cost of a new
device, ASCs have the option of either: (1) submitting the claim for
the device-intensive procedure to their Medicare contractor after the
procedure's performance, but prior to manufacturer acknowledgment of
credit for the device, and subsequently contacting the contractor
regarding a claim adjustment, once the credit determination is made; or
(2) holding the claim for the device implantation or insertion
procedure until a determination is made by the manufacturer on the
partial credit and submitting the claim with the ``FC'' modifier
appended to the implantation procedure HCPCS code if the partial credit
is 50 percent or more (but less than 100 percent) of the cost of the
device. Beneficiary coinsurance would be based on the reduced payment
amount. As finalized in the CY 2015 OPPS/ASC final rule with comment
period (79 FR 66926), to ensure our policy covers any situation
involving a device-intensive procedure where an ASC may receive a
device at no cost or receive full credit or partial credit for the
device, we apply our ``FB''/``FC'' modifier policy to all device-
intensive procedures.
In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59043
through 59044) we stated we would reduce the payment for a device-
intensive procedure for which the ASC receives partial credit by one-
half of the device offset amount that would be applied if a device was
provided at no cost or with full credit, if the credit to the ASC is 50
percent or more (but less than 100 percent) of the cost of the device.
In the CY 2020 OPPS/ASC final rule with comment period, we finalized
continuing our existing policies for CY 2020. We note that we
inadvertently omitted language that this policy would apply not just in
CY 2019 but also in subsequent calendar years. We intended to apply
this policy in CY 2019 and subsequent calendar years. Therefore, we
finalized our proposal to apply our policy for partial credits
specified in the CY 2019 OPPS/ASC final rule with comment period (83 FR
59043 through 59044) in CY 2022 and subsequent calendar years (86 FR
63775 through 63776). Specifically, for CY 2022 and subsequent calendar
years, we would reduce the payment for a device-intensive procedure for
which the ASC receives partial credit by one-half of the device offset
amount that would be applied if a device was provided at no cost or
with full credit, if the credit to the ASC is 50 percent or more (but
less than 100 percent) of the cost of the device. To report that the
ASC received a partial credit of 50 percent or more (but less than 100
percent) of the cost of a device, ASCs have the option of either: (1)
submitting the claim for the device intensive procedure to their
Medicare contractor after the procedure's performance, but prior to
manufacturer acknowledgment of credit for the device, and subsequently
contacting the contractor regarding a claim adjustment, once the credit
determination is made; or (2) holding the claim for the device
implantation or insertion procedure until a determination is made by
the manufacturer on the partial credit and submitting the claim with
the ``FC'' modifier appended to the implantation procedure HCPCS code
if the partial credit is 50 percent or more (but less than 100 percent)
of the cost of the device. Beneficiary coinsurance would be based on
the reduced payment amount.
We are not proposing any changes to our policies related to no
cost/full credit or partial credit devices for CY 2027.
D. Proposed Additions to ASC Covered Surgical Procedures and Covered
Ancillary Services Lists
1. Proposed Additions to the List of ASC Covered Surgical Procedures
Section 1833(i)(1) of the Act requires us, in part, to specify, in
consultation with appropriate medical organizations, surgical
procedures that are appropriately performed on an inpatient basis in a
hospital but that can also be safely performed in an ASC, a CAH, or an
HOPD, and to review and update the
[[Page 41946]]
list of ASC covered surgical procedures at least every 2 years. We
evaluate the ASC covered procedures list (ASC CPL) each year to
determine whether procedures should be added to or removed from the
list, and changes to the list are often made in response to specific
concerns raised by interested parties.
Under our current regulations at Sec. Sec. 416.2 and 416.166,
covered surgical procedures furnished on or after January 1, 2026, are
surgical procedures that meet the criteria specified in Sec.
416.166(b)(2). In the CY 2026 OPPS/ASC final rule with comment period,
we finalized a policy to expand the ASC CPL by revising our criteria
for adding surgical procedures to the ASC CPL (90 FR 53855 through
53886). Under the revised criteria, procedures added to the ASC CPL
must be separately paid under the OPPS and are not (1) currently
designated as requiring inpatient care under Sec. 419.22(n), (2) only
able to be reported using a CPT unlisted surgical procedure code, or
(3) otherwise excluded under Sec. 411.15. Additionally, we moved
certain general standards and exclusions used to evaluate services for
addition to the ASC CPL prior to January 1, 2026, to a new section of
the following non-binding physician considerations: (1) Is not expected
to pose a significant safety risk when performed in an ASC; (2) Is one
of which standard medical practice dictates the beneficiary would not
typically be expected to require active medical monitoring and care at
midnight following the procedure; (3) Generally results in extensive
blood loss; (4) Requires major or prolonged invasion of body cavities;
(5) Directly involves major blood vessels; (6) Is generally emergent or
life- threatening in nature; and (7) commonly requires systemic
thrombolytic therapy. We believe that these revised criteria are
sufficient to ensure, along with appropriate patient selection and
complex medical judgement of the physician, that the procedure can be
performed safely on an ambulatory basis, including procedures that
involve the five previous exclusion criteria. We believe that this
expansion of the ASC CPL could advance the goals of increasing
physician and patient choice and expanding site neutral options in
conjunction with patient safety considerations. For further discussion
on our policy to revise the ASC CPL criteria and expand the procedures
added to the list, please refer to section XIII.D. of the CY 2026 OPPS/
ASC final rule with comment period (90 FR 53855 through 53886).
In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59029
through 59030), we defined a surgical procedure under the ASC payment
system as any procedure described within the range of Category I CPT
codes that the CPT Editorial Panel of the AMA defines as ``surgery''
(CPT codes 10000 through 69999) (72 FR 42476), as well as procedures
that are described by Level II HCPCS codes or by Category I CPT codes
or by Category III CPT codes that directly crosswalk or are clinically
similar to procedures in the CPT surgical range that we determined met
the criteria established in previous years for addition to the ASC CPL.
For a detailed discussion of the history of our policies for adding
surgical procedures to the ASC CPL, we refer readers to the CY 2021
through CY 2026 OPPS/ASC final rules with comment period (85 FR 86143
through 86145; 86 FR 63777 through 63805; 87 FR 72068 through 72076; 88
FR 81923 through 81945; 89 FR 94331 through 94334; and (90 FR 53855
through 53886).
2. Proposed Changes to the List of ASC Covered Surgical Procedures for
CY 2027
Historically, we have reviewed the clinical characteristics of
procedures and consulted with appropriate medical organizations, other
interested parties, and our clinical advisors to determine if those
procedures would meet our existing regulatory criteria under 42 CFR
416.2 and 42 CFR 416.166.
As part of our evaluation process to add procedures to the CPL, we
assess potential procedures against the revised ASC CPL criteria at
Sec. 416.166(b)(2). For CY 2027, we reviewed interested parties'
nominations received in the pre-proposed rule nominations process.
Additionally, we reviewed procedures that are proposed to be removed
from the IPO list for CY 2027, as part of the continuation of the
elimination of the IPO list, as described in section IX. discussed
earlier in this proposed rule. Based upon this review, we propose to
update the ASC CPL by adding 618 procedures that we propose to remove
from the IPO list for CY 2027. This includes four procedures that were
recommended by interested parties for addition to the ASC CPL: CPT code
49596 (Repair of anterior abdominal hernia(s) (i.e., epigastric,
incisional, ventral, umbilical, spigelian), any approach (i.e., open,
laparoscopic, robotic), initial, including implantation of mesh or
other prosthesis when performed, total length of defect(s); greater
than 10 cm, incarcerated or strangulated), 49616 (Repair of anterior
abdominal hernia(s) (i.e., epigastric, incisional, ventral, umbilical,
spigelian), any approach (i.e., open, laparoscopic, robotic),
recurrent, including implantation of mesh or other prosthesis when
performed, total length of defect(s); 3 cm to 10 cm, incarcerated or
strangulated), 40617 (Repair of anterior abdominal hernia(s) (ie,
epigastric, incisional, ventral, umbilical, spigelian), any approach
(i.e., open, laparoscopic, robotic), recurrent, including implantation
of mesh or other prosthesis when performed, total length of defect(s);
greater than 10 cm, reducible), and 40618 (Repair of anterior abdominal
hernia(s) (i.e., epigastric, incisional, ventral, umbilical,
spigelian), any approach (i.e., open, laparoscopic, robotic),
recurrent, including implantation of mesh or other prosthesis when
performed, total length of defect(s); greater than 10 cm, incarcerated
or strangulated). We believe these procedures would meet the revised
ASC CPL criteria under 42 CFR 416.166, if we finalize our proposal to
remove these services from the IPO list for CY 2027. These procedures
are listed in the public use file titled ``Proposed Additions to the
List of ASC Covered Procedures for CY 2027,'' which is available on the
CMS website.
3. Covered Ancillary Services
Covered ancillary services are specified in Sec. 416.164(b) and,
as stated previously, are eligible for separate ASC payment. As
provided at Sec. 416.164(b), we make separate ASC payments for
ancillary items and services when they are provided integral to ASC
covered surgical procedures that include the following: (1)
brachytherapy sources; (2) certain implantable items that have pass-
through payment status under the OPPS; (3) certain items and services
that we designate as contractor-priced, including, but not limited to,
procurement of corneal tissue; (4) certain drugs and biologicals for
which separate payment is allowed under the OPPS; (5) certain radiology
services for which separate payment is allowed under the OPPS; and (6)
non-opioid pain management drugs, biologicals, and medical devices as
determined by CMS under Sec. 416.174; and (7) groups of skin
substitute supply products. Payment for ancillary items and services
that are not paid separately under the ASC payment system is packaged
into the ASC payment for the covered surgical procedure.
In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59062
through 59063), consistent with the established ASC payment system
policy (72 FR 42497), we finalized the policy
[[Page 41947]]
to update the ASC list of covered ancillary services to reflect the
payment status for the services under the OPPS and to continue this
reconciliation of packaged status for subsequent calendar years. As
discussed in prior rulemaking, maintaining consistency with the OPPS
may result in changes to ASC payment indicators for some covered
ancillary services. For example, if a covered ancillary service was
separately paid under the ASC payment system in CY 2026, but will be
packaged under the CY 2027 OPPS, we would also package the ancillary
service under the ASC payment system for CY 2027 to maintain
consistency with the OPPS. Comment indicator ``CH'' is used in Addendum
BB (which is available via the internet on the CMS website) to indicate
covered ancillary services for which we proposed a change in the ASC
payment indicator to reflect a proposed change in the OPPS treatment of
the service for CY 2025.
In the CY 2022 OPPS/ASC final rule with comment period, we
finalized our proposal to revise Sec. 416.164(b)(6) to include, as
ancillary items that are integral to a covered surgical procedure and
for which separate payment is allowed, non-opioid pain management drugs
and biologicals that function as a supply when used in a surgical
procedure as determined by CMS (86 FR 63490). In the CY 2025 OPPS/ASC
final rule with comment period, we revised Sec. 416.164(b)(6) to read
``Non-opioid pain management drugs, biologicals, and medical devices as
determined by CMS under Sec. 416.174,'' as we finalized a policy to
place qualifying medical devices on the ASC covered ancillary services
list (89 FR 94361).
In the CY 2026 OPPS/ASC final rule with comment period, we
finalized our proposal to pay separately for the provision of certain
groups of skin substitute products when used during a covered surgical
procedure, by revising Sec. 416.164(b) to include groups of skin
substitute products as covered ancillary items and services that are
integral to a covered surgical procedure.
E. Proposed CY 2027 Non-Opioid Policy for Pain Relief Under the OPPS
and ASC Payment System
1. Background
The Consolidated Appropriations Act (CAA), 2023 (Pub. L. 117-328),
was signed into law on December 29, 2022. Section 4135(a) and (b) of
the CAA, 2023, titled Access to Non-Opioid Treatments for Pain Relief,
amended section 1833(t)(16) and section 1833(i) of the Act,
respectively, to provide for temporary additional payments for non-
opioid treatments for pain relief (as that term is defined in section
1833(t)(16)(G)(i) of the Act). In particular, section 1833(t)(16)(G) of
the Act provides that with respect to a non-opioid treatment for pain
relief furnished on or after January 1, 2025, and before January 1,
2028, the Secretary shall not package payment for the non-opioid
treatment for pain relief into payment for a covered OPD service (or
group of services) and shall make an additional payment for the non-
opioid treatment for pain relief as specified in clause (ii) of that
section. Clauses (ii) and (iii) of section 1833(t)(16)(G) of the Act
provide for the amount of additional payment and set a limitation on
that amount.
Paragraph (10) of section 1833(i) of the Act cross-references the
OPPS provisions about the additional payment amount and payment
limitation for non-opioid treatments for pain relief and applies them
to payment under the ASC payment system. In particular, paragraph (A)
of paragraph (10) of section 1833(i) of the Act, as added by section
4135(b) of the CAA, 2023, provides that in the case of surgical
services furnished on or after January 1, 2025, and before January 1,
2028, additional payments shall be made under the ASC payment system
for non-opioid treatments for pain relief in the same amount provided
in clause (ii) and subject to the limitation in clause (iii) of section
1833(t)(16)(G) of the Act for the OPPS. Paragraph (B) of section
1833(i)(10) of the Act provides that a drug or biological that meets
the requirements of 42 CFR 416.174 and is a non-opioid treatment for
pain relief shall also receive additional payment in the amount
provided in clause (ii) and subject to the limitation in clause (iii)
of section 1833(t)(16)(G) of the Act.
Additional payments under this policy began on January 1, 2025. As
stated in the CY 2025 OPPS/ASC final rule with comment period (89 FR
94343 through 94344), the statute directs CMS to provide ``additional
payment'', and for purposes of this policy, we interpret this language
to be equivalent to ``separate payment,'' since CMS provides an
additional payment by unpackaging the product and then making a
separate payment. ``Separate payment'' is the more commonly used
terminology in the OPPS rule and likely more familiar to readers. To
avoid confusion, we will continue to use ``separate payment''
throughout the rest of this section, which we believe to be synonymous
with ``additional payment.'' Under section 1833(t)(2)(E) of the Act,
the temporary separate payments must be made in a budget neutral
manner.
For background information on the ASC Payment Policy for Non-Opioid
Post-Surgery Pain Management Drugs and Biologicals prior to CY 2025,
please see the summary provided in the CY 2025 OPPS/ASC final rule with
comment period (89 FR 94342 through 94343).
2. Finalized CY 2025 Non-Opioid Policy Implementation of Section 4135
of the CAA, 2023
In CY 2025, CMS finalized our implementation methodology for
section 4135 of CAA, 2023 (89 FR 94343 through 94361) to provide for
temporary separate payments for certain non-opioid treatment for pain
relief in the hospital outpatient department and ambulatory surgical
center settings on a temporary basis from January 1, 2025 through
December 31, 2027. CMS also finalized regulation text at 42 CFR 416.174
and 42 CFR 419.43(k), which outline the payment for non-opioid pain
management drugs, biologicals, and medical devices under both the ASC
payment system and OPPS, respectively.
a. Drugs and Biologicals Subject to the ASC Non-Opioid Policy (42 CFR
416.174)
Section 1833(i)(10)(B), titled ``Transition'', provides that a drug
or biological that meets the requirements of the regulation at 42 CFR
416.174, the current ASC non-opioid policy, and also meets the
definition of a non-opioid treatment for pain relief at section
1833(t)(16)(G)(iv) of the Act shall receive separate payments under
section 4135 of the CAA, 2023, subject to the payment limitation. In
light of this requirement, we finalized in the CY 2025 OPPS/ASC final
rule with comment period that drugs and biologicals that meet the
definition of a non-opioid treatment for pain relief for purposes of
section 4135 of the CAA, 2023 that were subject to the ASC policy for
non-opioid treatments authorized by section 6082 of the SUPPORT Act in
CY 2024, would instead receive separate payments, subject to the
limitation, for the duration of the payment period for section 4135 of
the CAA, 2023 (89 FR 94344).
b. Definition of Non-Opioid Treatment for Pain Relief
Section 1833(t)(16)(G)(iv) of the Act defines a non-opioid
treatment for pain relief for a drug, biological product, or medical
device and requires, in part, that such treatment does not receive
transitional pass-through payment and
[[Page 41948]]
has payment that is packaged into a payment for a covered OPD service
(or group of services). In addition, in order for a drug or biological
product to qualify as a non-opioid treatment for pain relief, pursuant
to section 1833(t)(16)(G)(iv)(I), the product must have ``a label
indication approved by the Food and Drug Administration to reduce
postoperative pain, or produce postsurgical or regional analgesia,
without acting upon the body's opioid receptors''. In order for a
medical device to qualify as a non-opioid treatment for pain relief,
pursuant to section 1833(t)(16)(G)(iv)(II) of the Act, it must, in
part, be ``used to deliver a therapy to reduce postoperative pain, or
produce post-surgical or regional analgesia''. A medical device must
also, pursuant to section 1833(t)(16)(G)(iv)(II)(aa) and (bb) of the
Act have both ``an application under section 515 of the Federal Food,
Drug, and Cosmetic Act that has been approved with respect to the
device, been cleared for market under section 510(k) of such Act, or is
exempt from the requirements of section 510(k) of such Act pursuant to
subsection (l) or (m) or section 510 of such Act or section 520(g) of
such Act'' and ``demonstrated the ability to replace, reduce, or avoid
intraoperative or postoperative opioid use or the quantity of opioids
prescribed in a clinical trial or through data published in a peer-
reviewed journal''.
c. Evidence Requirement for Medical Devices
To determine whether a medical device fulfills the statutory
requirement that it has demonstrated the ability to replace, reduce, or
avoid intraoperative or postoperative opioid use or the quantity of
opioids prescribed in a clinical trial or through data published in a
peer-reviewed journal, we finalized in the CY 2025 OPPS/ASC final rule
with comment period (89 FR 94345) a policy to review all data submitted
during the public comment period to determine if the device
demonstrates the ability to replace, reduce, or avoid intraoperative or
postoperative opioid use or the quantity of opioids. In CY 2025, we
encouraged interested parties submitting non-opioid device
recommendations to submit any relevant literature that demonstrates
that the named medical device replaces, reduces, or avoids opioid use
per this statutory provision with their public comments. We review any
literature submitted and determine whether it meets this evidence
criterion. There is no requirement that commenters submit any data or
literature with their device recommendations. If there is no data or
literature submitted for a medical device, or if the materials
submitted do not demonstrate any ability of the medical device to
replace, reduce, or avoid opioids, the medical device would not meet
this evidence criterion and would not qualify for separate payment
under section 4135 of the CAA, 2023.
d. Non-Opioid Product Indications
(1) FDA-Approved Indications for Drugs and Biologicals
Section 1833(t)(16)(G)(iv)(I) of the Act specifies that to meet the
definition of a non-opioid treatment for pain relief and to be eligible
for separate payment, a drug or biological product must have a label
indication approved by the Food and Drug Administration to reduce
postoperative pain, or produce postsurgical or regional analgesia,
without acting upon the body's opioid receptors.
Given these statutory requirements, we finalized a policy in the CY
2025 OPPS/ASC final rule with comment period (89 FR 94345 through
94346) only to approve separate payment for drug or biological products
with an FDA-approved indication that closely aligns with the
statutorily required indication language to reduce post-operative pain
or produce post-surgical or regional analgesia. We noted that products
without an indication that meets this statutory requirement would not
qualify. We specifically stated that products with only a general pain
indication will not qualify.
As discussed in the CY 2025 OPPS/ASC final rule with comment period
(89 FR 94345 through 94346), we note that the Congress specifically
included language at section 1833(t)(16)(G)(iv)(I) of the Act requiring
that drugs or biologicals have ``a label indication approved by the
Food and Drug Administration to reduce postoperative pain, or produce
postsurgical or regional analgesia, without acting upon the body's
opioid receptors''. Therefore, products without an indication that
meets the statutory requirement will not qualify.
(2) Intended Use for Medical Devices
Regarding medical devices, section 1833(t)(16)(G)(iv)(II) of the
Act specifies that such a device must be used to deliver a therapy to
reduce postoperative pain or produce postsurgical or regional analgesia
to qualify for separate payment under section 4135 of the CAA, 2023. It
also must have an application approved under section 515 of the Federal
Food, Drug, and Cosmetic Act (the FD&C Act), have been cleared for
market under section 510(k) of the FD&C Act, or be exempt from the
requirements of section 510(k) of the FD&C Act pursuant to section
510(l) or (m) or 520(g) of the FD&C Act. For CY 2025, for medical
devices, we finalized without modification our proposal that a device
must be used to deliver a therapy to reduce postoperative pain or
produce postsurgical or regional analgesia to qualify for separate
payment under section 4135 of the CAA, 2023 (89 FR 94346 through
94347). We also finalized that the medical device must have an
application approved under section 515 of the FD&C Act, which has been
cleared for market under section 510(k) of the FD&C Act, or be exempt
from the requirements of section 510(k) of the FD&C Act pursuant to
sections 510(l) or (m) or 520(g) of the FD&C Act. (89 FR 94346 through
94347). This is consistent with the regulation text at 42 CFR
419.43(k)(2)(i) through (iv).
e. Amount of Payment
Section 1833(t)(16)(G)(ii)(I) of the Act provides that, for a non-
opioid treatment for pain relief that is a drug or biological product,
the amount of separate payment is the amount of payment for such
product determined under section 1847A of the Act that exceeds the
portion of the otherwise applicable Medicare OPD fee schedule that the
Secretary determines is associated with the drug or biological, subject
to a limitation, as described in the next section. Section
1833(t)(16)(G)(ii)(II) of the Act provides that, for a non-opioid
treatment for pain relief that is a medical device, the amount of
separate payment is the amount of the hospital's charges for the
device, adjusted to cost, that exceeds the portion of the otherwise
applicable Medicare OPD fee schedule that the Secretary determines is
associated with the device, subject to a limitation, as described in
the next section.
In the CY 2025 OPPS/ASC final rule with comment period, we
finalized a policy to assign a payment offset of zero dollars for the
qualifying drugs, biologicals, and devices for CY 2025 (89 FR 94347
through 94348). A zero dollar offset means that we would not offset or
remove the amount that the non-opioid product represents from the
procedure payment rate when setting payment rates. We finalized a zero
dollar offset for the initial year of the policy as some of these
products are new products or newly separately paid in the OPPS setting
and their costs may not be fully reflected yet in the cost of
procedures in which they may be used. Therefore, we stated that the
separate payment for a drug or biological would be determined
[[Page 41949]]
by subtracting from the amount calculated using the methodology
outlined in section 1847A of the Act the portion of the otherwise
applicable Medicare OPD fee schedule associated with the drug or
biological, which as previously discussed, we finalized to be zero
dollars for CY 2025. For the amount of payment for a medical device,
since we are unable to reduce charges to costs for ASCs, we stated that
the separate payment amount would be contractor-priced by the ASC's
Medicare Administrative Contractor reduced by the portion of the
otherwise applicable Medicare OPD fee schedule amount associated with
the medical device, which as previously discussed, we finalized to be
zero dollars for CY 2025. These separate payment amounts are all
subject to the payment limitation, described in the subsequent section.
Section 1833(i)(10) of the Act establishes the same separate
payment for the ASC setting as for hospital outpatient departments, as
described in section 1833(t)(16)(G)(ii) of the Act. Both separate
payments are subject to the limitation in section 1833(t)(16)(G)(iii)
of the Act, which specifies that the separate payment amount shall not
exceed the estimated average of 18 percent of the OPD fee schedule
amount for the OPD service (or group of services) with which the non-
opioid treatment for pain relief is furnished. Given this statutory
requirement, we finalized paying the same separate payment amount for
qualifying non-opioid products in both the HOPD and ASC settings
starting on January 1, 2025 through December 31, 2027.
As the statute requires separate payment for these non-opioid
treatments for pain relief, these products cannot be packaged into the
procedure payment. Under our current threshold packaging policy, if the
estimated per day cost for a drug or biological is less than or equal
to the applicable OPPS drug packaging threshold, we package payment for
the drug or biological into the payment for the associated procedure.
Similarly, under our comprehensive APC (C-APC) policy, we package all
payments for services integral, ancillary, supportive, dependent, and
adjunctive to the primary service into a single payment for the primary
comprehensive service. For CY 2025, we finalized that non-opioid
treatments for pain relief would not be subject to the threshold
packaging policy and would also be separately paid when used during a
comprehensive APC (C-APC) procedure in the HOPD setting (89 FR 94347
through 94348). See section V.B.1.a. of this proposed rule for more
information regarding the drug packaging threshold. Section II.A.2.b.
of this proposed rule contains further information on C-APC packaging.
f. Payment Limitation
Section 1833(t)(16)(G)(iii) of the Act states that the separate
payment amount specified in clause (ii), (which is described in the
previous section) shall not exceed the estimated average of 18 percent
of the OPD fee schedule amount for the OPD service (or group of
services) with which the non-opioid treatment for pain relief is
furnished, as determined by the Secretary.
In the CY 2025 OPPS/ASC final rule with comment period, we
finalized a policy to base the 18 percent payment limitation on the
volume weighted average of the payment rates of the top five primary
procedures by volume into which a non-opioid treatment for pain relief
would have their payment packaged, absent this policy. We also
finalized applying the 18 percent payment limitation per date of
service billed (89 FR 94349).
g. Payment Limitation With No Claims Data
For drugs, biologicals, and devices with no claims data, such as
for newly FDA-approved and marketed products or products that did not
previously have their own product-specific HCPCS code by which to track
payment and utilization data, we finalized in the CY 2025 OPPS/ASC
final rule with comment period (89 FR 94350) a policy where CMS will
utilize the services with which a product would be expected to be
furnished and would typically be packaged absent this policy, to
calculate the payment limitation based on expected clinical use
patterns. The finalized policy stated that CMS will determine the
service, or group of services, to use to calculate the payment
limitation through engagement with interested parties and a review by
CMS Medical Officers and clinical staff during annual rulemaking. In
the absence of engagement from interested parties, we will determine
clinically appropriate procedures with which we would expect the drug
or device to be frequently used in order to determine the payment
limitation, including review of FDA approval materials, procedures
identified in literature available to CMS, and other relevant
materials. We noted that we may update the payment limitation amount in
future rulemaking as we gather additional claims data on the
utilization of and payment for this product.
3. Final CY 2026 Non-Opioid Policy Implementation of Section 4135 of
the CAA, 2023
In CY 2026, we finalized to continue the policies implemented in
the CY 2025 OPPS ASC final rule (90 FR 53888 through 53909), with minor
modifications to permit timely consideration of qualifying products. In
that final rule we finalized to maintain a zero-dollar offset for all
qualifying products regulated under the non-opioid policy, consistent
with our belief that costs for some of these products may not be fully
reflected yet in the cost of procedures in which they may be used.
Additionally, the data used for CY 2026 ratesetting was derived from CY
2024 claims, which was prior to the effective date of this policy in CY
2025. We also finalized conforming regulatory text changes at 42 CFR
416.174(c)(1) to remove language specific to CY 2025, allowing us to
consider or revise the offset amount through annual rulemaking.
We finalized a list of qualifying drugs, biologicals, and devices
that meet the statutory criteria for separate payment under section
4135. Similarly, we finalized payment limitation calculations for the
qualifying non-opioid products, and finalized our approach to
determining those payment limitations based on the proposed procedure
payment rates and utilization data available in the CY 2026 OPPS/ASC
proposed rule, which we stated was the best data available at the time
of writing the CY 2026 OPPS/ASC proposed rule.
In response to public comments, we finalized a modification to
allow for more timely consideration of qualifying products by
establishing a process to evaluate and approve additional non-opioid
treatments for pain relief on a quarterly basis, rather than limiting
consideration to annual rulemaking. We also made conforming regulatory
text revisions at 42 CFR 419.43(k) and 416.174 to remove references
tying qualification only to annual rulemaking.
4. Proposed CY 2027 Non-Opioid Policy Implementation of Section 4135 of
the CAA, 2023
For CY 2027, we propose to continue the policies finalized in the
CY 2026 OPPS/ASC final rule without modification (90 FR 53448), aside
from a technical modification to the payment limitation calculations as
described further in this section.
We continue to believe a zero-dollar offset is appropriate for all
qualifying products regulated under the non-opioid policy as some of
these products
[[Page 41950]]
are new products or newly separately paid in the OPPS setting and their
costs may not be fully reflected in the cost of procedures in which
they may be used. Additionally, given the clinical nature of non-opioid
treatments for pain relief, they can be used in a variety of
procedures, making an APC offset impractical. A continued zero-dollar
offset aligns with comment support for a zero-dollar offset as
discussed in the CY 2026 OPPS/ASC final rule with comment period (90 FR
53892).
We note that the payment limitation calculations will now be
displayed in a public use file for the proposed rule. The non-opioid
payment limitation public use file is available on the CMS website
under downloads for the CY 2027 OPPS proposed rule. By including the
payment limitations in the public use file, we are able to use the most
recently available data to calculate the payment limitations.
Therefore, the payment limitations calculated for this proposed rule
will be based on the payment rates and utilization data available for
this proposed rule. Accordingly, the final payment limitation
calculation in the CY 2027 OPPS/ASC final rule with comment period will
be based on the final rule procedure payment rates and utilization data
available for the final rule. Therefore, there could be slight changes
between the proposed rule payment calculations and the final rule
payment calculations as the payment rates and utilization data is
updated between the proposed and final rules.
Table 71 includes the drugs and biologicals we propose to have met
the statutory requirements and qualify for separate payment for this CY
2027 OPPS/ASC proposed rule. Given our updated policy to evaluate and
approve additional non-opioid treatments for pain relief on a quarterly
basis finalized in the CY 2026 OPPS/ASC final rule with comment period,
we anticipate that we will incorporate additional qualifying non-opioid
products into Table 71 in the final rule with comment period. For
parties interested in submitting additional products for consideration
under this policy, we refer readers to the guidance posted on the CMS
website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient-pps/non-opioid-treatments-pain-relief. We
will review eligible products as provided in the guidance.
We welcome comments on our proposals.
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F. Proposed New Technology Intraocular Lenses (NTIOLs)
New Technology Intraocular Lenses (NTIOLs) are intraocular lenses
that replace a patient's natural lens that has been removed in cataract
surgery and that also meet the requirements listed in Sec. 416.195.
1. NTIOL Application Cycle
Our process for reviewing applications to establish new classes of
NTIOLs is as follows:
Applicants submit their NTIOL requests for review to CMS
by the annual deadline which is announced in the annual OPPS/ASC final
rule with comment period. For a request to be considered complete, we
require submission of the information requested in the guidance
document titled ``Application Process and Information Requirements for
Requests for a New Class of NTIOLs or Inclusion of an IOL in an
Existing NTIOL Class'' posted on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/ambulatory-surgical-center-asc/new-technology-intraocular-lenses-ntiols.
We announce annually, in the CY OPPS/ASC proposed rule
updating the ASC and OPPS payment rates for the following calendar
year, a list of all requests to establish new NTIOL classes accepted
for review during the calendar year in which the proposal is published.
In accordance with section 141(b)(3) of Public Law 103-432 and our
regulations at Sec. 416.185(b), the deadline for receipt of public
comments is 30 days following publication of the list of requests to
establish a new NTIOL class as published in the proposed rule.
In the final rule with comment period updating the ASC and
OPPS payment rates for the following calendar year, we--
++ Provide a list of determinations made as a result of our review
of all new NTIOL class requests and public comments.
++ When a new NTIOL class is created, identify the predominant
characteristic of NTIOLs in that class that sets them apart from other
IOLs (including those previously approved as members of other expired
or active NTIOL classes) and that is associated with an improved
clinical outcome.
++ Set the date of implementation of a payment adjustment in the
case of approval of an IOL as a member of a new NTIOL class
prospectively as of 30 days after publication of the ASC payment update
final rule, consistent with the statutory requirement.
[[Page 41953]]
++ Announce the deadline for submitting requests for review of an
application for a new NTIOL class for the following calendar year.
2. Requests To Establish New NTIOL Classes for CY 2027
We did not receive any requests for review to establish a new NTIOL
class for CY 2027 by March 1, 2026, the due date published in the CY
2026 OPPS/ASC final rule with comment period (90 FR 53910).
3. Payment Adjustment
The current payment adjustment for a 5-year period from the
implementation date of a new NTIOL class is $50 per lens. Since
implementation of the process for adjustment of payment amounts for
NTIOLs in 1999, we have not revised the payment adjustment amount, and
we do not propose to revise the payment adjustment amount for CY 2027.
G. Proposed Calculation of the ASC Payment Rates and the ASC Conversion
Factor
1. Background
In the August 2, 2007 ASC final rule with comment period (72 FR
42493), we established our policy to base ASC relative payment weights
and payment rates under the revised ASC payment system on APC groups
and the OPPS relative payment weights. Consistent with that policy and
the requirement at section 1833(i)(2)(D)(ii) of the Act that the
revised payment system be implemented so that it would be budget
neutral, the initial ASC conversion factor (CY 2008) was calculated so
that estimated total Medicare payments under the revised ASC payment
system in the first year would be budget neutral to estimated total
Medicare payments under the prior (CY 2007) ASC payment system (the ASC
conversion factor is multiplied by the relative payment weights
calculated for many ASC services in order to establish payment rates).
That is, application of the ASC conversion factor was designed to
result in aggregate Medicare expenditures under the revised ASC payment
system in CY 2008 being equal to aggregate Medicare expenditures that
would have occurred in CY 2008 in the absence of the revised system,
taking into consideration the cap on ASC payments in CY 2007, as
required under section 1833(i)(2)(E) of the Act (72 FR 42522). We
adopted a policy to make the system budget neutral in subsequent
calendar years (72 FR 42532 through 42533; Sec. 416.171(e)).
In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857
through 66858), we set out a step-by-step illustration of the final
budget neutrality adjustment calculation based on the methodology
finalized in the August 2, 2007 ASC final rule (72 FR 42521 through
42531) and as applied to updated data available for the CY 2008 OPPS/
ASC final rule with comment period. The application of that methodology
to the data available for the CY 2008 OPPS/ASC final rule with comment
period resulted in a budget neutrality adjustment of 0.65.
For CY 2008, we adopted the OPPS relative payment weights as the
ASC relative payment weights for most services and, consistent with the
final policy, we calculated the CY 2008 ASC payment rates by
multiplying the ASC relative payment weights by the final CY 2008 ASC
conversion factor of $41.401. For covered office-based surgical
procedures, covered ancillary radiology services (excluding covered
ancillary radiology services involving certain nuclear medicine
procedures or involving the use of contrast agents, as discussed in
section XIII.D.2. of the CY 2023 OPPS/ASC proposed rule (87 FR 44715
through 44716)), and certain diagnostic tests within the medicine range
that are covered ancillary services, the established policy is to set
the payment rate at the lower of the PFS unadjusted nonfacility PE RVU-
based amount or the amount calculated using the ASC standard
ratesetting methodology. Further, as discussed in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66841 through 66843), we also
adopted alternative ratesetting methodologies for specific types of
services (for example, device-intensive-procedures).
As discussed in the August 2, 2007 ASC final rule with comment
period (72 FR 42517 through 42518) and as codified at Sec. 416.172(c)
of the regulations, the revised ASC payment system accounts for
geographic wage variation when calculating individual ASC payments by
applying the pre-floor and pre-reclassified IPPS hospital wage indexes
to the labor-related share, which is 50 percent of the ASC payment
amount based on a GAO report of ASC costs using 2004 survey data.
Beginning in CY 2008, CMS accounted for geographic wage variation in
labor costs when calculating individual ASC payments by applying the
pre-floor and pre-reclassified hospital wage index values that CMS
calculates for payment under the IPPS, using updated Core Based
Statistical Areas (CBSAs) issued by OMB in June 2003.
The reclassification provision in section 1886(d)(10) of the Act is
specific to acute care hospitals. We believe that using the most
recently available pre-floor and pre-reclassified IPPS hospital wage
indexes result in the most appropriate adjustment to the labor portion
of ASC costs. We continue to believe that the pre-floor, pre-
reclassified hospital wage indexes, which are updated yearly and are
used by several other Medicare payment systems, appropriately account
for geographic variation in labor costs for ASCs (89 FR 23424).
Therefore, the wage index for an ASC is the pre-floor and pre-
reclassified hospital wage index for the fiscal year under the IPPS of
the CBSA that maps to the CBSA where the ASC is located.
On July 21, 2023, OMB issued OMB Bulletin No. 23-01, which provided
the delineations of all Metropolitan Statistical Areas, Metropolitan
Divisions, Micropolitan Statistical Areas, Combined Statistical Areas,
and New England City and Town Areas in the U.S. and Puerto Rico based
on the standards published on July 16, 2021, in the Federal Register
(86 FR 37770) and 2020 Census Bureau data. (A copy of this bulletin may
be obtained at https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf.) As discussed in the FY 2025 IPPS/LTCH PPS
final rule with comment period (89 FR 69253 through 69266), we
finalized our proposal to use the new CBSAs delineations issued by OMB
in OMB Bulletin 23-01 for the IPPS hospital wage index beginning in CY
2025. Therefore, because the ASC wage indexes for the calendar year are
the pre-floor and pre-reclassified IPPS hospital wage indexes for the
fiscal year, in the CY 2025 OPPS/ASC final rule with comment period (89
FR 94362 through 94363) we finalized our proposal to incorporate the
new OMB delineations into CY 2025 ASC wage indexes. We believe that
using the revised delineations based on OMB Bulletin No. 23-01 will
increase the integrity of the ASC wage index system by creating a more
accurate representation of current geographic variations in wage
levels. In addition to adopting the revised delineations based on OMB
Bulletin No. 23-01, we also finalized our proposal to limit year-to-
year ASC wage index value changes to no more than a 5-percent decrease,
similar to the policy of other Medicare payment systems under Parts A
and B. This 5-percent cap, implemented in a budget neutral manner
through the wage index scalar, mitigates any large negative impacts of
adopting the new
[[Page 41954]]
delineations and prevents large year-to-year declines in wage index
values as a means to reduce volatility in Medicare payments.
The proposed CY 2027 ASC wage indexes reflect the OMB labor market
area delineations (including the revisions to the OMB labor market
delineations discussed previously, as set forth in OMB Bulletin No. 23-
01). We note that, in certain instances, there might be urban or rural
areas for which there is no IPPS hospital that has wage index data that
could be used to set the wage index for that area. When all of the
areas contiguous to the CBSA of interest are rural and there is no IPPS
hospital that has wage index data that could be used to set the wage
index for that area, our policy has been to determine the ASC wage
index by calculating the average of all wage indexes for urban areas in
the State (75 FR 72058 through 72059). For CY 2026, we applied this
methodology to ASCs located in CBSA 35 (Rural North Dakota) (90 FR
53911). For CY 2027, we propose to continue to apply a proxy wage index
based on this methodology to ASCs located in CBSA 35 (Rural North
Dakota). In other situations, where there are no IPPS hospitals located
in a relevant labor market area, we apply our current policy of
calculating an urban or rural area's wage index by calculating the
average of the wage indexes for CBSAs (or metropolitan divisions where
applicable) that are contiguous to the area with no wage index. For CY
2027, we propose that we continue to apply a proxy wage index based on
this methodology to ASCs located in CBSA 25980 (Hinesville, GA).
Further, the proposed CY 2027 ASC wage index includes our policy
finalized in the CY 2025 OPPS/ASC final rule with comment period that
limits wage index changes to decrease by no more than 5 percent from
the final CY 2026 ASC wage index value. As we discussed in the April
2025 Update to the Ambulatory Surgical Center Payment System (Change
Request 14017), to limit wage index changes by no more than 5 percent
from the final CY 2026 ASC wage index, some counties may require a
transition CBSA before being fully reflected in the OMB labor market
delineations as set forth in OMB Bulletin No. 23-01.
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2027 and Future
Years
We update the ASC relative payment weights each year using the
national OPPS relative payment weights (and PFS nonfacility PE RVU-
based amounts, as applicable) for that same calendar year and uniformly
scale the ASC relative payment weights for each update year to make
them budget neutral (72 FR 42533). The OPPS relative payment weights
are scaled to maintain budget neutrality for the OPPS. We then scale
the OPPS relative payment weights again to establish the ASC relative
payment weights. To accomplish this, we hold estimated total ASC
payment levels constant between calendar years for purposes of
maintaining budget neutrality in the ASC payment system. That is, we
apply the weight scalar to ensure that projected expenditures from the
updated ASC payment weights in the ASC payment system are equal to what
would be the current expenditures based on the scaled ASC payment
weights. In this way, we ensure budget neutrality and that the only
changes to total payments to ASCs result from increases or decreases in
the ASC payment update factor.
As discussed in section II.A.1.a. of this proposed rule, we are
using the CY 2025 claims data to be consistent with the OPPS claims
data for this proposed rule. Consistent with our established policy, we
propose to scale the CY 2027 relative payment weights for ASCs
according to the following method. Holding ASC utilization, the ASC
conversion factor, and the mix of services constant from CY 2025, we
propose to compare the estimated total payment using the CY 2026 ASC
relative payment weights with the estimated total payment using the CY
2027 ASC relative payment weights to take into account the changes in
the OPPS relative payment weights between CY 2026 and CY 2027.
In consideration of our policy to provide a higher ASC payment rate
with ASC complexity adjustment codes for certain primary procedures
when performed with add-on packaged services, we incorporated estimated
total spending and estimated utilization for these codes in our budget
neutrality calculation for CYs 2023 and 2024. For this proposed rule,
our proposed ASC complexity adjustment codes for CY 2027 did not impact
the ASC weight scalar.
Additionally, as discussed in section XIII.E. of the CY 2025 OPPS/
ASC final rule with comment period (89 FR 94342 through 94361), section
4135(a) and (b) of the CAA, 2023, titled ``Access to Non-Opioid
Treatments for Pain Relief'', amended sections 1833(t)(16) and 1833(i)
of the Act, respectively, to provide for temporary separate payments
for non-opioid treatments for pain relief. As discussed in further
detail in section XIII.E. of the CY 2025 OPPS/ASC final rule with
comment period, for qualifying non-opioid products, we finalized
applying an 18 percent payment limitation on the volume weighted
payment average of the top 5 services associated with the use of the
qualifying non-opioid product. In CY 2024, four of these qualifying
nonopioid products were separately payable without the 18 percent
payment limitation--HCPCS Codes C9089 (Bupivacaine implant, 1 mg),
J0666 (Inj, bupivacaine liposome), J1096 (Dexametha opth insert 0.1
mg), and J1097 (Phenylep ketorolac opth soln). Therefore, to maintain
budget neutrality, we estimated the total anticipated reduction in ASC
spending for these qualifying non-opioid products for CY 2025 as a
result of the 18 percent payment limitation required by section 4135 of
the CAA, 2023. Based on the updated 18 percent payment limitations and
CY 2025 utilization, we estimate that the proposed CY 2027 payment
limitations will not impact the ASC weight scalar.
We propose to use the ratio of estimated CY 2026 to estimated CY
2027 total payments (the weight scalar) to scale the proposed ASC
relative payment weights for CY 2027. The proposed CY 2027 ASC weight
scalar is 0.809. Consistent with historical practice, we propose to
scale, using this method (with an ASC weight scalar rounded to the
nearest thousandth), the ASC relative payment weights of covered
surgical procedures, covered ancillary radiology services, and certain
diagnostic tests within the medicine range of CPT codes, which are
covered ancillary services for which the ASC payment rates are based on
OPPS relative payment weights.
We propose that we would not scale ASC payment for separately
payable covered ancillary services that have a predetermined national
payment amount (that is, their national ASC payment amounts are not
based on OPPS relative payment weights), such as drugs and biologicals
that are separately paid or services that are contractor-priced or paid
at reasonable cost in ASCs. Any service with a predetermined national
payment amount, would be included in the ASC budget neutrality
comparison, but scaling of the ASC relative payment weights would not
apply to those services or the portion of those services. The ASC
payment weights for those services without predetermined national
payment amounts would be scaled to eliminate any difference in the
total payment between the current year and the update year.
[[Page 41955]]
Historically, the device portions of device-intensive procedures
were not scaled so that payment for device portions would remain
constant between the OPPS and ASC payment system. However, due to
increased utilization of orthopedic procedures in the ASC setting, ASC
expenditures on device portions of device-intensive procedures
represent a substantially larger share of total ASC expenditures than
in prior years. We estimate that spending attributable to device
portions increased from approximately 5.4 percent of total ASC
expenditures in CY 2016 to roughly 32.4 percent of total ASC
expenditures in 2026. As device expenditures account for an
increasingly significant share of total ASC spending, large year-to-
year increases in the estimated device portions of surgical procedures
require correspondingly larger reductions to the non-device portions of
surgical procedures and certain ancillary services to maintain budget
neutrality.
The change in the proposed ASC weight scaler for CY 2027
illustrates this effect. Specifically, the ASC weight scaler would
decrease from 0.872 in CY 2026 to a proposed 0.809 in CY 2027. This
reduction is largely attributable to the substantial increase in
expenditures for device portions of device-intensive procedures under
the ASC payment system. In turn, this increase in device portions
results from the proposed budget-neutral increase in OPPS payment rates
for surgical procedures that would offset the drug payment reductions
associated with our proposed payment policy for 340B acquired drugs as
a result of the OPPS Drug Acquisition Cost Survey.
As the ASC payment system uses the OPPS conversion factor to
determine payment for the device portions of device-intensive
procedures, this alters the payment relativity between services under
the OPPS because the entire portion of ASC payment rates for non-
device-intensive procedures is based on the lower ASC conversion
factor. Because of the proposed large increase in the device portions
for device-intensive procedures in CY 2027 as a result of the proposed
340B drug payment policy, we solicit comment on whether the device
portions of device-intensive procedures calculated using the OPPS
conversion factor should continue to be excluded from the ASC weight
scaler, or alternatively, whether these device portions should be
included in the expenditures subject to scaling through the ASC weight
scaler. We estimate that treating device expenditures for device-
intensive procedures as scalable prospective expenditures would
increase the proposed ASC weight scaler from 0.809 to 0.865 in CY 2027
and would reduce the device portions of device intensive procedures by
approximately 14 percent.
For any given year's ratesetting, we typically use the most recent
full calendar year of claims data to model budget neutrality
adjustments. We propose to use the CY 2025 claims data to model our
budget neutrality adjustment for CY 2027.
b. Updating the ASC Conversion Factor
Under the OPPS, we typically apply a budget neutrality adjustment
for provider-level changes, most notably a change in the wage index
values for the upcoming year, to the conversion factor. Consistent with
our final ASC payment policy, for the CY 2017 ASC payment system and
subsequent years, in the CY 2017 OPPS/ASC final rule with comment
period (81 FR 79751 through 79753), we finalized our policy to
calculate and apply a budget neutrality adjustment to the ASC
conversion factor for supplier-level changes in wage index values for
the upcoming year, just as the OPPS wage index budget neutrality
adjustment is calculated and applied to the OPPS conversion factor.
For CY 2027, we calculated the proposed adjustment for the ASC
payment system by using the most recent CY 2025 claims data available
and estimating the difference in total payment that would be created by
introducing the proposed CY 2027 ASC wage indexes. Specifically,
holding CY 2025 ASC utilization, service-mix, and the proposed CY 2027
national payment rates after application of the weight scalar constant,
we calculated the total adjusted payment using the CY 2026 ASC wage
indexes and the total adjusted payment using the proposed CY 2027 ASC
wage indexes which included the 5-percent cap on wage index declines.
We used the 50 percent labor-related share for both total adjusted
payment calculations. We then compared the total adjusted payment
calculated with the CY 2026 ASC wage indexes to the total adjusted
payment calculated with the proposed CY 2027 ASC wage indexes and
applied the resulting ratio of 1.0016 (the proposed CY 2027 ASC wage
index budget neutrality adjustment) to the CY 2026 ASC conversion
factor to calculate the proposed CY 2027 ASC conversion factor.
Section 1833(i)(2)(D)(v) of the Act requires that the ASC
conversion factor be reduced by a productivity adjustment in each
calendar year. Section 1886(b)(3)(B)(xi)(II) of the Act defines the
productivity adjustment to be equal to the 10-year moving average of
changes in annual economy-wide private nonfarm business multifactor
productivity (MFP). We finalized the methodology for calculating the
productivity adjustment in the CY 2011 PFS final rule with comment
period (75 FR 73394 through 73396) and revised it in the CY 2012 PFS
final rule with comment period (76 FR 73300 through 73301) and the CY
2016 OPPS/ASC final rule with comment period (80 FR 70500 through
70501). The proposed productivity adjustment for CY 2027 was projected
to be 0.8 percentage point, as published in the FY 2027 IPPS/LTCH PPS
proposed rule (91 FR 19496) based on IGI's 2025 fourth quarter
forecast.
Section 1833(i)(2)(C)(i) of the Act requires that, if the Secretary
has not updated amounts established under the revised ASC payment
system in a calendar year, the payment amounts shall be increased by
the percentage increase in the Consumer Price Index for all urban
consumers (CPI-U), U.S. city average, as estimated by the Secretary for
the 12-month period ending with the midpoint of the year involved. The
statute does not mandate the adoption of any particular update
mechanism, but it requires the payment amounts to be increased by the
CPI-U in the absence of any update. Because the Secretary updates the
ASC payment amounts annually, we adopted a policy, which we codified at
Sec. 416.171(a)(2)(ii)), to update the ASC conversion factor using the
CPI-U for CY 2010 and subsequent calendar years.
In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59075
through 59080), we finalized a policy to apply the hospital market
basket update (which is the inpatient hospital market basket percentage
increase reduced by the productivity adjustment) to ASC payment system
rates for an interim period of 5 years (CY 2019 through CY 2023),
during which we would assess whether there was a migration of the
performance of procedures from the hospital setting to the ASC setting
as a result of the use of a hospital market basket update, as well as
whether there were any unintended consequences, such as less than
expected migration of the performance of procedures from the hospital
setting to the ASC setting. At that time, the most recently available
full year of claims data to assess the expected migration applying the
productivity-adjusted hospital market basket update during the interim
period was within the period from CY 2019 through CY 2022. However, the
impact of the COVID-19 PHE on health care
[[Page 41956]]
utilization, CY 2020 in particular, was tremendously profound,
particularly for elective surgeries, because many beneficiaries avoided
healthcare settings, when possible, to avoid possible infection from
the SARS-CoV-2 virus. As a result, it was nearly impossible to
disentangle the effects from the COVID-19 PHE in our analysis of
whether the higher update factor for the ASC payment system caused
increased migration to the ASC setting. To analyze whether procedures
migrated from the hospital setting to the ASC setting, we needed to use
claims data from a period during which the COVID-19 PHE had less of an
impact on health care utilization. Therefore, for CY 2024, we finalized
our proposal to extend the 5-year interim period an additional 2 years
through CY 2024 and CY 2025 which we subsequently extended through CY
2026 in the CY 2026 OPPS/ASC final rule with comment period (90 FR
53914 through 53915). We believed hospital outpatient and ASC
utilization data from CYs 2023 through 2025 would enable us to more
accurately analyze whether the application of the hospital market
basket update to the ASC payment system had an effect on the migration
of services from the hospital setting to the ASC setting. We revised
our regulations at Sec. 416.171(a)(2)(iii), (iv), (vi), (vii), and
(viii) which establish the annual update to the ASC conversion factor,
to reflect these extensions.
For this proposed rule, we propose to extend our utilization of the
hospital market basket update factor in the ASC payment system for one
additional year, through CY 2027, as we continue to review and evaluate
hospital outpatient and ASC utilization data, as well as the migration
of surgical procedures between settings. In conjunction with our
proposal, we are revising our regulations at Sec. 416.171(a)(2)(iii),
(iv), (vi), (vii), and (viii), which establish the annual update to the
ASC conversion factor, the 2.0 percentage point reduction for ASCs that
fail to meet the standards for reporting ASC quality measures, and the
productivity adjustment, to reflect this one year extension.
2. CY 2027 Proposed ASC Conversion Factor
For CY 2027, we propose to utilize the proposed inpatient hospital
market basket percentage increase of 3.2 percent reduced by the
productivity adjustment of 0.8 percentage point, resulting in a final
hospital market basket update of 2.4 percent for ASCs meeting the
quality reporting requirements. Therefore, we propose to apply a 2.4
percent hospital market basket update factor to the CY 2026 ASC
conversion factor for ASCs meeting the quality reporting requirements
to determine the CY 2027 ASC payment amounts. The ASCQR Program
affected payment rates beginning in CY 2014 and, under this program,
there is a 2.0 percentage point reduction to the hospital market basket
update factor for ASCs that fail to meet the ASCQR Program
requirements. We refer readers to section XIV.E. of the CY 2019 OPPS/
ASC final rule with comment period (83 FR 59138 through 59139) and
section XIV.E. of this proposed rule for a detailed discussion of our
policies regarding payment reduction for ASCs that fail to meet ASCQR
Program requirements.
For CY 2027, we are adjusting the CY 2026 ASC conversion factor
($56.322) by a wage index budget neutrality factor of 1.0016 in
addition to the productivity-adjusted hospital market basket update of
2.4 percent, discussed previously, which results in a proposed CY 2027
ASC conversion factor of $57.766 for ASCs meeting quality reporting
requirements. For ASCs not meeting quality reporting requirements, we
are adjusting the CY 2026 ASC conversion factor ($56.322) by the wage
index budget neutrality factor of 1.0016 in addition to the reduced
productivity-adjusted hospital market basket update of 0.4 percent,
discussed above, which results in a proposed CY 2027 ASC conversion
factor of $56.638 for ASCs not meeting the quality reporting
requirements.
3. Display of the Proposed CY 2027 ASC Payment Rates and Alternative CY
2027 ASC Payment Rates
Addenda AA and BB to this proposed rule (which are available on the
CMS website) display the proposed ASC payment rates for CY 2027 for
covered surgical procedures and covered ancillary services,
respectively. The proposed payment rates included in Addenda AA and BB
to this proposed rule reflect the full ASC payment update and not the
reduced payment update used to calculate payment rates for ASCs not
meeting the quality reporting requirements under the ASCQR Program.
These Addenda contain several types of information related to the
proposed CY 2027 payment rates. Specifically, in Addendum AA, a ``Y''
in the column titled ``To be Subject to Multiple Procedure
Discounting'' indicates that the surgical procedure would be subject to
the multiple procedure payment reduction policy. As discussed in the CY
2008 OPPS/ASC final rule with comment period (72 FR 66829 through
66830), most covered surgical procedures are subject to a 50 percent
reduction in the ASC payment for the lower-paying procedure when more
than one procedure is performed in a single operative session.
The values displayed in the column titled ``Proposed CY 2027
Payment Weight'' are the proposed relative payment weights for each of
the listed services for CY 2027. The proposed relative payment weights
for all covered surgical procedures and covered ancillary services
where the ASC payment rates are based on OPPS relative payment weights
were scaled for budget neutrality. Therefore, scaling was not applied
to the device portion of the device-intensive- procedures; services
that are paid at the PFS nonfacility PE RVU-based amount; separately
payable covered ancillary services that have a predetermined national
payment amount, such as drugs and biologicals and brachytherapy sources
that are separately paid under the OPPS; or services that are
contractor-priced or paid at reasonable cost in ASCs. This includes
separate payment for non-opioid pain management drugs.
To derive the proposed CY 2027 payment rate displayed in the
``Proposed CY 2027 Payment Rate'' column, each ASC payment weight in
the ``Proposed CY 2027 Payment Weight'' column was multiplied by the
proposed CY 2027 conversion factor. The conversion factor includes a
budget neutrality adjustment for changes in the wage index values and
the annual update as reduced by the productivity adjustment. The
proposed CY 2027 ASC conversion factor uses the proposed CY 2027
productivity adjusted hospital market basket update factor of 2.4
percent (which is equal to the inpatient hospital market basket
percentage increase of 3.2 percent reduced by the productivity
adjustment of 0.8 percentage point). We also propose that if more
recent data subsequently become available (for example, a more recent
estimate of the inpatient hospital market basket percentage increase
and the productivity adjustment), we would use such data, if
appropriate, to determine the CY 2027 ASC conversion factor in the
final rule.
In Addendum BB, there are no relative payment weights displayed in
the ``Proposed CY 2027 Payment Weight'' column for items and services
with predetermined national payment amounts, such as separately payable
drugs and biologicals. The ``Proposed CY 2027 Payment'' column displays
the proposed CY 2027 national unadjusted
[[Page 41957]]
ASC payment rates for all items and services. The proposed CY 2027 ASC
payment rates listed in Addendum BB for separately payable drugs and
biologicals are generally based on the most recently available data
used for payment in physicians' offices. For CY 2021, we finalized
adding a new column to ASC Addendum BB titled ``Drug Pass-Through
Expiration during Calendar Year'' where we flag through the use of an
asterisk each drug for which pass-through payment is expiring during
the calendar year (that is, on a date other than December 31st).
Addendum EE to this proposed rule provides the HCPCS codes and
short descriptors for surgical procedures that are to be excluded from
payment in ASCs for CY 2027.
Addendum FF to this proposed rule displays the OPPS payment rate
(based on the standard ratesetting methodology), the APC device offset
percentage, the device offset percentage for determining device-
intensive status (based on the standard ratesetting methodology), and
the device portion of the ASC payment rate for CY 2027 for covered
surgical procedures.
XIV. Proposed Measure Removal for the Hospital Outpatient Quality
Reporting and Ambulatory Surgical Center Quality Reporting Programs
A. Background
We refer readers to sections XV. and XVII. of this proposed rule
for program-specific background information, including statutory
authority and program measure sets, regarding the Hospital Outpatient
Quality Reporting and Ambulatory Surgical Center (ASC) Quality
Reporting Programs, respectively.
B. Proposed Removal of the Appropriate Follow-Up Interval for Normal
Colonoscopy in Average Risk Patients Measure in the Hospital Outpatient
Quality Reporting and the ASC Quality Reporting Programs
We refer readers to the CY 2014 OPPS/ASC final rule with comment
period where we adopted the Appropriate Follow-Up Interval for Normal
Colonoscopy in Average Risk Patients (the Colonoscopy Follow-Up
Interval) measure into the Hospital Outpatient Quality Reporting and
the ASC Quality Reporting Programs (78 FR 75101 through 75102 and 78 FR
75127 through 75128), and the CY 2024 OPPS/ASC final rule with comment
period where we modified the measure to align with updated clinical
guidelines (88 FR 81972 through 81973 and 88 FR 82020 through 82021).
The Colonoscopy Follow-Up Interval measure assesses the percentage of
patients aged 45 years to 75 years receiving a screening colonoscopy
without biopsy or polypectomy who had a recommended follow-up interval
of at least 10 years for repeat colonoscopy documented in their
colonoscopy report.\153\
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\153\ Partnership for Quality Measurement. Appropriate Follow-Up
Interval for Normal Colonoscopy in Average Risk Patients. Available
at https://p4qm.org/measures/0658.
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When we adopted the Colonoscopy Follow-up Interval measure, we
sought to address what was, at the time, the critical issue of
colonoscopies potentially performed too frequently and potentially
increasing patients' exposure to procedural harm.154 155 The
measure was designed to promote adherence to recommended screening
intervals through documentation of follow-up recommendations in the
colonoscopy report, thereby increasing provider and patient awareness
of appropriate screening intervals. Importantly, this measure assesses
whether the recommended 10-year interval for a follow-up colonoscopy is
documented in the colonoscopy report, rather than whether appropriate
clinical care is delivered. In other words, the measure does not assess
whether the follow-up colonoscopy was performed according to this
recommended interval.
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\154\ Lieberman, D. A., Faigel, D. O., Logan, J. R., Mattek, N.,
Holub, J., Eisen, G., Morris, C., Smith, R., & Nadel, M. (2009).
Assessment of the quality of colonoscopy reports: results from a
multicenter consortium. Gastrointestinal endoscopy, 69(3 Pt 2), 645-
653. https://doi.org/10.1016/j.gie.2008.08.034.
\155\ Goodwin, J. S., Singh, A., Reddy, N., Riall, T. S., & Kuo,
Y. F. (2011). Overuse of screening colonoscopy in the Medicare
population. Archives of internal medicine, 171(15), 1335-1343.
https://doi.org/10.1001/archinternmed.2011.212.
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We continue to believe that it is important to encourage high-
quality colonoscopy care in hospital outpatient departments and ASCs.
We note that the Hospital Outpatient Quality Reporting Program and ASC
Quality Reporting Program measure sets both currently include another
measure that is tied more closely to outcomes of continued interest and
importance--the Facility 7-Day Risk-Standardized Hospital Visit Rate
after Outpatient Colonoscopy measure (79 FR 66948 through 66955 and 79
FR 66970 through 66979, respectively), which assesses the incidence of
hospital returns within 7 days of a colonoscopy, including emergency
department visits, observation stays, and unplanned readmissions. The
Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient
Colonoscopy measure is therefore a more patient-outcome focused measure
of procedure-related adverse events across both programs in contrast to
the Colonoscopy Follow-Up Interval measure, which assesses
documentation of recommended follow-up intervals rather than patient
outcomes.\156\ For these reasons, we propose to remove the Colonoscopy
Follow-Up Interval measure from the Hospital Outpatient Quality
Reporting and the ASC Quality Reporting Programs, beginning with the CY
2027 reporting period/CY 2029 payment determination. For both programs,
removal is appropriate under removal factor 6 (42 CFR
419.46(i)(3)(i)(F) and 416.320(c)(2)(vi)), the availability of a
measure that is more strongly associated with a desired patient outcome
for the particular topic. The Hospital Outpatient Quality Reporting
Program and ASC Quality Reporting Program measure sets would continue
to retain the Facility 7-Day Risk-Standardized Hospital Visit Rate
after Outpatient Colonoscopy measure.
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\156\ Partnership for Quality Measurement. Facility 7-Day Risk-
Standardized Hospital Visit Rate after Outpatient Colonoscopy.
Available at https://p4qm.org/measures/2539.
---------------------------------------------------------------------------
Additionally, we continue to prioritize appropriate colonoscopy
care in our other quality reporting or value-based programs. For
example, we have a Colorectal Cancer Screening measure within the
gastroenterology Merit-based Incentive Payment System (MIPS) Value
Pathway \157\ and the Medicare Shared Savings Program,\158\ which
assess the percentage of adults 45-75 years of age who had appropriate
screening for colorectal cancer.
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\157\ CMS Quality Payment Program Reporting Requirements.
Available at https://qpp.cms.gov/reporting-requirements/measures-activities/explore-mvps/2025/M1422.
\158\ CMS Measures Inventory Tool. Colorectal Cancer Screening,
Medicare Shared Savings Program. Available at https://cmit.cms.gov/cmit/#/MeasureView?variantId=11552§ionNumber=1.
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We invite public comment on this proposal.
XV. Hospital Outpatient Quality Reporting Program
A. Background
The Hospital Outpatient Quality Reporting Program promotes
transparency and quality of care furnished at hospital outpatient
departments (HOPDs). Section 1833(t)(17)(A) of the Act sets forth that
subsection (d) hospitals (as defined under section 1886(d)(1)(B) of the
Act) 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
Outpatient Department fee
[[Page 41958]]
schedule increase factor. We refer readers to the CY 2011 OPPS/ASC
final rule with comment period (75 FR 72064 through 72065) for a
detailed discussion of the statutory history of the Hospital Outpatient
Quality Reporting Program. We have codified certain program
requirements at 42 CFR 419.46. We also refer readers to the CMS website
at https://www.cms.gov/medicare/quality/initiatives/hospital-quality-initiative/hospital-outpatient-quality-reporting-program for general
background on the Hospital Outpatient Quality Reporting Program, as
well as the CMS QualityNet website at https://qualitynet.cms.gov/outpatient for current program requirements and measure specifications.
B. Hospital Outpatient Quality Reporting Program Measure Set
We refer readers to section XIV. of this proposed rule for a cross-
program proposal to remove the Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk Patients measure from the Hospital
Outpatient Quality Reporting and Ambulatory Surgical Center (ASC)
Quality Reporting Programs beginning with the CY 2027 reporting period/
CY 2029 payment determination. We are not proposing any other changes
to the Hospital Outpatient Quality Reporting Program measure set. Table
72 summarizes the previously finalized Hospital Outpatient Quality
Reporting Program measure set for the CY 2028 to CY 2032 payment
determinations.
BILLING CODE 4169-69-P
[[Page 41959]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.109
[[Page 41960]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.110
BILLING CODE 4169-69-C
C. Request for Information on the Advance Care Planning Electronic
Clinical Quality Measure
1. Background
We are seeking feedback on potential inclusion of an Advance Care
Planning electronic clinical quality measure (eCQM) and other quality
measure concepts related to advance care planning for the Hospital
Outpatient Quality Reporting Program. Advance care planning is a
continuous process that supports patients in understanding and
communicating their goals, values, and preferences regarding future
medical care and decision-making. The 1990 Patient Self-Determination
Act supports advance care planning by requiring health care facilities
to inform patients of their rights regarding medical decision-making
and to document in the medical record whether the patient has executed
an advance directive; however, it does not require that a copy of the
directive itself must always be placed in the medical record.\159\
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\159\ Patient Self Determination Act of 1990. 42 U.S.C.
1395cc(f) and 1396a(w).
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HOPDs provide care for adults with serious and complex conditions,
including those receiving cancer treatment, visiting the emergency
department (ED), or undergoing surgical procedures. In the CY 2026
OPPS/ASC final rule with comment period (90 FR 53780 through 53786), we
finalized the phase-out of the Inpatient-Only (IPO) list over a 3-year
period, beginning January 1, 2026, and ending January 1, 2029. As part
of the first step of the IPO phase-out, for 2026, we removed 285 HCPCS
codes (mostly for musculoskeletal procedures) from the IPO list. As
more procedures shift from the inpatient to the outpatient setting,
complex procedures may increasingly be furnished in HOPDs. Outpatient
encounters can provide repeated opportunities for clinicians to build
relationships with patients over time, which may support the initiation
or updating of advance care planning documentation, including when
patients are relatively stable or before their illness progresses.\160\
Many patients assume that their caregivers know their preferences
regarding their care; however, research indicates that caregivers
incorrectly predict patients' preferences approximately one-third of
the time.\161\ Additionally, care preferences may change over
time,\162\
[[Page 41961]]
particularly in response to changes in an individual's health status or
personal circumstances.163 164 Regular reassessment and
transparent communication are essential to maintaining person-centered
care. Advance care planning facilitates shared decision-making by
documenting patient preferences and ensuring that care remains aligned
with patients' goals across care settings and transitions.\165\
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\160\ Marshall, K. H., Riddiford-Harland, D. L., Meller, A. E.,
Caplan, G. A., Naganathan, V., Cullen, J., Gonski, P., Zwar, N. A.,
O'Keeffe, J. A., Krysinska, K., & Rhee, J. J. (2024). Feasibility
and Acceptability of Facilitated Advance Care Planning in Outpatient
Clinics: A Qualitative Study of Patient and Caregivers Experiences.
Journal of applied gerontology: the official journal of the Southern
Gerontological Society, 43(4), 339-348. https://doi.org/10.1177/07334648231206742.
\161\ National Institute on Aging. (2022). Advance Care
Planning: Advance Directives for Health Care. Available at https://www.nia.nih.gov/health/advance-care-planning/advance-care-planning-advance-directives-health-care.
\162\ Mastropolo, R., Cernik, C., Uno, H., Fisher, L., Xu, L.,
Laurent, C. A., Cannizzaro, N., Munneke, J., Cooper, R. M., Lakin,
J. R., Schwartz, C. M., Casperson, M., Altschuler, A., Kushi, L.,
Chao, C. R., Wiener, L., & Mack, J. W. (2024). Evolution in
Documented Goals of Care at End of Life for Adolescents and Younger
Adults With Cancer. JAMA network open, 7(12), e2450489. Available at
https://doi.org/10.1001/jamanetworkopen.2024.50489.
\163\ Shah, M. P., Wenger, N. S., Glaspy, J., Hays, R. D.,
Sudore, R. L., Rahimi, M., Gibbs, L., Anand, S., Tseng, C. H., &
Walling, A. M. (2025). Patient-reported discordance between care
goals and treatment intent in advanced cancer. Cancer, 131(17),
e35976. Available at https://doi.org/10.1002/cncr.35976.
\164\ Young Y, Stone A, Perre T. (2022). Are Young Adults Ready
to Complete Advance Directives? American Journal of Hospice &
Palliative Medicine, 39(10), 1188-1193. Available at https://doi.org/10.1177/10499091211066494.
\165\ McMahan, R. D., Tellez, I., Sudore, R. L. (2021).
Deconstructing the Complexities of Advance Care Planning Outcomes:
What Do We Know and Where Do We Go? A Scoping Review. Journal of the
American Geriatrics Society, 69(1), 234-244. Available at https://doi.org/10.1111/jgs.16801.
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We are interested in receiving feedback on whether the Advance Care
Planning eCQM is appropriate for use in the hospital outpatient
setting, with or without modifications. We seek input on this and on
other potential quality measures related to this topic that may be
appropriate for the hospital outpatient setting.
2. Advance Care Planning Electronic Clinical Quality Measure Overview
The Advance Care Planning eCQM was proposed for adoption for the
Hospital Inpatient Quality Reporting, PPS-Exempt Cancer Hospital
Quality Reporting, and Medicare Promoting Interoperability Programs in
the FY 2027 IPPS/LTCH PPS proposed rule (91 FR 19564 through 19568).
Potentially adopting the eCQM across our quality reporting programs
promotes the use of standardized advance care planning documentation in
the electronic health record (EHR). Such documentation helps ensure
that care remains aligned with patients' stated preferences, leverages
EHRs to facilitate health information exchange, and supports the
advancement of person-centered care across the care continuum.
We refer readers to the FY 2027 IPPS/LTCH PPS proposed rule (91 FR
19564 through 19568) for a complete discussion of the proposals to
adopt the Advance Care Planning eCQM in certain inpatient quality
reporting programs. The eCQM currently calculates the proportion of
adult patients with one or more hospitalizations during the measurement
period who, by the time of discharge for at least one encounter, have
either an advance care planning document in the EHR or documentation of
an advance care planning discussion that results in a documented
decision in the patient's EHR. The numerator comprises any one of the
following: (1) an 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), advance directive
(or living will), or a portable medical order (medical order for life-
sustaining treatment [MOLST], physician order for life-sustaining
treatment [POLST], or do not resuscitate [DNR] orders); \166\ or (2)
documentation that an advance care planning discussion resulting in a
documented decision occurred during the measurement
period.167 168
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\166\ Some state organizations may refer to a MOLST or POLST
form by other terms such as medical orders for scope of treatment
(MOST), physician orders for scope of treatment (POST), clinical
orders for life-sustaining treatment (COLST), or a transportable
physician orders for patient preferences (TPOPP).
\167\ Documentation that an advance care planning discussion
resulting in a documented decision occurred during the measurement
period includes a discussion with the patient or the surrogate. This
allows discussion with a surrogate in instances where a patient is
unable to participate (e.g., incapacitated) without requiring prior
discussion with the patient.
\168\ Partnership for Quality Management. Advance Care Planning.
Available at https://www.p4qm.org/prmr-measures/muc2025-020.
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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 documentation of
the date the advance care planning document was originally created or
last updated. However, we encourage clinicians to discuss with the
patient or their surrogate whether the document accurately reflects the
patient's current preferences. To be considered 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 a hospital encounter in the measurement period. If a patient has
multiple encounters during the measurement period, an advance care
planning discussion with a decision occurring in any one of the
hospital encounters during the measurement period is counted toward the
numerator. The denominator includes all patients aged 18 years and
older at the start of the measurement period who are discharged from a
hospitalization during the 12-month measurement period. The Advance
Care Planning eCQM is calculated as a proportion by dividing the number
of patients who meet the numerator criterion by the total number of
eligible patients who meet the denominator criterion.\169\
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\169\ Partnership for Quality Management. Advance Care Planning.
Available at https://www.p4qm.org/prmr-measures/muc2025-020.
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There are no exclusions for the Advance Care Planning eCQM as the
measure is intended to encourage advance care planning among all adult
patients, recognizing that serious illness or injury can occur at any
time, regardless of age or baseline health. The measure is designed to
account for situations where a patient does not have capacity to engage
in, declines, or defers advance care planning by crediting pre-existing
advance care planning documents in the EHR and including EHR data
elements that include advance care planning discussions with a decision
documented during a hospital encounter (including those conducted with
a surrogate when the patient does not have capacity) and documentation
that a patient declined or deferred advance care planning.
For more details on the Advance Care Planning eCQM, please refer to
https://www.p4qm.org/prmr-measures/muc2025-020. We refer readers to the
Electronic Clinical Quality Improvement (eCQI) Resource Center for more
details on the measure specifications at (https://ecqi.healthit.gov/ecqm/hosp-inpt/2028/cms1317v1) and to the CMS QualityNet website for a
list of the EHR data elements that comprise the numerator (https://qualitynet.cms.gov/inpatient/iqr/proposedmeasures).
3. Solicitation for Public Comment
We are seeking input on the importance, relevance, appropriateness,
and applicability of including the Advance Care Planning eCQM in the
Hospital Outpatient Quality Reporting Program, as well as on other
measure concepts related to advance care planning for the hospital
outpatient setting. We invite public comment on the following
considerations:
Tools and measures that capture advance care planning
processes and outcomes in hospital outpatient settings, including the
potential future use of and modifications to the Advance Care Planning
eCQM to better tailor it for the Hospital Outpatient Quality Reporting
Program.
Other approaches or measure concepts that may more
effectively capture advance care planning activities in the HOPD
setting.
[[Page 41962]]
Relevant aspects of advance care planning for the HOPD
setting, such as whether an advance care planning measure should focus
on specific patient populations, higher-acuity procedures, or select
departments (such as oncology, emergency department, and surgical
areas).
Timing and frequency of advance care planning, such as
when and how often it should occur in the HOPD setting.
Other measure development/re-specification ideas or
opportunities for addressing advance care planning in the HOPD setting,
including but not limited to changes to the current Advance Care
Planning eCQM.
D. Proposed Updates to the Validation of Hospital Outpatient Quality
Reporting Program Data
We refer readers to previous OPPS/ASC rulemaking \170\ and 42 CFR
419.46(f) for our existing policies regarding data validation in the
Hospital Outpatient Quality Reporting Program. We also refer readers to
our outpatient data validation resources at https://qualitynet.cms.gov/outpatient/data-management/data-validation/resources.
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\170\ Existing validation policies were adopted for the Hospital
Outpatient Quality Reporting Program in the CY 2011 OPPS/ASC final
rule with comment period (75 FR 72103 through 72106), CY 2012 OPPS/
ASC final rule with comment period (76 FR 74484 through 74487), CY
2013 OPPS/ASC final rule with comment period (77 FR 68484 through
68487), CY 2014 OPPS/ASC final rule with comment period (78 FR
75117), CY 2015 OPPS/ASC final rule with comment period (79 FR 66964
through 66966), CY 2016 OPPS/ASC final rule with comment period (80
FR 70524), CY 2018 OPPS/ASC final rule with comment period (82 FR
59441 through 59443), CY 2021 OPPS/ASC final rule with comment
period (85 FR 86185), CY 2022 OPPS/ASC final rule with comment
period (86 FR 63870 through 63873), and CY 2023 OPPS/ASC final rule
with comment period (87 FR 72115 through 72116).
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To ensure the accuracy of Hospital Outpatient Quality Reporting
Program data and the ability of interested parties to rely on such data
using the provider comparison tool on Medicare.gov (https://www.medicare.gov/care-compare/), we propose to incorporate the
validation of eCQM data into the Hospital Outpatient Quality Reporting
Program's existing validation process as well as to streamline certain
validation processes. In addition, we propose to: (1) change the
validation selection pool from 500 to up to 400 hospitals; (2) clarify
application of the targeting criteria to eCQMs; (3) update the number
of cases for chart-abstracted and eCQM validation; (4) include eCQM
validation in the timing and submission of medical record requests; (5)
align the submission quarters for chart-abstracted and eCQM validation;
(6) establish an eCQM validation scoring method based on data accuracy;
and (7) update the educational review process for validation results.
We anticipate the cumulative impact of these proposals would reduce
burden for hospitals while increasing the accuracy of data reported
under the program to better facilitate beneficiary decision-making and
hospital quality improvement efforts.
1. Proposed Electronic Clinical Quality Measure Data Validation
To incorporate validation of eCQMs into the existing Hospital
Outpatient Quality Reporting Program data validation process, we
propose that validation begin with each eCQM when there is a full year
of data available. For example, hospitals are required to submit all
four quarters of data for the Appropriate Treatment for ST-Segment
Elevation Myocardial Infarction (STEMI) Patients in the Emergency
Department (ED) eCQM beginning with data from the CY 2027 reporting
period (86 FR 63837 through 63840); therefore, validation for the STEMI
eCQM would begin with data from the CY 2027 reporting period. Likewise,
validation for the Emergency Care Access & Timeliness (ECAT) eCQM would
begin with data from the CY 2028 reporting period, which is the first
year that submitting four quarters of data for this measure is
mandatory (90 FR 53925 through 53934). Any future eCQMs adopted into
the measure set would become eligible for validation after mandatory
reporting of a full year of data is in effect, and information
regarding the measures to be validated would be obtained from the CMS
QualityNet website (or other CMS-designated website).
2. Proposed Changes to Selection Process for Hospital Outpatient
Quality Reporting Program Validation
a. Validation Selection Pool
In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74484
through 74485), we finalized an annual process for the Hospital
Outpatient Quality Reporting Program of selecting a random sample of
450 hospitals for validation purposes and an additional 50 hospitals
based on specific targeting criteria. Since this process was finalized,
we have found that hospitals randomly selected for validation generally
have high accuracy rates for chart-abstracted measures and believe the
number of hospitals randomly selected for validation could be reduced
without impacting our ability to assess the accuracy of hospital data.
At the same time, we believe that increasing the number of hospitals
selected for validation based on specific targeting criteria will help
to ensure data accuracy by allowing a greater number of hospitals
meeting specific targeting criteria to have their data submissions
reviewed for accuracy.
Therefore, we propose that, beginning with hospital selections for
validation affecting the CY 2030 payment determination, up to 200
hospitals would be selected at random and up to 200 hospitals would be
selected using targeting criteria, for a total of up to 400 hospitals
selected for validation. As we have found consistently high agreement
rates and relatively low variation among randomly selected hospitals,
this change would reduce the total number of hospitals selected for
validation each year from 500 to up to 400 hospitals, while maintaining
a sufficiently reliable sample size. Since the total number of
hospitals required to participate in validation each year would be
fewer, this proposed change would also reduce overall burden for
hospitals. Re-balancing the number of randomly selected hospitals
compared to the number of hospitals selected by targeting criteria
would also more effectively and efficiently direct validation program
resources to ensure data accuracy. Beginning with validation affecting
the CY 2030 payment determination, we would require any hospital
selected for validation, either randomly or after meeting targeting
criteria, to submit both chart-abstracted measure and eCQM data for
validation. Under the current policy, hospitals selected for validation
affecting the CY 2029 payment determination would continue to
participate only in chart-abstracted measure validation as no eCQMs
would yet be eligible for validation. Hospital selections for
validation affecting the CY 2029 payment determination would continue
under the existing policy. Additionally, hospitals selected for
validation affecting the CY 2030 payment determination would only be
required to submit eCQM data for validation when the relevant eCQM is
required and eligible for validation for the applicable reporting
period. This aligns with the validation process finalized for the
Hospital Inpatient Quality Reporting Program, which hospitals are
familiar with (85 FR 58946 through 58949). We propose to update the
codified policy at Sec. 419.46(f)(3) to reflect this proposed change.
[[Page 41963]]
b. Targeting Criteria for Validation Selection Pool
We have previously established several targeting criteria set forth
at Sec. 419.46(f)(3)(i) through (v):
The hospital fails the validation requirement that applies
to the previous year's payment determination; or
The hospital has an outlier value for a measure based on
the data it submits. An ``outlier value'' is a measure value that is
greater than 5 standard deviations from the mean of the measure values
for other hospitals, and indicates a poor score; or
Any hospital that has not been randomly selected for
validation in any of the previous 3 years; or
Any hospital that passed validation in the previous year
but had a two-tailed confidence interval that included 75 percent; or
Any hospital with a two-tailed confidence interval that is
less than 75 percent, and that had less than four quarters of data due
to receiving an extraordinary circumstance exception (ECE) for one or
more quarters.
We propose to apply the targeting criteria at Sec. 419.46(f)(3)(i)
through (v) to all measures eligible for validation in the Hospital
Outpatient Quality Reporting Program, including but not limited to
chart-abstracted measures and eCQMs.
3. Case Selection for Validation
We refer readers to the CY 2012 OPPS/ASC final rule with comment
period (76 FR 74485 through 74486) and CY 2013 OPPS/ASC final rule with
comment period (77 FR 68486), where we finalized that for each hospital
selected through either random sampling or targeting criteria, we will
validate up to 48 randomly selected patient cases (12 cases per
quarter) from the total number of cases that the hospital successfully
submitted to the CMS Clinical Data Warehouse via the Hospital Quality
Reporting (HQR) system.
We propose to revise the number and distribution of cases selected
for validation under the Hospital Outpatient Quality Reporting Program
to ensure a balanced assessment across measure types. Specifically, we
propose to validate up to 32 randomly selected patient cases for each
measure, starting with validation of CY 2027 data affecting the CY 2030
payment determination. For each chart-abstracted clinical process of
care measure, cases would be submitted quarterly, with up to 8 cases
validated per quarter. For each eCQM, up to 32 cases would be submitted
annually, allowing validation of up to 8 cases from each quarter. Table
73 illustrates these proposed changes.
[GRAPHIC] [TIFF OMITTED] TP07JY26.111
We believe this approach would support a more balanced and
representative assessment of data accuracy across both chart-abstracted
measures and eCQMs. We further believe that broadening the selection of
cases across measure types, rather than concentrating cases within a
single measure, would improve our ability to detect potential data
inaccuracies and systemic reporting issues.
[[Page 41964]]
Under this proposed validation policy, all hospitals selected for
validation purposes would receive a total of five medical record
requests for complete supporting medical record documentation from CMS
or its designated contractor: four quarterly requests containing
randomly selected chart-abstracted cases and one annual request
containing randomly selected eCQM cases. We refer readers to Sec.
482.24(c) for a definition of what is expected in a medical record
submitted for validation.
4. Timing and Electronic File Submission for Medical Records Requests
a. Chart-Abstracted Measures
We refer readers to the CY 2022 OPPS/ASC final rule with comment
period (86 FR 63870 through 63871) and Sec. 419.46(f)(1) for
additional information on the use of electronic file submissions for
chart-abstracted measure medical records requests and the time period
for data validation, including the deadlines for submitting medical
records to CMS. We are not proposing any changes affecting the time
period or deadlines for electronic file submission for chart-abstracted
measures under our validation policy.
b. Electronic Clinical Quality Measures
Under this proposal, we would apply the same electronic file
submissions policy to eCQM medical records requests in alignment with
the chart-abstracted measures that hospitals are already familiar with.
Upon written request by CMS or its contractor, a hospital would be
required to submit portable document format (PDF) copies of medical
records using direct electronic file submission via a CMS-approved
secure file transmission process (currently, Unified File Management
[UFM]/Managed File Transfer [MFT]). A hospital must submit the
supporting medical record documentation to CMS or its contractor within
30 days of the date on the written request. We would continue to
reimburse hospitals at $3.00 per chart, consistent with current
reimbursement for electronic submissions of charts.
5. Submission Quarters
a. Background
Currently, hospitals selected for chart-abstracted validation are
required to submit data from 2 years prior to the applicable CY payment
determination year, consisting of validation quarter 1 (January 1
through March 31), validation quarter 2 (April 1 through June 30),
validation quarter 3 (July 1 through September 30), and validation
quarter 4 (October 1 through December 31) (80 FR 70524).
Under our proposed validation policy, hospitals selected for eCQM
validation for a given payment determination year would be required to
submit data from the calendar year that is 3 years prior to the
applicable payment determination year because eCQM data are reported
annually rather than quarterly. A 3-year cycle allows sufficient time
to complete sampling, medical record abstraction, confidence interval
calculation, educational reviews, and quality assurance prior to
payment determination.
To support the transition to a combined validation process for both
chart-abstracted measures and eCQMs, we would shift the payment impact
of validation from 2 years after the reporting period to 3 years after
the reporting period. During this transition, the validation results
for CY 2027 chart-abstracted data would affect both the CY 2029 and the
CY 2030 payment determination, as detailed below.
b. Validation Affecting the CY 2029 Payment Determination
To maintain the continuity of annual validation activities while we
shift to a 3-year cycle, CY 2027 chart-abstracted data would continue
to be used for the CY 2029 payment determination under the existing 2-
year cycle in accordance with existing policy for chart-abstracted
measure validation. In other words, there will be no change from our
current policy for the CY 2029 payment determination.
c. Validation Affecting the CY 2030 Payment Determination
For the CY 2030 payment determination, CY 2027 chart-abstracted
data would be used again in combination with CY 2027 eCQM data for
validation. That is, validation results for CY 2027 chart-abstracted
data would impact both the CY 2029 and CY 2030 payment determinations.
Table 74 illustrates our proposed changes, including a transition year,
to align the validation for chart-abstracted and eCQM data.
[[Page 41965]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.112
For the transition year affecting the CY 2030 payment
determination, we propose a one-time modification of the hospital
selection and targeting methodology such that hospitals selected for
validation based on CY 2027 data, affecting the CY 2029 payment
determination, would not be selected again, either randomly or through
targeted selection, for validation of the same data affecting the CY
2030 payment determination. For example, we would not automatically
reselect a hospital that failed to meet the validation requirements for
the CY 2029 payment determination under the targeting criterion at
Sec. 419.46(f)(3)(i) for validation affecting the CY 2030 payment
determination. This approach is intended to eliminate the potential
burden to hospitals that would have gone through the validation process
for the CY 2029 payment determination while allowing validation
activities to continue during the transition year.
d. Validation Affecting the CY 2031 Payment Determination and for
Subsequent Years
As seen in Table 74, following the transition period, we would
adopt a 3-year validation cycle, under which validation results for an
annual reporting period would be applied to the applicable payment
determination 3 years later. That is, beginning with CY 2028 chart-
abstracted and eCQM data, validation results would impact the payment
determination 3 years following the reporting period, which for CY 2028
reporting period data is the CY 2031 payment determination. Following
the transition year, we would proceed with validation policies under
the 3-year validation cycle, including the use of aligned data
submission periods and the application of established hospital
selection and targeting methodologies. We believe aligning the quarters
of submission data used for both chart-abstracted measures and eCQM
validation would allow hospitals selected for validation to more easily
track and meet validation requirements.
6. Scoring Method
a. Chart-Abstracted Measures
In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72103
through 72106), we finalized the calculation of validation scores under
the Hospital Outpatient Quality Reporting Program using the upper bound
of a 90 percent two-sided confidence interval with a 75 percent lower
bound threshold level. We are not proposing any changes to this
threshold.
b. Electronic Clinical Quality Measures
We propose that eCQM validation scores would be determined using
the same methodology currently used to score chart-abstracted measure
validation, such that eCQM validation scoring would be based on the
accuracy of eCQM data (the extent to which data abstracted for
validation matches the data submitted to CMS), beginning with CY 2027
eCQM data affecting the CY 2030 payment determination. Consistent with
the data validation scoring threshold currently applied to chart-
abstracted measures and codified at Sec. 419.46(f)(2), a minimum score
of 75 percent accuracy would be required for the hospital to pass the
eCQM validation requirement. Applying an upper bound of a 90 percent
two-sided confidence interval with a 75 percent lower bound threshold
level is appropriate because it accounts for sampling variability,
reflects a reasonable standard of data accuracy, and aligns with
existing validation thresholds for chart-abstracted measures while
allowing for legitimate differences in hospital data implementation.
To incentivize the timely and complete submission of requested
medical records, we propose that any missing medical records would be
treated as mismatches, beginning with the validation of the CY 2027
eCQM data affecting the CY 2030 payment determination and for
subsequent years. Because mismatches would count against the agreement
rate, treating any missing medical records as mismatches would
encourage submission of complete medical records and disincentivize
selective medical record submissions. We note that this approach is
consistent with our existing policy for chart-abstracted measure
validation, under which missing records are treated as mismatches.
Using this approach, at the end of each calendar year, we would
compute an eCQM confidence interval using the results of all four
quarters to determine the final eCQM validation score. Hospitals'
submitted eCQM data and the
[[Page 41966]]
submitted medical records would be used to compute an agreement rate
and the associated confidence interval around the score. The upper
bound of the 90 percent two-sided confidence interval would be used as
the final eCQM validation score for the selected hospital. We would
then compare this final validation score to the 75 percent accuracy
threshold described below to determine whether the hospital meets the
eCQM validation requirement. Data validation scoring is at the measure
level, not the individual data element level. If CMS or its contractor
does not reach the same outcome as the hospital's original submission,
then the case may be considered a mismatch. We selected 75 percent as
the threshold for the validation score because we believe this level is
reasonable to reflect accurate performance, but still realistic for
hospitals to achieve. It also allows for legitimate differences in how
hospitals implement measures and map their data. We note we adopted the
same eCQM scoring method for the Hospital Inpatient Quality Reporting
Program (89 FR 69574 through 69577).
c. Annual Payment Update
Beginning with the validation of CY 2027 data affecting the CY 2030
payment determination, hospitals would receive two validation scores:
one for chart-abstracted measure data and one for eCQM data. As we
finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR
66873 through 66874), a hospital that does not meet validation
requirements will not receive the full annual payment update under the
OPPS. Therefore, if a hospital does not meet either chart-abstracted
validation requirements or eCQM validation requirements, we propose the
hospital would not receive the full OPPS annual payment update. In
other words, to be eligible for a full annual payment update, provided
all other Hospital Outpatient Quality Reporting Program requirements
are met, a hospital selected for validation would need to attain at
least a 75 percent validation score for chart-abstracted measure
validation and at least a 75 percent validation score for eCQM data
validation. We also propose to codify this policy by updating the
regulatory text at Sec. 419.46(f)(2).
7. Educational Review Process
a. Chart-Abstracted Measures
We refer readers to the CY 2018 OPPS/ASC final rule with comment
period (82 FR 59441 through 59443) and the CY 2021 OPPS/ASC final rule
with comment period (85 FR 86185) where we finalized and codified a
policy to formalize the Educational Review Process for Chart-Abstracted
Measures, including Validation Score Review and Correction. We also
refer readers to Sec. 419.46(f)(4) for our policies regarding the
educational review process, including validation score review and
correction, for chart-abstracted measures. As described in the CY 2018
OPPS/ASC final rule with comment period (82 FR 59441 through 59443),
for CY 2020 and subsequent years, if a hospital requests an educational
review for any of the first three quarters of validation and this
review yields incorrect CMS validation results for chart-abstracted
measures, the corrected quarterly score will be used to compute the
final confidence interval.
We propose to revise our policy to allow the results of educational
reviews for all four quarters of chart-abstracted measure validation to
be reflected in the final validation score prior to the calculation of
the confidence interval, beginning with the CY 2030 payment
determination. Under our current policy, due to time constraints,
educational reviews for the final quarter of data are not completed in
time to affect validation results, and hospitals must use the
reconsideration process. Under the proposal to extend the validation
timeline from a 2-year cycle to a 3-year cycle, sufficient time would
become available to complete educational reviews for all four quarters.
As a result, any corrected scores from educational reviews across all
quarters would be used in calculating the final confidence interval.
b. Electronic Clinical Quality Measures
We propose extending the educational review process established for
chart-abstracted measure validation to eCQM validation beginning with
validation affecting the CY 2030 payment determination (that is,
starting with validated data from CY 2027). We believe that expanding
the educational review process to include eCQMs would allow hospitals
to better understand the processes and data for eCQM validation.
Hospitals may request an educational review if they believe they
have been scored incorrectly or if they have questions about their
validation of eCQMs. A hospital would have 30 calendar days following
receipt of the validation results to contact CMS' Validation Support
Contractor requesting a written explanation of its performance. Because
hospitals receive eCQM validation results on an annual basis, they
would have the opportunity to request an educational review once
annually. Upon receipt of an educational review request, we would
review the requested data elements and written justifications provided
by the hospital. We would also provide the results of the eCQM
validation educational review to the requesting hospital, including our
findings of whether the scores were correct or incorrect, through a
CMS-approved secure file transmission process (currently, UFM/MFT). If
the results of a validation educational review determine that the
original validation score was incorrect, the corrected score would be
used to compute the final validation score and confidence interval at
the end of each calendar year.
We propose to codify this policy by revising Sec. 419.46(f)(4) to
include eCQMs. As proposed, Sec. 419.46(f)(4) would indicate that
hospitals selected for validation may request an educational review
within 30 calendar days from the date validation results are made
available. Under the proposed revisions to Sec. 419.46(f)(4), if the
results of an educational review indicate one or more measures were
incorrectly scored, the corrected validation score will be used to
compute the final validation score used for payment determination.
Refer to section XXIV.A. of this proposed rule for more information on
the burden estimates associated with these proposals.
We invite public comment on the proposed changes regarding data
validation in the Hospital Outpatient Quality Reporting Program,
including incorporating eCQM validation into the existing validation
process for chart-abstracted measures, reducing the validation
selection pool from 500 to up to 400 hospitals, updating the number of
cases for chart-abstracted and eCQM validation, transitioning from a 2-
year to a 3-year cycle between the reporting period and the payment
determination year, establishing the eCQM validation scoring method,
and expanding the educational review process to include eCQM
validation.
E. Proposed Updates to the Hospital Outpatient Quality Reporting
Program Validation Reconsiderations and Appeals Procedures
1. Reconsiderations and Appeals
We refer readers to Sec. 419.46(g) for our reconsideration and
appeals procedures. Under our existing requirements at Sec.
419.46(g)(2)(vii), hospitals submitting reconsideration requests are
required to submit a copy of all materials that the hospital submitted
to comply with the requirements of the affected payment determination
year. In the CY 2022 OPPS/ASC final rule with comment
[[Page 41967]]
period, we finalized a requirement for hospitals to submit only
electronic files rather than paper copies of medical records for
validation of chart-abstracted measures, beginning with validation
affecting the CY 2024 payment determination and for subsequent years
(86 FR 63871).
2. Proposed Removal of the Re-Submission of Supporting Medical
Documentation for Validation Reconsideration Requests
With the transition to all electronic submission of copies of
medical records for Hospital Outpatient Quality Reporting Program data
validation, the current reconsideration requirement to resubmit records
used for validation results in a validation-related reconsideration
request is no longer necessary and creates duplicative files and
administrative burden. We note the Hospital Inpatient Quality Reporting
Program finalized a policy in the FY 2025 IPPS/LTCH PPS final rule with
comment period to remove the requirement to resubmit medical records as
part of their request for reconsideration of a validation determination
beginning with CY 2023 discharges affecting the FY 2026 payment
determination (89 FR 69577).
We propose to revise existing Sec. 419.46(g)(2)(vii) and (viii) of
our regulations to no longer require hospitals to resubmit materials
previously submitted to CMS for validation reconsideration requests,
unless specifically requested by CMS, and to require only that the
hospital provide any evidence supporting its validation reconsideration
request. Under this proposal, hospitals that need to submit a revised
medical record may still do so, but those hospitals that would
otherwise be submitting copies of previously submitted records would no
longer be required to submit them. Removing resubmission of medical
documentation as a requirement for validation reconsideration would
reduce administrative burden for most hospitals that do not have
revised records to submit, as well as for CMS to collect and track
medical records that are already available. Please refer to section
XXIV.A.5. of this proposed rule for more information on the burden
estimates associated with this proposed removal.
We invite public comment on this proposal to remove the requirement
for hospitals to resubmit medical documentation as part of their
request for reconsideration of validation, beginning with data from the
CY 2026 reporting period affecting the CY 2028 payment determination.
We also propose to codify this policy by updating the regulatory text
at Sec. 419.46(g).
F. Payment Reduction for Hospitals That Fail To Meet the Hospital
Outpatient Quality Reporting (OQR) Program Requirements for the CY 2027
Payment Determination
1. Background
Section 1833(t)(17) of the Act, which applies to subsection (d)
hospitals (as defined under section 1886(d)(1)(B) of the Act), states
that hospitals that fail to report data required to be submitted on
measures selected by the Secretary, in the form and manner, and at a
time, specified by the Secretary will incur a 2.0-percentage point
reduction to their OPD fee schedule increase factor; that is, the
annual payment update factor. Section 1833(t)(17)(A)(ii) of the Act
specifies that any reduction applies only to the payment year involved
and will not be taken into account in computing the applicable OPD fee
schedule increase factor for a subsequent year.
The application of a reduced OPD fee schedule increase factor
results in reduced national unadjusted payment rates that apply to
certain outpatient items and services provided by hospitals that are
required to report outpatient quality data in order to receive the full
payment update factor and that fail to meet the Hospital OQR Program
requirements. Hospitals that meet the reporting requirements receive
the full OPPS payment update without the reduction. For a more detailed
discussion of how this payment reduction was initially implemented, we
refer readers to the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68769 through 68772).
The national unadjusted payment rates for many services paid under
the OPPS equal the product of the OPPS conversion factor and the scaled
relative payment weight for the APC to which the service is assigned.
The OPPS conversion factor, which is updated annually by the OPD fee
schedule increase factor, is used to calculate the OPPS payment rate
for services with the following status indicators (listed in Addendum B
to this proposed rule, which is available via the internet on the CMS
website): ``J1'', ``J2'', ``P'', ``Q1'', ``Q2'', ``Q3'', ``R'', ``S'',
``T'', ``V'', or ``U''. Payment for all services assigned to these
status indicators will be subject to the reduction of the national
unadjusted payment rates for hospitals that fail to meet Hospital OQR
Program requirements, with the exception of services assigned to New
Technology APCs with assigned status indicator ``S'' or ``T''. We refer
readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR
68770 through 68771) for a discussion of this policy. In the CY 2017
OPPS/ASC final rule with comment period (81 FR 79796), we clarified
that the reporting ratio does not apply to codes with status indicator
``Q4'' because services and procedures coded with status indicator
``Q4'' are either packaged or paid through the Clinical Laboratory Fee
Schedule and are never paid separately through the OPPS.
The OPD fee schedule increase factor is an input into the OPPS
conversion factor, which is used to calculate OPPS payment rates. To
reduce the OPD fee schedule increase factor for hospitals that fail to
meet reporting requirements, we calculate two conversion factors--a
full market basket conversion factor (that is, the full conversion
factor), and a reduced market basket conversion factor (that is, the
reduced conversion factor). We then calculate a reduction ratio by
dividing the reduced conversion factor by the full conversion factor.
We refer to this reduction ratio as the ``reporting ratio'' to indicate
that it applies to payment for hospitals that fail to meet their
reporting requirements. Applying this reporting ratio to the OPPS
payment amounts results in reduced national unadjusted payment rates
that are mathematically equivalent to the reduced national unadjusted
payment rates that would result if we multiplied the scaled OPPS
relative payment weights by the reduced conversion factor. For example,
to determine the reduced national unadjusted payment rates that applied
to hospitals that failed to meet their quality reporting requirements
for the CY 2010 OPPS/ASC final rule with comment period, we multiplied
the final full national unadjusted payment rate found in Addendum B of
the CY 2010 OPPS/ASC final rule with comment period by the CY 2010 OPPS
final rule with comment period reporting ratio of 0.980 (74 FR 60642).
We note that the only difference in the calculation for the full
conversion factor and the calculation for the reduced conversion factor
is that the full conversion factor uses the full OPD update, and the
reduced conversion factor uses the reduced OPD update. The baseline
OPPS conversion factor calculation is the same since all other
adjustments would be applied to both conversion factor calculations.
Therefore, our standard approach of calculating the reporting ratio as
described earlier in this section is equivalent to dividing the reduced
OPD
[[Page 41968]]
update factor by that of the full OPD update factor. In other words:
Full Conversion Factor = Baseline OPPS conversion factor * (1 + OPD
update factor)
Reduced Conversion Factor = Baseline OPPS conversion factor * (1 + OPD
update factor-0.02)
Reporting Ratio = Reduced Conversion Factor/Full Conversion Factor
Which is equivalent to:
Reporting Ratio = (1 + OPD Update factor-0.02)/(1 + OPD update factor)
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771
through 68772), we established a policy that the Medicare beneficiary's
minimum unadjusted copayment and national unadjusted copayment for a
service to which a reduced national unadjusted payment rate applies
would each equal the product of the reporting ratio and the national
unadjusted copayment or the minimum unadjusted copayment, as
applicable, for the service. Under this policy, we apply the reporting
ratio to both the minimum unadjusted copayment and national unadjusted
copayment for services provided by hospitals that receive the payment
reduction for failure to meet the Hospital OQR Program reporting
requirements. This application of the reporting ratio to the national
unadjusted and minimum unadjusted copayments is calculated according to
Sec. 419.41 of our regulations, prior to any adjustment for a
hospital's failure to meet the quality reporting standards according to
Sec. 419.43(h). Beneficiaries and secondary payers thereby share in
the reduction of payments to these hospitals.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68772), we established the policy that all other applicable adjustments
to the OPPS national unadjusted payment rates apply when the OPD fee
schedule increase factor is reduced for hospitals that fail to meet the
requirements of the Hospital OQR Program. For example, the following
standard adjustments apply to the reduced national unadjusted payment
rates: the wage index adjustment, the multiple procedure adjustment,
the interrupted procedure adjustment, the rural sole community hospital
adjustment, and the adjustment for devices furnished with full or
partial credit or without cost. Similarly, OPPS outlier payments made
for high cost and complex procedures will continue to be made when
outlier criteria are met. For hospitals that fail to meet the quality
data reporting requirements, the hospitals' costs are compared to the
reduced payments for purposes of outlier eligibility and payment
calculation. We established this policy in the OPPS beginning in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60642). For a
complete discussion of the OPPS outlier calculation and eligibility
criteria, we refer readers to section II.G. of the CY 2023 OPPS/ASC
proposed rule (87 FR 44533 through 44534).
2. Proposed Reporting Ratio Application and Associated Adjustment
Policy for CY 2027
We propose to continue our established policy of applying the
reduction of the OPD fee schedule increase factor through the use of a
reporting ratio for those hospitals that fail to meet the Hospital OQR
Program requirements for the full CY 2027 annual payment update factor.
For the CY 2027 OPPS/ASC proposed rule, the proposed reporting ratio is
0.9805, which, when multiplied by the proposed full conversion factor
of $102.004, equals a proposed conversion factor for hospitals that
fail to meet the requirements of the Hospital OQR Program (that is, the
reduced conversion factor) of $100.015. We propose to continue to apply
the reporting ratio to all services calculated using the OPPS
conversion factor. We propose to continue to apply the reporting ratio,
when applicable, to all HCPCS codes to which we have proposed status
indicator assignments of ``J1,'' ``J2,'' ``P,'' ``Q1,'' ``Q2,'' ``Q3,''
``R,'' ``S,'' ``T,'' ``V,'' and ``U'' (other than New Technology APCs
to which we have proposed status indicator assignments of ``S'' and
``T''). We propose to continue to exclude services paid under New
Technology APCs. We propose to continue to apply the reporting ratio to
the national unadjusted payment rates and the minimum unadjusted and
national unadjusted copayment rates of all applicable services for
those hospitals that fail to meet the Hospital OQR Program reporting
requirements. We also propose to continue to apply all other applicable
standard adjustments to the OPPS national unadjusted payment rates for
hospitals that fail to meet the requirements of the Hospital OQR
Program. Similarly, we propose to continue to calculate OPPS outlier
eligibility and outlier payment based on the reduced payment rates for
those hospitals that fail to meet the reporting requirements. In
addition to our proposal to implement the policy through the use of a
reporting ratio, we propose to continue to calculate the reporting
ratio to four decimals.
XVI. Rural Emergency Hospital (REH) Quality Reporting Program
The Rural Emergency Hospital (REH) Quality Reporting Program,
implemented under section 1861(kkk)(7) of the Act, ensures transparency
and quality for rural emergency hospitals (REHs), defined at section
1861(kkk)(2) of the Act. We refer readers to the CY 2024 OPPS/ASC final
rule with comment period (88 FR 82046 through 82047) for a detailed
discussion of the history of the REH Quality Reporting Program. The REH
Quality Reporting Program requirements are codified at 42 CFR 419.95.
We also refer readers to the CMS QualityNet REH Quality Reporting
Program website at https://qualitynet.cms.gov/reh/rehqr for current
program requirements and measure specifications. We are not proposing
any changes to the REH Quality Reporting Program in this proposed rule.
XVII. Ambulatory Surgical Center Quality Reporting Program
A. Background
The Ambulatory Surgical Center (ASC) Quality Reporting Program
promotes transparency regarding the quality of care provided at ASCs.
Section 1833(i)(7)(A) of the Act authorizes the Secretary to reduce any
annual increase under the revised ambulatory surgical center (ASC)
payment system by 2.0 percentage points for such year that an ASC fails
to submit required data on quality measures specified by the Secretary
in accordance with section 1833(i)(7)(B) of the Act. We refer readers
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492
through 74494) for a detailed discussion of the statutory authority of
the ASC Quality Reporting Program. We have codified certain ASC Quality
Reporting Program requirements at 42 CFR part 416, subpart H
(Sec. Sec. 416.300 through 416.330). We also refer readers to the CMS
website at https://www.cms.gov/medicare/quality/initiatives/asc-quality-reporting for general background on the ASC Quality Reporting
Program and to the CMS QualityNet ASC Quality Reporting Program website
at https://qualitynet.cms.gov/asc for current program requirements and
measure specifications.
B. ASC Quality Reporting Program Measure Set
We refer readers to section XIV. of this proposed rule for a cross-
program proposal to remove the Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk Patients
[[Page 41969]]
measure from the ASC Quality Reporting and Hospital Outpatient Quality
Reporting Programs beginning with the CY 2027 reporting period/CY 2029
payment determination. We are not proposing any other changes to the
previously finalized ASC Quality Reporting Program policies in this
proposed rule.
Table 75 summarizes the previously finalized ASC Quality Reporting
Program measure set for the CY 2028 to CY 2032 payment determinations.
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C. Request for Information on Stratification of the All-Cause Transfer/
Admission Measure
We previously adopted the All-Cause Transfer/Admission measure in
the ASC Quality Reporting Program in the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74499). The All-Cause Transfer/Admission
measure is an outcome measure that assesses the rate of patients
receiving care in an ASC who require transfer to a hospital or
admission to a hospital upon discharge from the ASC. Currently, the
measure does not distinguish the phase of care in which a transfer
occurs (pre-procedure, intra-procedure, or post-procedure).\171\
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\171\ Partnership for Quality Measurement. All-Cause Hospital
Transfer/Admission. Available at https://p4qm.org/measures/0265.
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As reported in MedPAC's 2025 Report to Congress, extracapsular
cataract removal with intraocular lens insertion was the most common
Medicare Fee-for-Service procedure performed by ASCs in 2023,
accounting for 19 percent of all ASC Fee-For-Service volume. In
addition, a substantial number of ASCs that bill Medicare specialize in
a single clinical area, with gastroenterology and ophthalmology among
the most common specialties providing services to Medicare
beneficiaries.\172\ A recent retrospective study which examined the
causes and timing of direct hospital transfers from an ophthalmology-
specific surgery center over a 2-year period reported that about 77
percent of hospital transfers were associated with concerns identified
prior to the induction of anesthesia, including transfers identified in
the preoperative area or upon connection to monitoring equipment in the
operating room.\173\ Nearly 23 percent of these transfers were directly
related to anesthesia or the surgical procedure, including events
occurring during induction or intraoperatively. These findings suggest
that the majority of hospital transfers from ophthalmology-specific
ASCs could be occurring preoperatively rather than procedural
complications. While many of these events occur prior to anesthesia
induction, they are often identified during anesthesia-led pre-
procedure evaluation, reflecting important safety checks in patient
assessment.\174\
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\172\ MedPac. (2025). Report to the Congress: Medicare Payment
Policy-Ambulatory Surgical Center Services: Status Report. Available
at https://www.medpac.gov/wp-content/uploads/2025/03/Mar25_Ch10_MedPAC_Report_To_Congress_SEC.pdf.
\173\ Stange, N. R., & Rauen, M. P. (2025). Evaluating ASC-4
transfer rates in cataract surgery: insights into timing and causes
of hospital transfers. Journal of cataract and refractive surgery,
51(5), 376-381. https://doi.org/10.1097/j.jcrs.0000000000001613.
\174\ Stange, N. R., & Rauen, M. P. (2025). Evaluating ASC-4
transfer rates in cataract surgery: insights into timing and causes
of hospital transfers. Journal of cataract and refractive surgery,
51(5), 376-381. https://doi.org/10.1097/j.jcrs.0000000000001613.
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Based on these findings and discussions with interested parties, we
are considering whether adding a phase of care stratification relative
to the surgical encounter (for example, pre-procedure, intra-procedure,
and post-procedure) could improve the interpretability and usefulness
of the All-Cause Transfer/Admission measure in the ASC Quality
Reporting Program. The current measure reports an overall rate of
transfers/admissions and does not specify when during the ASC encounter
the need for transfer/admission is identified. Stratification by phase
of care would improve attribution and interpretability across the
diverse range of ASC services, including non-operative procedures such
as those associated with pain management, for hospital transfers/
admissions associated with ASC care.
It is important to measure and monitor transfers/admissions that
occur pre-procedure, intra-procedure, and post-procedure, as each
stratum could provide insight into care processes between facilities.
Pre-procedure events may reflect the effectiveness of pre-operative
evaluation, patient selection, and escalation or transfer processes,
while intraoperative and post-procedure events may be more closely
associated with anesthesia administration, the procedure itself, and
immediate recovery, including complications that arise during or after
the ASC encounter. A phase of care stratification may also provide more
comprehensive information to support beneficiary decision-making and
patient safety monitoring.
We seek public comment on clinically meaningful and operationally
feasible approaches for incorporating a phase of care stratification
for the All-Cause Transfer/Admission measure. Specifically, we seek
input on potential stratification frameworks, including appropriate
time anchors, their operational definitions, and the corresponding time
windows that could be used to define each stratification category.
D. Form, Manner, and Timing of Data Submission
We refer readers to prior OPPS/ASC final rules with comment period
and Sec. 416.310 for information regarding the data submission and
reporting requirements for claims-based,\175\ survey-based,\176\ web-
based \177\ (that is, data submitted via a CMS-designated information
system), and patient-reported outcome-based performance
[[Page 41972]]
measures \178\ in the ASC Quality Reporting Program. We maintain
measure technical specification manuals (referred to as Specifications
Manuals) that can be found on the CMS website at https://qualitynet.cms.gov/asc/specifications-manuals.
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\175\ We refer readers to Sec. Sec. 416.310(a) and (b) and the
CY 2016 OPPS/ASC final rule with comment period (80 FR 70534 through
70536) for information regarding the claims-based measure data
submission and reporting requirements.
\176\ We refer readers to Sec. 416.310(e) and the CY 2022 OPPS/
ASC final rule with comment period (86 FR 63905 through 63909) for
information regarding the survey-based data submission and reporting
requirements.
\177\ We refer readers to Sec. 416.310(c)(1) and the CY 2025
OPPS/ASC final rule with comment period (89 FR 94435 and 94436) for
details regarding submission of web-based data via a CMS-designated
information system (currently the Hospital Quality Reporting (HQR)
system).
\178\ We refer readers to the CY 2024 OPPS/ASC final rule with
comment period (88 FR 82041 through 82045) for information regarding
the patient-reported outcome-based performance measure data
submission and reporting requirements.
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We are not proposing any changes to these policies in this proposed
rule.
E. Payment Reduction for ASCs That Fail To Meet the ASCQR Program
Requirements
1. Statutory Background
We refer readers to the CY 2012 OPPS/ASC final rule with comment
period (76 FR 74492 through 74493) for a detailed discussion of the
statutory background regarding payment reductions for ASCs that fail to
meet the ASCQR Program requirements.
2. Policy Regarding Reduction to the ASC Payment Rates for ASCs That
Fail To Meet the ASCQR Program Requirements for a Payment Determination
Year
The national unadjusted payment rates for many services paid under
the ASC payment system are equal to the product of the ASC conversion
factor and the scaled relative payment weight for the APC to which the
service is assigned. For CY 2027, the ASC conversion factor is equal to
the conversion factor calculated for the previous year updated by the
productivity-adjusted hospital market basket update factor. The
productivity adjustment is set forth in section 1833(i)(2)(D)(v) of the
Act. The productivity-adjusted hospital market basket update was the
annual update for the ASC payment system for a 5-year period (CY 2019
through CY 2023), which was extended an additional 2 years (through CY
2025) in the CY 2024 OPPS/ASC final rule with comment period (88 FR
81960). In the CY 2026 OPPS/ASC final rule with comment period (90 FR
53915), we extended the interim period an additional year (through CY
2026). As discussed in section XIII. of this proposed rule, we propose
to continue using the productivity-adjusted hospital market basket
update as the update factor for the ASC payment system for CY 2027.
Under the ASCQR Program, in accordance with section 1833(i)(7)(A) of
the Act and as discussed in the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68499), any annual increase in certain payment
rates under the ASC payment system shall be reduced by 2.0 percentage
points for ASCs that fail to meet the reporting requirements of the
ASCQR Program. This reduction applied beginning with the CY 2014
payment rates (77 FR 68500). For a complete discussion of the
calculation of the ASC conversion factor and our finalized proposal to
update the ASC payment rates using the inpatient hospital market basket
update for CYs 2019 through 2023, we refer readers to the CY 2019 OPPS/
ASC final rule with comment period (83 FR 59073 through 59080).
In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499
through 68500), in order to implement the requirement to reduce the
annual update for ASCs that fail to meet the ASCQR Program
requirements, we finalized the following policies: (1) to calculate a
full update conversion factor and an ASCQR Program reduced update
conversion factor; (2) to calculate reduced national unadjusted payment
rates using the ASCQR Program reduced update conversion factor that
would apply to ASCs that fail to meet their quality reporting
requirements for that calendar year payment determination; and (3) that
application of the 2.0 percentage point reduction to the annual update
may result in the update to the ASC payment system being less than zero
prior to the application of the productivity adjustment. The ASC
conversion factor is used to calculate the ASC payment rate for
services with the following payment indicators (listed in Addenda AA
and BB to this proposed rule, which are available via the internet on
the CMS website): ``A2'', ``D2'', ``G2'', ``P2'', ``R2'', and ``Z2'',
as well as the service portion of device-intensive procedures
identified by ``J8'' (77 FR 68500). We finalized our proposal that
payment for all services assigned the payment indicators listed would
be subject to the reduction of the national unadjusted payment rates
for applicable ASCs using the ASCQR Program reduced update conversion
factor (77 FR 68500).
The conversion factor is not used to calculate the ASC payment
rates for separately payable services that are assigned status
indicators other than payment indicators ``A2'', ``D2'', ``G2,''
``J8'', ``P2'', ``R2'', and ``Z2.'' These services include separately
payable drugs, biologicals, and radiopharmaceuticals, skin substitute
supplies, software-as-a-service codes, pass-through devices that are
contractor-priced, brachytherapy sources that are paid based on the
OPPS payment rates, and certain office-based procedures, radiology
services, and diagnostic tests where payment is based on the PFS
nonfacility PE RVU-based amount, and a few other specific services that
receive cost-based payment (77 FR 68500). As a result, we also
finalized our proposal that the ASC payment rates for these services
would not be reduced for failure to meet the ASCQR Program requirements
because the payment rates for these services are not calculated using
the ASC conversion factor and, therefore, are not affected by
reductions to the annual update (77 FR 68500).
Office-based surgical procedures (generally those performed more
than 50 percent of the time in physicians' offices) and separately paid
radiology services (excluding covered ancillary radiology services
involving certain nuclear medicine procedures or involving the use of
contrast agents) are paid at the lesser of the PFS nonfacility PE RVU-
based amounts or the amount calculated under the standard ASC
ratesetting methodology. Similarly, in the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66933 through 66934), we finalized our
proposal that payment for certain diagnostic test codes within the
medical range of CPT codes for which separate payment is allowed under
the OPPS will be at the lower of the PFS nonfacility PE RVU-based (or
technical component) amount or the rate calculated according to the
standard ASC ratesetting methodology when provided integral to covered
ASC surgical procedures. In the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68500), we finalized our proposal that the
standard ASC ratesetting methodology for this type of comparison would
use the ASC conversion factor that has been calculated using the full
ASC update adjusted for productivity. This is necessary so that the
resulting ASC payment indicator, based on the comparison, assigned to
these procedures or services is consistent for each HCPCS code,
regardless of whether payment is based on the full update conversion
factor or the reduced update conversion factor.
For ASCs that receive the reduced ASC payment for failure to meet
the ASCQR Program requirements, we have noted our belief that it is
both equitable and appropriate that a reduction in the payment for a
service should result in proportionately reduced coinsurance liability
for beneficiaries (77 FR 68500). Therefore, in the CY 2013 OPPS/ASC
final rule with comment period (77 FR 68500), we finalized our proposal
that the Medicare beneficiary's national unadjusted coinsurance for a
service to
[[Page 41973]]
which a reduced national unadjusted payment rate applies will be based
on the reduced national unadjusted payment rate.
In the CY 2013 OPPS/ASC final rule with comment period, we
finalized our proposal that all other applicable adjustments to the ASC
national unadjusted payment rates would apply in those cases when the
annual update is reduced for ASCs that fail to meet the requirements of
the ASCQR Program (77 FR 68500). For example, the following standard
adjustments would apply to the reduced national unadjusted payment
rates: the wage index adjustment; the multiple procedure adjustment;
the interrupted procedure adjustment; and the adjustment for devices
furnished with full or partial credit or without cost (77 FR 68500). We
believe that these adjustments continue to be equally applicable to
payment for ASCs that do not meet the ASCQR Program requirements (77 FR
68500).
In the CY 2015 through CY 2026 OPPS/ASC final rules with comment
period, we did not make any other changes to these policies. We propose
to continue applying these policies for the CY 2027 reporting period/CY
2029 payment determination and for subsequent years.
XVIII. Accrediting Organization (AO) Deeming Authority for the
Emergency Medical Treatment and Labor Act (EMTALA)
A. Background
The Emergency Medical Treatment and Labor Act (EMTALA) was enacted
in 1986 and codified as section 1867 of the Act (42 U.S.C. 1395dd) to
address concerns regarding the inappropriate transfer of, or refusal to
treat individuals with emergency medical conditions who are seeking
emergency department care, commonly referred to as ``patient dumping.''
EMTALA applies to hospitals that participate in Medicare and operate
emergency departments, including critical access hospitals (CAHs) and
rural emergency hospitals (REHs). For purposes of this discussion, the
term ``hospitals'' includes CAHs and REHs. To enroll and participate in
Medicare under section 1866(a)(1)(I) of the Act (42 U.S.C.
1395cc(a)(1)(I)), all such hospitals must agree to comply with EMTALA's
statutory and regulatory requirements.
Section 1867 of the Act establishes the three core obligations of
EMTALA. First, when an individual comes to a hospital's emergency
department and requests examination or treatment, the hospital must
provide an appropriate medical screening examination to determine
whether an emergency medical condition exists. Second, if the hospital
determines that the individual has an emergency medical condition, the
hospital must provide either necessary stabilizing treatment within its
capability or arrange for an appropriate transfer to another medical
facility. Third, hospitals with specialized capabilities or facilities
shall not refuse to accept appropriate transfers of individuals
requiring such capabilities or facilities if the receiving hospital has
the capacity to treat the individual. The statute also authorizes the
imposition by the Office of Inspector General (OIG) of civil monetary
penalties and, for physicians, exclusion from participation in Federal
health care programs for violations, and permits the Centers for
Medicare & Medicaid Services (CMS) to impose termination of a
hospital's Medicare provider agreement for non-compliance in accordance
with 42 CFR 489.53.
CMS has implemented EMTALA through regulations at 42 CFR 489.20 and
Sec. 489.24, which address two distinct categories of obligations.
Section 489.20(l), (m), (q) and (r) sets forth administrative
requirements, including to post EMTALA signage, maintain a central log
of individuals who present to the emergency department, retain transfer
records for 5 years, and maintain an on-call physician list. These
administrative obligations support transparency, documentation, and
accountability in emergency care operations. These requirements are
provider agreement commitments, and obligations hospitals accept as a
condition of Medicare participation under section 1866(a)(1)(I) of the
Act. They are distinct from the substantive individual care protections
at Sec. 489.24.
Section 489.24 implements the statute's substantive protection
requirements for individuals who present to the emergency department
and request examination or treatment, including detailed provisions
governing the provision of medical screening examinations, stabilizing
treatment, appropriate transfers, and receiving hospital
responsibilities. These requirements reflect the core protections
established by section 1867 of the Act and are directly enforceable by
CMS and/or the Office of Inspector General (OIG).
Enforcement of EMTALA has historically occurred through complaint
investigations conducted by State Survey Agencies (SAs) under CMS
direction. However, hospitals may also participate in Medicare via
accreditation from a CMS-approved accrediting organization (AO) under
section 1865(a)(1)(A) of the Act and implementing regulations at 42 CFR
part 488. Pursuant to Sec. 488.6, CMS ``deems'' a hospital to meet
Medicare requirements if it is accredited by an AO with a hospital
accreditation program approved by CMS. CMS will approve such
organizations if it finds that its standards and survey processes
provide reasonable assurance that accredited entities meet or exceed
applicable Medicare requirements. Hospitals accredited by such AOs are
deemed to meet the Medicare CoPs but are subject to CMS validation
surveys and complaint investigations in accordance with existing CMS
policies and procedures. More than 90 percent of Medicare-participating
hospitals (excluding CAHs and REHs) and more than 40 percent of CAHs,
independent of hospitals, are accredited by AOs with CMS-approved
accreditation programs. At this time, no REHs are deemed to meet
requirements through a CMS-approved accreditation program.
We propose that if an AO identifies EMTALA deficiencies at Sec.
489.24 during an accreditation or reaccreditation survey, the matter
would have to be referred to the CMS location for further review and
possible SA investigation. If an AO identifies EMTALA deficiencies at
Sec. 489.20(l), (m), (q) and (r), they would require the hospital or
CAH to submit an acceptable Plan of Correction (PoC) addressing how it
would come into compliance with the cited EMTALA requirements. If the
PoC is accepted and the hospital has returned to compliance, then no
further enforcement action would be taken. If the PoC is rejected, the
AO would be required to contact the CMS location for further review.
Under Sec. 488.5(a)(4)(ix), accreditation organizations are already
required to timely notify CMS if an AO survey identifies an ``immediate
jeopardy''; the proposed EMTALA requirement would augment the already-
existing reporting requirement. If a complaint alleging an EMTALA
violation is received by CMS (or the SA acting under an agreement
pursuant to section 1864 of the Act), it would be triaged to determine
its investigation priority level. The SA or CMS conducts an onsite
investigation and if a violation is identified, a deficiency is cited
and the survey findings documented. Currently the SA refers Sec.
489.24 violations to the OIG, which has independent statutory authority
to impose civil money penalties and potential exclusion of physicians
from Federal health care programs. CMS retains the authority to
terminate a hospital's Medicare provider agreement
[[Page 41974]]
for EMTALA noncompliance at Sec. 489.53.
In CY 2025, we issued 1,071 EMTALA citations for violations of the
two applicable regulations, underscoring the need for Medicare-
participating hospitals to comply with emergency care obligations. Of
these, 521 citations were issued under Sec. 489.20 requirements, 530
citations were issued under Sec. 489.24, the more expansive regulation
that governs the specific medical screening, stabilization, and
transfer requirements hospitals must fulfill when an individual
presents to a dedicated emergency department and requests examination
or treatment, and 20 citations were issued under both Sec. 489.20 and
Sec. 489.24. Administrative compliance under Sec. 489.20 appears to
be a leading indicator of overall EMTALA program integrity. A hospital
that cannot maintain accurate on-call logs, post required notices, or
retain transfer documentation is a hospital whose broader EMTALA
compliance posture warrants closer scrutiny. Incorporating a
structured, thorough review of Sec. 489.20 requirements into every
hospital survey is essential to fulfilling the protective intent of
EMTALA. The incorporation of the requirements at Sec. 489.20(l), (m),
(q) and (r) into the accreditation and reaccreditation survey process
mean that AOs would assess whether hospitals are maintaining the
documentation, recordkeeping, and operational safeguards that support
transparency and accountability in emergency care. Because these
obligations are record-based and procedural, we propose to review AO
survey processes as part of our hospital accreditation program approval
to check that EMTALA requirements are included within the existing
accreditation framework.
This proposal does not alter the existing framework governing CMS'
disclosure of accreditation survey findings. Under section 1865(b) of
the Act, the Secretary is prohibited from disclosing any accreditation
survey released to the Secretary and conducted by a CMS-approved AO,
unless the survey and information related to such a survey relates to
an enforcement action or to a home health agency or hospice program
survey. Accordingly, most accreditation survey reports submitted by
CMS-approved AOs are not subject to the same government disclosure
requirements as SA-conducted surveys. However, the statute does not
prohibit the AO itself or a client hospital from disclosing its own
survey findings.
It should be noted that findings related to potential Sec. 489.24
violations must be referred to CMS for SA investigation and those
findings would continue to follow existing public disclosure procedures
applicable to complaint-based SA investigations, which are separate
from AO accreditation survey reports. Section 1865(b) of the Act
explicitly permits the Secretary to publicly disclose AO surveys and
information related to them to the extent that such surveys and
information relate to an enforcement action taken by the Secretary.
Our regulations at 42 CFR part 488 govern AO approval and
oversight. The proposal described in this rule would operate within
section 1865 of the Act and part 488 statutory and regulatory
structures by integrating review of EMTALA's administrative
requirements into existing accreditation organization processes for
accrediting and re-accrediting hospitals, while preserving CMS and OIG
enforcement authority over EMTALA's core statutory protections under
section 1867 of the Act. We anticipate several benefits associated with
this proposal. First, integrating EMTALA administrative review into
accreditation and state certification surveys would minimize
operational disruption for hospitals. Rather than undergoing separate
review processes triggered by administrative deficiencies, hospitals
would address these requirements within the structured accreditation
survey framework.
Second, this policy may improve compliance consistency with the
documentation and operational safeguards at Sec. 489.20(l), (m), (q)
and (r). Because these requirements are record-based and procedural in
nature, they are well-suited to routine survey evaluation. Regular
review during accreditation surveys may enhance sustained compliance.
Third, this proposal would free SAs from needing to carry out
EMTALA-only initial investigations, and allow such SAs to concentrate
more resources on complaint-based investigations involving potential
violations of Sec. 489.24, including issues related to appropriate
medical screening examinations, stabilizing treatment, and appropriate
transfers. These investigations often require case-specific fact-
finding and clinical review, and preserving SA capacity for these
activities supports effective enforcement of EMTALA's core protections.
B. CMS Approval of Accreditation Organizations
We propose to clarify at Sec. 488.5(a) that an AO with CMS-
approved accrediting programs for hospitals under section 1865 of the
Act may assess compliance with the EMTALA-related administrative
requirements set forth at Sec. 489.20(l), (m), (q) and (r) as part of
their initial accreditation and reaccreditation surveys for those
provider types. This proposal is limited to AOs conducting initial
accreditation or reaccreditation surveys within the scope of their
existing CMS-approved accrediting programs. This amendment would
formally require CMS-approved AOs to incorporate review of these
specified EMTALA obligations into the existing accreditation framework,
while preserving CMS' direct enforcement authority over EMTALA's core
statutory protections.
Under this proposal, AOs would evaluate hospital compliance with
the administrative commitments codified at Sec. 489.20(l), (m), (q)
and (r), including requirements to post appropriate EMTALA signage;
maintain a central log of individuals who present to the emergency
department; retain transfer records for a period of 5 years; and
maintain an on-call physician list to ensure availability of specialty
services. These obligations are documentary and administrative in
nature, are well-established in regulation, and are conducive to
structured review within the context of accreditation and
reaccreditation surveys.
If an AO identifies noncompliance with any of the EMTALA
administrative requirements at Sec. 489.20(l), (m), (q) and (r), the
AO would cite the deficiency and address it through its established
procedures, consistent with the procedures it used to address other
Medicare deficiencies identified during accreditation and
reaccreditation surveys. This would include requiring corrective action
plans, monitoring compliance, and reporting findings to CMS in
accordance with existing oversight and validation protocols. CMS would
retain ultimate oversight responsibility and could take additional
action as appropriate under its survey and enforcement authorities.
Importantly, this proposal would not authorize AOs to assess or
enforce compliance with the EMTALA requirements at Sec. 489.24. CMS
and OIG would retain enforcement authority over those provisions,
including obligations related to medical screening examinations,
stabilizing treatment, appropriate transfers, and receiving hospital
responsibilities. If an AO
[[Page 41975]]
identified potential noncompliance with Sec. 489.24 during an initial
accreditation or reaccreditation survey, the AO would be required to
refer the matter to CMS for further review and possible SA
investigation, consistent with existing procedures outlined in the CMS
State Operations Manual (SOM) Chapter 5, ``Complaint Procedures.'' In
addition, the OIG would continue to exercise its statutory authority
under section 1867(d) of the Act to impose civil monetary penalties or
exclusion, as applicable. CMS would also retain authority to terminate
a hospital's Medicare provider agreement for EMTALA violations under
section 1866(b)(2) of the Act and Sec. 489.53.
We believe that the administrative requirements at Sec. 489.20(l),
(m), (q) and (r) are appropriate for evaluation during initial
accreditation and reaccreditation surveys. Integrating review of these
provisions into the AO survey process would promote more consistent
monitoring of established documentation and recordkeeping obligations,
reduce duplicative investigations triggered solely by administrative
concerns, and minimize disruption to hospital operations. At the same
time, this approach would allow SAs to concentrate their resources on
complaint-based investigations involving potential violations of Sec.
489.24.
To implement this proposal, we would revise Sec. 488.5(a) by
adding a new paragraph (21), laying out the AO's responsibility to
incorporate the EMTALA administrative requirements into its
accreditation standards and survey processes and to identify and
address noncompliance with those provisions within the deeming
framework.
C. Evaluation of Accreditation Authority Request
In Sec. 488.5, we propose to add a new paragraph (a)(21) to
integrate review of the EMTALA administrative requirements at Sec.
489.20(l), (m), (q) and (r) into the existing hospital accreditation
deeming framework.
Under this proposal, AOs with a CMS-approved accrediting program
for hospitals would be required to assess compliance with the Sec.
489.20(l), (m), (q) and (r) administrative requirements including
required signage display, maintenance of an emergency department log,
retention of transfer records, and maintenance of an on-call physician
list as part of their accreditation and reaccreditation surveys. AOs
would have to document the procedures used to assess compliance with
these requirements and would be required to cite and address any
identified deficiencies through their established accreditation
procedures, consistent with the procedures used to address Medicare
deficiencies identified during accreditation and reaccreditation
surveys.
XIX. Expansion of Botulinum Toxin Injection Codes for Hospital
Outpatient Department (OPD) Prior Authorization Process
A. Background
In the CY 2020 OPPS/ASC final rule with comment period, we
established a prior authorization process for certain hospital OPD
services (84 FR 61142, 61446 through 61456) using our authority under
section 1833(t)(2)(F) of the Act, which requires the Secretary to
develop ``a method for controlling unnecessary increases in the volume
of covered OPD services''.\179\ As part of the CY 2021 OPPS/ASC final
rule with comment period, we added two additional service categories to
the prior authorization process for certain hospital OPD services (85
FR 85866, 86236 through 86248). Through the CY 2023 OPPS/ASC final rule
with comment period, we added one more service category to the prior
authorization process for certain hospital OPD services (87 FR 71748,
72224 through 72233). The regulations governing the prior authorization
process for certain hospital OPD services are located in subpart I of
42 CFR part 419, specifically at Sec. Sec. 419.80 through 419.89, with
the specific service categories listed in Sec. 419.83.
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\179\ See also correction notice issued January 3, 2020 (85 FR
224).
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Section 419.83(a)(1) lists the specific service categories for
which prior authorization must be obtained for service dates on or
after July 1, 2020: blepharoplasty, botulinum toxin injections,
panniculectomy, rhinoplasty, and vein ablation. Section 419.83(a)(2)
lists two additional service categories for which prior authorization
must be obtained for service dates on or after July 1, 2021: cervical
fusion with disc removal, and implanted spinal neurostimulators.
Section 419.83(a)(3) lists Facet Joint Interventions as an additional
service category for which prior authorization must be obtained for
service dates on or after July 1, 2023. Section 419.83(b) states that
CMS will adopt the list of hospital outpatient department service
categories requiring prior authorization, and any updates or geographic
restrictions, through formal notice-and-comment rulemaking. Section
419.83(c) describes the circumstances under which CMS may elect to
exempt a provider from the prior authorization process, and Sec.
419.83(d) states that CMS may suspend the prior authorization process
requirements generally or for a particular service at any time by
issuing a notification on the CMS website.
B. Controlling Unnecessary Increases in the Volume of Covered OPD
Services
In accordance with Sec. 419.83(b), we propose to expand prior
authorization requirements to include additional Botulinum Toxin
Injection services. The eight additional Botulinum Toxin Injection
codes would be incorporated into the existing list at proposed revised
Sec. 419.83(a)(2) and would require prior authorization for services
provided on or after July 1, 2027. Additionally, to improve readability
and brevity, we propose to remove effective date language from the
regulatory text and revise the section numbering. The former paragraphs
(a)(1)(i) through (v), (a)(2)(i) and (ii), and (a)(3) would be
renumbered as (a)(1) through (8).
1. Expansion of Service Category
We propose that additional Botulinum Toxin Injection codes that
would require prior authorization beginning on July 1, 2027, are those
identified by the HCPCS codes in Table 76. For ease of reference, in
Table 77 we have included the 2020 Final List of Outpatient Services
that Require Prior Authorization for the five initial service
categories, the 2021 Final List of Outpatient Services that Require
Prior Authorization for two additional service categories, and the 2023
Final List of Outpatient Services that Require Prior Authorization for
one more service category. As we mentioned previously, we propose to
incorporate additional codes into the existing Botulinum Toxin
Injections service category that was established through the CY 2020
OPPS/ASC final rule with comment period.
2. Basis for Expanding Service Category
As part of our responsibility to protect the Medicare Trust Funds,
we routinely analyze data associated with all aspects of the Medicare
program. This responsibility includes monitoring the total amount or
types of claims submitted by providers; analyzing the claims data to
assess the growth in the number of claims submitted over time (for
example, monthly and annually, among other intervals); and conducting
comparisons of the data with other relevant data, such as the total
number of Medicare beneficiaries served by providers, to help ensure
the continued
[[Page 41976]]
appropriateness of payment for services furnished in the hospital OPD
setting.
In proposing the addition of these new services, we reviewed over
100 million OPD claims from 2017 through 2024. We determined that, on
average, the number of OPD claims submitted for payment to the Medicare
program decreased yearly by 1.1 percent. This reflects a decrease from
approximately 114 million OPD claims submitted for payment in 2017 to
approximately 104 million claims submitted for payment in 2024, with
claim counts rounded for reporting purposes. The 1.1 percent decrease
in overall OPD claims annually represents a decrease compared to the
0.6 percent increase identified in the CY 2023 OPPS/ASC proposed rule
when we looked at the period from 2012 through 2021. Our analysis also
showed that the Medicare allowed amount (the amount Medicare would pay
for services regardless of external variables, such as beneficiary plan
differences, deductibles, and appeals) for overall OPD claims increased
from approximately $65.4 million in 2017 to approximately $101.1
million in 2024, representing an average annualized growth rate of 3.5
percent. Again, this is a decrease when compared to the 4.2 percent
rate of growth identified in the CY 2023 OPPS/ASC proposed rule from
2012 through 2021. This analysis provides a benchmark regarding overall
Medicare spending trends for OPD services during the same period.
In contrast to overall OPD utilization trends, utilization of all
Botulinum Toxin Injection codes listed in Table 76 (2027 Proposed List
of Additional Outpatient Department Services That Require Prior
Authorization) has grown at a notably higher rate. This difference
suggests that these services are increasing faster than overall OPD
utilization, which warrants further review to ensure appropriate
utilization. Our analysis of Integrated Data Repository (IDR) \180\
data showed that claim volume for Botulinum Toxin Injection codes
listed in Table 76 increased by 42.8 percent overall between 2017 and
2024,\181\ based on a direct comparison of claims volume in 2017 and
2024, and there was a 4.6 percent average annualized growth rate
increase during the same time period. Specifically, claims volume for
the additional Botulinum Toxin Injection codes increased from
approximately 43,500 claims submitted for payment in 2017 to
approximately 62,103 claims submitted for payment in 2024. By
comparison, the overall OPD claims volume decreased by 8.3 percent
between 2017 and 2024,\182\ based on a direct comparison of total OPD
claims in 2017 and 2024, and by the 1.1 percent average annualized rate
decrease in OPD claims submitted for payment during the same time
period. We also recognize that additional FDA-approved indications for
botulinum toxin products during this period may have contributed to
some increase in utilization. However, the newly approved indications
represent a limited number of additional clinical uses and are not
expected to account for the full magnitude of the observed increase in
utilization, suggesting that other factors may also be contributing.
Accordingly, we do not believe that expanded indications alone fully
explain the magnitude of the observed growth, which suggests that other
factors may also be contributing to increased utilization.
Specifically, overall OPD claims decreased from approximately 114
million claims in 2017 to approximately 104 million claims in 2024. The
codes included in this proposal represent approximately $102 million in
annual Medicare payments and constitute a subset of overall botulinum
toxin utilization selected based on observed utilization volume, growth
trends, and program integrity considerations.
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\180\ The IDR is a high-volume data warehouse integrating
Medicare Parts A, B, C, and D, and durable medical equipment claims,
beneficiary and provider data sources, along with ancillary data
such as contract information and risk scores. Additional information
is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/IDR/index.html.
\181\ Using the formula (2024 claims - 2017 claims) / 2017
claims, this results in a 42.8 percent increase. This calculation is
separate from the 4.6 percent compound annual growth rate, which
reflects the annualized rate of growth during the same period.
\182\ Using the formula (2024 claims - 2017 claims) / 2017
claims, this results in an 8.3 percent decrease. This calculation is
separate from the 1.1 percent average annualized decrease, which
reflects the average year-over-year change during the same period.
---------------------------------------------------------------------------
When analyzing the data, we took the COVID-19 Public Health
Emergency (PHE) into consideration. As a result of the PHE, health care
use and spending dropped sharply due to cancellations of elective and
non-emergency care to increase hospital capacity and social distancing
measures to reduce the community spread of the coronavirus.
Consequently, the claims data for CY 2020 showed a notable decrease in
volume of services compared to the previous year. This decline in CY
2020 due to the PHE is reflected in the overall trend for the 2017
through 2024 period, including calculations of the 1.1 percent average
annualized decrease in OPD claims submitted for payment over the 2017
through 2024 period discussed previously, which is based on year-over-
year changes across all years in the period, including CY 2020.
Although a decline in utilization was observed in CY 2020, claims
volume for these services increased significantly in subsequent years
and exceeded levels that would have been reasonably expected based on
overall OPD utilization trends. Accordingly, we do not believe any
claim decreases resulting from the PHE affect our conclusion that there
were ``unnecessary increases in the volume of covered'' claims for
these services. This determination is based on several considerations,
including utilization growth for Botulinum Toxin Injection services
substantially exceeding overall OPD utilization trends during the same
period, despite overall OPD claims volume declining. In addition, the
increased utilization persisted over multiple years rather than
reflecting a temporary fluctuation. CMS also reviewed potential
explanations for the increase in utilization, including changes in
clinical need, coding changes, and other factors that could reasonably
explain sustained growth in service volume, but did not identify
sufficient evidence to account for the magnitude of the increase
observed. CMS further considered broader program integrity concerns,
including billing patterns and utilization trends that may indicate a
risk of unnecessary utilization.
Our conclusion that increases in volume for Botulinum Toxin
Injections are unnecessary is based not only on data specific to these
services but also on a comparison of the rate of increase for these
procedures to the overall trends for all OPD services. We believe that
comparing the utilization rate for specific services to the overall
Medicare OPD utilization trends is generally an appropriate method for
identifying unnecessary increases in volume, particularly when there
are no legitimate clinical or coding reasons for the changes. The
Medicare allowed amount analysis discussed above provides additional
information regarding broader Medicare spending trends during the same
period. As we have stated in the previous OPPS/ASC final rules with
comment period, we believe that prior authorization is an effective
mechanism to ensure Medicare beneficiaries receive medically necessary
care while protecting the Medicare Trust Funds from unnecessary
increases in the volume of covered OPD Services without adding onerous
new documentation requirements. Therefore,
[[Page 41977]]
we believe prior authorization for these additional codes will be an
effective method for controlling unnecessary increases in the volume of
these services and expect that it will reduce the instances in which
Medicare pays for services that are determined not to be medically
necessary. This will also serve as a tool within CMS' broad program
integrity strategy to address potential fraud, waste, and abuse. We
request comments on the addition of these new services, specifically on
the potential for unintended clinical consequences that may result from
this addition.183 184 185 186
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\183\ CPT 67911 (Correction of lid retraction) was removed on
January 7, 2022.
\184\ CPT 21235 (Obtaining ear cartilage for grafting) was
removed on June 10, 2020.
\185\ CPT codes 63685 (Insertion or replacement of spinal
neurostimulator pulse generator or receiver) and 63688 (Revision or
removal of implanted spinal neurostimulator pulse generator or
receiver) were temporarily removed from the list of OPD services
that require prior authorization, as finalized in the CY 2021 OPPS/
ASC final rule with comment period.
\186\ CPT codes 64492 (Injection(s), diagnostic or therapeutic
agent, paravertebral facet (zygapophyseal) joint (or nerves
innervating that joint) with image guidance (fluoroscopy or CT),
cervical or thoracic; third and any additional level(s)) and 64495
(Injection(s), diagnostic or therapeutic agent, paravertebral facet
(zygapophyseal) joint (or nerves innervating that joint) with image
guidance (fluoroscopy or CT), lumbar or sacral; third and any
additional level(s)) will be removed on August 16, 2024.
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BILLING CODE 4169-69-P
[GRAPHIC] [TIFF OMITTED] TP07JY26.115
[[Page 41978]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.116
[[Page 41979]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.117
[[Page 41980]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.118
BILLING CODE 4169-69-c
XX. Codification of Section 6225 of the Consolidated Appropriations
Act, 2026 for the Requirements for Provider-Based Status (Sec. Sec.
413.65 and 419.23)
A. Background
Section 1861(u) of the Act lists the types of facilities that are
regarded as providers of services but does not use or define the term
``provider-based''. Since the beginning of the Medicare program,
however, some providers, referred to as main providers, have functioned
as a single entity while owning and operating multiple subordinate
facilities that were treated as part of the main provider for Medicare
purposes (as related to, for instance, payment; certification;
coverage; and/or billing). With this treatment, compared to being
treated as a freestanding facility, provider-based facilities might
experience a number of advantages, including most notably, increased
payments from Medicare. Therefore, we have maintained that having clear
criteria for treating a facility as provider-based, as opposed to
operating as a freestanding facility, is important because failure to
properly distinguish between the two risks inaccurate program payments,
which can result in provider overpayments and increased beneficiary
coinsurance liability, with no commensurate benefit to the Medicare
program or its beneficiaries. Section 413.65 specifies the criteria for
treating a facility as provider-based and the requirements for a CMS
determination of provider-based status, including an attestation by the
provider that the facility meets the provider-based criteria. Provider
compliance with provider-based rules is mandatory, but since the
passage of the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act (BIPA) of 2000 (Pub. L. 106-554, App'x F), a provider
has needed to submit an attestation only if it wishes to obtain a CMS
determination of provider-based status.
B. Requirements at Section 6225 of the Consolidated Appropriations Act,
2026
Section 6225 of the Consolidated Appropriations Act, 2026 (CAA,
2026), Public Law 119-75, enacted on February 3, 2026, amends section
1833(t) of the Act by adding new paragraph (23). In brief, section 6225
of the CAA, 2026 will prohibit Medicare payments under the OPPS
beginning January 1, 2028, unless off-campus outpatient departments of
a provider bill using a separate National Provider Identifier (NPI) and
the main provider has submitted an attestation that the departments
meet the provisions at Sec. 413.65. As noted previously, although
provider compliance with provider-based rules is mandatory, payment had
not been conditioned on verification of such compliance.
Section 1833(t)(23)(A) of the Act, as added by section 6225 of the
CAA, 2026, specifies that no payment may be made under that subsection
(or under an applicable payment system pursuant to paragraph (21) of
section 1833(t) of the Act) for items and services furnished on or
after January 1, 2028, by an off-campus outpatient department of a
provider unless that department has obtained, and the items and
services are billed under, an NPI that is separate from the NPI of the
main provider; the main provider has submitted to the Secretary, during
the 2-year period
[[Page 41981]]
ending on the date such items and services are furnished, an initial
provider-based status attestation that the off-campus outpatient
department is compliant with the requirements described in section
Sec. 413.65 (or a successor regulation); and the main provider has
submitted a subsequent attestation within the timeframe specified by
the Secretary. The initial attestation may include an attestation
submitted in accordance with existing Sec. 413.65(b)(3) until the
Secretary establishes the new attestation submission process, which is
discussed further below.
New section 1833(t)(23)(B)(i) of the Act requires the Secretary,
through notice and comment rulemaking, to establish a process for each
provider with an off-campus outpatient department to submit an initial
and subsequent attestation, for the review of each such attestation and
for the determination, through site visits, remote audits, or other
means (as determined appropriate by the Secretary), whether each off-
campus outpatient department is compliant with the requirements
described in subparagraph (A). In addition, new section 1833(t)(23)(C)
of the Act defines an ``off-campus outpatient department of a
provider'' for purposes of paragraph (23) as a department of a provider
(as defined in Sec. 413.65) that is not located on the campus (also
defined in Sec. 413.65) of the main provider or is not within the
distance described in such definition of campus from a remote location
of a hospital (also defined in Sec. 413.65).
C. Proposed Modifications To Implement the Provisions of Section 6225
of the CAA, 2026
1. Proposed Modification to the Hospital OPPS Regulations
As discussed previously, section 1833(t)(23)(A) of the Act, as
added by section 6225, specifies that no payment may be made under the
OPPS for items and services furnished on or after January 1, 2028, by
an off-campus outpatient department of a provider unless that
department has obtained, and the items and services are billed under,
an NPI that is separate from the NPI of the main provider; the main
provider has submitted to the Secretary, during the 2-year period
ending on the date such items and services are furnished, an initial
provider-based status attestation that the off-campus outpatient
department is compliant with the requirements described in section
Sec. 413.65; and the main provider has submitted a subsequent
attestation within the timeframe specified by the Secretary. We are
proposing to add new section Sec. 419.23 to codify this requirement.
(We note the proposed changes to the provider-based regulations at
Sec. 413.65 to implement the attestation requirements are discussed in
the next section. We also note, as discussed in greater detail in the
next section, we propose that prior to submitting an attestation,
providers must obtain an NPI for each provider-based department.)
2. Proposed Modifications to the Provider-Based Regulations at Sec.
413.65
In this proposed rule, we propose changes to the provider-based
regulations at Sec. 413.65 to implement the new requirements in
section 6225 of the CAA, 2026. First, we propose the addition of a new
entry in the list of definitions in Sec. 413.65(a)(2) for an ``Off-
campus outpatient department of a provider''. CMS currently defines a
``department of a provider'' as a facility or organization that is
either created by, or acquired by, a main provider for the purpose of
furnishing health care services of the same type as those furnished by
the main provider under the name, ownership, and financial and
administrative control of the main provider. The definition of a
department of a provider does not include rural health clinics (RHCs)
or, except as specified in Sec. 413.65(n), Federally Qualified Health
Centers (FQHCs). In accordance with the statutory definition provided
in section 1833(t)(23)(C) of the Act, we propose to add a new
definition to paragraph (a)(2) describing an off-campus outpatient
department of a provider as a department of a provider that is not
located on the campus of the main provider or within 250 yards of a
remote location of a hospital. Under this proposed definition,
facilities or organizations that are not located on the campus of the
main provider would be considered off-campus for provider-based
purposes. This would include remote locations of a hospital, which are
defined in Sec. 413.65 as facilities that provide inpatient services
in a location off the campus of a main provider. Remote locations are
often referred to as secondary or subordinate ``multi-campus''
locations of a hospital, and in most cases operate in a substantially
similar manner as the main provider. Section 6225 of the CAA, 2026,
adding section 1833(t)(23)(C) to the Act, defines an ``off-campus
outpatient department of a provider'' as neither being on the campus of
the main provider, nor within the distance specified in the definition
of campus of a remote location of a hospital.
Section 413.65(e) includes additional requirements applicable to
off-campus facilities or organizations. These requirements apply to all
off-campus outpatient facilities, including those that are in close
proximity to (and often within the same building as) inpatient remote
locations. The implementation of section 603 of the Bipartisan Budget
Act of 2015 (Pub. L. 114-74) in the CY 2017 OPPS/ASC final rule with
comment period (81 FR 79699 through 79719) and interim final rule with
comment period (81 FR 79720 through 79729), however, excepted
outpatient departments located within 250 yards of a remote location
from payment policy implications for off-campus departments. Given the
definition of an ``off-campus outpatient department of a provider'' in
section 603 of the Bipartisan Budget Act of 2015 and section 6225 of
the CAA, 2026 separates outpatient departments located outside the
regulatorily-specified distance of a remote location of a hospital and
provider off-campus outpatient departments, we believe that it would be
appropriate to distinguish off-campus requirements from those for
hospital outpatient departments that are within 250 yards of a remote
location of the main provider. Therefore, we propose to revise Sec.
413.65(e) to specifically exclude outpatient departments located within
250 yards of a remote location of a hospital, and to revise Sec.
413.65(b)(3)(ii), (g)(1)(i), and (h) to append ``or within 250 yards of
a remote location of a hospital'' to the references of being on the
campus of the main provider. We believe these proposed conforming
changes will better clarify which facilities are affected by the new
legislation and will better align the current provider-based rules with
statutory provisions regarding the distinction between on- and off-
campus locations and services. In addition, we propose to make a
technical change to Sec. 413.65(g)(1)(i) and (ii) to revise ``treated
by Medicare'' to ``treated by CMS'' consistent with the other proposals
discussed in this section.
We propose to add a reference to the new mandatory attestation
requirements required by section 6225 of the CAA, 2026 and propose a
maximum 5-year timeframe for any subsequent attestation(s).
Specifically, we propose to add Sec. 413.65(b)(6) to state that, as of
January 1, 2028, a main provider must submit an initial attestation of
provider-based status for each of its off-campus outpatient departments
within the 2-year period prior to furnishing services, and subsequent
attestation(s) within a period not to exceed 5 years thereafter.
[[Page 41982]]
We anticipate addressing the subsequent attestation requirement in the
2028 rulemaking cycle; nonetheless, we welcome comments on the
subsequent attestation at this time. For all off-campus outpatient
departments providing services on or before January 1, 2028, we propose
initial attestations must be submitted between January 1, 2026 and
December 31, 2027, and off-campus outpatient departments that begin
providing services after January 1, 2028, must submit an attestation
within the 2 years prior to when the billed services are delivered.
Subsequent attestation(s) would be submitted at an interval to be
specified by CMS and not to exceed 5 years thereafter. In addition,
providers who submit initial attestations within the 2-year period
prior to January 1, 2028, would meet the attestation requirements of
section 6225 of the CAA, 2026, even if they have not received a
provider-based status determination from CMS by January 1, 2028. We
also seek comments on an initial mandatory attestation for provider
departments that received a determination of provider-based status
prior to January 1, 2026, and remain in compliance with all applicable
provisions of Sec. 413.65. For these departments, we are considering
having the authorized official attest with a letter to CMS with
evidence of CMS determination attached affirming its continued
compliance with Sec. 413.65. Indian Health Service and Tribal
facilities described in Sec. 413.65(m) and certain FQHCs and ``look
alikes'' described in Sec. 413.65(n) are considered to be in
compliance with provider-based requirements, and would not be subject
to review of provider-based status. We, therefore, propose to exclude
these facilities from the proposed attestation requirements. Other
parts of Sec. 413.65 not specifically addressed are outside the scope
of this rulemaking.
To implement section 6225 of the CAA, 2026, we propose to establish
a standardized attestation form for provider-based determinations,
which would replace the current Medicare Administrative Contractor
(MAC)-specific templates and ensure consistency across MACs. Through
this standardization, CMS proposes that main providers would submit the
attestation through a centralized electronic system, which we believe
would result in a reduction in administrative burden for providers and
a more efficient review process for MACs and CMS. Further, we
anticipate that standardization and centralized submission processes
may reduce unnecessary duplicative documentation burden while
continuing to support appropriate compliance review and program
integrity oversight. Until the standardized form and centralized
electronic system are finalized, providers may continue to submit
attestations in accordance with existing Sec. 413.65(b)(3)(ii) in
satisfaction of section 6225 of the CAA, 2026 to their servicing MAC.
To ensure providers have clarity on how to satisfy the mandatory
attestation requirement under section 6225 of the CAA, 2026, we propose
to require that providers submit attestations using the referenced CMS-
standardized attestation form. The attestation would be a list of
identifying information of the main provider and provider-based
department such as name, address, and NPI that includes a list of the
requirements at Sec. 413.65(d)(e), (g), and (h) with a certifying
statement affirming compliance to be signed by an authorized official
of the main provider. A draft is located at the following link for
comment: https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices/cms-1850-p. Under the
current attestation process, providers submit their attestations and
supporting documentation to their MAC, which performs a preliminary
review and forwards its recommendation to CMS for the initial
determination. We propose to modify this process so that CMS'
contractors, including MACs, conduct standardized review and validation
activities in support of initial determination regarding compliance
with Sec. 413.65, rather than requiring separate CMS review of each
attestation recommendation. To reflect this proposal, we propose to
revise Sec. 413.65(b)(3)(iii) to specify that CMS ``or its agents''
will send the provider written acknowledgment of receipt of the
attestation, review the attestation for completeness and consistency
with information in the possession of CMS ``or its agents'' at the time
the attestation is received, and make a determination as to whether the
facility or organization is provider-based. We also propose that the
determinations issued through this process would constitute CMS initial
determinations for purposes of Sec. 498.3(b)(2). In conducting review
and validation activities, CMS and its contractors, including MACs,
would employ standardized review, validation, and risk-based screening
processes to assess attestations for completeness, consistency with the
provider's enrollment records, and compliance with the applicable
requirements of Sec. 413.65. These processes may include automated
validation activities, data analysis, targeted documentation review,
and contractor review procedures designed to support consistent
national implementation and program integrity oversight. We propose to
establish, through operational guidance, specific review criteria,
validation protocols, and documentation standards that CMS and its
contractors, including MACs, must apply in conducting review and
validation activities and supporting initial determinations, in order
to promote consistent assessment of provider-based requirements across
all CMS contactors including MAC jurisdictions. CMS will conduct
ongoing quality review and oversight of attestation determinations and
related review activities. (For additional discussion of our proposed
documentation requirements for provider-based attestations and proposed
verification and oversight activities, refer to sections XX.D, and
XX.E, respectively, of this preamble.)
We also propose an additional modification to Sec.
413.65(b)(3)(ii) to revise the timing and modernize the manner in which
supporting documentation is submitted for off-campus provider-based
facilities and organizations. CMS and its contractors, including MACs,
proposed to employ standardized review and validation processes,
including automated validation activities, data analysis, risk-based
screening methodologies, targeted documented review, and other program
integrity activities, to evaluate attestations and identify submissions
requiring additional review of compliance verification. Providers would
continue to be required to maintain documentation demonstrating
compliance with applicable provider-based requirements and to furnish
such information to CMS or its contractors, including MACs, upon
request as part of review, validation, audit, or oversight activities.
We believe these proposals will afford providers greater flexibility in
meeting the statutory deadlines imposed by section 6225 of the CAA,
2026, while continuing to allow CMS oversight and access to information
necessary to evaluate compliance and make a determination. We also
propose a modification to Sec. 413.65(k) to remove references to what
constitutes a `complete' attestation, with supporting documentation and
additional information to be requested from the provider, as necessary,
after the standardized attestation form has been submitted.
[[Page 41983]]
We propose that main providers, prior to submitting an attestation,
must obtain an NPI for each provider-based department and update
Provider Enrollment, Chain, and Ownership System (PECOS). As discussed
previously, to implement section 6225 of the CAA, 2026, CMS proposes to
establish a standardized attestation form for provider-based
determinations that would replace the current MAC-specific templates;
the attestation would then be submitted through a centralized
electronic system. We believe this standardized approach would ensure
consistency across MACs and would result in a reduction in
administrative burden for providers and a more efficient review process
for MACs and CMS. For providers that submit attestations for more than
one off-campus outpatient department, CMS is considering streamlined
supporting documentation requirements and seeks input on how best to
minimize burden while ensuring robust oversight. Further, we anticipate
a reduction in the documentation supporting the attestation. For
instance, we anticipate leveraging system capabilities to reduce
duplicative documentation submissions by allowing supporting
documentation applicable to multiple locations to be submitted a single
time, where appropriate.
The future standard attestation format would request identifying
information for both the main provider and the provider-based entity,
including applicable NPIs. Once all attestations are submitted,
providers would indicate their submission is complete. CMS and its
contractors, including MACs, may employ automated validation,
screening, targeted review and risk-based methodologies to identify
attestations requiring additional review, supporting documentation, or
follow-up activities. We anticipate giving providers a reasonable
period, generally not to exceed 60 days, to furnish requested
supporting documentation.
If CMS or its contractor, including MACs, determine that an
attestation demonstrates compliance with the provider-based
requirements at Sec. 413.65, we propose that an approval notice would
be issued. CMS and its contractor, including MACs, propose to request
supporting documentation at any stage of the review, validation, audit
or oversight process to evaluate compliance with applicable provider-
based requirements. If CMS or its contractor determines that an
attestation fails to demonstrate compliance with the provider-based
requirements, or if the provider fails to furnish all requested
information or attest to all applicable requirements, we propose that a
denial would be issued, including applicable appeal rights. Until the
standardized form and centralized electronic system are finalized, we
propose providers may continue to submit attestations in accordance
with Sec. 413.65(b)(3), in satisfaction of Section 6225. As noted
previously, an off-campus outpatient department of a provider will also
need to obtain an NPI before January 1, 2028, consistent with section
1833(t)(23)(A)(i) of the Act as added by Section 6225.
In addition, we propose to use program integrity mechanisms
currently available to CMS, or that may become available in the future,
whether through improved technology, contracting, data analysis or
other means, to evaluate compliance with provider-based requirements
and identify attestations requiring additional review or oversight
activities. In Sec. 413.65(k), we propose to specify that these
activities may include site visits, remote audits, investigations, or
require submission of additional documentation as may be necessary to
make a determination of compliance with the provider-based requirement,
and the use of current or future Medicare program integrity
contractors. We believe this proposal would continue to address CMS'
longstanding concerns, regarding potential increased costs to the
Medicare program and its beneficiaries by ensuring compliance with
provider-based regulations. For additional discussion of our proposed
documentation requirements for provider-based attestations, refer to
section XX.D of this preamble. For additional discussion of the
proposed CMS verification and oversight activities, refer to section
XX.E of this preamble.
D. Documentation Requirements for Provider-Based Attestations
To support meaningful CMS oversight of provider compliance with the
provider-based requirements of Sec. 413.65, and consistent with the
mandatory attestation requirement established by section 6225 of the
CAA, 2026, we propose that attestations submitted through the proposed
standardized attestation process include, or be supported by,
documentation sufficient to demonstrate compliance with the applicable
provisions of Sec. 413.65(d), (e), (g), and (h). We describe in this
section the categories of documentation that providers may be required
to submit or retain in connection with their attestations. As discussed
further, CMS anticipates that not all documentation described herein
would be required at the time of initial attestation submission;
rather, CMS and its contractors, including MACs, will employ risk-based
screening and targeted documentation review processes to identify those
attestations for which additional documentation is warranted. The
rationale behind using targeted documentation review is that any main
provider typically manages its departments in a consistent manner. By
drawing a sample from each main provider's universe of provider-based
departments, we would be able to gain a reliable understanding of their
universe. This approach would not only ensure adequate representation
across all providers, regardless of their volume--it would also provide
meaningful insight into whether compliance standards are being upheld
across all departments. We invite public comment on the appropriate
scope of documentation requirements, including whether any of the
categories described should be modified, consolidated, or eliminated in
order to reduce provider burden while preserving CMS' ability to
evaluate compliance and protect the Medicare program. Specifically, we
propose the following documentation framework:
Attestation Form Completeness and Authorization:
++ We propose that providers must submit a completed attestation
using the CMS-standardized attestation form, signed and dated by an
authorized official of the main provider as identified in PECOS. The
attestation would be required to identify both the main provider and
each off-campus outpatient department of the provider for which
provider-based status is sought, including the applicable NPIs,
provider numbers, addresses, and the date on which provider-based
conditions were met or the date the department was acquired, as
applicable. Where a provider designates a consultant or outside
representative as the primary contact for the attestation, we propose
the provider must authorize the representative in writing.
Location:
++ We anticipate the attestation system would have the ability to
measure the distance requirement. However, if the distance is not
systematically verified or exceeds 35-miles, we propose providers would
be required to submit supporting documentation in support of Sec.
413.65(e)(3).
Licensure:
++ We propose providers must be prepared to demonstrate that the
off-campus outpatient department is operated under the same licensure
as
[[Page 41984]]
the main provider, consistent with Sec. 413.65(d)(1), or to provide
documentation that the applicable State does not require a separate
license for the department.
Clinical Services Integration:
++ We propose providers must be prepared to demonstrate that the
off-campus outpatient department meets the clinical integration
requirements of Sec. 413.65(d)(2), including that professional staff
at the department hold privileges at the main provider; that
appropriate monitoring and oversight of the department by the main
provider is in place; that inpatient and outpatient services of the
department and the main provider are integrated; and that patients
treated at the department who require further care have full access to
all services of the main provider.
Financial Integration:
++ We propose providers must be prepared to demonstrate that the
revenues and expenses of the off-campus outpatient department are
integrated with those of the main provider, consistent with Sec.
413.65(d)(3), such that the department does not maintain a separate
general ledger or trial balance independent of the main provider.
Public Awareness:
++ We propose that providers must be prepared to demonstrate that
the off-campus outpatient department is clearly identified to the
public as part of the main provider, consistent with Sec.
413.65(d)(4), and that patients entering the department are aware they
are receiving services from the main provider.
Obligations of Hospital Outpatient Departments:
++ For off-campus outpatient departments that are departments of
hospitals, we propose that providers must be prepared to demonstrate
compliance with the applicable obligations of hospital outpatient
departments under Sec. 413.65(g), including compliance with Emergency
Medical Treatment and Labor Act (EMTALA) requirements, antidumping
rules, site-of-service billing requirements, and the requirement to
provide written notice to Medicare beneficiaries of their potential
financial liability prior to the delivery of services at an off-campus
location.
Ownership, Control, Administration, and Supervision (Off-
Campus Departments):
++ We propose providers must be prepared to demonstrate that the
department operates under the ownership and control of the main
provider consistent with Sec. 413.65(e)(1), including that the
department is 100 percent owned by the main provider and that the main
provider retains final approval over administrative decisions,
personnel policies, and medical staff appointments. We also propose
providers must also be prepared to demonstrate that the administrative
functions of the department are integrated with those of the main
provider consistent with Sec. 413.65(e)(2), including through
submission of an organizational chart reflecting the reporting
relationship between the department and the main provider.
E. CMS Verification and Oversight Activities
Section 1833(t)(23)(B)(i) of the Act directs the Secretary to
establish a process for determining, through site visits, remote
audits, or other means as determined appropriate by the Secretary,
whether each off-campus outpatient department of a provider is
compliant with the applicable requirements. Consistent with this
statutory direction, we propose that CMS and its contractors, including
MACs, employ a layered, risk-based approach to verification and
oversight that is designed to promote efficient processing of the
significantly increased volume of attestations expected under the
mandatory attestation requirement while preserving meaningful CMS
oversight of provider compliance with Sec. 413.65.
At the initial review stage, CMS and its contractors, including
MACs, would conduct automated validation and screening of all submitted
attestations to verify completeness, consistency with PECOS enrollment
records, and the presence of required attestation elements.
Attestations that pass automated validation would be processed for
initial determination. Attestations that present indicators of
incompleteness, inconsistency, or elevated compliance risk would be
flagged for targeted documentation review, during which CMS or its
contractors may request that the provider furnish supporting
documentation from any or all of the categories described.
At the extended review stage, CMS and its contractors, including
program integrity contractors, would employ risk-based methodologies to
select a subset of attestations for more extensive compliance review.
Such methodologies may include remote audits of provider records and
documentation, site visits conducted by CMS or contractors to verify
that the attested department meets the physical, financial, clinical,
and administrative integration requirements of Sec. 413.65, or
investigations of potential non-compliance identified through data
analysis, referral, or other sources. The criteria and methodologies
CMS would use to select attestations for extended review would be
established through operational guidance and would be designed to focus
oversight resources on providers and departments that present the
highest risk of non-compliance with the provider-based requirements. We
propose that failure to submit requested documentation within the
timeframe specified by CMS may result in a determination of non-
compliance and recovery of payments as described in Sec. 413.65 (k).
We invite public comment on the appropriate scope and sequencing of
documentation requirements, including whether the categories described
should be further prioritized, consolidated, or phased in over time to
facilitate provider compliance with the January 1, 2028 statutory
deadline.
We solicit public comment on the proposed policies and processes
described in this section. Specifically, we seek feedback from
stakeholders regarding feasibility, operational impact, implementation
considerations, potential burden, and any unintended consequences
associated with these proposals. We encourage commenters to provide
detailed rationale, data, examples, or alternative approaches that may
assist CMS in evaluating and refining the final policy.
XXI. Payment for Direct and Indirect Graduate Medical Education (GME)
Costs--Notice of Closure of Teaching Hospital and Opportunity To Apply
for Available Slots
A. Background
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
[[Page 41985]]
language at section 1886(d)(5)(B)(v) of the Act. These changes instruct
the Secretary to establish a process to increase the full-time
equivalent (FTE) resident caps at other hospitals based upon the FTE
resident caps at teaching hospitals that closed on or after March 23,
2008. In the CY 2011 OPPS/ASC 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 graduate medical education (GME) and indirect medical education
(IME) FTE resident cap slots from the hospital that closed. We made
certain additional modifications to Sec. 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 to teaching
hospitals that closed between March 23, 2008, and August 3, 2010, and
to teaching hospitals that close after August 3, 2010 (75 FR 72215).
B. Notice of Closure of Louis A. Weiss Memorial Hospital Located in
Chicago, Illinois and the Application Process--Round 29
CMS learned of the closure of Louis A. Weiss Memorial Hospital,
located in Chicago, Illinois (CCN 140082). Accordingly, we are
providing notice of the closure of this teaching hospital and
initiating another round of the application and selection process to
redistribute the closed hospital's FTE resident caps. This round will
be the 29th round (``Round 29'') of the application and selection
process. Table 78 contains the identifying information for the closed
teaching hospital and its IME and direct GME FTE resident caps, which
are part of the Round 29 application process under section 5506 of the
Affordable Care Act.
[GRAPHIC] [TIFF OMITTED] TP07JY26.119
C. Application Process for Available Resident Slots
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). Hospitals that wish to
apply for and receive slots from the previously noted hospital's FTE
resident caps must submit Round 29 applications using the electronic
application intake system, Medicare Electronic Application Request
Information System\TM\ (MEARIS\TM\) between July 13, 2026, and October
13, 2026. The section 5506 application can be accessed at https://mearis.cms.gov/public/home.
CMS will only accept Round 29 applications submitted via MEARIS\TM\
. Applications submitted through any other method will not be
considered. Within MEARIS\TM\, we have built in several resources to
support applicants:
Refer to the ``Resources'' section for guidance regarding
the application submission process at https://mearis.cms.gov/public/resources.
Technical support is available under ``Useful Links'' at
the bottom of the MEARIS\TM\ web page.
Application related questions can be submitted to CMS
using the form available under ``Contact'' at https://mearis.cms.gov/public/resources.
Application submission through MEARIS\TM\ will not only help CMS
track applications and streamline the review process, but it will also
create efficiencies for applicants when compared to a paper submission
process.
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
through MEARIS 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 https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/direct-graduate-medical-education-dgme. Hospitals should access this website for a list of additional
section 5506 guidelines for applying for slots, and the redistribution
of the slots under sections 1886(h)(4)(H)(vi) and 1886(d)(5)(B)(v) of
the Act.
XXII. Consideration of Potential Approaches for Separate IPPS Payment
for Domestic Procurement of Personal Protective Equipment and Essential
Medicines
In the ``Ensuring Safety Through Domestic Security With Made in
America Personal Protective Equipment (PPE) and Essential Medicine
Procurement by Medicare Participating Hospitals'' advance notice of
proposed
[[Page 41986]]
rulemaking (91 FR 3851),\187\ we sought public comment on potential
options we could consider for Medicare participating hospitals to help
foster a more resilient supply chain for American-made PPE and
essential medicines to secure our nation's health and safety, and to
reflect the additional resource costs incurred when procuring these
domestically manufactured items. We sought input on a possible new
``Secure American Medical Supplies'' friendly designation that could be
earned by hospitals that demonstrate their commitment to domestic
procurement. In addition, we sought input on potential ways such a
designation could facilitate the creation of new, streamlined payment
policies to support hospitals in their efforts. We also sought input on
a potential new structural quality measure as part of the Hospital
Inpatient Quality Reporting (IQR) Program that could promote hospital
commitments to invest in domestic procurement to secure our nation's
health and safety.
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\187\ Hereinafter referred to as ``the ANPRM''.
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We are now seeking further public input on this issue after
reviewing the comments on the ANPRM. Specifically, we are soliciting
public comment on potential policy approaches for a payment adjustment,
a methodology to calculate the price differential between domestic and
non-domestic PPE and essential medicines, information sources of those
price differentials, a definition of domestic essential medicine and
PPE, and a process for verifying that a given essential medicine or PPE
is ``domestic.''
A. Overview
We continue to believe that hospitals' procurement preferences
directly influence upstream intermediary and manufacturer behavior and
can be leveraged to help foster a more resilient supply chain for
domestically manufactured goods, which is foundational to safeguarding
timely access and continuity of care for patients. Because hospitals
are the primary purchasers and users of essential medicines and medical
PPE, we believe a voluntary payment adjustment that reflects the
additional marginal costs that hospitals face in procuring these
products may help to sustain their domestic production and availability
and thereby help to safeguard personnel and beneficiary safety over the
long term.
We currently have a voluntary payment policy under the IPPS and
OPPS for the additional resource costs that hospitals face in procuring
domestic National Institute for Occupational Safety and Health (NIOSH)-
approved surgical N95 filtering facepiece respirators (FFRs). Building
on public input from the ANPRM, we are considering expanding the
existing IPPS payment policy to include other forms of domestic PPE and
certain essential medicines.
1. Expanded Scope of PPE and Domestic Definition
For PPE, as discussed in section XXII.C., we are considering
expanding the policy to include all domestic NIOSH-approved filtering
face piece respirators that demonstrate compliance with the American
Society for Testing and Materials (ASTM) Respirator Fit Capability
Standard; domestic medical gloves in compliance with FDA requirements
and conforming to ASTM standards; and domestic gowns in compliance with
FDA requirements and conforming to Association for the Advancement of
Medical Instrumentation (AAMI) standards. We are considering defining
the term ``domestic'' using the contract terms listed in the Make PPE
In America Act, (section 70953 of Pub. L. 117-58), which identifies
American-made PPE as domestically-made from domestic materials and
components that are ``grown, reprocessed, reused, or produced in the
United States''. Given the lack of available domestic nitrile butadiene
rubber (NBR),\188\ we are considering an exception for nitrile gloves
which are made in the U.S. with foreign rubber. Future rulemaking may
revisit this potential exception in the event that domestically
produced NBR becomes available.
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\188\ https://www.madeinamerica.gov/waivers/nonavailability/6994cfdf16e70851109b4247.
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2. Potentially Eligible Essential Medicines and Domestic Definition
For essential medicines, as discussed in section XXII.D., we are
seeking comment on including in an expanded policy certain FDA-approved
medicines which have existing U.S. finished dosage form (FDF)
production and do not contain API from countries listed on the
``foreign adversaries'' list at 15 CFR 791.4.\189\ As discussed further
in sections XXII.C. and XXII.D., in developing this potential subset of
eligible essential medicines, we prioritized non-substitutable sterile
injectables and generic antibiotics as per the prioritization framework
developed by ASPR and Federal supply chain security offices, including
within HHS and the Department of War (DOW). We are seeking comment as
to whether an essential medicine should be defined as domestic if the
country of origin is the United States (U.S.), where country of origin
is defined through incorporation by reference as the country in which
``substantial transformation'' of the final dosage form occurs via 19
CFR 134.1(b).
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\189\ https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-E/part-791/subpart-A/section-791.4.
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3. Domestic and Non-Domestic Cost Differential
As also discussed in sections XXII.C and XXII.D, we are considering
whether the methodology for determining the amount of the payment
adjustment should be based on the use of standardized cost
differentials for eligible domestic PPE and essential medicines, which
would be updated on an annual basis. We seek comment on the potential
base cost differentials for eligible categories of PPE in section
XXII.C. and the potential base cost differentials for eligible
essential medicines in section XXII.D.
4. Manufacturer Attestation of Domestic Origin
Additionally, as discussed in section XXII.E., we are considering
whether under a potential policy a manufacturer should voluntarily be
able to provide an attestation to HHS that its product meets the
applicable domestic definition. To make it easier for hospitals to
identify domestic products, HHS would compile these attestations
annually and create a public file of eligible products by National Drug
Code (NDC) or Unique Device Identifier (UDI), as applicable, based on
the information provided by the manufacturers. Only products in this
file would be eligible for separate payment.
5. Potential Payment Adjustment Approaches
We are also seeking feedback on different potential approaches
under the IPPS to separately pay for the additional resource costs that
hospitals face when purchasing eligible domestic PPE and essential
medicines. These approaches are discussed in section XXII.F.
6. Annual Spending Threshold
As discussed in section XXII.G., under any approach that may be
considered, we believe it also may be prudent to consider establishing
an appropriate maximum annual amount of aggregate separate payment
under this policy and to prospectively allocate shares of that amount
to individual hospitals before the start of the fiscal year. Under this
approach, if the actual separate payment to a hospital for the fiscal
year exceeds its allocated
[[Page 41987]]
maximum amount, the excess amount would be reconciled at cost report
settlement, as that excess amount would be considered still bundled
into the MS-DRG payment and not separately payable.
B. Background and Summary of Prior Rulemaking
As discussed in the ANPRM, sufficient domestic availability of PPE
and essential medicines in the health care sector is a critical
component of emergency public health preparedness. In the spring of
2020, supply chains for PPE faced severe disruptions due to lockdowns
that limited production and unprecedented demand spikes across multiple
industries. Supplies of N95[supreg] FFRs, nitrile gloves, and isolation
gowns were examples of PPE that experienced significant supply chain
disruptions. So-called ``just-in-time'' supply chains that minimize
stockpiling, in addition to reliance on overseas production, left U.S.
hospitals unable to obtain enough PPE to protect health care workers.
Similarly, shortages for critical medical products have persisted, with
a recent report authored by the Senate Committee on Homeland Security
and Government Affairs noting that the average drug shortage lasts
about 1.5 years.\190\ For pharmaceuticals, hospitals reported more than
40 drug shortages at the time they were surveyed--from antibiotics used
to treat severe bacterial infections to crash cart drugs necessary to
stabilize and resuscitate critically ill adults.\191\ Historically,
most shortages occur after quality-related breakdowns in manufacturing
processes, as generic drug manufacturers face intense price
competition, uncertain revenue streams, and high investment
requirements to maintain mature manufacturing quality systems.\192\
Shortages of both essential medicines and reliable PPE jeopardize
patient safety and health care quality, and it is therefore critical to
ensure that quality PPE and essential medicines are available to health
care personnel and patients when needed. The COVID-19 pandemic
illustrated how overseas production shutdowns, foreign export
restrictions, or ocean shipping delays can jeopardize availability of
raw materials and components needed to make critical public health
supplies. Sustaining domestic production of these important medical
supplies is therefore critical in ensuring patients and health care
personnel have the critical medical supplies they need.
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\190\ Senate Committee on Homeland Security & Governmental
Affairs, Short Supply: The Health and National Security Risks of
Drug Shortages, March 2023: https://www.hsgac.senate.gov/wp-content/uploads/2023-06-06-HSGAC-Majority-Draft-Drug-Shortages-Report.-FINAL-CORRECTED.pdf.
\191\ Vizient, Beyond the shortage: The hidden cost of drug
supply chain disruptions, June 2025: https://www.vizientinc.com/newsroom/news-releases/2025/new-vizient-survey-finds-drug-shortages-cost-hospitals-nearly-900m-annually-in-labor-expenses.
\192\ U.S Department of Health and Human Services: Policy
Considerations to Prevent Drug Shortages and Mitigate Supply Chain
Vulnerabilities in the United States, April 2024: https://aspe.hhs.gov/sites/default/files/documents/bd863be8f0aaf5380dc801390440bc3d/HHS-White-Paper-Preventing-Shortages-Supply-Chain-Vulnerabilities.pdf.
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In recent years we have solicited comment on, and based on feedback
from interested parties, implemented payment adjustments to Medicare
participating hospitals to reflect the additional costs of procuring
domestically made surgical N95 FFRs and creating and maintaining buffer
stocks of certain essential medicines.\193\ In the CY 2023 OPPS/ASC
final rule with comment period (87 FR 72037), we implemented payment
adjustments under the IPPS and OPPS to support a resilient and reliable
domestic supply of NIOSH-approved[supreg] surgical N95 respirators.
This payment adjustment is based on the IPPS and OPPS shares of the
difference in cost between domestic and non-domestic NIOSH-approved
surgical N95 FFRs and is available where those costs are separately
tracked, reported, and appropriately claimed by the hospital on its
cost report submitted to Medicare. As discussed in the CY 2023 OPPS/ASC
final rule with comment period, the payment adjustment was intended to
account for the marginal costs that hospitals face in procuring
domestically made NIOSH-approved and FDA-certified surgical N95 FFRs.
These marginal costs are due to higher per-unit acquisition prices that
stem from higher costs of inputs and labor in the U.S. as compared to
international suppliers, which make many N95 and other FFRs, as well as
a demonstrated record of more consistent high-quality for domestically
made products. Usage of the payment adjustments has been limited, and
HHS conducted outreach to interested parties to better understand
barriers to awareness and uptake and seek feedback on potential
modifications that could increase effectiveness. For FY 2024, fewer
than 100 hospitals reported the information necessary to determine the
payment adjustment on their cost reports. This low adoption rate may
have been partially attributable to administrative reporting burden
concerns raised by interested parties.
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\193\ Hereafter referred to as ``the N95 policy'' and ``the
essential medicines policy,'' respectively.
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As noted in the CY 2023 OPPS/ASC final rule with comment period (87
FR 72039), we received many comments urging us to expand this policy to
cover other forms of PPE and critical medical supplies. A few
commenters stated that other forms of PPE are susceptible to shortages
similar to surgical N95 FFRs, and therefore investing in domestic
production for these products was also important for future emergency
preparedness. We stated that we would consider these comments, and
other modifications to the payment adjustment, for future rulemaking as
we gained more experience with our policy.
In addition to PPE, essential medicines are another critical
component of preparedness. In the FY 2025 IPPS/Long-Term Care Hospital
(LTCH) PPS final rule (89 FR 68986, 69387 through 69400), we finalized
a separate payment under the IPPS to small (100 beds or fewer),
independent hospitals for the estimated additional resource costs of
voluntarily establishing and maintaining access to a 6-month buffer
stock of one or more essential medicines. Under this policy, essential
medicines are defined as the medicines prioritized in the report
Essential Medicines Supply Chain and Manufacturing Resilience
Assessment developed by the U.S. Department of Health and Human
Services, Administration for Strategic Preparedness and Response
(formally known as the Office of the Assistant Secretary for Strategic
Preparedness and Response) and published in May 2022, and any
subsequent revisions to that list of medicines.\194\ The President's
Executive Order 14336 further required that the ASPR provide the
Assistant to the President and Homeland Security Advisor (APHSA), the
Assistant to the President for Economic Policy (APEP), and the Office
of Management and Budget (OMB) with an update to this list.\195\
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\194\ The list is available at https://www.armiusa.org/wp-content/uploads/2022/07/ARMI_Essential-Medicines_Supply-Chain-Report_508.pdf and there have been no public revisions to the list
yet.
\195\ https://www.whitehouse.gov/presidential-actions/2025/08/ensuring-american-pharmaceutical-supply-chain-resilience-by-filling-the-strategic-active-pharmaceutical-ingredients-reserve/.
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We solicited feedback and comments in the CY 2025 OPPS/ASC proposed
rule (89 FR 59186, 59396 through 59399) on potential modifications to
the surgical N95 FFR policy to increase hospital uptake, reduce
reporting burden, and achieve the policy goal to maintain a baseline
domestic production capacity of PPE to ensure
[[Page 41988]]
that quality PPE is readily available to health care personnel when
needed. As discussed in the CY 2025 OPPS/ASC final rule with comment
period (89 FR 93912, 94290 through 94295), commenters were supportive
of a variety of modifications to the established policy, including
modifications to the payment adjustment methodology calculation that
would provide a national standard unit cost differential between
domestic and non-domestic NIOSH-approved surgical N95 FFRs, stating
that such a modification would minimize reporting burden for hospitals
and ensure payments to hospitals are equitable. We note that some
commenters differed in their view as to how the cost differential
should be calculated. Commenters also stated that expanding the payment
adjustment to more products would increase uptake of the payment
adjustment by hospitals, strengthen the existing U.S. manufacturing
base, incentivize other manufacturers to prioritize domestic
production, and protect access to high-quality products. Commenters
requested that CMS work with the Congress to give CMS authority to
offset all the marginal costs incurred by the hospital in procuring
domestically manufactured surgical N95 FFRs rather than just the
Medicare share of these costs. Some commenters also indicated that
hospitals have had difficulty ascertaining which products meet the
definition of domestic under the surgical N95 FFR policy and were
supportive of making publicly available a list of products eligible
under the surgical N95 FFR policy.
As discussed in the CY 2025 OPPS/ASC final rule with comment
period, several commenters urged CMS to expand the payment adjustment
to include other PPE types and medical devices (89 FR 94295). Examples
from commenters included isolation gowns, hair nets, beard covers,
bouffant caps, shoe covers, face shields, ASTM level II and III
surgical masks, powered air purifying respirators, elastomeric
respirators, syringes, needles, catheters, and wound care dressings.
Commenters indicated that many of these products are currently being
purchased from non-domestic manufacturers and have been prone to
shortages and quality issues. For example, a commenter cited safety
concerns regarding the quality of imported syringes and needles which
they stated have had issues ranging from leaks to breakages that
compromise patient safety.
In the ANPRM, we solicited comment on potential options we might
consider for Medicare participating hospitals to help foster a more
resilient supply chain for American-made PPE and essential medicines to
secure our nation's health and safety and to reflect the additional
resource costs incurred when procuring these domestically manufactured
items. These potential options included the creation of a ``Secure
American Medical Supplies'' friendly designation that could be earned
by hospitals with a demonstrated commitment to procuring domestic PPE
and domestic essential medicines, a potential separate Medicare payment
to ``Secure American Medical Supplies'' friendly hospitals, and a
structural measure that would require hospitals to attest to meeting
the domestic procurement designation minimum percentages for PPE and
essential medicines as part of the Hospital IQR Program.
Commenters generally continued to support CMS' efforts to foster a
more resilient domestic supply chain for critical medical supplies and
favored voluntary, non-budget-neutral payment approaches over quality
measures or payments tied to hospital designations. Commenters raised
concerns about administrative burden, and many hospitals highlighted
challenges in identifying qualifying domestic products and tracking
their use, as well as other costs associated with domestic purchasing.
Commenters also urged creating a public list of eligible domestic
products, standardizing the domestic cost differentials, and expanding
the eligible product categories.
Several commenters emphasized that long-term, committed contracting
arrangements (for example, 2- to 3-year or longer arrangements) between
purchasers and manufacturers of domestic medical supplies would be
necessary to increase the domestic manufacturing base. Some commenters
stated that CMS would need to pay beyond the IPPS and OPPS shares of
the additional costs in a non-budget neutral manner to shift
purchasing, with several commenters suggesting that CMS work with
Congress to achieve this objective. Some commenters supported the
establishment of a resiliency \196\ measure to supplement or replace
the quality measure discussed in the ANPRM. Several of these commenters
advocated for any potential separate payment to be tied to demonstrated
efforts on the part of hospitals and manufacturers to implement
resiliency processes into their procurement practices.
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\196\ In this context, we define ``resiliency'' in a manner
consistent with the supply chain characteristics described by
Executive Order 14017: https://www.federalregister.gov/documents/2021/03/01/2021-04280/americas-supply-chains.
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C. Potential Eligible Domestic PPE Products and Cost Differentials
As described previously in section XXII.B., under the IPPS we
currently make a payment adjustment for the additional resource costs
that hospitals face in procuring domestic NIOSH-approved[supreg]
surgical N95[supreg] respirators.\197\ After consideration of the
comments received on the ANPRM, to further support a level of supply
resilience that is critical to protect the health and safety of
personnel and patients, we are considering expanding the PPE products
eligible for the separate IPPS payment adjustment to include all
domestic NIOSH-approved FFRs that demonstrate compliance with the ASTM
Respirator Fit Capability Standard, domestic medical gloves in
compliance with FDA requirements and conforming to ASTM standards, and
domestic gowns in compliance with FDA requirements and conforming to
AAMI standards. We are not considering including other PPE products
such as face shields, protective eyewear, surgical masks, and head and
foot coverings at this time.
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\197\ N95 and NIOSH Approved are registered certification
trademarks of the HHS in the U.S. and several other countries.
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Given that the unique device identifier (UDI) codes for PPE, as
applicable, may refer to packages of multiple items, our unit of
analysis is a single item (that is, one glove). As previously noted, we
are considering whether the methodology for determining the amount of
the payment adjustment under any such expanded policy should be based
on the use of standardized cost differentials for eligible categories
of domestic PPE.
Potential eligible PPE items, per item differentials, and
qualifying criteria under consideration are listed in Table 79. These
potential PPE cost differentials were derived from public comments,
prior discussions with manufacturers, and Federal procurement data. We
invite public comments on approaches for determining the base cost
differentials between domestic and non-domestic PPE items.
[[Page 41989]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.120
In the CY 2023 OPPS/ASC final rule with comment period, we stated
that we believed the most appropriate framework for determining if
NIOSH-approved surgical N95 FFRs were considered domestic for purposes
of the separate payment is the Berry Amendment (87 FR 72039 through
40). The Berry Amendment is a statutory requirement familiar to
manufacturers that restricts the Department of Defense (DoD) from using
funds appropriated or otherwise available to DoD for procurement of
food, clothing, fabrics, fibers, yarns, other made-up textiles, and
hand or measuring tools that are not grown, reprocessed, reused, or
produced in the U.S. Berry Amendment restrictions are implemented by
the DoD Federal Acquisition Regulation Supplement (DFARS) 252.225-7002,
and the provision at 252.225-7002-1 states DoD cannot acquire specified
``items, either as end products or components, unless the items have
been grown, reprocessed, reused, or produced in the U.S.'' With limited
exceptions, the entire production process of an affected product, from
the production of raw materials to the manufacture of all components to
final assembly, must be performed in the U.S.\198\
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\198\ Congressional Research Service: Buying American:
Protecting U.S. Manufacturing Through the Berry and Kissell
Amendments: sgp.fas.org/crs/misc/R44850.pdf.
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However, given that the inputs and constituent materials of some
potentially eligible domestic PPE products (such as nitrile gloves) are
not wholly defined by the Berry Amendment, we are considering defining
domestic for purposes of this potential payment policy using the Make
PPE In America Act domestic content requirements for Federal
procurement contracts outlined in section 70953 of the Infrastructure
Investment and Jobs Act. This statute defines American-made PPE as
``personal protective equipment, including the materials and components
thereof, that is grown, reprocessed, reused, or produced in the United
States.'' Those statutory requirements, which apply to procurement of
PPE by the U.S. Departments of Health and Human Services, and Veterans
Affairs, and Homeland Security, require the procurement of PPE,
including the materials and components thereof, that is grown,
reprocessed, reused, or produced in the U.S. This Act is similar to the
Berry Amendment but broader in the scope of PPE products it covers. PPE
manufacturers are generally familiar with its requirements. The
aforementioned NIOSH-approved FFRs that demonstrate compliance with the
ASTM Respirator Fit Capability Standard, medical gloves in compliance
with FDA requirements and conforming to ASTM standards, and gowns in
compliance with FDA requirements conforming to AAMI standards eligible
for Federal procurement would also be considered domestic for purposes
of this potential policy and would therefore be eligible for the
potential payment. On an annual basis, in connection with
manufacturers' attestations of eligible domestic PPE, a specific
exception for NBR for nitrile gloves would be specified if applicable.
D. Potential Eligible Domestic Essential Medicines and Cost
Differentials
The report Essential Medicines Supply Chain and Manufacturing
Resilience Assessment, as developed by the U.S. Department of Health
and Human Services (HHS) Office of the Assistant Secretary for
Preparedness and Response (ASPR) with the Advanced Regenerative
Manufacturing Institute's (ARMI's) Next Foundry for American
Biotechnology, prioritized 86 essential medicines \199\ from the
Executive Order 13944 List of Essential Medicines, Medical
Countermeasures, and Critical Inputs, as developed under the Executive
Order by the U.S. Food and Drug Administration (FDA).\200\
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\199\ Hereinafter referred to as the ``ARMI List'' or ``ARMI's
List.''
\200\ https://www.fda.gov/about-fda/reports/executive-order-13944-list-essential-medicines-medical-countermeasures-and-critical-inputs.
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The ARMI List is a prioritized list of 86 medicines that are either
critical for minimum patient care in acute settings or important for
acute care with no comparable alternatives available. The medicines
included in the ARMI List were considered, by consensus, to be most
critically needed for typical acute patient care. In this context,
acute patient care was defined as: rescue use or lifesaving use or both
(that is, Intensive Care Units, Cardiac/Coronary Care Units, and
Emergency Departments), stabilizing patients in hospital continued care
to enable discharge, and urgent or emergency surgery. Development of
the ARMI List focused on assessing the clinical criticality and supply
chains of small molecules and therapeutic biologics. The development of
the ARMI List was informed by meetings with multiple key pharmaceutical
supply chain interested parties (for example, manufacturers, group
purchasing organizations, wholesale distributors, providers,
pharmacies), surveys and workshops with groups of clinicians and
industry interested parties, public feedback on the Executive Order
13944 List (provided during a public comment period starting in October
2020), and other research. As discussed in section XXII.B., we
previously finalized a separate payment under the IPPS to small,
independent hospitals for the estimated additional resource costs of
voluntarily establishing and maintaining access to a 6-month buffer
stock of one or more of the ARMI List's essential medicines.
For this potential payment policy, we are considering including
certain FDA-approved medicines from the ARMI List
[[Page 41990]]
which have existing U.S. FDF production, and do not contain API from
countries listed on the ``foreign adversaries'' list at 15 CFR
791.4.\201\ In developing the potential list of eligible essential
medicines, we prioritized non-substitutable sterile injectables and
generic antibiotics as per the prioritization framework developed by
ASPR and Federal supply chain security offices, including within HHS
and the DoD. Scheduled drugs, which are already predominantly
manufactured domestically, as well as branded drugs were not considered
in developing the potential list of eligible essential medicines. All
drugs included in the potential list have also been subject to shortage
within the previous decade.\202\ The priority matrix used for drug
selection in developing the potential list of eligible essential
medicines under consideration is shown in Table 80:
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\201\ https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-E/part-791/subpart-A/section-791.4.
\202\ Shortages listed on ASHP database: https://www.ashp.org/drug-shortages/current-shortages/drug-shortages-list?page=All.
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BILLING CODE 4169-69-P
[[Page 41991]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.121
[[Page 41992]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.122
BILLING CODE 4169-69-C
As previously noted, we are seeking comment regarding whether the
methodology for determining the amount of the payment adjustment under
this potential policy should be based on the use of standardized cost
differentials for eligible categories of domestic essential medicines.
For each eligible essential medicine, we are seeking comment regarding
whether it would be appropriate to use two separate possible base cost
differentials, depending on whether both the FDF and API for the drug
are manufactured domestically, or just the FDF is manufactured
domestically. Each drug's base cost differential could be subject to
change on an annual basis to reflect inflation and changing
pharmaceutical prices over time. We include in Table 81 a list of
potential base cost differentials derived from economic analysis of
wholesale acquisition costs and informed by public comments,
consultations with pharmacists and government procurement specialists,
and available literature to estimate costs of domestic production
(including a 2022 study by ASPR that found domestic API is around 12
times more expensive than foreign API, and several studies identifying
domestic generic costs as 35 to 50 percent higher than generics in
India and China \203\). We invite public comments on approaches for
determining the base cost differentials between domestic and non-
domestic essential medicines.
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\203\ Lu, Z.J.; Shih, Y.-C. T. Re-Shoring of Generic Drug Global
Supply Chain: An Exploratory Economic Analysis. Preprints 2026,
2026021157. https://doi.org/10.20944/preprints202602.1157.v1; Mark
Abdoo, Douglas Throckmorton. 2020. ``COVID-19 and Beyond: Oversight
of the FDA's Foreign Drug Manufacturing Inspection Process--06/02/
2020.'' FDA. June 4, 2020. https://www.fda.gov/news-events/congressional-testimony/covid-19-and-beyond-oversight-fdas-foreign-drug-manufacturing-inspection-process-06022020; Shireesh Ambhaikar,
Shantaram Shenai, V. Govindarajan, Pavan Gajare, P. K. Kulkarni,
Shankar Suryanarayanan, Christopher Peterson, et al. 2025.
``Differences in the Cost of Manufacturing Pharmaceuticals in India
for Differently Regulated Markets: A Comparative Analysis.'' MedRxiv
(Cold Spring Harbor Laboratory), April. https://doi.org/10.1101/2025.04.16.25325941.
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The cost differential for a given drug dosage would be relative to
each particular drug's unit of measurement, referred to here as base
dosage. For instance, amoxicillin's base dosage is a single 500 mg
capsule; this means that the domestic cost differential for
reimbursement would be $0.12 per 500 mg amoxicillin if the drug is made
in the U.S. with non-U.S. API, and $0.25 per 500 mg amoxicillin if the
drug is made in the U.S. with U.S. API. If a hospital purchases a
bottle of 100 capsules of amoxicillin and each individual capsule
contains 1 gram of amoxicillin, then the purchased drug dosage (1000
mg) divided by the drug base dosage (500 mg) would lead to a multiple
of 2x per capsule, or 200x for the whole bottle. The NDC as used by the
hospital would correspond to the entire bottle of 100 amoxicillin
capsules, and would equate to a differential separate payment to the
hospital of $25 for U.S. FDF only. Similarly, if a 150 ml vial contains
100mg/5ml of linezolid, the purchased drug dosage is 3 gm linezolid
which is a multiple of 3x over the base dosage listed in the Table 81
of 1 gm.
All combination drugs containing the eligible drug molecules would
be acceptable for a potential separate payment adjustment, based only
on the dosage of eligible molecules (see Table 81 for examples).
Using the drug base dosage to calculate the differential separate
payment amounts would have three primary benefits over alternative
methodologies. First, it would provide flexibility with respect to new
market entrants because the base rate would correspond to a product
category as a whole, rather than a particular item. Second, this
approach would be more resistant to gaming than alternative approaches
because it does not rely on manufacturer submitted prices or temporary
market conditions that are more liable to capture idiosyncratic
factors, such as opportunistic price reporting, unrepresentative market
conditions at the time of measurement, or atypically exquisite
packaging. Lastly, it would be more transparent from the standpoint of
hospitals, which would be able to determine the amount of separate
payment for any NDC by applying the payment formula using the publicly
available file of eligible products by NDC.
Specifically, we are considering the following domestic essential
medicines for inclusion with the following base cost differentials and
drug base dosages:
BILLING CODE 4169-69-P
[[Page 41993]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.123
BILLING CODE 4169-69-C
If we were to adopt such a policy, we would expect to add
additional drugs in the future, increasing the number of drugs until
the list eventually includes all non-scheduled generic drugs with
domestic FDF production on the latest ARMI List. We would also expect
that we may account for the production location of pharmaceutical
precursors or key starting materials in addition to API and FDF
locations.
For these essential medicines, we are considering that an essential
medicine would be domestic if the country of origin is the U.S., where
``country of origin'' is defined through incorporation by reference as
``substantial transformation'' of the final dosage form (or the Active
Pharmaceutical Ingredient) via 19 CFR 134.1(b). This is identical to
the standard used by U.S. Customs and Border Protection, and thus
represents a familiar definition for the pharmaceutical industry. This
regulation defines ``country of origin'' as the country of manufacture,
production, or growth of any article of foreign origin entering the
U.S. The regulation also specifies that further work or material added
to an article in another country must effect a substantial
transformation in order to render such other country the ``country of
origin.'' ``Substantial transformation'' is defined by the
International Trade Administration to mean that the good underwent a
fundamental change in form, appearance, nature, or character.\204\
Under this approach, articles manufactured, produced, or grown in the
U.S., or that otherwise undergo a substantial transformation in the
U.S. would have a domestic country of origin for purposes of the
potential payment.
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\204\ For more information, see: https://www.trade.gov/rules-origin-substantial-transformation.
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E. Public File of Potential Eligible Domestic PPE and Potential
Eligible Domestic Essential Medicines
Under this potential policy, manufacturers of potentially eligible
domestic PPE and essential medicines would voluntarily submit annual
attestations to HHS that their products meet our domestic definitions.
The annual attestations for potentially eligible domestic essential
medicines would need to include country-of-origin information for FDF
and API, as applicable, that demonstrates that the product was either
wholly manufactured, produced, grown, or otherwise substantially
transformed in the U.S. Repackaging, on its own, would not be
interpreted as passing the ``substantial transformation'' test. For
domestically produced drugs whose API is not produced domestically,
submitters would attest that the API's country of origin was not a
country on the ``foreign adversaries'' list at 15 CFR
[[Page 41994]]
791.4 in order to be eligible. The annual attestations from PPE
manufacturers would have to demonstrate that the product was in
compliance with the ``Make PPE in America'' standards for domestic
procurement, with the exception of NBR. We believe manufacturers are
uniquely positioned to provide this information. We would welcome
public feedback on these approaches to determining eligibility for
domestic PPE and essential medicines for purposes of this potential
payment policy, including whether alternatives to ``country of origin''
would be more appropriate for determining eligibility for domestic
essential medicines, such as identifying the specific FDA-registered
facilities responsible for producing the FDF and API.
Under this potential policy, HHS would compile the information
provided by manufacturers and create an annual file of eligible
domestic products and domestic cost differential estimates, including
the NDC or UDI for the product, as applicable, manufacturer name, and
part number. This public file would be intended to provide hospitals
with a simple, reliable reference for identifying eligible domestic
products and the estimated domestic cost differentials.
F. Potential IPPS Approaches to a Separate Voluntary Payment Adjustment
for the IPPS Share of the Additional Resource Costs of Procuring
Eligible Domestic PPE and Eligible Domestic Essential Medicines
As discussed previously in section XXII.B., we are requesting
public comments on a potential separate payment adjustment under the
IPPS for the additional resource costs hospitals incur when procuring
domestically manufactured items. Based on a review of comments received
on the ANPRM, we are considering using our authority under section
1886(d)(5)(I) of the Act to establish a voluntary separate IPPS payment
adjustment for the IPPS share of the additional resource costs incurred
by hospitals in procuring eligible domestic PPE and essential
medicines, as discussed in greater detail in this section. To further
support the strategic policy goal of sustaining a level of supply
resilience for eligible domestic PPE and essential medicines that are
critical to protect the health and safety of personnel and patients,
consistent with the existing surgical N95 FFRs policy, we are
considering if this potential IPPS payment adjustment should not be
budget neutral.
High-quality domestic PPE and essential medicines are generally
more expensive than foreign-made ones, especially those produced by
manufacturers with less mature manufacturing quality systems.\205\
These higher prices primarily stem from higher costs of manufacturing
labor in the U.S. compared to costs in other countries, where most PPE
and molecular precursors of pharmaceuticals are made, and high
investment requirements to maintain mature manufacturing quality
systems. These higher prices result in higher marginal costs for
hospitals for procuring domestically made PPE and essential medicines.
As discussed in the ANPRM (91 FR 3854), an ASPR review of publicly
available individual and wholesale prices for both domestic and non-
domestic nitrile gloves on manufacturer websites shows that the price
of domestically manufactured nitrile gloves is approximately 1.5 to 3
times that of non-domestically manufactured nitrile gloves. A similar
ASPR review of the publicly available prices of API from domestic and
non-domestic sources reveals that domestic API are, on average,
approximately 12 times as expensive as non-domestic alternatives. As
previously discussed, we are requesting public comments on a potential
separate payment adjustment under the IPPS for the IPPS share of the
additional resource costs hospitals incur when procuring domestic PPE
and essential medicines. We are also seeking feedback on potential
approaches to calculating that separate payment, including the
approaches discussed in this section.
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\205\ U.S Department of Health and Human Services: Policy
Considerations to Prevent Drug Shortages and Mitigate Supply Chain
Vulnerabilities in the United States, April 2024: https://aspe.hhs.gov/sites/default/files/documents/bd863be8f0aaf5380dc801390440bc3d/HHS-White-Paper-Preventing-Shortages-Supply-Chain-Vulnerabilities.pdf.
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One approach we are considering proposing in future rulemaking is a
claims-based payment approach (Approach 1) and another is a cost-report
payment approach (Approach 2). We first discuss the potential
approaches as applied to domestic essential medicines and then discuss
them as applied to domestic PPE as tracking domestic PPE use at the
IPPS patient level may not be possible for hospitals, although we seek
public input on this issue. To the extent tracking domestic PPE use at
the IPPS patient level may not be possible for hospitals, we discuss
two potential options for an allocation methodology under Approach 2 as
applied to domestic PPE (Approach 2a and Approach 2b) that we might
consider for future rulemaking.
Under Approach 1 as applied to domestic essential medicines, the
claims processing system would use the domestic cost differentials
discussed in section XXII.D. to automatically calculate and pay the
separate IPPS payment adjustment based on the domestic NDCs and units
of those NDCs for eligible domestic essential medicines furnished to an
IPPS inpatient during an IPPS hospital stay that a hospital voluntarily
bills on the IPPS claim for that IPPS stay.
Under Approach 2 as applied as applied to essential medicines, a
hospital would voluntarily use that same information to calculate the
payment across all of its IPPS stays during its cost reporting period
and report that aggregated information on its cost report instead of
billing individually on its IPPS claims. The payment is the same under
either approach, but the hospital would not need to submit the NDCs on
the claim under Approach 2. As with the current N95 policy, hospitals
could request interim biweekly payments under Approach 2 and would be
reconciled at cost report settlement. Biweekly payment amounts would be
determined by the Medicare Administrative Contractor, consistent with
existing policies and procedures using an estimate of the annual
reimbursable amount for the year divided into 26 equal payments.
For PPE, to the extent that a hospital can track its use of
domestic PPE for individual IPPS inpatients as it can for domestic
essential medicines, Approach 1 and Approach 2 would operate similarly
for domestic PPE as they would for domestic essential medicines. Under
Approach 1, the claims processing system would use the domestic cost
differentials discussed in section XXII.C. to automatically calculate
and pay the separate IPPS payment adjustment based on the amount of
eligible domestic PPE used in furnishing services to an IPPS inpatient
during an IPPS hospital stay that a hospital voluntarily bills on the
IPPS claim for that IPPS stay.
To implement this approach, we would create three new billing codes
for this purpose: a billing code for eligible domestic N95 FFRs, a
billing code for eligible domestic gloves, and a billing code for
eligible domestic gowns.
Under Approach 2, a hospital would voluntarily use that same
information to calculate the payment across all of its IPPS stays
during its cost reporting period and report that aggregated information
on its cost report instead of billing it individually on its IPPS
claims. The payment is the same under
[[Page 41995]]
either approach (if domestic PPE use is tracked by the hospital at the
IPPS patient level under Approach 2, such as by UDI for the product),
but hospitals would not need to submit new PPE billing codes on the
claim under Approach 2.
To the extent tracking domestic PPE use at the IPPS patient level
may not be possible for a hospital, a reasonable allocation methodology
would need to be used under Approach 2 to allocate the aggregate amount
of domestic PPE purchased by the hospital to IPPS inpatients. We
discuss two potential options for an allocation methodology under
Approach 2 that we might consider for future rulemaking. Under either
potential allocation option, a hospital would report on its cost report
the aggregate amount of eligible domestic FFRs purchased, the aggregate
amount of eligible domestic gloves purchased, and the aggregate amount
of eligible domestic gowns purchased. We also discuss an illustrative
example of how each approach might work for the domestic FFRs purchased
by a hospital.
Under the first allocation option (Approach 2a), we could use the
domestic cost differentials discussed in section XXII.C. and the amount
of each type of eligible domestic PPE purchased to calculate the total
domestic differential costs incurred by the hospital. To allocate a
portion of the total domestic differential costs to IPPS inpatients for
purposes of making a separate payment under Approach 2a, we would use
the same method and cost data already reported on the hospital cost
report that is used under the current N95 FFRs policy. Specifically,
the separate payment would be calculated by multiplying the total
domestic differential costs by the following fraction (Fraction 1):
Total Medicare Part A hospital inpatient costs as reported
on the cost report in Worksheet D-1 Part II, line 49,\206\ divided by
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\206\ Include the inpatient costs as reported in Worksheet E,
Part A, lines 55, 55.01, and 56, if applicable.
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Total costs for all inpatient routine services, ancillary
services, outpatient services, and other reimbursable services as
reported on the cost report in Worksheet C Part I line 202 column 5.
An alternative allocation approach (Approach 2b) could be to
determine, for each category of PPE, a reasonable upper bound on the
amount of eligible domestic PPE used in furnishing services to IPPS
inpatients. Under this approach, in addition to reporting the aggregate
amounts of eligible domestic FFRs, eligible domestic gloves, and
eligible domestic gowns purchased, a hospital would report the
aggregate amounts of total FFRs, total gloves, and total gowns
purchased--irrespective of whether the FFRs, gloves, and gowns are
domestic or non-domestic.
Under Approach 2b, we would first proxy the inpatient portion of
the total amount purchased for each category of PPE. In other words,
because the total amount purchased by the hospital was used to furnish
outpatient and inpatient services, we first need to proxy the portion
that was used to furnish inpatient services. We seek public input on
potentially using the hospital revenue information on Worksheet G-2 (or
suggestions for other alternatives, revenue based or otherwise) to
proxy the portion of the total amount purchased for each PPE category
that was used to furnish inpatient services.\207\ If CMS were to use
revenue, we would multiply the total purchased for each PPE category by
the following fraction (Fraction 2) calculated from existing cost
report information:
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\207\ Because ancillary costs for all payers are not cleanly
subdivided on the cost report between inpatient and outpatient, we
are considering using inpatient and outpatient revenue for this
purpose.
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The sum of the inpatient revenue reported on Worksheet G-
2, Part I, column 1 (Inpatient), lines 1,16, and 18, divided by
The sum of the total revenue reported on Worksheet G-2,
Part I, column 3 (Total), line 28.
Having proxied the inpatient portion of each PPE category, CMS
could then proxy an upper bound on the IPPS inpatient portion of each
PPE category by multiplying by a fraction (Fraction 3) that represents
the portion of the hospital's inpatient services furnished to Medicare
inpatients relative to all inpatients, calculated from existing cost
report information as:
The sum of the Medicare inpatient days reported on
Worksheet S-3, Part I, column 6 (Title XVIII), or column 6.01 (if
applicable), lines 1, 8 through 12, and subscripts as applicable,
divided by
The sum of the inpatient days reported on Worksheet S-3,
Part I, column 8 (Total All Patients), lines 1, 8 through 12, and
subscripts as applicable.
The result of this calculation for each PPE category would be the
estimated upper bound on the eligible domestic FFRs, gowns, and gloves,
respectively, used in furnishing services to IPPS inpatients.
For each PPE category, we would then multiply the upper bound by
the domestic cost differential discussed in section XXII.C. to
establish an IPPS limit for the separate payment to the hospital for
that category of eligible PPE.
Using these IPPS limits, the separate payment to a hospital under
Approach 2b would be calculated as the domestic cost differentials
discussed in section XXII.C. multiplied by the aggregate amount of each
type of domestic PPE purchased by the hospital, not to exceed the IPPS
limit for that category of PPE for that hospital.
For purposes of illustrating the differences between Approach 2a
and Approach 2b, we provide a hypothetical calculation of the separate
IPPS payment under each approach for domestic FFRs purchased by General
Hospital (GH). This calculation uses the following assumptions
regarding GH's FFR purchases and cost report: (1) GH purchased 1
million FFRs; (2) 300,000 of those FFRs were domestic; (3) GH's total
Medicare Part A hospital inpatient costs represent 10 percent of its
total costs (Fraction 1); (4) GH's inpatient revenue represents 35
percent of its total revenue (Fraction 2); and (5) GH's IPPS days
represent 25 percent of its total inpatient days (Fraction 3). The last
three assumptions are approximately equal to the median values of those
percentages across all IPPS hospitals based on cost report data.
Under Approach 2a, GH would report on its cost report the 300,000
domestic FFRs purchased by the hospital.
Using the potential domestic differential unit cost for FFRs of
$0.38 as discussed in Section XXII.C., the total domestic differential
incurred by the hospital is $114,000, which is equal to the 300,000
domestic FFRs purchased times the $0.38 domestic differential unit
cost.
Using the fact that GH's total Medicare Part A hospital inpatient
costs represent 10 percent of its total costs (Fraction 1), the
separate IPPS payment under Approach 2a would be $11,400, which is
equal to 10 percent of the $114,000 total domestic differential.
Alternatively, under Approach 2b, GH would report on its cost
report the 1 million total FFRs purchased and the 300,000 domestic FFRs
purchased.
Using the fact that GH's inpatient revenue represents 35 percent of
its total revenue (Fraction 2), CMS would proxy the portion of the 1
million FFRs used in furnishing services to inpatients as 350,000 FFRs,
which is equal to 35 percent of the 1 million total FFRs.
Using the fact that GH's IPPS days represent 25 percent of its
total inpatient days (Fraction 3), CMS would calculate an upper bound
on the number of those 350,000 inpatient FFRs used in furnishing
services to IPPS
[[Page 41996]]
inpatients as 87,500 FFRs, which is equal to 25 percent of the 350,000
inpatient FFRs.
Using the potential domestic differential unit cost for FFRs of
$0.38, CMS would calculate the IPPS payment limit as $33,250, which is
equal to the 87,500 FFRs times the $0.38 domestic differential unit
cost.
CMS would compare the total domestic differential of $114,000
(calculated the same as under Approach 2a) with the IPPS payment limit
of $33,250 and the separate payment would be the lower of the two. In
this illustrative example, the separate payment to GH under Approach 2b
would be $33,250 because the total domestic differential of $114,000
exceeds the IPPS payment limit.
In summary, in this illustrative example GH would receive a
separate IPPS payment of $11,400 under Approach 2a or alternatively a
separate payment of $33,250 under Approach 2b.
G. Maximum Annual Amount of Aggregate Payments
Regardless of the payment approach, in conjunction with any such
potential policy, we believe it may be prudent to establish an
appropriate maximum annual amount of aggregate separate payments that
would be available (e.g. $500 million or $1 billion) across all IPPS
hospitals. To implement such an approach, we could prospectively
allocate shares of this aggregate amount to individual hospitals before
the start of the fiscal year. If the actual separate payment to a
hospital for the fiscal year exceeds its allocated maximum amount, the
excess amount would be reconciled at cost report settlement, as the
payment for that hospital's excess cost would be considered still
bundled into the MS-DRG payment and not separately payable. One
potential mechanism for allocating the amount to individual hospitals
would be the Medicare inpatient days as reported on Worksheet S-3, Part
I, column 6 (Title XVIII), or column 6.01 (if applicable), lines 1, 8
through 12, and subscripts as applicable. A hospital's share of the
Medicare inpatient days aggregated across all hospitals would be
multiplied by the maximum annual amount of aggregate separate payment
in order to determine its allocated amount. For example, if the maximum
annual amount of aggregate separate payment under this potential policy
were $1 billion in a given fiscal year and a hospital's share of
aggregated Medicare inpatient days was 0.03 percent based on historical
cost reports, then the prospectively determined allocated maximum
amount for that hospital for that fiscal year would be $300,000 (=$1
billion * 0.03 percent).
H. Solicitation of Additional Options: Domestic PPE and Essential
Medicines
In addition to the approaches described earlier, we solicit general
input on additional options from the public. Comments that include
detailed information on economic impacts, timing, potential statutory
authorities, and a discussion of trade-offs with respect to such
options are especially useful to CMS. We are also requesting comment on
the operational feasibility and difference of the approach for PPE
versus essential medicine of the different aspects of the potential
policy. We also seek comment and applicable data regarding current
domestic production capacity, manufacturers' ability to expand output,
expected expansion timelines, and barriers to scaling production.
Please include references to research and data in comments where
appropriate.
We note that because the current statutory authority for the
existing payment adjustment under the OPPS for the additional resource
costs that hospitals face in procuring domestic NIOSH-approved surgical
N95 FFRs (section 1833(t)(2)(E) of the Act) requires those payments to
be budget neutral (87 FR 72042, 72268 through 72269), we are not
considering expanding and revising the current OPPS N95 policy.
Instead, we are considering sunsetting the existing surgical N95 FFRs
policy, and also considering simultaneously prospectively removing the
associated OPPS budget neutrality adjustment while we explore
alternative outpatient approaches for the future.
We also note that after consideration of public feedback on the
ANPRM, we are no longer exploring, at this time, a new ``Secure
American Medical Supplies'' friendly designation or a new structural
quality measure as part of the Hospital IQR Program.
XXIII. Request for Information on Strengthening the Standardization and
Comparability of Hospital Price Transparency Data
A. Background
Since January 1, 2021, CMS has required each hospital operating in
the United States to provide clear, accessible pricing information
online about the items and services they offer in two ways: (1) as a
comprehensive machine-readable file (MRF) and (2) via a consumer-
friendly display. The data we require hospitals to disclose in the MRF
serves as a critical resource for users, including employers,
researchers and innovators, who may be leveraging the data with the
goal of stimulating competition, generating new insights, and driving
down healthcare costs. In parallel, the consumer-friendly display
empowers consumers seeking healthcare services by making it easier to
shop and compare prices across hospitals. Through past rulemaking
cycles, requests for information (RFIs), interested parties' listening
sessions, and evidence gathered from our compliance process, we
continue to identify paths to further refine the hospital price
transparency regulations.
The White House issued Executive Order 14221, ``Making America
Healthy Again by Empowering Patients with Clear, Accurate, and
Actionable Healthcare Pricing Information'' on February 25, 2025 (90 FR
11005). Pursuant to this Executive Order, we will ``continue to promote
universal access to clear and accurate healthcare prices'' and
``identify opportunities to further empower patients with meaningful
price information.'' We are committed to providing consumers with the
information needed to make informed decisions about their healthcare,
and on November 21, 2025, we issued the CY 2026 OPPS/ASC final rule
with comment period to further advance this commitment (90 FR 53448).
In the CY 2026 OPPS/ASC final rule with comment period, we finalized
changes to the hospital price transparency regulations to help ensure
that hospitals provide meaningful, accurate information about the
amount they charge for healthcare items and services. We required
hospitals to make their MRFs more useful and comparable by publishing
actual dollar-based pricing data. Specifically, when a payer-specific
negotiated charge is based on a percentage or algorithm, hospitals are
required to encode the median, 10th percentile, and 90th percentile
allowed amounts (as defined by CMS at 45 CFR 180.20), along with the
number of claims used to calculate those figures, using remittance data
from the prior 12 to 15 months. We also required hospitals to attest
that their MRFs are true, accurate, and complete and that the hospital
has included all applicable payer-specific negotiated charges in
dollars that can be expressed as a dollar amount; and for payer-
specific negotiated charges that cannot be expressed as a dollar amount
in the MRF or are not knowable in advance, the hospital has provided in
the MRF all necessary information available to the hospital for the
public to be able to derive a dollar amount. Furthermore, we
[[Page 41997]]
required that the attestation identify a senior official designated to
oversee the encoding of true, accurate, and complete data. Lastly, we
finalized a requirement for hospitals to include their Type 2 National
Provider Identifier(s) to improve standardization across hospitals.
These changes went into effect January 1, 2026, with enforcement of
these requirements starting April 1, 2026.
B. MRF RFI
We continue to make meaningful progress in standardizing the MRF to
lay a strong foundation for transparency and consistency, and we
believe that further enhancements to the format and content of the MRF
will build on this progress to increase the utility and comparability
of the data. We also continue to gain experience with the recent
changes finalized in the CY 2026 OPPS/ASC final rule with comment
period and continue to assess the extent to which they achieve the
objectives outlined in Executive Order 14221. To inform potential
enhancements, we have sought feedback from interested parties. On May
22, 2025, we posted the CMS Hospital Price Transparency Accuracy and
Completeness RFI on the CMS Hospital Price Transparency website. The
feedback gathered from this RFI further emphasized the importance of
standardization of data within the MRF to promote accuracy and
completeness. Responses also informed CMS' development of additional
checks during our compliance review of MRFs. In addition, since the
issuance of the CY 2026 OPPS/ASC final rule with comment period, we
have received additional suggestions from users of the MRF (innovators,
researchers, employers and consumers) through our hospital price
transparency mailbox regarding ways to further standardize and improve
the MRF data.
Over time, we have introduced several free text data elements (data
elements in which unstructured, narrative information is entered)
within the MRF and have required hospitals to encode a variety of
supporting standard charge information within these data elements. This
includes the requirement to encode a description of the standard charge
methodology in a free text data element if `other' is selected as the
valid value for the methodology as well as the requirement to encode an
explanation in a free text data element when the allowed amount
calculations are required but there is no remittance data to perform
those calculations. However, we have received feedback from interested
parties that valuable contextual information in these free text fields
can be difficult for MRF users to interpret or parse. We have
specifically received feedback regarding the need for more
standardization of outlier provisions and additional contract terms,
including, for example, outlier contract provisions that provide
additional reimbursement for cases with exceptionally high costs, stop-
loss contract clauses which provide additional reimbursement when a
patient's treatment costs exceed a specific pre-negotiated threshold,
rate-tiering arrangements where payers have categorized hospitals into
different tiers based on cost and quality, and carve-out provisions
which separate high-cost specialized services from standard bundled
rates. Some interested parties noted that these provisions are common
contracting practices between hospitals and payers, and that requiring
hospitals to report these clauses in a more standardized format would
help MRF users better understand when a standard charge applies, and
circumstances in which it may not apply. Through compliance reviews, we
have observed that this information is not uniformly encoded across
hospital MRFs.
We seek interested parties' feedback about whether outlier, stop-
loss, rate-tiering, and carve-out provisions are considered payer-
specific negotiated charges at the item or service level, in which case
they are already required to be encoded in the algorithm data element
for each item or service, or whether they are more appropriately
considered general contract provisions that apply broadly. When such
provisions apply broadly across items and services, we are interested
in feedback about specific requirements for standardization of such
complex contracting methodologies that would facilitate hospital
reporting of accurate and complete information. We have recently issued
guidance and examples on how to encode the payer-specific negotiated
charge algorithm data element, including the disclosure of outlier
information, to support standardization and comparability of this
information.\208\ However, given the importance of such provisions in
hospital contracts and evidence gathered from our experience with
compliance reviews and interested parties' feedback, which has shown
the need to more clearly indicate whether and when such provisions
apply in the MRFs, we anticipate providing additional guidance to
support even more clear and accurate reporting of this information and
proposing additional requirements through future notice and comment
rulemaking.
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\208\ https://www.cms.gov/files/document/hospital-price-trasparency-faqs-encoding-algorithms.pdf.
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Interested parties have also identified challenges arising from
variations in the name of a payer or a plan across hospitals' MRFs
which makes it hard to identify the payer-specific negotiated charge
for a specific payer-plan combination and makes comparison across
hospitals more difficult. For example, we have seen variations in plan
names such as Blue Cross, BlueCross, BC, and BCBS. Interested parties
have provided a number of recommendations on how CMS should require
more standardization including: publishing a standardized list of the
top payer names, requiring a payer or plan unique identifier, for
example, a tax identification number or employer identification number,
and requiring additional clarifying information like product type and
plan type.
Based on our observations while monitoring hospital compliance with
the hospital price transparency requirement, as well as assessing
recommendations from MRF users, we recognize the importance of
requiring more standardization in the MRF to increase the utility of
the data and, thereby, increasing competition. As such, we are seeking
information from the public on how to strengthen the transparency and
usability of the MRFs. Specifically, we welcome public comment on the
areas of consideration outlined below:
1. Increasing Transparency of Outlier Provisions and Additional
Contract Terms
What information is needed for users of the MRF to fully
understand contract terms related to outlier payments, stop-loss, rate-
tiering, carve-outs, and other adjustments that occur across hospital
items and services?
How are hospitals currently reporting contract terms for
outlier payments, stop-loss, rate-tiering, carve outs or other
adjustments in the MRFs? Are the current formats sufficient for
conveying these and other important contract terms? If not, what
changes to the current formats, such as separate data elements, would
be advised to accommodate the disclosure of such contract terms in a
standard manner?
Do outlier and carve-out contract terms typically apply to
individual services, a category of services, or across the entire
contract? Should rate-tiering standard charge information be reflected
in the payer-specific negotiated charge?
What additional contracting or payment adjustments affect
payer-specific negotiated charges at the item
[[Page 41998]]
or service level, across items and services, or at the contract level,
and should that information be encoded in the current data elements
provided? If not, what changes to the current formats would be advised
to capture this information in a standard manner?
2. Standardization To Enhance Utility of the MRF
Are there challenges in parsing and categorizing the free
text fields when analyzing MRFs? If so, what parameters or requirements
would facilitate parsing and categorizing free text fields?
Are there categories of information or topics consistently
included in free text fields that may be standardized through the
addition of new data elements? If so, what topic areas should be
considered?
Are there additional contract methodologies that should be
reflected as valid values in the MRF, outside the current valid values
of fee schedule, capitation, per diem, case rate and other?
Should CMS require more structured reporting of payer,
plan, product, network, and employer (as applicable) information across
hospital MRFs, and if so, which elements should be required? Are there
existing identifiers for payers and plans, to which hospitals have
access, that should be incorporated in the MRF?
What additional information should we consider to enhance
the utility and comparability of the MRF data?
C. Consumer-Friendly Display Request for Public Comment
In the final rule that appeared in the November 27, 2019, Federal
Register (84 FR 65524) titled ``Medicare and Medicaid Programs: CY 2020
Hospital Outpatient PPS Policy Changes and Payment Rates and Ambulatory
Surgical Center Payment System Policy Changes and Payment Rates: Price
Transparency Requirements for Hospitals to Make Standard Charges
Public'' (the CY 2020 HPT final rule), we finalized the requirement for
hospitals to display 300 total items and services, 70 of which CMS
specified, in a consumer-friendly display. We allowed hospitals to
choose the method to do so, either in a shoppable services file or
using a price estimator tool. At the time, we provided limited
specifications about the data requirements, allowing hospitals
flexibility in the format used to display this information.
While we have not altered these consumer-friendly display
requirements since issuing the CY 2020 HPT final rule, in an effort to
implement Executive Order 14221 we engaged in a series of listening
sessions with consumers, consumer advocacy organizations, hospitals,
and price estimator tool developers in June and July 2025. During these
sessions, we gathered feedback on how effective the consumer-friendly
display options were in supporting access to a real and comparable
price. The consumers and consumer advocacy organizations shared the
challenges of navigating different hospital consumer-friendly display
formats to find meaningful price comparisons, as well as the need for a
consistent set of requirements across the shoppable services file and
the price estimator tool, as the applicable regulatory requirements
differ. So as to streamline and standardize requirements for the
consumer-friendly display, some interested parties have recommended
that CMS no longer deem hospitals compliant with the consumer-friendly
display requirements if they offer a price estimator tool, as provided
at 45 CFR 180.60(a)(2). Some interested parties also indicated the
platforms and formats of price estimator tools vary widely across
hospitals, making it difficult to find and compare information. Given
the variability of price estimator tools across hospitals, deeming
hospitals compliant with the consumer-friendly display requirements if
they offer a price estimator tool may limit CMS' ability to address
consumers' requests to increase the comparability and usefulness of
this information.
Hospitals, consumers, consumer advocacy organizations, and price
estimator tool developers also provided feedback on what additional
contextual information is important to the consumer to understand a
real price, for example, knowing whether the price displayed includes
facility or professional service charges. Interested parties from
hospitals also indicated that consumers want to know what services are
and are not included in the price displayed, as well as the ancillary
services that would be billed with the shoppable service. Further,
interested parties offered suggestions on how to go beyond
standardizing data formats, suggesting a requirement to post more
comprehensive information, such as standard service packages, inclusive
of standard codes and ancillary services.
In addition, and as mentioned above, in the CY 2020 HPT final rule,
we required hospitals to display 70 CMS-specified items and services as
part of the total 300 items and services. Since the initial
requirement, we have heard feedback from interested parties that some
of these items and services may not be particularly useful to consumers
or are not universally applicable across all hospitals, such as the
add-on CPT code 29826 for shaving of shoulder bone using an endoscope,
which may not be considered a shoppable service by consumers or
furnished by all hospitals subject to the hospital price transparency
requirements. We have also received feedback that some of the required
items and services may be out-of-date as this list has not been updated
since the CY 2020 HPT final rule. Interested parties have offered
suggestions about items and services that may be better suited for the
CMS-specified items and services.
Finally, we frequently observe, through compliance reviews, that
there are differences between the data in a hospital's consumer-
friendly display and MRF for the same items and services. Specifically,
we have noted that standard charges in a hospital's consumer-friendly
display do not always match the standard charges for the same items and
services listed in the hospital's MRF. We are seeking feedback to
better understand the circumstances leading to differences in the
information across the two formats. Furthermore, a few interested
parties, particularly consumer advocates, have observed that hospitals
are able to provide information about discounted cash prices in their
price estimator tool, even where there is no information about
discounted cash prices encoded in the hospital's MRF. We are seeking
clarification to better understand why a hospital would be able to
provide information about a discounted cash price in the price
estimator tool, yet attest in their MRF, by not encoding the
information, that they have not established a discounted cash price for
that item or service.
From our interactions with consumers, hospitals, and price
estimator tool developers, we understand the need to strengthen the
comparability of the data included in the consumer-friendly display to
enhance consumers' ability to shop for care and obtain pricing
information in advance of scheduled services. As such, we are seeking
information from the public on how to enhance the comparability of the
consumer-friendly display data to inform future rulemaking.
Specifically, we welcome public comment on the following questions:
Should we revisit the number and types of CMS-specified
shoppable services? What are the advantages and disadvantages of
increasing or decreasing the number of shoppable services? Are there
specific shoppable services that CMS should include,
[[Page 41999]]
exclude, or update on the list of 70 CMS-specified items and services?
What would be the advantages and/or disadvantages of
requiring hospitals to submit a shoppable services file? Alternatively,
what would be the advantages and/or disadvantages of removing the
deemed compliance for the price estimator tools? Does the current
incongruity in how hospitals display shoppable services, with some
posting a shoppable services file and others utilizing a price
estimator tool, make it more difficult for consumers to actually
compare prices for shoppable services across different hospitals? What
positive or negative effects would consumers experience if the price
estimator tool alone were no longer considered compliant?
For hospitals that satisfy the consumer-friendly display
requirements through a price estimator tool, what mechanisms could be
used to make the underlying data available in a separate file?
Are there circumstances in which the standard charges in a
hospital's shoppable services file would not match the information for
the same items and services listed in the hospital's MRF? Why would a
hospital be able to provide a discounted cash price in its price
estimator tool but not in its MRF?
Which data elements are important for consumers to make
comparisons between hospitals? Would a standard shoppable services file
template make the information more comparable? How could a shoppable
services file indicate the ancillary services that are included in or
excluded from the price?
How should hospitals present ancillary items, implants,
and bundled services so consumers better understand total expected
costs? What approaches most effectively distinguish included versus
excluded services?
What additional information should we consider to enhance
the comparability of the consumer-friendly display data between
hospitals?
XXIV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501-
3520, we are required to provide notice in the Federal Register and
solicit public comment before a collection of information requirement
is submitted to the Office of Management and Budget (OMB) for review
and approval. To fairly evaluate whether an information collection
should be approved by OMB, 44 U.S.C. 3506(c)(2)(A) requires that we
solicit comment on the following issues:
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 are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs):
A. ICRs for the Hospital Outpatient Quality Reporting (OQR) Program
1. Background
In sections XIV. and XV. of this proposed rule, we discuss the
proposed requirements for the Hospital Outpatient Quality Reporting
Program. The Hospital Outpatient Quality Reporting Program is generally
aligned with the CMS quality reporting program for hospital inpatient
services known as the Hospital Inpatient Quality Reporting Program. We
refer readers to the CY 2026 OPPS/ASC final rule with comment period
(90 FR 54029 through 54037) for detailed discussions of the previously
finalized Hospital Outpatient Quality Reporting Program ICRs which are
currently under review for approval under OMB control number 0938-1109
(expiration date June 30, 2026).
In this proposed rule, we propose to: (1) remove the Appropriate
Follow-Up Interval for Normal Colonoscopy in Average Risk Patients
measure beginning with the CY 2027 reporting period/CY 2029 payment
determination; (2) incorporate electronic clinical quality measures
(eCQMs) into the existing validation process for chart-abstracted
measures beginning with eCQM data from the CY 2027 reporting period
affecting the CY 2030 payment determination; (3) reduce the validation
selection pool from 500 to up to 400 HOPDs beginning with validation
affecting the CY 2030 payment determination; and (4) remove the
requirement for hospitals to resubmit medical documentation as part of
their request for reconsideration of validation noncompliance,
beginning with data from the CY 2026 reporting period affecting the CY
2028 payment determination.
Additionally, as part of our proposal to incorporate eCQMs into the
existing validation process for chart-abstracted measures beginning
with CY 2027 eCQM data affecting the CY 2030 payment determination, we
would: (1) modify the number of chart-abstracted cases required for
validation from 12 per quarter to a maximum of 8 per quarter per
measure beginning with validation affecting the CY 2030 payment
determination; (2) replace the previously finalized 2-year validation
cycle with a 3-year validation cycle, where hospitals selected for
validation based on CY 2027 data affecting the CY 2029 payment
determination would not be selected again for validation of the same
data affecting the CY 2030 payment determination; (3) determine eCQM
validation scores using the same methodology currently used to score
chart-abstracted measure validation; (4) revise the policy to allow the
results of educational reviews for all four quarters of chart-
abstracted measure validation to be reflected in the final validation
score prior to the calculation of the confidence interval; and (5)
extend the educational review process established for chart-abstracted
measure validation to eCQM validation.
In the CY 2026 OPPS/ASC final rule with comment period, we
calculated reporting burden estimates for the Hospital Outpatient
Quality Reporting Program by utilizing the Bureau of Labor Statistics
(BLS) median hourly wage rate for Medical Records Specialists (90 FR
54029). Specifically, we used the industry-specific wage for Medical
Records Specialists working in ``general medical and surgical
hospitals'', as this categorization aligns the closest with the
Hospital Outpatient Quality Reporting Program care setting. The most
recent data from BLS' May 2025 National Occupational Employment and
Wage Estimates reflects a median hourly wage of $28.59 per hour for
Medical Records Specialists working in ``general medical and surgical
hospitals'' (SOC 29-2072).\209\ We calculated the cost of overhead,
including fringe benefits, at 100 percent of the median hourly wage,
consistent with previous years. This is a rough adjustment, both
because fringe benefits and overhead costs vary significantly by
employer and methods of estimating these costs vary widely in the
literature. Nonetheless, we believe that doubling the hourly wage rate
($28.59 x 2 = $57.18) to estimate total cost burden is reasonably
accurate. Accordingly, unless otherwise specified, we calculate cost
burden to hospitals using a wage plus benefits estimate of $57.18 per
hour throughout the discussion in this section of this proposed rule
for the
[[Page 42000]]
Hospital Outpatient Quality Reporting Program.
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\209\ U.S. Bureau of Labor Statistics. (2026). Occupational
Outlook Handbook, Medical Records Specialists. Available at https://data.bls.gov/oes/#/industry/622100/2025. Accessed: May 18, 2026.
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In the CY 2026 OPPS/ASC final rule with comment period, our burden
estimates assumed that approximately 3,200 hospital outpatient
departments (HOPDs) will report data to the Hospital Outpatient Quality
Reporting Program (90 FR 54029). For this proposed rule, based on the
most recent available data from the CY 2026 Hospital Outpatient Quality
Reporting Program payment determination, we estimate that 3,000 HOPDs
will report data to the Hospital Outpatient Quality Reporting Program
for the CY 2027 reporting period/CY 2029 payment determination and
future years.
2. Information Collection Burden Estimate for the Proposed Removal of
the Appropriate Follow-Up Interval for Normal Colonoscopy in Average
Risk Patients Measure Beginning With the CY 2027 Reporting Period/CY
2029 Payment Determination
As discussed in section XIV.B. of this proposed rule, we propose
removal of the Appropriate Follow-Up Interval for Normal Colonoscopy in
Average Risk Patients measure beginning with the CY 2027 reporting
period/CY 2029 payment determination. For this measure, HOPDs are
required to abstract data from patient charts as well as report the
measure electronically via CMS' Hospital Quality Reporting (HQR)
system. According to the current Hospital Outpatient Quality Reporting
Program Specifications Manual, the sample size requirement for HOPDs
with populations of 900 patients or less is 63 cases annually, and the
requirement for HOPDs with populations of greater than 900 patients is
96 cases annually.\210\ To be conservative, we base our burden
estimates on an estimate of 96 cases per HOPD annually. Under OMB
control number 0938-1109, the currently approved burden is 2.92 minutes
(0.049 hours) per case for chart-abstraction and 10 minutes (0.167
hours) per HOPD to report the measure via the HQR. Therefore, we
estimate that this proposal would result in a decrease in burden for
all 3,000 HOPDs of 14,612 hours [(0.049 hours x 96 cases x 3,000 HOPDs)
+ (0.167 hours x 3,000 HOPDs)] at a savings of $835,514 (14,612 hours x
$57.18) beginning with the CY 2027 reporting period.
---------------------------------------------------------------------------
\210\ CMS. (2025). Hospital OQR Program Specifications Manual
Release Notes version 19.0. Available at https://qualitynet.cms.gov/files/69274c02ec892eacec2209b5?filename=OQR_SpecManual_v19.0a.pdf.
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3. Information Collection Burden Estimate for the Proposed Validation
of eCQMs Beginning With Validation of CY 2027 Data Affecting the CY
2030 Payment Determination
As discussed in section XV.D. of this proposed rule, we propose to
incorporate eCQMs into the Hospital Outpatient Quality Reporting
Program's existing validation process for chart-abstracted measures. We
assume HOPDs would only need to upload one PDF file per case to CMS'
HQR system, and therefore estimate a burden of 1 minute (0.067 hours)
per case per HOPD and propose to validate up to 32 eCQM cases annually
from four calendar quarters of eCQM data (up to 8 cases x 4 quarters)
for each eCQM with mandatory reporting, starting with validation of CY
2027 eCQM data affecting the CY 2030 payment determination. For
purposes of estimating burden in this proposed rule, we assume 400
HOPDs would be selected for validation as discussed in section
XXIV.A.4. of this proposed rule. If the proposed reduction of the
validation selection pool from 500 to 400 HOPDs is not finalized in the
CY 2027 OPPS/ASC final rule with comment period, we will revise our
burden estimates in that final rule with comment period using the
requirement for selection of 500 HOPDs currently approved under OMB
control number 0938-1109. We note submission of medical documentation
would occur in the CY immediately following the CY of the data being
submitted (for example, CY 2027 data would be submitted in CY 2028, and
CY 2028 data would be submitted in CY 2029). For the CY 2028 reporting
period, in which HOPDs would be selected for validation of the ST-
Segment Elevation Myocardial Infarction (STEMI) eCQM, we estimate an
increase in burden of 213 hours across the 400 HOPDs selected for eCQM
validation (0.0167 hours x 4 quarters x 8 cases x 400 HOPDs) at a cost
of $12,198 (213 hours x $57.18). For the CY 2029 reporting period and
subsequent years, in which HOPDs would be selected for validation of
both the STEMI and Emergency Care Access & Timeliness eCQMs, we
estimate an increase in burden of 427 hours across the 400 HOPDs
selected for eCQM validation (0.0167 hours x 4 quarters x 16 cases x
400 HOPDs) at a cost of $24,397 (427 hours x $57.18).
As discussed in section XV.D. of this proposed rule, we propose
policies which would align the proposed incorporation of eCQMs into the
existing validation process for chart-abstracted measures beginning
with CY 2027 eCQM data affecting the CY 2030 payment determination.
Specifically, we propose to modify the number of cases selected for
chart-abstracted measure validation under the Hospital Outpatient
Quality Reporting Program to align with the proposed number of cases
selected for eCQM validation. We also propose to validate up to 32
randomly selected patient cases annually for each chart-abstracted
measure. Under these proposals, we would validate up to 32 randomly
selected patient cases for chart-abstracted clinical process of care
measures (up to 8 cases per quarter), starting with validation of CY
2027 data affecting the CY 2030 payment determination. Submission of
medical documentation will occur in the CY immediately following the CY
of the data being submitted (for example, CY 2027 data will be
submitted in CY 2028). As currently approved under OMB control number
0938-1109, selected HOPDs are required to submit medical documentation
for validation for 48 cases (12 cases per quarter), for which we
estimate an information collection burden of 15 minutes (0.25 hours)
per case, or 12 hours per HOPD (0.25 hours/case x 48 cases). For the CY
2028 reporting period, in which HOPDs would be selected for validation
of both the Median Time from Emergency Department (ED) Arrival to ED
Departure for Discharged ED Patients and the Head Computed Tomography
(CT) or Magnetic Resonance Imaging (MRI) Scan Results for Acute
Ischemic Stroke or Hemorrhagic Stroke Patients Who Received Head CT or
MRI Scan Interpretation Within 45 Minutes of Arrival measures, we
estimate the burden associated with these proposals for the 400 HOPDs
selected for validation to be 6,400 hours (0.25 hours x 64 cases x 400
HOPDs) at a cost of $365,952 (6,400 hours x $57.18). For the CY 2029
reporting period, in which HOPDs would be selected for validation of
only the Head CT or MRI Scan Results for Acute Ischemic Stroke or
Hemorrhagic Stroke Patients Who Received Head CT or MRI Scan
Interpretation Within 45 Minutes of Arrival measures, we estimate the
burden associated with these proposals for the 400 HOPDs selected for
validation to be 3,200 hours (0.25 hours x 32 cases x 400 HOPDs) at a
cost of $182,976 (3,200 hours x $57.18). We discuss the revised
information collection burden for all HOPDs selected for chart-
abstracted measure validation in section XXIV.A.4. of this proposed
rule where we discuss our proposal to modify the validation
[[Page 42001]]
selection pool from 500 HOPDs to 400 HOPDs.
Additionally, we propose to replace the previously finalized 2-year
validation cycle with a 3-year validation cycle beginning with CY 2027
data affecting the CY 2030 payment determination, under which
validation results for a single year of data would be applied to the
applicable payment determination 3 years later. Under this proposal,
HOPDs selected for chart-abstracted measure validation based on CY 2027
data, affecting the CY 2029 payment determination, would not be
selected again for validation of the same data affecting the CY 2030
payment determination. We also propose to determine eCQM validation
scores using the methodology currently used to score chart-abstracted
measure validation; revise our policy to allow the results of
educational reviews for all four quarters of chart-abstracted measure
validation to be reflected in the final validation score prior to the
calculation of the confidence interval; and extend the educational
review process established for chart-abstracted measure validation to
eCQM validation. These proposed changes to the HOPD selection and
targeting methodology, validation cycles, scoring methodology,
validation scoring, and the educational review process would not affect
information collection burden as neither the amount of data nor
frequency of data submission is impacted.
4. Information Collection Burden Estimate for the Proposed Modification
of the Validation Selection Pool From 500 to up to 400 HOPDs Beginning
With Validation of CY 2027 Data Affecting the CY 2030 Payment
Determination
As discussed in section XV.D.2.a. of this proposed rule, we propose
to reduce the number of hospitals selected at random for validation
from 450 HOPDs to up to 200 HOPDs and to increase the number of
hospitals selected by targeting criteria from 50 HOPDs to up to 200
HOPDs, for a total of up to 400 HOPDs selected each year beginning with
validation of CY 2027 data affecting the CY 2030 payment determination.
For purposes of estimating burden in this proposed rule, we assume
HOPDs would be required to submit medical record documentation for 32
cases as discussed in section XXIV.A.3. of this proposed rule. If the
proposed modification to modify the number of required cases from 48 to
32 cases per chart-abstracted measure is not finalized in the CY 2027
OPPS/ASC final rule with comment period, we will revise our burden
estimates using the requirement of 48 cases currently approved under
OMB control number 0938-1109. As discussed in section XXIV.A.3. of this
proposed rule, for the CY 2028 reporting period, we estimate these two
proposals would result in a revised total burden of 6,400 hours (0.25
hours x 4 quarters x 16 cases x 400 HOPDs) at a cost of $365,952 (6,400
hours x $57.18) if finalized; an increase of 400 hours and $22,872 from
our currently approved burden of 6,000 hours and $343,080. For the CY
2029 reporting period, we estimate these two proposals would result in
a revised total burden of 3,200 hours (0.25 hours x 4 quarters x 8
cases x 400 HOPDs) at a cost of $182,976 (3,200 hours x $57.18) if
finalized; a decrease of -2,800 hours and $160,104 from our currently
approved burden estimate.
5. Information Collection Burden Estimate for the Proposed Removal of
the Requirement for Hospitals To Resubmit Medical Documentation as Part
of a Validation Reconsideration Request, Beginning With Data From the
CY 2026 Reporting Period Affecting the CY 2028 Payment Determination
As discussed in section XV.E. of this proposed rule, we propose to
remove the requirement for HOPDs to resubmit medical documentation as
part of their request for reconsideration of validation noncompliance,
beginning with data from the CY 2026 reporting period affecting the CY
2028 payment determination. Instead, we would re-use the medical
documentation previously submitted by the HOPD during the validation
process. The removal of this requirement would not affect burden
related to validation requirements, as reconsideration is an optional
administrative activity, and HOPDs would still be required to submit
the same number of requested medical records to validate the accuracy
of eCQM data (the extent to which data abstracted from the submitted
medical record matches the data submitted in the QRDA I file).
Additionally, as currently approved under OMB control number 0938-1109,
consistent with regulations under the Paperwork Reduction Act of 1995,
5 CFR 1320.4, the burden associated with filing a Reconsideration
Request is excluded from our calculation of information collection
burden because this collection occurs during the conduct of an
administrative action.
6. Summary of Information Collection Burden Estimates for the Hospital
OQR Program
Tables 82 through 84 summarize the information collection burden
changes under OMB control number 0938-1109. We estimate that the
proposed measure removal and modifications to the validation process in
this proposed rule would result in a net decrease in information
collection burden of 16,985 hours at a savings of $971,221 annually for
all 3,000 program-eligible HOPDs beginning with the CY 2029 reporting
period/CY 2031 payment determination. We will submit the revised
information collection estimates to OMB for approval under OMB control
number 0938-1109. With respect to any costs/burdens unrelated to data
submission, we refer readers to the regulatory impact analysis in
section XXVII. of this proposed rule.
[[Page 42002]]
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[[Page 42003]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.125
[[Page 42004]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.126
B. ICRs for the Rural Emergency Hospital (REH) Quality Reporting
Program
1. Background
In section XVI. of this proposed rule, we summarize the previously
approved requirements for the REH Quality Reporting Program. We are not
proposing any changes to the previously finalized REH Quality Reporting
Program policies in this proposed rule. The REH Quality Reporting
Program is generally aligned with the CMS quality reporting program for
HOPDs, known as the Hospital Outpatient Quality Reporting Program. We
refer readers to the CY 2026 OPPS/ASC final rule with comment period
(90 FR 54037 through 54041) for detailed discussions of the previously
finalized REH Quality Reporting Program ICRs, which have been approved
under OMB control number 0938-1454 (expiration date December 31, 2026).
In the CY 2026 OPPS/ASC final rule with comment period, we
calculated reporting burden estimates for the REH Quality Reporting
Program by utilizing the BLS median hourly wage rate for Medical
Records Specialists (90 FR 54037). Specifically, we used the industry-
specific wage for Medical Records Specialists working in the ``general
medical and surgical hospitals'' industry, as this categorization
aligns the closest with the REH Quality Reporting Program care setting.
The most recent data from BLS' May 2025 National Occupational
Employment and Wage Estimates reflects a median hourly wage of $28.59
[[Page 42005]]
per hour for Medical Records Specialists working in ``general medical
and surgical hospitals'' (SOC 29-2072).\211\ We calculated the cost of
overhead, including fringe benefits, at 100 percent of the median
hourly wage, consistent with previous years. This is necessarily a
rough adjustment, both because fringe benefits and overhead costs vary
significantly by employer and methods of estimating these costs vary
widely in the literature. Nonetheless, doubling the hourly wage rate
($28.59 x 2 = $57.18) to estimate total cost is a reasonably accurate
estimation method. Accordingly, unless otherwise specified, we will
calculate cost burden to REHs using a wage plus benefits estimate of
$57.18 per hour throughout the discussion in this section of this rule
for the REH Quality Reporting Program.
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\211\ U.S. Bureau of Labor Statistics. (2026). Occupational
Outlook Handbook, Medical Records Specialists. Available at: https://data.bls.gov/oes/#/industry/622100/2025. Accessed: May 18, 2026.
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In the CY 2026 OPPS/ASC final rule with comment period, our burden
estimates were based on the 38 acute care and critical access hospital
conversions to REH status as of April 11, 2025 (90 FR 54037). For this
proposed rule, based on the actual number of acute care and critical
access hospital conversions to REH status as of April 6, 2026, we
estimate that 48 REHs will report data to the REH Quality Reporting
Program during the CY 2027 reporting period unless otherwise noted.
While the exact number of REHs required to submit data may vary due to
status changes to and from an REH, as reiterated in section XVI. of
this proposed rule, REHs are required by statute to submit quality
data. Therefore, we assume that all 48 REHs will submit data under the
REH Quality Reporting Program for the CY 2027 reporting period and
subsequent years.
2. Revised Information Collection Burden Estimates for Currently
Approved Measures
Our currently approved information collection burden estimates of
464 hours at a cost of $26,532 (using revised wage rates) are based on
an estimate of 38 REHs reporting data for the REH Quality Reporting
Program. This burden is entirely associated with the reporting of
chart-abstracted measures as REHs have the option to report either the
Median Time for Discharged Emergency Department (ED) Patients measure
or the Emergency Care Access & Timeliness eCQM to meet program
requirements, and the estimated burden for the Median Time for
Discharged ED Patients is greater than the estimated burden for the
Emergency Care Access & Timeliness eCQM. As discussed in section
XXIV.B.1. of this proposed rule, we are updating our assumption of the
number of REHs that will submit data under the REH Quality Reporting
Program from 38 REHs to 48 REHs, an increase of 10 REHs. Our currently
approved burden estimates assume that for chart-abstracted measures
where patient-level data are submitted directly to CMS, REHs require
2.9 minutes, or 0.049 hours per case per measure to collect and submit
the data for each submitted case. We further assume that each REH will
abstract and submit data from 63 cases per quarter, for a total of 252
cases per year. Therefore, we estimate each REH requires 12.2 hours
(0.049 hours x 252 cases) at a cost of approximately $698 (12.2 hours x
$57.18) to collect and report data for the Median Time for Discharged
ED Patients measure. For the increase of 10 REHs, we estimate an
increase in annual chart-abstraction burden of 122 hours (12.2 hours x
10 REHs) at a cost of $6,976 (122 hours x $57.18).
C. ICRs for the Ambulatory Surgical Center (ASC) Quality Reporting
Program
1. Background
In sections XIV. and XVII. of this proposed rule, we discuss the
proposed requirements for the ASC Quality Reporting Program. We refer
readers to the CY 2026 OPPS/ASC final rule with comment period (90 FR
54041 through 54045) for detail regarding the previously finalized ASC
Quality Reporting Program ICRs which are currently under review for
approval under OMB control number 0938-1270 (expiration date June 30,
2026). We propose to remove the Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk Patients measure beginning with the
CY 2027 reporting period/CY 2029 payment determination.
In the CY 2026 OPPS/ASC final rule with comment period, we
calculated reporting burden estimates for the ASC Quality Reporting
Program by utilizing the BLS median hourly wage rate for Medical
Records Specialists (90 FR 54042). Specifically, we used the industry-
specific wage for Medical Records Specialists working in the ``general
medical and surgical hospitals'' industry, as this categorization
aligns the closest with the ASC Quality Reporting Program care setting.
The most recent data from BLS' May 2025 National Occupational
Employment and Wage Estimates reflects a median hourly wage of $28.59
per hour for Medical Records Specialists working in ``general medical
and surgical hospitals'' (SOC 29-2072).\212\ We calculated the cost of
overhead, including fringe benefits, at 100 percent of the median
hourly wage, consistent with previous years. This is necessarily a
rough adjustment, both because fringe benefits and overhead costs vary
significantly by employer and methods of estimating these costs vary
widely in the literature. Nonetheless, doubling the hourly wage rate
($28.59 x 2 = $57.18) to estimate total cost is a reasonably accurate
estimation method. Accordingly, unless otherwise specified, we will
calculate cost burden to ASCs using a wage plus benefits estimate of
$57.18 per hour throughout the discussion in this section of this rule
for the ASC Quality Reporting Program.
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\212\ U.S. Bureau of Labor Statistics. (2026). Occupational
Outlook Handbook, Medical Records Specialists. Available at: https://data.bls.gov/oes/#/industry/622100/2025. Accessed: May 18, 2026.
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Based on the most recent analysis of the CY 2026 payment
determination data, we found that of the 6,930 ASCs that were actively
billing Medicare, 4,399 were required to participate in the ASC Quality
Reporting Program. Of the 2,531 ASCs not required to participate in the
program, 650 ASCs did so and met full requirements. On this basis, we
estimate that 5,149 ASCs (4,399 + 650) will submit data for the ASC
Quality Reporting Program for the CY 2027 reporting period/CY 2029
payment determination and future years.
2. Information Collection Burden Estimate for the Proposed Removal of
the Appropriate Follow-Up Interval for Normal Colonoscopy in Average
Risk Patients Measure Beginning With the CY 2027 Reporting Period/CY
2029 Payment Determination
As discussed in section XIV.B. of this proposed rule, we propose
removal of the Appropriate Follow-Up Interval for Normal Colonoscopy in
Average Risk Patients measure beginning with the CY 2027 reporting
period/CY 2029 payment determination. For this measure, ASCs are
required to both abstract data from patient charts as well as report
the measure electronically via the HQR system. Regarding the number of
cases required for chart-abstraction, based on the current ASC Quality
Reporting Program Specifications Manual, we estimate that each
participating ASC will abstract and submit data for the minimum yearly
sample size of 63 annually.\213\ Under OMB control number 0938-1270,
the currently approved burden is 2.92 minutes (0.049
[[Page 42006]]
hours) per case for chart-abstraction and 10 minutes (0.167 hours) per
ASC to report the measure via the HQR. Therefore, we estimate that this
proposal would result in a decrease in burden for all 5,149 ASCs of
16,753 hours [(0.049 hours x 63 cases x 5,149 ASCs) + (0.167 hours x
5,149 ASCs)] at a savings of $957,937 (16,753 hours x $57.18).
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\213\ https://qualitynet.cms.gov/files/692dbe71ec892eacec22890b?filename=ASC_v15.0a_FullSpecMan.pdf.
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3. Summary of Information Collection Burden Estimates for the ASC
Quality Reporting Program
Table 85 summarizes the information collection burden changes for
OMB control number 0938-1270. We estimate the proposed measure removal
in this proposed rule would result in a decrease in information
collection burden of 16,753 hours at a savings of $957,937 annually for
all 5,149 program-eligible ASCs beginning with the CY 2027 reporting
period/CY 2029 payment determination. We will submit the revised
information collection estimates to OMB for approval under OMB control
number 0938-1270. With respect to any costs/burdens unrelated to data
submission, we refer readers to the regulatory impact analysis in
section XXVII. of this proposed rule.
[GRAPHIC] [TIFF OMITTED] TP07JY26.127
D. ICRs for the Implementation of Section 6225 of the Consolidated
Appropriations Act, 2026 for the Requirements for Provider-Based Status
(Sec. 413.65)
The requirements for a determination that a facility or an
organization has provider-based status are in the regulations at Sec.
413.65. Section 6225 of the CAA, 2026 added paragraph (23) to section
1833(t) of the Act, and prohibits Medicare payments for items and
services furnished on or after January 1, 2028, unless off-campus
outpatient departments of a provider meet certain conditions. New
section 1833(t)(23)(A) of the Act requires, as a condition of receiving
payment, that off-campus outpatient departments of a provider obtain
and bill under separate NPIs and that main providers submit provider-
based attestations in accordance with provisions at Sec. 413.65. New
section 1833(t)(23)(B)(i) of the Act requires the Secretary, through
notice and comment rulemaking, to establish a process for each provider
with an off-campus outpatient department to submit an initial and
subsequent attestation, for the review of each such attestation and for
the determination, through site visits, remote audits, or other means
(as determined appropriate by the Secretary), whether each off-campus
outpatient department is compliant with the requirements described in
subparagraph (A). In addition, new section 1833(t)(23)(C) defines an
``off-
[[Page 42007]]
campus outpatient department of a provider'' for purposes of paragraph
(23) as a department of a provider (as defined in Sec. 413.65) that is
not located on the campus (also defined in Sec. 413.65) of the main
provider or is not within the distance described in such definition of
campus from a remote location of a hospital (also defined in Sec.
413.65).
As discussed in greater detail section XX. of this proposed rule,
we propose modifications to the provider-based regulations at Sec.
413.65 to implement the new requirements of section 6225 of the CAA,
2026. Among those proposals, we propose to revise Sec. 413.65(b) to
add a reference to the new mandatory attestation requirement for an
off-campus outpatient department of a provider required by section 6225
of the CAA, 2026 and propose a maximum 5-year timeframe for any
subsequent attestation(s). In addition, we propose to establish a
standardized attestation form for provider-based determinations, in
connection with the provisions of section 6225 of the CAA, 2026, and
propose that providers would submit the attestation through a
centralized electronic system. The standardized form would replace the
current MAC-specific templates. We also propose to eliminate the
mandatory requirement for off-campus provider-based facilities or
organizations to supply supporting documentation at the time of
attestation. Under our proposal, until the standardized form and
centralized electronic system are finalized, providers may continue to
submit attestations using the current process in satisfaction of
section 6225 of the CAA, 2026.
The collection of information requirements for the existing
regulations at Sec. 413.65 that govern the requirements for a
determination that a facility or an organization has provider-based
status is associated with OMB control number 0938-0798 (expiration date
December 31, 2027). For the existing attestation requirement in Sec.
413.65(b)(3), OMB has currently approved 2,500 hours of burden at a
cost of approximately $327,150 based on accounting for information
collection burden experienced by approximately 250 main providers .
This estimated burden is based on the expectation that it would take a
main provider 10 hours per attestation and each main provider would
submit 1 attestation. In this proposed rule, we describe the burden
changes regarding collection of information, under OMB control number
0938-0798.
The burden associated with this new attestation requirement
continues to be the time for the main provider to report the facility's
status to CMS and furnish the necessary documentation to support a
provider-based determination. We believe this is reasonable as the
information submitted by the provider is typically information that the
provider already has regarding their business. However, as discussed in
greater detail in section XX.3. of this proposed rule, under the
proposal to establish a standardized attestation form for provider-
based determinations that providers would submit through a centralized
electronic system, we expect there would be a reduction in
administrative burden for providers, and a more efficient review
process for MACs and CMS. We anticipate that this reduction in
administrative burden for providers would decrease the time required to
submit each attestation by 25 to 75 percent.
As discussed in section XX.C. of this proposed rule, under existing
regulations the attestation process was required only if the main
provider sought a CMS determination of provider-based status. However,
under the provisions of section 6225 of the CAA, 2026, Medicare
payments will be prohibited unless off-campus outpatient departments of
a provider meet certain conditions, including that the main provider
has submitted an initial provider-based status attestation that the
off-campus outpatient department is compliant with the requirements
described in section Sec. 413.65 (or a successor regulation); and the
main provider has submitted a subsequent attestation within the
timeframe specified by the Secretary. As a result of this new mandatory
attestation requirement, we expect there to be an increase in both the
number of main providers submitting attestations and the number of
attestations submitted by each main provider. Under these new provider-
based status attestation requirements, it is estimated that 1,832 main
providers would take 5 hours per attestation, and, on average, each
main provider would submit 9 attestations for provider based
departments. Therefore, we have calculated the burden as follows:
16,488 responses times 5 hours per response = 82,440 burden hours. We
believe that an executive officer will be making the attestation
because an executive officer is in the best position to have access to
the business information required to make the attestation. Based on the
most recent Bureau of Labor and Statistics Occupational and Employment
Data (May 2024) at http://www.bls.gov/oes/current/oes_nat.htm# for
Category 11-0000 for the position of Top Executives, the mean hourly
wage for a top executive is $67.24. We have added 100 percent for
fringe and overhead benefits, which calculates to $134.48 per hour. We
estimate the total cost is $11,086,531 (82,440 hours x $134.48 per
hour). The estimated number of attestations has increased due to
section 6225 of the CAA, 2026 requiring providers submit attestations
for all off-campus provider-based departments. As such, the estimated
number of attestations has increased from 250 to 16,488 and the
estimated total cost has increased from $327,150 to $11,086,531.
E. ICRs for Expansion of Botulinum Toxin Injection Codes for Hospital
Outpatient Department (OPD) Prior Authorization Process
In the CY 2020 OPPS/ASC final rule with comment period, we
established a prior authorization process for certain hospital OPD
services using our authority under section 1833(t)(2)(F) of the Act,
which requires the Secretary to develop a method for controlling
unnecessary increases in the volume of covered OPD services (84 FR
61142, 61446 through 61456).\214\ As part of the CY 2021 OPPS/ASC final
rule with comment period, we added additional service categories to the
prior authorization process (85 FR 85866, 86236 through 86248). Through
the CY 2023 OPPS/ASC final rule with comment period, we added an eighth
service category to the list of OPD services requiring prior
authorization (87 FR 71748, 72224 through 72233.) The regulations
governing the prior authorization process are located in subpart I of
42 CFR part 419, specifically at Sec. Sec. 419.80 through 419.89.
---------------------------------------------------------------------------
\214\ See also Correction Notice issued January 3, 2020 (85 FR
224).
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In accordance with Sec. 419.83(b), we propose to expand the
Botulinum Toxin Injection service category to include additional codes
requiring prior authorization. To improve readability and brevity, as
we indicated earlier in the preamble, effective dates were removed and
the section numbering in the regulatory text was updated. The former
paragraphs (a)(1)(i) through (v), (a)(2)(i) and (ii), and (a)(3) have
been renumbered as (a)(1) through (8). The additional Botulinum Toxin
Injection codes would be added to existing codes located at proposed
revised Sec. 419.83 (a)(2) and would require prior authorization
beginning for service dates on or after July 1, 2027.
The ICR associated with prior authorization requests for these
covered outpatient department services is the required documentation
submitted by
[[Page 42008]]
providers. The prior authorization request must include all relevant
documentation necessary to show that the service meets applicable
Medicare coverage, coding, and payment rules. The request must be
submitted before the service is provided to the beneficiary and before
the claim is submitted for processing.
The burden associated with the prior authorization process for the
additional Botulinum Toxin Injection codes will be the time and effort
necessary for the submitter to locate and obtain the relevant
supporting documentation to show that the service meets applicable
coverage, coding, and payment rules, and to forward the information to
CMS or its contractor (Medicare Administrative Contractor) for review
and determination of a provisional affirmation. We expect that this
information will generally be maintained by providers within the normal
course of business and that this information will be readily available.
We estimate that the average time for office clerical activities
associated with this task would be 30 minutes, which is equivalent to
that for normal prepayment or postpayment medical review. We anticipate
that most prior authorization requests will be sent by means other than
mail. However, we estimate a cost of $5 per request for mailing medical
records. Based on CY 2024 data for the new services, we estimate that
annually, there would be 17,699 initial requests mailed during a year.
In addition, we estimate there would be 5,808 resubmissions of a
request mailed following a non-affirmed decision. Therefore, the total
annual mailing cost is estimated at $117,537 (23,507 mailed requests x
$5). We also estimate that an additional 3 hours per provider would be
required to attend educational meetings, train staff on what services
require prior authorization, and review training documents.
The average labor costs (including 100 percent fringe benefits)
used to estimate the costs were calculated using data available from
the Bureau of Labor Statistics (BLS). Based on the BLS 2024 rate for
Healthcare Support Workers, All Other,\215\ we estimate an average
median clerical hourly rate of $22.14 with a loaded rate of $44.28. The
prior authorization program for the new services will not create any
new documentation requirements. Instead, it will only require the same
documents needed to support claim payments to be submitted earlier in
the claim process. The estimate uses the clerical rate since we do not
believe that clinical staff will need to spend more time completing the
documentation that will be needed in the absence of the prior
authorization policy. The hourly rate reflects the time required for
the additional clerical work of submitting the prior authorization
request. We believe providers will need to educate their staff on what
services are included in the prior authorization process. Following
this education, the staff will know which services need prior
authorization and will not need additional time or resources to
determine whether a service requires prior authorization. We estimate
that the total annual number of submissions would be 78,358 (54,851
submissions via fax or electronic means + 23,507 mailed submissions).
The annual burden hours for the new services, allotted across all
providers, would be 41,555 hours (0.5 hours x 78,358 submissions plus 3
hours x 792 providers for education). The annual burden cost would be
$1,957,592 (41,555 hours x $44.28 plus $117,537 for mailing costs). The
ICR approved under OMB control number 0938-1368 will be revised and
submitted to OMB for approval.
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\215\ https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------
Table 86 is a chart reflecting the total burden and associated
costs for the provisions included in this proposed rule.
[GRAPHIC] [TIFF OMITTED] TP07JY26.128
If you comment on these information collection, that is, reporting,
recordkeeping or third-party disclosure requirements, please submit
your comments electronically as specified in the ADDRESSES section of
this proposed rule.
Comments must be received by the date and time specified in the
DATES section of this rule.
XXV. Files Available to the Public via the Internet
The Addenda to the OPPS/ASC proposed rules and final rules with
comment period are published and available via the internet on the CMS
website. In the CY 2019 OPPS/ASC final rule with comment period (83 FR
59154), for CY 2019, we changed the format of the OPPS Addenda A, B,
and C by adding a column titled ``Copayment Capped at the Inpatient
Deductible of $1,364.00'' where we flag, through use of an asterisk,
those items and services with a copayment that is equal to or greater
than the inpatient hospital deductible amount for any given year (the
copayment amount for a procedure performed in a year cannot exceed the
amount of the inpatient hospital deductible established under section
1813(b) of the Act for that year). In the CY 2021 OPPS/ASC final rule
with comment period (85 FR 86266), we updated the format of the OPPS
Addenda A, B, and C by adding a column titled ``Drug Pass-Through
Expiration during Calendar Year'' where we flag, through the use of an
asterisk, each drug for which pass-through payment is expiring during
the calendar year on a date other than December 31. In the CY 2026
final rule with comment period (90 FR 54058), we retained these columns
that are updated to reflect the drug codes for which pass-through
payment is expiring in the applicable year.
In the CY 2023 OPPS/ASC final rule with comment period (87 FR
72250) for CY 2023, we changed the format of the OPPS Addenda A, B, and
C by adding a column titled ``Drug Pass-Through Expiration during
Calendar Year'' to include devices, so that the column reads: ``Drug
and Device Pass-Through
[[Page 42009]]
Expiration during Calendar Year'' where we flagged, through the use of
an asterisk, each drug and device for which pass-through payment was
expiring during the calendar year on a date other than December 31.
In the CY 2024 OPPS/ASC final rule with comment period (88 FR
82131), we deleted the column titled ``Copayment Capped at the
Inpatient Deductible'' and instead added a new column for ``Adjusted
Beneficiary Copayment'' to identify any copayment adjustment due to
either the inpatient deductible amount copayment cap or the inflation-
adjusted copayment of a Part B rebatable drug per section 1833(t)(8)(F)
and section 1833(i)(9) of the Act, as added by section 11101 of the
Inflation Reduction Act (IRA). We also added another column for notes.
The ``Note'' column contains multiple messages including, but not
limited to, inflation-adjusted copayment of a Part B rebatable drug,
the copayment for a code capped at the inpatient deductible, or 8
percent of the reference product add-on applied for a biosimilar.
In addition, for CY 2024, we updated the format of the OPPS Addenda
A, B, and C by adding another column for ``IRA Coinsurance Percentage''
to identify the percentage for the inflation-adjusted copayment of a
Part B rebatable drug per section 1833(t)(8)(F) and section 1833(i)(9)
of the Act, as added by section 11101 of the IRA.
In the CY 2026 OPPS/ASC proposed rule, we proposed that for CY 2026
and subsequent years to keep the same format for the addenda A, B, and
C, and we did not propose any additional changes for CY 2026 (90 FR
33837). In the CY 2026 OPPS/ASC final rule with comment period, we
finalized our policy as proposed (90 FR 54058).
For CY 2027, we are not proposing any changes relating to the
format for the addenda A, B, and C.
To view the Addenda to this proposed rule pertaining to CY 2027
proposed payment rates under the OPPS, we refer readers to the CMS
website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices select ``CMS-1850-P''
from the list of regulations. All OPPS Addenda to this proposed rule
are contained in the zipped folder titled ``2027 NPRM OPPS Addenda'' in
the related links section at the bottom of the page. To view the
Addenda to this proposed rule pertaining to CY 2027 proposed payment
rates under the ASC payment system, we refer readers to the CMS website
at https://www.cms.gov/medicare/payment/prospective-payment-systems/ambulatory-surgical-center-asc/asc-regulations-and-notices; select
``CMS-1850-P'' from the list of regulations. The ASC Addenda to this
proposed rule are contained in a zipped folder titled ``2027 NPRM
Addendum AA, BB, DD1, DD2, EE, and FF'' in the related links section at
the bottom of the page.
XXVI. Response to Comments
Because of the large number of public comments, we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this proposed
rule; and, when we proceed with a subsequent document, we will respond
to the comments in the preamble to that document.
XXVII. Economic Analyses
A. Statement of Need
This proposed rule is necessary to make updates to the Medicare
hospital OPPS rates. It is also necessary to make changes to the
payment policies and rates for outpatient services furnished by
hospitals and CMHCs in CY 2027. We are required under section
1833(t)(3)(C)(ii) of the Act to update annually the OPPS conversion
factor used to determine the payment rates for APCs. We also are
required under section 1833(t)(9)(A) of the Act to review, not less
often than annually, and revise the groups, the relative payment
weights, and the wage and other adjustments described in section
1833(t)(2) of the Act. We must review the clinical integrity of payment
groups and relative payment weights at least annually. We propose to
revise the APC relative payment weights using claims data for services
furnished on and after January 1, 2025 through and including December
31, 2025, and processed through June 30, 2026, and update HCRIS cost
report information.
This proposed rule is also necessary to make updates to the ASC
payment rates for CY 2027, enabling CMS to make changes to payment
policies and payment rates for covered surgical procedures and covered
ancillary services that are performed in ASCs in CY 2027. Because ASC
payment rates are based on the OPPS relative payment weights for most
of the procedures performed in ASCs, the ASC payment rates are updated
annually to reflect annual changes to the OPPS relative payment
weights. In addition, we are required under section 1833(i)(1) of the
Act to review and update the list of surgical procedures that can be
performed in an ASC, not less frequently than every 2 years.
In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59075
through 59079), we finalized a policy to update the ASC payment system
rates using the hospital market basket update instead of the CPI-U for
CY 2019 through 2023. In the CY 2024 OPPS/ASC final rule with comment
period, we finalized a policy to extend the 5-year interim period by an
additional 2 years, through CY 2024 and CY 2025, to enable us to more
accurately analyze whether the application of the hospital market
basket update to the ASC payment system resulted in a migration of
services from the hospital setting to the ASC setting (88 FR 81960). As
discussed in section XIII. of this proposed rule, we propose to extend
our utilization of the hospital market basket update as the update
factor for the ASC payment system for one additional year (through CY
2027). The ASC impacts discussed below reflect our application of the
hospital market basket update for CY 2027.
In addition, this proposed rule is necessary to make policy changes
for facilities reporting data under the Hospital OQR and ASCQR
Programs. The primary objective of these quality reporting programs is
to promote higher quality, more efficient health care for Medicare
beneficiaries by collecting and reporting on quality-of-care metrics.
This information is made available to consumers, both to empower
Medicare beneficiaries and inform decision making, as well as to
incentivize healthcare facilities to make continued improvements.
B. Overall Impact of Provisions of This Proposed Rule
We have examined the impacts of this 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; and 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
[[Page 42010]]
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, the Office of Management and Budget's
(OMB) Office of Information and Regulatory Affairs (OIRA) has
determined this rulemaking is significant per section 3(f)(1).
Accordingly, we have prepared a Regulatory Impact Analysis that to the
best of our ability presents the costs and benefits of the rulemaking.
We estimate that the total increase in Federal Government
expenditures under the OPPS for CY 2027, compared to CY 2026, due to
the changes to the OPPS in this proposed rule, will be approximately
$1.82 billion. Taking into account our estimated changes in enrollment,
utilization, and case-mix for CY 2027 we estimate that the OPPS
expenditures, including beneficiary cost-sharing, for CY 2027 will be
approximately $110.9 billion, which is approximately $9.5 billion
higher than estimated OPPS expenditures in CY 2026. We also estimate
that the proposed 3.0 percentage point adjustment for the 340B Remedy
Offset is expected to reduce overall OPPS payments by $2.3 billion in
CY 2027. Table 88 of this proposed rule displays the distributional
impact of the CY 2027 changes in OPPS payment to various groups of
hospitals and for CMHCs.
We note that under our proposed CY 2027 policy, drugs and
biologicals are generally paid at ASP plus 6 percent, WAC plus 6
percent, or 95 percent of AWP, as applicable. However, under the
proposed 340B drug payment policy for CY 2027, we would pay for drugs
acquired through the 340B Drug program at ASP minus 33.4 percent.
We estimate that the proposed update to the conversion factor will
increase total OPPS payments by 2.4 percent in CY 2027. The proposed
changes to the APC relative payment weights, the proposed changes to
the wage indexes, the proposed continuation of a payment adjustment for
rural SCHs, including EACHs, and the proposed payment adjustment for
cancer hospitals would not increase total OPPS payments because these
changes to the OPPS are budget neutral. However, these updates would
change the distribution of payments within the budget neutral system.
We estimate that the total change in payments between CY 2026 and CY
2027, considering all budget-neutral payment adjustments, proposed
changes in estimated total outlier payments, the application of the
frontier State wage adjustment, the proposed payment adjustment for
imaging without contrast services furnished at excepted off campus
PBDs, in addition to the application of the OPD fee schedule increase
factor after all adjustments required by sections 1833(t)(3)(F),
1833(t)(3)(G), and 1833(t)(17) of the Act will increase total estimated
OPPS payments by 1.9 percent. We note that, as previously discussed in
section V.B.7 of this proposed rule, we propose to reduce payments for
non-drug items and services for hospitals for whom the annual reduction
to payment amounts under Sec. 419.32(b)(1)(iv)(B)(12) applies by 3.0
percentage points in CY 2027. We estimate that this reduction would
reduce OPPS spending by approximately $2.3 billion in CY 2027.
We estimate the total increase (from changes to the ASC provisions
in this proposed rule, as well as from enrollment, utilization, and
case-mix changes) in Medicare expenditures (not including beneficiary
cost-sharing) under the ASC payment system for CY 2027 compared to CY
2026, to be approximately $520 million. Tables 89 and 90 of this
proposed rule display the redistributive impact of the CY 2027 changes
regarding ASC payments, grouped by specialty area and then grouped by
procedures with the greatest ASC expenditures, respectively.
C. Detailed Economic Analyses
1. Estimated Effects of OPPS Changes in This Proposed Rule
a. Limitations of Our Analysis
The distributional impacts presented here are the projected effects
of the proposed CY 2027 policy changes on various hospital groups. We
post our hospital-specific estimated payments for CY 2027 on the CMS
website with the other supporting documentation for this proposed rule.
To view the hospital-specific estimates, we refer readers to the CMS
website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient. On the website, select ``Regulations and
Notices'' from the left side of the page and then select ``CMS-1850-P''
from the list of regulations and notices. The hospital-specific file
layout and the hospital-specific file are listed with the other
supporting documentation for this proposed rule. We show hospital-
specific data only for hospitals whose claims were used for modeling
the impacts shown in Table 88 of this proposed rule. We do not show
hospital-specific impacts for hospitals whose claims we were unable to
use. We refer readers to section II.A. of this proposed rule for a
discussion of the hospitals whose claims we do not use for ratesetting
or impact purposes.
We estimate the effects of the individual policy changes by
estimating payments per service, while holding all other payment
policies constant. We use the best data available but do not attempt to
predict behavioral responses to our policy changes in order to isolate
the effects associated with specific policies or updates, but any
policy that changes payment could have a behavioral response. In
addition, we have not made any adjustments for future changes in
variables, such as service volume, service-mix, or number of
encounters.
b. Estimated Effects of the Proposal To Control Unnecessary Increases
in the Volume of Outpatient Services Furnished in Excepted Off-Campus
Provider Based Departments (PBDs)
In section X.A. of this proposed rule, we discuss our CY 2027
proposal to control for unnecessary increases in the volume of
outpatient services by paying for imaging without contrast services
furnished at an off-campus PBD at an amount equal to the site-specific
PFS payment rate for nonexcepted items and services furnished by a
nonexcepted off-campus PBD (the PFS payment rate). Specifically, we
proposed to pay for HCPCS codes billed with modifier ``PO'' and
assigned to and paid through imaging without contrast APCs 5521 through
5524 and composite imaging without contrast APCs 8004, 8005, and 8007
at an amount equal to the site-specific PFS payment rate for
nonexcepted items and services furnished by a nonexcepted off-campus
PBD (the PFS payment rate).
To develop an estimated impact of this policy, we began with CY
2025 outpatient claims data used, for claim lines with HCPCS codes
assigned for payment through imaging without contrast APCs 5521 through
5524 and
[[Page 42011]]
composite imaging without contrast APCs 8004, 8005, and 8007 that
contained modifier ``PO'' because the presence of this modifier
indicates that such claims were billed for services furnished by an
off-campus department of a hospital paid under the OPPS. We then
simulated payment for the remaining claim lines as if they were paid at
the PFS-equivalent rate, removing a portion of the payment associated
with rural sole community hospitals based on our finalized exception
for those hospitals. An estimate of the proposed policy that includes
the effects of estimated changes in enrollment, utilization, and case-
mix based on the FY 2027 Mid-Session review budget approximates the
estimated decrease in total payments at $260 million, with Medicare
OPPS payments decreasing by $190 million and beneficiary copayments
decreasing by $70 million in CY 2027.
This estimate is utilized for the accounting statement displayed in
Table 87 of this proposed rule because the impact of this proposed CY
2027 policy, which is not budget neutral, is combined with the impact
of the OPD update, which is also not budget neutral, to estimate
changes in Medicare spending under the OPPS as a result of the changes
in this proposed rule.
We note our estimates may differ from the actual effect of the
proposed policy due to offsetting factors, such as changes in provider
behavior. We note that by removing this payment differential that may
influence site-of-service decision-making, we anticipate an associated
decrease in the volume of imaging without contrast services provided in
the excepted off-campus PBD setting.
[GRAPHIC] [TIFF OMITTED] TP07JY26.129
c. Estimated Effects of OPPS Changes on Hospitals
Table 88 shows the estimated impact of the proposed rule on
hospitals. Historically, the first line of the impact table, which
estimates the change in payments to all facilities, has always included
cancer and children's hospitals, which are held harmless to their pre-
Balanced Budget Act (BBA) amount. We also include CMHCs in the first
line that includes all providers. We include a second line for all
hospitals, excluding permanently held harmless hospitals and CMHCs.
We present separate impacts for CMHCs in Table 88, and we discuss
them separately below, because CMHCs are paid only for partial
hospitalization and intensive outpatient program services under the
OPPS and are a different provider type from hospitals. In the CY 2025
OPPS/ASC final rule with comment period (89 FR 94269 through 94270), we
finalized paying CMHCs for partial hospitalization services and
intensive outpatient services under APCs 5851 through 5854. For CY
2027, we propose to maintain the same APC structure and we propose to
continue our CY 2026 methodology for calculating rates by applying the
40 percent Medicare Physician Fee Schedule (MPFS) Relativity Adjuster
to calculate PHP and IOP payment rates for CMHCs.
The estimated increase in the total payments made under the OPPS is
determined largely by the increase to the conversion factor under the
statutory methodology. The distributional impacts presented do not
include assumptions about changes in volume and service-mix. The
conversion factor is updated annually by the OPD fee schedule increase
factor, as discussed in detail in section II.B. of this proposed rule.
Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee
schedule increase factor is equal to the market basket percentage
increase applicable under section 1886(b)(3)(B)(iii) of the Act, which
we refer to as the IPPS market basket percentage increase. The proposed
IPPS market basket percentage increase applicable to the OPD fee
schedule for CY 2027 is 3.2 percent. Section 1833(t)(3)(F)(i) of the
Act reduces that 3.2 percent by the productivity adjustment described
in section 1886(b)(3)(B)(xi)(II) of the Act, which is a proposed 0.8
percentage point for CY 2027 (which is also the productivity adjustment
for FY 2027 in the FY 2027 IPPS/LTCH PPS proposed rule (91 FR 19850))
resulting in the proposed CY 2027 OPD fee schedule increase factor of
2.4 percent. We are using the OPD fee schedule increase factor of 2.4
percent in the calculation of the proposed CY 2027 OPPS conversion
factor. Section 10324 of the Affordable Care Act, as amended by HCERA,
further authorized additional expenditures outside budget neutrality
for hospitals in certain frontier States that have a wage index less
than 1.0000. The amounts attributable to this frontier State wage index
adjustment are incorporated in the estimates in Table 88 of this
proposed rule.
To illustrate the impact of the CY 2027 changes, our analysis
begins with a baseline simulation model that uses the CY 2026 relative
payment weights, the CY 2026 final OPPS wage indexes that include
reclassifications, and the final CY 2026 conversion factor. Table 88
shows the estimated redistribution of the increase or decrease in
payments for CY 2027 over CY 2026 payments to hospitals and CMHCs as a
result of the following factors: the impact of the APC reconfiguration
and recalibration changes between CY 2026 and CY 2027
[[Page 42012]]
(Column 2); the wage indexes and the provider adjustments (Column 3);
the effect of the proposed payment adjustment for drugs acquired
through the 340B Program (Column 4); the combined impact of all of the
changes described in the preceding columns plus the 2.4 percent OPD fee
schedule increase factor update to the conversion factor (Column 5);
the additional estimated impact for the proposed payment adjustment for
imaging without contrast services furnished at excepted off campus PBDs
(Column 6); the estimated impact taking into account all payments for
CY 2027 relative to all payments for CY 2026, including the impact of
changes in estimated outlier payments and changes to the pass-through
payment estimate (Column 7).
We did not model an explicit budget neutrality adjustment for the
rural adjustment for SCHs because we propose to maintain the current
adjustment percentage for CY 2027. Because the proposed updates to the
conversion factor (including the update of the OPD fee schedule
increase factor), the estimated cost of the rural adjustment, and the
estimated cost of projected passthrough payment for CY 2027 are applied
uniformly across services, observed redistributions of payments in the
impact table for hospitals largely depend on the mix of services
furnished by a hospital (for example, how the APCs for the hospital's
most frequently furnished services would change, or what proportion of
OPPS payments to the hospital are for services compared to drugs), and
the impact of the wage index changes on the hospital. However, total
payments made under this system and the extent to which this proposed
rule redistribute money during implementation will also depend on
changes in volume, practice patterns, and the mix of services billed
between CY 2026 and CY 2027 by various groups of hospitals, which CMS
cannot forecast.
Overall, we estimate that the proposed rates for CY 2027 would
increase Medicare OPPS payments by an estimated 1.9 percent. Removing
payments to cancer and children's hospitals because their payments are
held harmless to the pre-OPPS ratio between payment and cost and
removing payments to CMHCs results in an estimated 1.8 percent increase
in Medicare payments to all other hospitals. These estimated payments
would not significantly impact other providers. We note that providers
not considered ``new providers'' for purposes of the 340B remedy offset
would receive an adjustment to their OPPS payment rates of minus 3.0
percent, which we estimate reduces overall provider payment by 2.9
percent.
Column 1: Total Number of Hospitals
The first line in Column 1 in Table 88 shows the total number of
facilities (3,471), including designated cancer and children's
hospitals and CMHCs, for which we were able to use CY 2025 hospital
outpatient and CMHC claims data to model CY 2026 and CY 2027 payments,
by classes of hospitals, for CMHCs and for dedicated cancer hospitals.
We excluded all hospitals and CMHCs for which we could not plausibly
estimate CY 2026 or CY 2027 payment and entities that are not paid
under the OPPS. The latter entities include CAHs, IHS and tribal
hospitals, and hospitals located in Guam, the U.S. Virgin Islands,
Northern Mariana Islands, American Samoa, and the State of Maryland.
This process is discussed in greater detail in section II.A. of this
proposed rule. At this time, we are unable to calculate a DSH variable
for hospitals that are not also paid under the IPPS because DSH
payments are only made to hospitals paid under the IPPS. Hospitals for
which we do not have a DSH variable are grouped separately and
generally include freestanding psychiatric hospitals, rehabilitation
hospitals, and long-term care hospitals. We show the total number of
OPPS hospitals (3,362), excluding the hold harmless cancer and
children's hospitals and CMHCs, on the second line of the table. We
excluded cancer and children's hospitals because section 1833(t)(7)(D)
of the Act permanently holds harmless cancer hospitals and children's
hospitals to their ``pre-BBA amount'' as specified under the terms of
the statute, and therefore, we removed them from our impact analyses.
We show the isolated impact on the 39 CMHCs at the bottom of the impact
table (Table 88) and discuss that impact separately below.
Column 2: APC Recalibration--All Changes
Column 2 shows the estimated effect of APC recalibration. Column 2
also reflects any changes in multiple procedure discount patterns or
conditional packaging that occur as a result of the changes in the
relative magnitude of payment weights. As a result of APC
recalibration, we estimate that urban hospitals would experience an
increase of 0.1, with the impact ranging from a decrease of 0.3 to an
increase of 0.4, depending on the number of beds. Rural hospitals would
experience a decrease of 0.1 percent overall. Major teaching hospitals
would experience a decrease of 0.3 percent.
Column 3: Wage Indexes and the Effect of the Provider Adjustments
Column 3 demonstrates the combined budget neutral impact of the APC
recalibration, the updates for the wage indexes with the FY 2027 IPPS
post-reclassification wage indexes, the rural adjustment, the frontier
adjustment, and the cancer hospital payment adjustment. We modeled the
independent effect of the budget neutrality adjustments and the OPD fee
schedule increase factor by using the relative payment weights and wage
indexes for each year and using a CY 2026 conversion factor that
included the OPD fee schedule increase and a budget neutrality
adjustment for differences in wage indexes.
We modeled the independent effect of updating the wage indexes by
varying only the wage indexes, holding APC relative payment weights,
service-mix, and the rural adjustment constant and using the CY 2027
scaled weights and a CY 2026 conversion factor that included a budget
neutrality adjustment for the effect of the changes to the wage indexes
between CY 2025 and CY 2027.
Column 3 reflects the independent effects of the updated wage
indexes, including the application of budget neutrality for the rural
floor policy on a nationwide basis, as well as the proposed CY 2027
changes in wage index policy, discussed in section II.C. of this
proposed rule. We did not model a budget neutrality adjustment for the
rural adjustment for SCHs because we propose to continue the rural
payment adjustment of 7.1 percent to rural SCHs for CY 2027, as
described in section II.E. of this proposed rule. We modeled a budget
neutrality adjustment for the proposed cancer hospital payment
adjustment because the proposed payment-to-cost ratio target for the
cancer hospital payment adjustment in CY 2027 is 0.88, which is higher
than the PCR target adopted in the CY 2026 OPPS/ASC final rule with
comment period (90 FR 53501). We note that, in accordance with section
16002 of the 21st Century Cures Act, we apply a budget neutrality
factor calculated as if the cancer hospital adjustment target payment-
to-cost ratio was 0.89, not the 0.88 target payment-to-cost ratio we
discuss in section II.F. of this proposed rule.
Column 3 also includes the effects of the proposed COLA factors for
providers located in Hawaii and Alaska, which would apply to the non-
labor portion of OPPS payments. This proposal is
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discussed in detail in section X.C of this proposed rule.
Column 4: Effect of the Proposed Payment Adjustment for 340B Drugs
Column 4 demonstrates the total payment effect of the proposed
payment adjustment for drugs acquired under the 340B Program from ASP
plus 6 percent to ASP minus 33.4 percent. This column includes both the
reduced payment for 340B acquired drugs and the increase to the
conversion factor for budget neutrality purposes, which increases
payment for all non-drug OPPS services. For rural sole community
hospitals, this column shows a 5.7 percent increase, reflecting no
payment adjustment for drugs (because these providers are proposed to
be exempt from these reductions) and an 8.44 percent increase for non-
drug services.
We also note that the proposed 340B drug payment policy described
in this column can significantly affect an OPPS provider's estimated CY
2027 payment depending on the proportion of a provider's payment
represented by drugs purchased through the 340B Drug Program. For
providers that are excepted from the 340B drug payment proposal and for
non-340B hospitals, we would generally expect an increase in these
providers' estimated 2027 OPPS payments under this column, as they
would receive an increase to their non-drug service payments through
the budget neutral adjustment to the OPPS conversion factor due to this
policy but no change to their drug payments. However, for 340B
hospitals, estimated payment changes due to this policy would depend on
the volume of 340B drugs the provider furnishes and how that compares
to the volume of non-drug services provided by the provider. For most
340B providers, the decreased 340B drug payments will outweigh the
increased payments for non-drug services.
Column 5: All Budget Neutrality Changes Combined With the Market Basket
Update
Column 5 demonstrates the combined impact of all the proposed
changes previously described and the proposed update to the conversion
factor of 2.4 percent. Overall, these changes would increase payments
to urban hospitals by 1.9 percent and to rural hospitals by 6.4
percent. Rural sole community hospitals would receive an estimated
increase of 8.8 percent while other rural hospitals would receive an
estimated increase of 2.5 percent.
Column 6--Proposed Off-Campus PBD Imaging Without Contrast Payment
Policy
Column 6 displays the estimated effect of our proposed CY 2027
policy to pay for imaging without contrast services assigned to APCs
5521 through 5524 and composite imaging without contrast APCs 8004,
8005, and 8007 when billed with modifier ``PO'' at a PFS-equivalent
rate. We note that the numbers provided in this column isolate the
estimated effect of this proposed policy adjustment relative to the
numerator of Column 5. Therefore, the numbers reported in Column 6 show
how much of the difference between the estimates in Column 5 and the
estimates in Column 7 are a result of the off-campus PBD imaging
without contrast policy.
Column 7: All Changes With Outlier--Proposed CY 2027 Update
Column 7 depicts the full impact of the proposed CY 2027 policies
on each hospital group by including the effect of all changes for CY
2027 and comparing them to all estimated payments in CY 2025. Column 7
shows the combined budget neutral effects of Columns 2 and 3 and 4; the
effect of the off-campus provider-based department drug administration
policy; the OPD fee schedule increase; the impact of estimated OPPS
outlier payments, as discussed in section II.G. of this proposed rule;
the Hospital OQR Program payment reduction for the small number of
hospitals in our impact model that failed to meet the reporting
requirements (discussed in section XV. of this proposed rule); and
other rule adjustments to the CY 2027 OPPS payments.
Of those hospitals that failed to meet the Hospital OQR Program
reporting requirements for the full CY 2026 update (and assumed, for
modeling purposes, to be the same number for CY 2027), we included 64
hospitals in our model because they had both CY 2024 claims data and
recent cost report data. We estimate that the cumulative effect of all
changes for CY 2027 would increase payments to all facilities by 1.9
percent for CY 2027. We modeled the independent effect of all changes
in Column 7 using the final relative payment weights for CY 2026 and
the proposed relative payment weights for CY 2027. We used the final
conversion factor for CY 2026 of $91.415 and a CY 2027 conversion
factor of $102.004 discussed in section II.B. of this proposed rule.
Column 7 contains simulated outlier payments for each year. We used
the 1 year charge inflation factor used in the FY 2027 IPPS/LTCH PPS
proposed rule (91 FR 19808) of 7.3 percent (1.07310) to increase
charges on the CY 2025 claims, and we used the overall CCR in the April
2026 Outpatient Provider-Specific File (OPSF) to estimate outlier
payments for CY 2026. Using the CY 2025 claims and a 7.3 percent charge
inflation factor, we currently estimate that outlier payments for CY
2026, using a multiple threshold of 1.75 and a fixed-dollar threshold
of $6,225, would be approximately 1.19 percent of total payments. The
estimated current outlier payments of 1.19 percent are incorporated in
the comparison in Column 7. We used the same set of claims and a charge
inflation factor of 15.1 percent (1.15154) and the CCRs in the April
2026 OPSF, with an adjustment of 0.977497 (91 FR 19808), to reflect
relative changes in cost and charge inflation between CY 2026 and CY
2027, to model the proposed CY 2027 outliers at 1.0 percent of
estimated total payments using a multiple threshold of 1.75 and a fixed
dollar threshold of $7,150. The charge inflation and CCR inflation
factors are discussed in detail in the FY 2027 IPPS/LTCH PPS proposed
rule (91 FR 19807 through 19811).
Overall, we estimate that facilities would experience an increase
of 1.9 percent under this proposed rule in CY 2027 relative to total
spending in CY 2026. This projected increase (shown in Column 7) of
Table 88 of this proposed rule reflects the proposed 2.4 percent OPD
fee schedule increase factor, removing the 0.19 difference in estimated
outlier payments between CY 2026 (1.19 percent) and CY 2027 (1.0
percent), including the 0.4 percent decrease due to the payment
adjusted for drug administration at off campus PBDs, plus 0.12 percent
for the change in the pass-through payment estimate between CY 2026 and
CY 2027. We estimate that the combined effect of all changes for CY
2027 would increase payments to urban hospitals by 1.3 percent.
Overall, we estimate that rural hospitals would experience a 5.9
percent increase as a result of the combined effects of all the changes
for CY 2027.
Among hospitals, by teaching status, we estimate that the impacts
resulting from the combined effects of all changes include a decrease
of 3.1 percent for major teaching hospitals and an increase of 6.0
percent for nonteaching hospitals. Minor teaching hospitals would
experience an estimated increase of 3.2 percent.
In our analysis, we also have categorized hospitals by type of
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ownership. Based on this analysis, we estimate that voluntary hospitals
would experience an increase of 1.4 percent, proprietary hospitals
would experience an increase of 10.3 percent, and governmental
hospitals would experience a decrease of 1.3 percent.
Reduction for Providers Subject to the 340B Remedy Offset
In column 8 we have included additional information to account for
estimated payment changes in the CY 2027 OPPS for providers subject to
the 340B Remedy Offset which we propose will be a 3.0 percent point
decrease in CY 2027.
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d. Estimated Effects of OPPS Changes on CMHCs
The last line of Table 88 demonstrates the isolated impact on
CMHCs, which furnished only partial hospitalization and intensive
outpatient program services under the OPPS during CY 2025. As discussed
in section VIII.C. of this proposed rule, we propose for CY 2027 to
continue paying CMHCs using APCs 5851 through 5854. We modeled the
impact of this APC policy, assuming CMHCs will continue to provide the
same PHP and IOP care as seen in the CY 2025 claims used for
ratesetting in this proposed rule. We did not exclude days with one or
two services from our modeling for CY 2027, because our proposed rule
policy would pay the per diem rate for APC 5853 for such days in CY
2027. As a result of the proposed PHP APC changes for CMHCs, we
estimate that CMHCs would experience a 0.5 percent decrease in CY 2027
payments relative to their CY 2026 payments (shown in Column 2). For a
detailed discussion of our proposed PHP and IOP policies, please see
section VIII. of this proposed rule.
Column 3 shows the estimated impact of adopting the proposed FY
2027 wage index values, which result in an estimated decrease of 1.9
percent to CMHCs.
Column 5 shows that combining the OPD fee schedule increase factor,
along with the proposed changes in APC policy for CY 2027 and the
proposed FY 2027 wage index updates, and proposed 340B payment policy,
would result in an estimated increase of 8.1 percent.
e. Estimated Effect of OPPS Changes on Beneficiaries
For services for which the beneficiary pays a copayment of 20
percent of the payment rate, the beneficiary's payment would increase
for services for which the OPPS payments would rise and decrease for
services for which the OPPS payments would fall. For further discussion
of the calculation of the national unadjusted copayments and minimum
unadjusted copayments, we refer readers to section II.H. of this
proposed rule. In all cases, section 1833(t)(8)(C)(i) of the Act limits
beneficiary liability for copayment for a procedure performed in a year
to the hospital inpatient deductible for the applicable year.
We estimate that the aggregate beneficiary coinsurance percentage
would be approximately 18 percent for all services paid under the OPPS
in CY 2027. The estimated aggregate beneficiary coinsurance reflects
general system adjustments. We note that the individual payments, and
therefore copayments, associated with services may differ based on the
setting in which they are furnished. However, at the aggregate system
level, we do not currently observe significant impact on beneficiary
coinsurance as a result of those policies.
f. Estimated Effects of OPPS Changes on Other Providers
The relative payment weights and payment amounts established under
the OPPS affect the payments made to ASCs, as discussed in section
XIII. of this proposed rule. Hospitals, CMHCs, and ASCs will be
affected by the changes in this proposed rule. Additionally, the
payment policies we established for IOP services affect RHCs and FQHCs.
These providers of IOP are not paid under the OPPS and are not included
in the impact analysis shown in Table 88. However, the proposed payment
amount for OPPS APC 5861 will affect payments to RHCs and FQHCs since
under sections 1834(o)(5)(A) and 1834(y)(3)(A) of the Act payment for
IOP services in these settings is required to be equal to the payment
determined for IOP services in the hospital outpatient department.
g. Estimated Effects of OPPS Changes on the Medicare and Medicaid
Programs
The effect of the update on the Medicare program is expected to be
an increase of $1.82 billion in program
[[Page 42020]]
payments for OPPS services furnished in CY 2027. The effect on the
Medicaid program is expected to be limited to copayments that Medicaid
may make on behalf of Medicaid recipients who are also Medicare
beneficiaries. We estimate that the changes in proposed rule would
increase these Medicaid beneficiary payments by approximately $40
million in CY 2027. Currently, there are approximately 11.8 million
dual-eligible beneficiaries, which represent approximately 40 percent
of Medicare Part B fee-for-service beneficiaries. The impact on
Medicaid was determined by taking 12 percent of the beneficiary cost-
sharing impact. The national average split of Medicaid payments is 58
percent Federal payments and 42 percent State payments. Therefore, for
the estimated $40 million Medicaid increase, approximately $25 million
would be from the Federal Government and $15 million would be from
State governments.
h. Alternative OPPS Policies Considered
Alternatives to the OPPS changes we proposed and the reasons for
our selected alternatives are discussed throughout this proposed rule.
2. Estimated Effects of CY 2027 ASC Payment System Changes
Most ASC payment rates are calculated by multiplying the ASC
conversion factor by the ASC relative payment weight. As discussed
fully in section XIII. of this proposed rule, we are setting the CY
2027 ASC relative payment weights by scaling the final CY 2027 OPPS
relative payment weights by the proposed CY 2027 ASC scalar of 0.809.
The estimated effects of the updated relative payment weights on
payment rates are varied and are reflected in the estimated payments
displayed in Tables 89 and 90.
Beginning in CY 2011, section 3401 of the Affordable Care Act
requires that the annual update to the ASC payment system after
application of any quality reporting reduction be reduced by a
productivity adjustment. In CY 2019, we adopted a policy for the annual
update to the ASC payment system to be the hospital market basket
update for CY 2019 through CY 2023. In the CY 2024 OPPS/ASC final rule
with comment period, we extended this 5-year interim period an
additional 2 years through CYs 2024 and 2025. In the CY 2026 OPPS/ASC
final rule with comment period, we extended the interim period an
additional year through 2026. As discussed in further detail in section
XIII. of this proposed rule, we propose an extension of our utilization
of the hospital market basket update as the update factor to the ASC
payment system for 1 additional year (through CY 2027). Section
1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment to
be equal to the 10-year moving average of changes in annual economywide
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). For ASCs
that fail to meet their quality reporting requirements, the CY 2027
payment determinations would be based on the application of a 2.0
percentage point reduction to the hospital market basket update for CY
2027. We calculated the proposed CY 2027 ASC conversion factor by
adjusting the CY 2026 ASC conversion factor ($56.322) by 1.0016 to
account for changes in the pre-floor and pre-reclassified hospital wage
indexes between CY 2026 and CY 2027, which includes our policy to limit
wage index declines of greater than 5 percent, and by applying the CY
2027 hospital market basket update factor of 2.4 percent (which is
equal to the proposed inpatient hospital market basket percentage
increase of 3.2 percent reduced by a productivity adjustment of 0.8
percentage point). The proposed CY 2027 ASC conversion factor is
$57.766 for ASCs that successfully meet the quality reporting
requirements.
a. Limitations of Our Analysis
Presented here are the projected effects of the proposed changes
for CY 2027 on Medicare payment to ASCs. A key limitation of our
analysis is our inability to predict changes in ASC service-mix between
CY 2026 and CY 2027 with precision. We believe the net effect on
Medicare expenditures resulting from the proposed CY 2027 changes would
be small in the aggregate for all ASCs. However, such changes may have
differential effects across surgical specialty groups, as ASCs continue
to adjust to the payment rates based on the policies of the revised ASC
payment system. We are unable to accurately project such changes at a
disaggregated level. Clearly, individual ASCs would experience changes
in payment that differ from the aggregated estimated impacts presented
below.
b. Estimated Effects of ASC Payment System Policies on ASCs
Some ASCs are multispecialty facilities that perform a wide range
of surgical procedures from excision of lesions to hernia repair to
cataract extraction; others focus on a single specialty and perform
only a limited range of surgical procedures, such as ophthalmology,
digestive system, or orthopedic procedures. The combined effect of the
final update to the payments on an individual ASC would depend on a
number of factors, including, but not limited to, the mix of services
the ASC provides, the volume of specific services provided by the ASC,
the percentage of its patients who are Medicare beneficiaries, and the
extent to which an ASC provides different services in the coming year.
The following discussion includes tables that display estimates of the
impact of the proposed CY 2027 updates to the ASC payment system on
Medicare payments to ASCs, assuming the same mix of services, as
reflected in our CY 2024 claims data. Table 89 depicts the estimated
aggregate percent change in payment by surgical specialty by comparing
estimated CY 2026 payments to estimated CY 2027 payments, and Table 90
shows a comparison of estimated CY 2026 payments to estimated CY 2027
payments for items and procedures that we estimate would receive the
most Medicare payment in CY 2026.
In Table 89, we have aggregated the surgical HCPCS codes by
specialty group and then estimated the effect on aggregated payment for
surgical specialty. The groups are sorted for display in descending
order by estimated Medicare program payment to ASCs. The following is
an explanation of the information presented in Table 89.
Column 1--Surgical Specialty Group indicates the surgical
specialty into which ASC procedures are grouped. To group surgical
procedures by surgical specialty, we used the CPT code range
definitions and Level II HCPCS codes and Category III CPT codes, as
appropriate, to account for all surgical procedures to which the
Medicare program payments are attributed.
Column 2--Estimated CY 2026 ASC Payments were calculated
using CY 2025 ASC utilization data (the most recent full year of ASC
utilization) and CY 2026 ASC payment rates. The surgical specialty
groups are displayed in descending order based on estimated CY 2026 ASC
payments.
Column 3--Estimated CY 2027 Percent Change is the
aggregate percentage increase or decrease in Medicare program payment
to ASCs for each surgical specialty that is attributable to the
proposed update to ASC payment rates for CY 2027 compared to CY 2026.
As shown in Table 89, for the six specialty groups that account for
the most ASC utilization and spending, we
[[Page 42021]]
estimate that the proposed update to ASC payment rates for CY 2027
would result in a 1 percent decrease in aggregate payment amounts for
eye and ocular adnexa procedures, a 6 percent increase in aggregate
payment amounts for musculoskeletal system procedures, a 6 percent
increase in aggregate payment amounts for nervous system procedures, a
2 percent decrease in aggregate payment amounts for digestive system
procedures, a 5 percent increase in aggregate payment amounts for
cardiovascular system procedures, and a 1 percent increase in aggregate
payment amounts for genitourinary system procedures. We note that these
changes can be a result of different factors, including updated data,
payment weight changes, and changes in policy. After the payment rate
update is accounted for, aggregate payment increases or decreases for a
category of services can be higher or lower than the proposed 2.4
percent increase, depending on if payment weights in the OPPS APCs
after application of the ASC weight scaler that correspond to the
applicable services increased or decreased, if the most recent data
show an increase or a decrease in the volume of services performed in
an ASC for a category. For example, we estimate a 1 percent decrease in
eye surgical procedure payments and a 2 percent decrease in
gastrointestinal surgical procedure payments. The decrease in
expenditures for these surgical specialties is attributable to the 2.4
percent hospital market basket update being offset by the reduction in
the ASC weight scaler. The reduction in the ASC weight scaler from
0.872 in CY 2026 to our proposed 0.809 for CY 2027 is attributable to
the increase in device portions under the ASC payment system as a
result of the increase in OPPS payment rates for clinical services for
CY 2027 and out policy to treat device portions of device-intensive
procedures as constant between the OPPS and ASC payment system. The
increase in proposed CY 2027 OPPS payment rates for clinical services
is a result of the OPPS budget neutrality adjustment from the proposed
340B drug payment policy. Therefore, surgical specialties that
predominantly consist of procedures designated as device-intensive
under the ASC payment system will see an increase in expenditures
greater than the 2.4 percent hospital market basket update whereas
surgical procedures that have relatively few device-intensive
procedures will see a relatively smaller increase or decrease in CY
2027 expenditures. The increases in expenditures for musculoskeletal,
nervous system, and cardiovascular surgical specialties groups is a
result of the higher share of device-intensive procedures that are
assigned to this surgical specialty group. For estimated changes for
selected procedures, we refer readers to Table 89.
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Table 90 shows the estimated impact of the updates to the revised
ASC payment system on aggregate ASC payments for selected surgical
procedures during CY 2027. The table displays 30 of the procedures
receiving the greatest estimated CY 2026 aggregate Medicare payments to
ASCs. The HCPCS codes are sorted in descending order by estimated CY
2026 program payment.
Column 1-CPT/HCPCS code.
Column 2-Short Descriptor of the HCPCS code.
Column 3-Estimated CY 2026 ASC Payments were calculated
using CY 2024 ASC utilization (the most recent full year of ASC
utilization) and the CY 2026 ASC payment rates. The estimated CY 2026
payments are expressed in millions of dollars.
Column 4-Estimated CY 2027 Percent Change reflects the
percent differences between the estimated ASC payment for CY 2026 and
the estimated payment for CY 2027 based on the final update.
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c. Estimated Effects of ASC Payment System Policies on Beneficiaries
We estimate that the CY 2027 update to the ASC payment system will
be generally positive (that is, result in lower cost-sharing) for
beneficiaries with respect to the procedures we are finalizing to add
to the ASC CPL for CY 2027. First, other than certain preventive
services where coinsurance and the Part B deductible are waived to
comply with sections 1833(a)(1) and (b) of the Act, the ASC coinsurance
rate for all procedures is 20 percent. This contrasts with procedures
performed in HOPDs under the OPPS, where the beneficiary is responsible
for copayments that range from 20 percent to 40 percent of the
procedure payment (other than for certain preventive services),
although the majority of HOPD procedures have a 20-percent copayment.
Second, in almost all cases, the ASC payment rates under the ASC
payment system are lower than payment rates for the same procedures
under the OPPS. Therefore, the beneficiary coinsurance amount under the
ASC payment system will usually be less than the OPPS copayment amount
for the same services. (The only exceptions will be if the ASC
coinsurance amount exceeds the hospital inpatient deductible since the
statute requires that OPPS copayment amounts not exceed the hospital
inpatient deductible. Therefore, in limited circumstances, the ASC
coinsurance amount may exceed the hospital inpatient deductible and,
therefore, the OPPS copayment amount for similar services.) Beneficiary
coinsurance for services migrating from physicians' offices to ASCs may
decrease or increase under the ASC payment system, depending on the
particular service and the relative payment amounts under the MPFS
compared to the ASC. While the ASC payment system bases most of its
payment rates on hospital cost data used to set OPPS relative payment
weights, services that are performed a majority of the time in a
physician office are generally paid the lesser of the ASC amount
according to the standard ASC ratesetting methodology or at the
nonfacility practice expense-based amount payable under the PFS. For
those additional procedures that we finalized to designate as office-
based in
[[Page 42023]]
CY 2027, the beneficiary coinsurance amount under the ASC payment
system generally will be no greater than the beneficiary coinsurance
under the PFS because the coinsurance under both payment systems
generally is 20 percent (except for certain preventive services where
the coinsurance is waived under both payment systems).
Accounting Statements and Tables for OPPS and ASC Payment System
As required by OMB Circular A-4 (available on the Office of
Management and Budget website at https://www.whitehouse.gov/wp-content/uploads/2025/08/CircularA-4.pdf, we have prepared accounting statements
to illustrate the impacts of the OPPS and ASC changes in this proposed
rule. The first accounting statement, Table 91, illustrates the
classification of expenditures for the CY 2027 estimated hospital OPPS
incurred benefit impacts associated with the proposed CY 2027 OPD fee
schedule increase and the proposed policy for imaging without contrast
services furnished at excepted off-campus PBDs. The second accounting
statement, Table 92, illustrates the classification of expenditures
associated with the 2.4 percent CY 2027 update to the ASC payment
system, based on the provisions of the proposed rule and the baseline
spending estimates for ASCs. Both tables classify most estimated
impacts as transfers.
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3. Effects of Proposed Changes in Requirements for the Hospital
Outpatient Quality Reporting Program
a. Background
We refer readers to the CY 2026 OPPS/ASC final rule with comment
period (90 FR 54071 and 54072) for the previously estimated effects of
changes to the Hospital Outpatient Quality Reporting Program for the CY
2026 reporting period and subsequent years. Of the 2,984 hospital
outpatient departments (HOPDs) that met eligibility requirements for
the CY 2026 payment determination for the Hospital Outpatient Quality
Reporting Program, we determined that 35 HOPDs did not meet the program
requirements to receive the full annual Outpatient Department (OPD) fee
schedule increase factor while an additional 47 HOPDs elected not to
participate.
b. Impact of CY 2027 OPPS/ASC Proposed Rule Proposals
We propose to: (1) remove the Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk Patients measure beginning with the
CY 2027 reporting period/CY 2029 payment determination; (2) incorporate
electronic clinical quality measures (eCQMs) into the existing
validation process for chart-abstracted measures beginning with eCQM
data from the CY 2027 reporting period affecting the CY 2030 payment
determination; (3) reduce the validation selection pool from 500 to up
to 400 HOPDs beginning with validation affecting the CY 2030 payment
determination; and (4) remove the requirement for hospitals to resubmit
medical documentation as part of their request for reconsideration of
validation, beginning with data from the CY 2026 reporting period
affecting the CY 2028 payment determination.
As part of the proposal to incorporate eCQMs into the existing
validation process for chart-abstracted measures, we would also update
our data validation policies for chart-abstracted measures, including
modifying the number of chart-abstracted measure cases required for
validation from 12 per quarter to up to 8 per quarter per measure
beginning with validation affecting the CY 2030 payment determination.
We refer readers to section ``XXIV. Collection of Information'' of
this proposed rule for a detailed discussion of the calculations
estimating the changes to the information collection and reporting
burden for proposed data requirements under the Hospital Outpatient
Quality Reporting Program for the estimated 3,000 program-eligible
HOPDs. As shown in summary Table 84 in section XXIV.A.6. of this
proposed rule, we estimate a total information collection and reporting
burden net decrease of 16,985 hours at a savings of $971,221 annually
associated with our proposals beginning with the CY 2029 reporting
period/CY 2031 payment determination compared to our information
collection burden estimates which are currently under review for
approval under OMB control number 0938-1109 (expiration date June 30,
2026).
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In addition to the reduced information collection burden associated
with the proposals in this proposed rule, we believe there would be
administrative cost savings associated with the proposed removal of the
requirement for HOPDs to resubmit medical documentation as part of
their request for reconsideration of validation noncompliance.
Regarding the proposed incorporation of eCQMs into the existing
validation process for chart-abstracted measures, with more than 98
percent of HOPDs eligible to participate in the Hospital Outpatient
Quality Reporting Program affiliated with hospital systems that are
already familiar with the eCQM validation process under the Hospital
Inpatient Quality Reporting Program, we anticipate their experience
with eCQM validation for the Hospital Inpatient Quality Reporting
Program would minimize the additional costs beyond the information
collection burden discussed in section XXIV.A. of this proposed rule
associated with eCQM validation by leveraging existing or similar
personnel and processes.
We do not believe the remaining proposals would result in any
additional economic impact beyond that discussed in section ``XXIV.
Collection of Information'' of this proposed rule.
4. Effects of Requirements for the Rural Emergency Hospital (REH)
Quality Reporting Program
We refer readers to the CY 2026 OPPS/ASC final rule with comment
period (90 FR 54072 and 54073) for the previously discussed effects of
changes to the REH Quality Reporting Program for the CY 2026 reporting
period and subsequent years. For the CY 2027 reporting period, we have
estimated there will be 48 REHs required to report under the REH
Quality Reporting Program based on acute care and critical access
hospital conversions to REH status as of April 6, 2026. We note that
this estimate is an increase of 10 REHs from our estimate of 38
provided in the CY 2026 OPPS/ASC final rule with comment period,
resulting in an increase in total information collection burden for the
REH Quality Reporting Program of 122 hours and $6,976 (90 FR 54072). We
are not proposing any changes to our previously finalized REH Quality
Reporting Program policies in this proposed rule.
5. Effects of Proposed Changes in Requirements for the Ambulatory
Surgical Center (ASC) Quality Reporting Program
a. Background
We refer readers to the CY 2026 OPPS/ASC final rule with comment
period (90 FR 54073) for the previously estimated effects of changes to
the ASC Quality Reporting Program for the CY 2026 reporting period and
subsequent years. Based on the most recent analysis of the CY 2026
payment determination data, we found that, of the 6,930 ASCs that were
actively billing Medicare, 4,399 were required to participate in the
ASC Quality Reporting Program. Of the 2,531 ASCs not required to
participate in the program, 650 ASCs did so and met full requirements.
On this basis, we estimate that 5,149 ASCs (4,399 + 650) will submit
data for the ASC Quality Reporting Program for the CY 2027 reporting
period and subsequent years unless otherwise noted. We note that this
estimate is an increase of 559 ASCs from our estimate of 4,590 provided
in the CY 2026 OPPS/ASC final rule with comment period (90 FR 54073)
due to more recent data analysis regarding numbers of eligible ASCs.
b. Impact of CY 2027 OPPS/ASC Proposed Rule Proposals
We propose to remove the Appropriate Follow-Up Interval for Normal
Colonoscopy in Average Risk Patients measure beginning with the CY 2027
reporting period/CY 2029 payment determination. We refer readers to
section ``XXIV. Collection of Information'' of this proposed rule for a
detailed discussion of the calculations estimating the changes to the
information collection and reporting burden for proposed data
requirements under the ASC Quality Reporting Program for the estimated
5,149 program-eligible ASCs. As shown in summary Table 85 in section
XXIV.C.3. of this proposed rule, we estimate a total information
collection and reporting burden decrease of 16,753 hours at a savings
of $957,937 annually associated with our proposal for the CY 2027
reporting period/CY 2029 payment determination and subsequent years
compared to our information collection burden estimates which are
currently under review for approval under OMB control number 0938-1270
(expiration date June 30, 2026). We do not believe this proposal would
result in any additional economic impact beyond those discussed in
section ``XXIV. Collection of Information'' of this proposed rule.
6. Effects of Addition of New Codes for Hospital Outpatient Department
(OPD) Prior Authorization Process
a. Overall Impact
In the CY 2020 OPPS/ASC final rule with comment period, we
established a prior authorization process for certain hospital OPD
services using our authority under section 1833(t)(2)(F) of the Act,
which requires the Secretary to develop ``a method for controlling
unnecessary increases in the volume of covered OPD services'' (84 FR
61142, November 12, 2019).\216\ As part of the CY 2021 OPPS/ASC final
rule with comment period, we added additional service categories to the
prior authorization process (85 FR 85866, December 29, 2020). Through
the CY 2023 OPPS/ASC final rule with comment period, we added an eighth
service category to the list of OPD services requiring prior
authorization (87 FR 71748, 72224 through 72233, November 23, 2022).
The regulations governing the prior authorization process are located
in subpart I of 42 CFR part 419, specifically at Sec. Sec. 419.80
through 419.89.
---------------------------------------------------------------------------
\216\ See also Correction Notice issued January 3, 2020 (85 FR
224).
---------------------------------------------------------------------------
In accordance with Sec. 419.83(b), we propose to expand the
Botulinum Toxin Injection service category to include additional codes
requiring prior authorization. To improve readability and brevity, as
we indicated earlier in section XVIII. of this proposed rule, effective
dates were removed and the section numbering in the regulatory text was
updated. The former paragraphs (a)(1)(i) through (v), (a)(2)(i) and
(ii), and (a)(3) have been renumbered as (a)(1) through (8). The
additional Botulinum Toxin Injection codes would be added to the
existing codes located at proposed revised Sec. 419.83(a)(2) and would
require prior authorization beginning for service dates on or after
July 1, 2027.
The addition of these services is consistent with our authority
under section 1833(t)(2)(F) of the Act and is based upon our
determination that there has been an unnecessary increase in the volume
of these services.
The overall economic impact on the healthcare sector to require
prior authorization for these additional codes is dependent on the
number of claims affected. Table 94, Overall Economic Impact on the
Health Sector, lists an estimate of the overall economic impact on the
health sector for the new services. The values populating Table 93 were
obtained from the cost reflected in Table 94, Annual Private Sector
Costs, and Table 95, Estimated Annual
[[Page 42025]]
Administrative Costs to CMS. Tables 94 and 95 combine to convey the
overall economic cost impact to the health sector for the new services,
which is illustrated in Table 93.
Based on the estimate, the overall economic cost impact is
approximately $9.6 million in the first year for the new services. The
5-year impact is approximately $48 million, and the 10-year impact is
approximately $95.9 million. Additional administrative paperwork costs
to private sector providers and an increase in Medicare spending to
conduct reviews combine to create the financial impact; however, this
impact is offset by Medicare savings. Annually, we estimate an overall
Medicare savings of $25 million. We believe there are likely to be
other benefits that result from the prior authorization requirement for
the new services, though many of those benefits are difficult to
quantify. For instance, we expect to see savings in the form of reduced
unnecessary utilization, fraud, waste, and abuse, including a reduction
in improper Medicare fee-for-service payments (we note that not all
improper payments are fraudulent). We will solicit public comments on
the potentially increased costs and benefits associated with this
proposed provision for the new services.
[GRAPHIC] [TIFF OMITTED] TP07JY26.139
According to the RFA's use of the term, most suppliers and
providers are small entities. Likewise, the vast majority of physician
and nurse practitioner (NP) practices are considered small businesses
according to the SBA's size standards of having total revenues of $10
million or less in any 1 year. While the economic costs and benefits
are substantial in the aggregate, the economic impact on individual
entities compliant with Medicare program coverage and utilization rules
and regulations will be relatively small. We estimate that 90 to 95
percent of providers who provide these services are small entities
under the RFA definition. The rationale behind requiring prior
authorization is to control unnecessary increases in the volume of
covered OPD services. The impact on providers not in compliance with
Medicare coverage, coding, and payment rules and regulations could be
significant, as the proposed rule may change the billing practices of
those providers. The purpose of the statute and this proposed rule is
to avoid unnecessary increases in utilization of OPD services.
Therefore, we do not view decreased revenues from the additional OPD
services to be a condition that we must mitigate. We believe that the
effect would be minimal on providers who are compliant with Medicare
coverage, coding, and payment rules and requirements. Adding the new
services would offer additional protection to a provider's cash flow as
the provider would know in advance if the Medicare requirements were
met.
b. Anticipated Specific Cost Effects
(1) Private Sector Costs
We do not believe that this proposed rule would significantly
affect the number of legitimate claims submitted for the new services.
However, we expect a decrease in the overall amount paid for the
services resulting from a reduction in unnecessary utilization of the
services requiring prior authorization.
We estimate that the private sector's per-case time burden
attributed to submitting documentation and associated clerical
activities in support of a prior authorization request for the
additional services will be equivalent to that of submitting
documentation and clerical activities associated with prepayment
review, which is 0.5 hours. We apply this time burden estimate to
initial submissions and resubmissions.
[[Page 42026]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.140
(2) Administrative Costs to CMS
CMS would incur additional costs associated with processing the
prior authorization requests for the new services. We use the range of
potentially affected cases (submissions and resubmissions) and multiply
it by $95, the estimated cost to review each request. The combined cost
also includes other elements such as appeals, education, outreach, and
system changes.
[GRAPHIC] [TIFF OMITTED] TP07JY26.141
(3) Estimated Beneficiary Costs
We expect a reduction in the utilization of the new Medicare OPD
services when such utilization does not comply with one or more of
Medicare's coverage, coding, and payment rules. While there may be an
associated burden on beneficiaries while they wait for the prior
authorization decision, we are unable to quantify that burden. Although
this proposed rule permits utilization that is medically necessary, OPD
services that are not medically necessary may still provide convenience
or usefulness for beneficiaries; any rule-induced loss of such
convenience or usefulness constitutes a cost of the rule that we lack
data to quantify. Additionally, beneficiaries may have out-of-pocket
costs for those services that are determined not to comply with
Medicare requirements and, thus, are not eligible for Medicare payment.
We lack the data to quantify these costs as well.
(4) Estimated Benefits
There will be quantifiable benefits for this proposed rule because
we expect a reduction in the unnecessary utilization of the new
Medicare OPD services subject to prior authorization. It is difficult
to project the exact decrease in unnecessary utilization; however,
based on a 25 percent savings percentage, we estimate an overall gross
savings of $25 million. These savings represent a Medicare benefit from
more efficient use of health care resources while still maintaining the
same health outcomes for necessary services. We will closely monitor
utilization and billing practices. The expected benefits would also
include changed billing practices that would also enhance the
coordination of care for the beneficiary. For example, requiring prior
authorization for the additional OPD services would help ensure that
the primary care practitioner recommending the service and the facility
collaborate more closely to provide the most appropriate OPD services
to meet the needs of the beneficiary. The practitioner recommending the
service would evaluate the beneficiary to determine what services are
medically necessary based on the beneficiary's condition. This would
require the facility to collaborate closely with the practitioner early
in the process to ensure the services are truly necessary and meet all
requirements and that their supporting documentation is complete and
correct. Improper payments made because the practitioner did not
evaluate the patient, or the patient does not meet the Medicare
requirements, would likely be reduced by requiring a provider to submit
clinical documentation as part of its prior authorization request.
[[Page 42027]]
We solicit comments on the potential additional burden associated
with applying prior authorization requirements to these additional
botulinum toxin injection codes, including any impacts on providers and
beneficiaries.
D. Regulatory Review Cost Estimation
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 this
rule. It is possible that not all commenters reviewed this 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 also recognize that different types of entities are in many
cases affected by mutually exclusive sections of this proposed rule,
and 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 Bureau of Labor Statistics
(BLS) for medical and health service managers (Code 11-9111), we
estimate that the cost of reviewing this rule is $119.10 per hour,
including overhead and fringe benefits (https://www.bls.gov/oes/current/oes_nat.htm). Assuming an average reading speed, we estimate
that it would take approximately 8 hours for the staff to review half
of this proposed rule. For each entity that reviews the rule, the
estimated cost is $952.80 (8 hours x $119.10). Therefore, we estimate
that the total cost of reviewing this regulation is $2,898,418 ($952.80
x 3,042).
E. Regulatory Flexibility Act (RFA) Analysis
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
governmental jurisdictions. The great majority of 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 http://www.sba.gov/content/small-business-size-standards (refer to the 620000 series or Sector 62, Health Care
and Social Assistance).)
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. 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.\217\ Table 96 shows
the number of firms, revenue, and estimated impact per hospital
category.
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\217\ https://www.sba.gov/sites/sbagov/files/2023-03/Table%20of%20Size%20Standards_Effective%20March%2017%2C%202023%20%281%29%20%281%29_0.pdf.
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[[Page 42028]]
[GRAPHIC] [TIFF OMITTED] TP07JY26.142
[GRAPHIC] [TIFF OMITTED] TP07JY26.143
For purposes of the RFA, approximately half of all hospitals are
considered to be small entities. As shown in Table 96, 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. This
[[Page 42029]]
proposed rule includes a number of proposed policy changes that can
significantly increase or decrease estimated 2027 payments at an
individual level, including changes such as the proposed exceptions to
the 340B drug payment proposal and the payment adjustment for imaging
without contrast services furnished at provider based departments.
Based on this impact 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.
Therefore, the Secretary has certified that this proposed rule will
have a significant economic impact on a substantial number of small
entities.
For example, we estimate that a majority of the 3,481 OPPS
providers included in the impact analysis presented in Table 88 would
experience average payment increases of approximately 2.0 percent. We
attribute those changes primarily to the proposed change in estimated
outlier payments, changes in estimated pass through spending, and the
proposed OPPS update. Across hospital categories, we estimate that
impacts would range from an increase of 8.8 percent for rural sole
community hospitals to an estimated decrease of 4.2 percent for
hospitals with a DSH patient percentage greater than 35 percent.
As shown in Tables 91 and 92, we estimate that this proposed rule
would result in aggregate transfers of approximately $1.82 billion to
OPPS providers and $170 million to ASCs. In Table 97, 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 3,481 OPPS providers,
approximately 1,605 are small entities. Applying the 1.8 percent
revenue share, we estimate that approximately $32.9 million of the OPPS
impacts would accrue to small entities, which corresponds to an average
impact of approximately $20,498 per small OPPS provider.
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, in
the corresponding sections of this proposed rule.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis 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 RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has 100 or fewer beds. This proposed rule would
affect payments to a substantial number of small rural hospitals and a
small number of rural ASCs, as well as other classes of hospitals,
CMHCs, and ASCs, and some effects may be significant. However, as noted
in the impact analysis of this proposed rule, this rule is expected to
generally increase OPPS payments to the approximately 511 small rural
hospitals. Therefore, the Secretary has certified that this proposed
rule will have a significant impact on the operations of a substantial
number of small rural hospitals.
The analyses presented in this section 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.
F. Unfunded Mandates Reform Act (UMRA)
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 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 2027, that
threshold is approximately $193 million.
This proposed rule would not impose a mandate 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 1
year.
G. Federalism
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.
We have examined the OPPS and ASC provisions included in this
proposed rule in accordance with Executive Order 13132, Federalism, and
have determined that they would not have a substantial direct effect on
State, local, or tribal governments, preempt State law, or otherwise
have a federalism implication. As reflected in Table 88 of this
proposed rule, we estimate that OPPS payments to governmental hospitals
(including State and local governmental hospitals) would decrease by
1.3 percent under this proposed rule. While we do not know the number
of ASCs or CMHCs with government ownership, we anticipate that it is
small. The analyses we have provided in this section of this proposed
rule, in conjunction with the remainder of this document, demonstrate
that this rule is consistent with the regulatory philosophy and
principles identified in Executive Order 12866, the RFA, and section
1102(b) of the Act.
H. E.O. 14192, ``Unleashing Prosperity Through Deregulation''
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 rule is expected
to be an E.O. 14192 regulatory action. We estimated that this rule will
generate $6.23 million in annualized cost at a 7 percent discount rate,
discounted relative to year 2024, over a perpetual time horizon.
Mehmet Oz, Administrator of the Centers for Medicare & Medicaid
Services, approved this document on July 1, 2026.
List of Subjects
42 CFR Part 413
Diseases, Health facilities, Medicare, Puerto Rico, Reporting and
recordkeeping requirements.
42 CFR Part 416
Health facilities, Health professions, Medicare, Reporting and
recordkeeping requirements.
42 CFR Part 419
Hospitals, Medicare, Reporting and recordkeeping requirements.
42 CFR Part 427
Administrative practice and procedure, Biologics, Inflation
rebates, Medicare, Prescription drugs.
42 CFR Part 488
Administrative practice and procedure, Health facilities, Health
professions, Medicare, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth
below:
[[Page 42030]]
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT
RATES FOR SKILLED NURSING FACILITIES; PAYMENT FOR ACUTE KIDNEY
INJURY DIALYSIS
0
1. The authority citation for part 413 continues to read as follows:
Authority: 42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a),
(i), and (n), 1395m, 1395x(v), 1395x(kkk), 1395hh, 1395rr, 1395tt,
and 1395ww.
0
2. Section 413.65 is amended--
0
a. In paragraph (a)(2) by adding the definition of ``Off-campus
outpatient department of a provider'' in alphabetical order;
0
b. By revising paragraphs (b)(3)(ii) and (iii);
0
c. By adding paragraph (b)(6);
0
d. By revising paragraphs (e) introductory text, (g)(1)(i) and (ii),
(h) introductory text, and (k).
The additions and revisions read as follows:
Sec. 413.65 Requirements for a determination that a facility or an
organization has provider-based status.
(a) * * *
(2) * * *
* * * * *
Off-campus outpatient department of a provider means a department
of a provider that is not located on the campus of the main provider
(as defined in this section) or within 250 yards of a remote location
of a hospital (as defined in this section).
* * * * *
(b) * * *
(3) * * *
(ii) If the facility is not located on the campus of the potential
main provider or within 250 yards of a remote location of a hospital,
the attesting provider would be required to submit an attestation
stating that the facility meets the criteria in paragraphs (d) and (e)
of this section, and if the facility is operated under a management
contract, the requirements of paragraph (h) of this section. If the
potential main provider is a hospital, the hospital also would be
required to attest that it will fulfill the obligations of hospital
outpatient departments and hospital-based entities described in
paragraph (g) of this section. The provider would be required to
maintain documentation of the basis for its attestations to CMS and to
furnish such information upon request.
(iii) Whenever a provider submits an attestation of provider-based
status for an on-campus facility or organization, as described in
paragraph (b)(3)(i) of this section, CMS or its agents will send the
provider written acknowledgment of receipt of the attestation, review
the attestation for completeness, consistency with the criteria in this
section, and consistency with information in the possession of CMS or
its agents at the time the attestation is received, and make a
determination as to whether the facility or organization is provider-
based.
* * * * *
(6) As of January 1, 2028, for each off-campus outpatient
department of a provider, excluding those described in paragraphs (m)
or (n) of this section, a provider must submit an initial attestation
for provider-based status within the 2-year period prior to furnishing
services, and a subsequent attestation within a period not to exceed 5
years thereafter.
* * * * *
(e) Additional requirements applicable to off-campus facilities or
organizations. Except as described in paragraphs (b)(2) and (5) of this
section, any facility or organization for which provider-based status
is sought that is not located on the campus of a potential main
provider or within 250 yards of a remote location of a hospital must
meet both the requirements in paragraph (d) of this section and all of
the following additional requirements, in order to be determined by CMS
to have provider-based status.
* * * * *
(g) * * *
(1) * * *
(i) Any facility or organization that is located on the main
hospital campus or within 250 yards of a remote location of a hospital
and is treated by CMS under this section as a department of the
hospital; and
(ii) Any facility or organization that is located off the main
hospital campus that is treated by CMS under this section as a
department of the hospital and is a dedicated emergency department, as
defined in Sec. 489.24(b) of this chapter.
* * * * *
(h) Management contracts. A facility or organization that is not
located on the campus of the potential main provider or within 250
yards of a remote location of a hospital and otherwise meets the
requirements of paragraphs (d) and (e) of this section, but is operated
under management contracts, must also meet all of the following
criteria:
* * * * *
(k) Temporary treatment as provider-based. If a provider submits an
attestation of compliance with the requirements for provider-based
status, as described in paragraph (b) of this section, for a facility
or organization that has not previously been found by CMS to have been
inappropriately treated as provider-based under paragraph (j) of this
section, the provider may bill and be paid for services of the facility
or organization as provider-based from the date it submits an
attestation until the date that CMS determines that the facility or
organization does not meet the provider-based rules. CMS may, at any
time, initiate an extended review to validate the attestation of
compliance, including through site visits, remote audits, desk reviews,
investigations, or any other means CMS determines appropriate. As part
of such a review, the provider must submit supporting documentation
sufficient to demonstrate compliance with the provider-based
requirements set forth in this section, in the form and manner and
within the timeframe specified by CMS. Failure to submit requested
documentation within the timeframe specified by CMS may result in a
determination of non-compliance and recovery of payments as described
in this paragraph (k). If CMS determines that the requirements for
provider-based status are not met, CMS will recover the difference
between the amount of payments that actually was made since the date
the attestation of compliance with provider-based requirements was
submitted and the amount of payments that CMS estimates should have
been made in the absence of compliance with the provider-based
requirements.
* * * * *
PART 416--AMBULATORY SURGICAL SERVICES
0
3. The authority citation for part 416 is revised to read as follows:
Authority: 42 U.S.C. 273, 1302, 1320b-8, and 1395hh.
0
4. Section 416.171 is amended by revising paragraphs (a)(2)(iii)
through (viii) to read as follows:
Sec. 416.171 Determination of payment rates for ASC services.
(a) * * *
(2) * * *
(iii) For CY 2019 through CY 2027, the update is the hospital
inpatient market basket percentage increase applicable under section
1886(b)(3)(B)(iii) of the Act.
(iv) For CY 2028 and subsequent years, the update is the Consumer
Price Index for All Urban Consumers (U.S. city average) as estimated by
the Secretary for the 12-month period
[[Page 42031]]
ending with the midpoint of the year involved.
(v) For CY 2014 through CY 2018, the Consumer Price Index for All
Urban Consumers update determined under paragraph (a)(2)(ii) of this
section was reduced by 2.0 percentage points for ASCs that failed to
meet the standards for reporting of ASC quality measures as established
by the Secretary for the corresponding calendar year.
(vi) For CY 2019 through CY 2027, the hospital inpatient market
basket percentage increase determined under paragraph (a)(2)(iii) of
this section is reduced by 2.0 percentage points for an ASC that fails
to meet the standards for reporting of ASC quality measures as
established by the Secretary for the corresponding calendar year.
(vii) For CY 2028 and subsequent years, the Consumer Price Index
for All Urban Consumers update determined under paragraph (a)(2)(iv) of
this section is reduced by 2.0 percentage points for an ASC that fails
to meet the standards for reporting of ASC quality measures as
established by the Secretary for the corresponding calendar year.
(viii)(A) For CY 2011 through CY 2018, the Consumer Price Index for
All Urban Consumers determined under paragraph (a)(2)(ii) of this
section, after application of any reduction under paragraph (a)(2)(v)
of this section, was reduced by the productivity adjustment described
in section 1886(b)(3)(B)(xi)(II) of the Act.
(B) For CY 2019 through CY 2027, the hospital inpatient market
basket percentage increase determined under paragraph (a)(2)(iii) of
this section, after application of any reduction under paragraph
(a)(2)(vi) of this section, is reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act.
(C) For CY 2028 and subsequent years, the Consumer Price Index for
All Urban Consumers determined under paragraph (a)(2)(iv) of this
section, after application of any reduction under paragraph (a)(2)(vii)
of this section, is reduced by the productivity adjustment described in
section 1886(b)(3)(B)(xi)(II) of the Act.
* * * * *
PART 419--PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES
0
5. The authority citation for part 419 continues to read as follows:
Authority: 42 U.S.C. 1302, 1395l(t), and 1395hh.
0
6. Adding Sec. 419.23 to subpart B to read as follows:
Sec. 419.23 Special rule for off-campus outpatient department of a
provider.
(a) No payment may be made under this part for items and services
furnished on or after January 1, 2028, by an off-campus outpatient
department of a provider (as defined in paragraph (b) of this section)
unless--
(1) Such department has obtained, and such items and services are
billed under, a National Provider Identifier that is separate from such
identifier for such provider;
(2) Such provider has submitted an initial attestation for
provider-based status in accordance with Sec. 413.65(b)(6) of this
chapter; and
(3) After such provider has submitted an initial attestation under
paragraph (a)(2) of this section, such provider has submitted a
subsequent attestation within the timeframe specified in and in
accordance with Sec. 413.65(b)(6) of this chapter.
(b) For purposes of this section, off-campus outpatient department
of a provider is defined at Sec. 413.65(a)(2) of this chapter.
0
7. Section 419.32 is amended by--
0
a. Revising paragraph (b)(1)(iv)(B)(12); and
0
b. Adding paragraph (b)(1)(iv)(B)(13).
The revision and addition read as follows:
Sec. 419.32 Calculation of prospective payment rates for hospital
outpatient services.
* * * * *
(b) * * *
(1) * * *
(iv) * * *
(B) * * *
(12) For calendar year 2026, a multifactor productivity adjustment
(as determined by CMS), and 0.5 percentage point reduction, except that
the 0.5 percentage point reduction shall not apply to hospital
outpatient items and services, not including separately payable drugs
or biologicals, furnished by a hospital with a CMS certification number
(CCN) effective date of January 2, 2018, or later.
(13) Beginning in calendar year 2027, a multifactor productivity
adjustment (as determined by CMS), and 3.0-percentage point reduction,
except that the 3.0-percentage point reduction shall not apply to
hospital outpatient items and services furnished by a hospital with a
CMS certification number (CCN) effective date of January 2, 2018, or
later. This reduction and associated exception to the reduction will be
in effect until the estimated payment reductions made in accordance
with paragraph (b)(1)(iv)(B)(12) of this section and this paragraph
(b)(1)(iv)(B)(13) for all applicable hospital outpatient items and
services reaches $7.769 billion, as further described in each calendar
year's rule.
* * * * *
0
8. Section 419.43 is amended by adding paragraph (l) to read as
follows:
Sec. 419.43 Adjustments to national program payment and beneficiary
copayment amounts.
* * * * *
(l) Cost-of-living adjustment. An additional adjustment is made for
hospitals located in Alaska and Hawaii to account for the higher cost-
of-living in those States.
9. Section 419.46 is amended by revising paragraphs (f)(2), (f)(3)
introductory text, (f)(4), and (g)(2)(vii) and (viii) to read as
follows:
Sec. 419.46 Requirements under the Hospital Outpatient Quality
Reporting (OQR) Program.
* * * * *
(f) * * *
(2) A hospital meets the validation requirements with respect to a
calendar year if it achieves:
(i) An overall reliability score of at least 75-percent for chart-
abstracted measure validation, as determined by CMS; and
(ii) Beginning with validation affecting the CY 2030 payment
determination, an overall reliability score of at least 75-percent for
eCQM validation, as determined by CMS.
(3) CMS will select a random sample of up to 200 hospitals,
beginning with validation affecting the CY 2030 payment determination,
or 450 hospitals, for validation affecting payment determinations prior
to CY 2030, for validation purposes, and will select up to an
additional 200 hospitals, beginning with validation affecting the CY
2030 payment determination, or 50 hospitals for validation affecting
payment determinations prior to CY 2030, for validation purposes based
on the following criteria:
* * * * *
(4) Hospitals that are selected and receive a score for validation
may request an educational review in order to better understand the
results within 30 calendar days from the date the validation results
are made available. If the results of an educational review indicate
that a hospital's medical records selected for validation were
incorrectly scored, the corrected validation score will be used to
compute the hospital's final validation score at the end of the
calendar year.
(g) * * *
(2) * * *
[[Page 42032]]
(vii) Except as provided in paragraph (g)(2)(viii) of this section,
a copy of all materials that the hospital submitted to comply with the
requirements of the affected Hospital OQR Program payment determination
year; and
(viii) If the hospital is requesting reconsideration on the basis
that CMS determined it did not meet the affected payment determination
year's validation requirement set forth in paragraph (f)(2) of this
section, the hospital must provide:
(A) A written justification for each appealed data element
classified during the validation process as a mismatch. Only data
elements that affect a hospital's validation score are eligible to be
reconsidered; and
(B) Any evidence that supports the hospital's reconsideration
request, including, as applicable, copies of patient charts, emails,
and other documents. The hospital is not required to resubmit materials
previously submitted to CMS unless specifically requested by CMS.
* * * * *
0
10. Section 419.83 is amended by revising paragraph (a) to read as
follows:
Sec. 419.83 List of hospital outpatient department services requiring
prior authorization.
(a) Service categories for the list of hospital outpatient
department services requiring prior authorization. The following
service categories comprise the list of hospital outpatient department
services requiring prior authorization:
(1) Blepharoplasty.
(2) Botulinum toxin injections.
(3) Panniculectomy.
(4) Rhinoplasty.
(5) Vein ablation.
(6) Cervical Fusion with Disc Removal.
(7) Implanted Spinal Neurostimulators.
(8) Facet Joint Interventions.
PART 427--MEDICARE PART B DRUG INFLATION REBATE PROGRAM
0
11. The authority citation for part 427 continues to read as follows:
Authority: 42 U.S.C. 1395w-3a(i), 1302, and 1395hh.
0
12. Section 427.303 is amended by revising paragraph (b)(1)(iv) to read
as follows:
Sec. 427.303 Determination of total number of billing units.
* * * * *
(b) * * *
(1) * * *
(iv) Separately payable billing units in claim lines billed with
the ``TB'' modifier and successor billing modifiers to identify 340B
units, for claims with dates of service on or after January 1, 2025.
* * * * *
PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES
0
13. The authority citation for part 488 continues to read as follows:
Authority: 42 U.S.C. 1302 and 1395hh.
0
14. Section 488.5 is amended by adding paragraph (a)(21) to read as
follows:
Sec. 488.5 Application and re-application procedures for national
accrediting organizations.
(a) * * *
(21) For accrediting organizations seeking or maintaining CMS
approval of accrediting programs for hospitals, Critical Access
Hospitals, and Rural Emergency Hospitals, the application must include
a description of the policies and procedures the organization will use
to assess compliance with the EMTALA-administrative requirements set
forth at Sec. 489.20 (l), (m), (q), and (r) during accreditation and
reaccreditation surveys, including--
(i) Procedures for reviewing required EMTALA signage;
(ii) Procedures for verifying that transfer records are maintained
and retained for at least 5 years;
(iii) Procedures for verifying the on-call physician lists are
maintained as required;
(iv) Procedures for verifying a central log of individuals
presenting to the emergency department is maintained as required;
(v) Procedures for reporting identified noncompliance with Sec.
489.20 to CMS in accordance with CMS oversight requirements; and
(vi) Procedures for reporting identified noncompliance with Sec.
489.24 subsequently identified during survey to CMS in accordance with
CMS oversight requirements.
* * * * *
Robert F. Kennedy, Jr.,
Secretary, Department of Health and Human Services.
[FR Doc. 2026-13656 Filed 7-2-26; 8:45 am]
BILLING CODE 4169-69-P