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

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.

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

OutpatientPPS@cms.hhs.gov.

Accrediting Organization (AO) Deeming for Emergency Medical Treatment and Labor Act (EMTALA), contact Melissa Daly via email at

Melissa.Daly@cms.hhs.gov

.

Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact the HOP Panel mailbox at

APCPanel@cms.hhs.gov.

Ambulatory Surgical Center Covered Procedures List (ASC CPL), contact Abigail Cesnik via email at

Abigail.Cesnik@cms.hhs.gov.

Ambulatory Surgical Center Quality Reporting Program measures, contact Marsha Hertzberg via email at

Marsha.Hertzberg@cms.hhs.gov.

Ambulatory Surgical Center Quality Reporting Program policies, contact Anita Bhatia via email at

Anita.Bhatia@cms.hhs.gov.

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

Nathan.Vercauteren@cms.hhs.gov.

Blood and Blood Products, contact Gil Ngan via email at

Gil.Ngan@cms.hhs.gov.

Cancer Hospital Payments, contact Scott Talaga via email at

Scott.Talaga@cms.hhs.gov.

CMS Web Posting of the OPPS and ASC Payment Files, contact Gil Ngan via email at

Gil.Ngan@cms.hhs.gov

.

Composite APCs (Multiple Imaging and Mental Health) and Comprehensive APCs (C-APCs), contact Elise Barringer via email at

Elise.Barringer@cms.hhs.gov.

Device-Intensive Status and No Cost/Full Credit and Partial Credit Devices, contact Scott Talaga via email at

Scott.Talaga@cms.hhs.gov.

Hospital Outpatient Quality Reporting Program measures, contact Kristina Rabarison via email at

Kristina.Rabarison@cms.hhs.gov.

Hospital Outpatient Quality Reporting Program policies, contact Kimberly Go via email at

Kimberly.Go@cms.hhs.gov.

Hospital Outpatient Visits (Emergency Department Visits and Critical Care Visits), contact Elise Barringer via email at

Elise.Barringer@cms.hhs.gov.

Hospital Price Transparency, contact Sarah Wheat via email at

PriceTransparencyHospitalCharges@cms.hhs.gov.

Inpatient Only (IPO) Procedures List, contact Abigail Cesnik via email at

Abigail.Cesnik@cms.hhs.gov.

Medicare OPPS Drug Acquisition Cost Survey, contact Cory Duke via email at

Cory.Duke@cms.hhs.gov

or Gil Ngan at

Gil.Ngan@cms.hhs.gov

or Nate Vercauteren at

Nathan.Vercauteren@cms.hhs.gov.

Method to Control Unnecessary Increases in the Volume of Outpatient Services, contact Elise Barringer via email at

Elise.Barringer@cms.hhs.gov.

New Technology Intraocular Lenses (NTIOLs), contact Scott Talaga via email at

Scott.Talaga@cms.hhs.gov.

Non-Opioid Policy or Implementation of Section 4135 of the Consolidated Appropriations Act (CAA), 2023, contact Cory Duke via email at

Cory.Duke@cms.hhs.gov

or Nicole Marcos via email at

Nicole.Marcos@cms.hhs.gov.

OPPS Brachytherapy, contact Scott Talaga via email at

Scott.Talaga@cms.hhs.gov.

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

Erick.Chuang@cms.hhs.gov

or Scott Talaga via email at

Scott.Talaga@cms.hhs.gov.

OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar Products, contact Gil Ngan via email at

Gil.Ngan@cms.hhs.gov,

Cory Duke via email at

Cory.Duke@cms.hhs.gov,

or Nate Vercauteren via email at

Nathan.Vercauteren@cms.hhs.gov.

OPPS New Technology Procedures/Services, contact the New Technology APC mailbox at

NewTechAPCapplications@cms.hhs.gov.

OPPS Packaged Items/Services, contact Cory Duke via email at

Cory.Duke@cms.hhs.gov.

OPPS Pass-Through Devices, contact the Device Pass-Through mailbox at

DevicePTapplications@cms.hhs.gov.

OPPS Status Indicators (SI) and Comment Indicators (CI), contact Marina Kushnirova via email at

Marina.Kushnirova@cms.hhs.gov

or Tonya Gierke at

Tonya.Gierke@cms.hhs.gov.

Outpatient Department Prior Authorization Requirements, contact Yuliya Cook via email at

Yuliya.Cook@cms.hhs.gov.

Partial Hospitalization Program (PHP), Intensive Outpatient (IOP), and Community Mental Health Center (CMHC) Issues, contact the PHP Payment Policy Mailbox at

PHPPaymentPolicy@cms.hhs.gov.

Potential Separate IPPS Payment for Domestic Procurement of Personal Protective Equipment and Essential Medicines Issues, please contact

DAC@cms.hhs.gov.

Provider-Based Attestation Requirements, please contact

CAA_2026_Section_6225@cms.hhs.gov.

Rural Emergency Hospital Quality Reporting Program policies, contact Anita Bhatia via email at

Anita.Bhatia@cms.hhs.gov.

Rural Emergency Hospital Quality Reporting Program measures, contact Melissa Hager via email at

Melissa.Hager@cms.hhs.gov.

Skin Substitute Products, contact Nicole Marcos via email at

Nicole.Marcos@cms.hhs.gov.

Software as a Medical Service, contact Nicole Marcos via email at

Nicole.Marcos@cms.hhs.gov.

All Other Issues Related to Hospital Outpatient Payments Not Previously Identified, contact the OPPS mailbox at

OutpatientPPS@cms.hhs.gov.

All Other Issues Related to the Ambulatory Surgical Center Payments Not Previously Identified, contact the ASC mailbox at

ASCPPS@cms.hhs.gov.

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

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

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

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

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 § 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

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

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

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

$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

outpatientpps@cms.hhs.gov.

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

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.

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

(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

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

EP07JY26.012

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

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).

BILLING CODE 4169-69-P

EP07JY26.013

EP07JY26.014

BILLING CODE 4169-69-C

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

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.

BILLING CODE 4169-69-P

EP07JY26.015

EP07JY26.016

EP07JY26.017

EP07JY26.018

BILLING CODE 4169-69-C

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

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 § 419.2(b), we refer to them as “policy-packaged” drugs, biologicals, and radiopharmaceuticals. In particular, under § 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 § 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 § 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

from hospital claims. Additionally, we finalized corresponding modifications to the regulation text at § 419.2(b)(15) and § 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

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.

6

https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps/downloads/opps_asp_radiopharm_guidance10302009.pdf.

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.

BILLING CODE 4169-69-P

EP07JY26.019

BILLING CODE 4169-69-C

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.

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

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

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 §  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.

BILLING CODE 4169-69-P

EP07JY26.144

EP07JY26.145

BILLING CODE 4169-69-C

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 §§  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 §  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”

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 § 412.103 reclassification along with geographically rural hospitals in all rural wage index calculations, and we exclude “dual reclass” hospitals (hospitals with simultaneous § 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 6

This text is long and has been trimmed here. Open the source document for the complete record.