# 91 FR 41734: 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

> Federal · Regulations · In force

URL: https://www.frixlaw.com/law-library/statutes/FR_PRORULE_2026-13656

## Section

- **Citation:** 91 FR 41734
- **Heading:** 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
- **Jurisdiction:** Federal
- **Kind:** Regulations
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** Federal Register / Vol. 91 / 91 FR 41734

## Text

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
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
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
d 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
et 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
tecting 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
e 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
chnology 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
ogy 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
uding 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
r 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
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
s, 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)
istory 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)
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
e.
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”
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
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)
ts 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
rvices 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
nal 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)
ical 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
thin 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.
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
e 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.
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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)
(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).
rdingly, in the CY 2025 OPPS/ASC final rule with comment period, we finalized a policy to exclude the non-opioid treatments for pain relief identified as satisfying the required criteria for payment under section 4135 of the CAA, 2023 from the C-APC policy to ensure payment is not packaged into any C-APC and that separate payment is made in accordance with the statute (89 FR 93938 through 93939).
(6) C-APCs for CY 2027
For CY 2027 and subsequent years, we propose to continue to apply the C-APC payment policy methodology. We refer readers to the CY 2017 OPPS/ASC final rule with comment period (81 FR 79583) for a discussion of the C-APC payment policy methodology- and revisions.
Each year, in accordance with section 1833(t)(9)(A) of the Act, we review and revise the services within each APC group and the APC assignments under the OPPS. As a result of our annual review of the services and the APC assignments under the OPPS, we are not proposing to convert any standard APCs to C-APCs in CY 2027; thus, we propose that the number of C-APCs for CY 2027 (see Table 2) would be the same as the number for CY 2026, which is 74 C-APCs (91 FR 8384).
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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
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
e of service using the multiple imaging composite APC payment methodology. We continue to believe that this policy would reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session.
For CY 2027, except where otherwise indicated, we propose to use the costs derived from CY 2025 claims data to set the proposed CY 2027 payment rates. Therefore, for CY 2027, the proposed payment rates for the five multiple imaging composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) were based on proposed geometric mean costs calculated from CY 2025 claims available for the CY 2027 OPPS/ASC proposed rule that qualify for composite payment under the current policy (that is, those claims reporting more than one procedure within the same family on a single date of service). To calculate the proposed geometric mean costs, we used the same methodology that we used to calculate the geometric mean costs for these composite APCs since CY 2014, as described in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74918). The imaging HCPCS codes referred to as “overlap bypass codes” that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC geometric mean costs, in accordance with our established methodology as stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74918), are identified by asterisks in Addendum N to this proposed rule (which is available via the internet on the CMS website https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient/regulations-notices ) and are discussed in more detail in section II.A.1.a. of this proposed rule.
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BILLING CODE 4169-69-C 3. Proposed Changes to Packaged Items and Services
a
s 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
, 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)
m 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.
7. 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
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)
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
e newly assigned HCPCS code (89 FR 93958). We continue to believe the hierarchy previously specified is appropriate to determine the payment for a diagnostic radiopharmaceutical that is new and described by a HCPCS code, but without claims data, as it is consistent with the typical hierarchy associated with payment for drugs and biologicals paid under the OPPS as discussed in sections V.A. and V.B. of this proposed rule.
(4) Qualifying Diagnostic Radiopharmaceuticals Above the Diagnostic Radiopharmaceutical Packaging Threshold
The HCPCS codes that describe diagnostic radiopharmaceuticals with per day costs that exceed the proposed diagnostic radiopharmaceutical packaging threshold are proposed to be assigned to a status indicator of “K”, indicating separate payment to be paid based on that HCPCS code's arithmetic MUC. A proposed APC and a proposed payment rate are assigned as shown in Addendum B to this proposed rule. HCPCS codes that describe diagnostic radiopharmaceuticals with per day costs that are at or below the proposed diagnostic radiopharmaceutical packaging threshold are proposed to continue to be assigned to a status indicator of “N”, indicating packaged payment.
The proposed list of diagnostic radiopharmaceuticals that we calculate as having per day costs that exceeded $665 and their proposed status indicators can be found in Table 4.
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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
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
ive 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
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)
ublishes 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
ee 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
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
nversion 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
PPS 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
e 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
osts 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
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
793, 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
(8)(C)(ii) of the Act (88 FR 58971 through 58973). We refer readers to the FY 2027 IPPS/LTCH PPS proposed rule (91 FR 19459 through 19479) for a detailed discussion of all proposed changes to the FY 2027 IPPS wage indexes.
We note that in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through 49021), we finalized a permanent approach to smooth year-to-year decreases in hospitals' wage indexes. Specifically, for FY 2023 and subsequent years, we apply a 5 percent cap on any decrease to a hospital's wage index from its wage index in the prior FY, regardless of the circumstances causing the decline. That is, a hospital's wage index for FY 2027 would not be less than 95 percent of its final wage index for FY 2026. Except for newly opened hospitals, we apply the cap for a fiscal year using the final wage index applicable to the hospital on the last day of the prior fiscal year. A newly opened hospital would be paid the wage index for the area in which it is geographically located for its first full or partial fiscal year (subject to any reclassification), and it would not receive a cap for that first year, because it would not have been assigned a wage index in the prior year (in accordance with 42 CFR 419.41(c)(1) and 419.43(c), as noted previously).
Consistent with the FY 2026 IPPS/LTCH PPS final rule (90 FR 36852 through 36854), we discontinued for CY 2026 and subsequent years the low wage index hospital policy under the OPPS (90 FR 53495 through 53496). Under the low wage index hospital policy that we previously adopted for the OPPS (84 FR 61186 through 61188), we increased the wage index for hospitals with a wage index value below the 25th percentile wage index value for a calendar year by half the difference between the otherwise applicable final wage index value for a year for that hospital and the 25th percentile wage index value for that year across all hospitals
uthority allows the Secretary to establish, in a budget neutral manner, adjustments as determined to be necessary to ensure equitable payments.
The CY 2026 transitional exception policy under the OPPS applied to hospitals that benefited from the CY 2024 low wage index hospital policy. For those hospitals, we compared the hospital's proposed CY 2026 wage index to the hospital's CY 2024 wage index. If the hospital was significantly impacted by the discontinuation of the low wage index hospital policy, meaning the hospital's proposed CY 2026 wage index was decreasing by more than 9.75 percent from the hospital's CY 2024 wage index, then the transitional payment exception for CY 2026 for that hospital was equal to the additional CY 2026 amount the hospital would be paid under the OPPS if its CY 2026 wage index were equal to 90.25 percent of its CY 2024 wage index. This transitional payment exception was applied after the application of the 5-percent cap described at 42 CFR 412.64(h)(7). This policy was budget neutral under the OPPS through the second wage index budget neutrality adjustment applied to the OPPS conversion factor (which currently includes the 5 percent hold harmless cap policy).
In the FY 2027 IPPS/LTCH proposed rule (91 FR 19476 through 19478) we proposed, using our authority under section 1886(d)(5)(I)(i) of the Act, to continue to apply the narrow transitional payment exception to the calculation of FY 2027 IPPS payments for low wage index hospitals significantly impacted by the discontinuation of the low wage index hospital policy that we adopted in CY 2026
policy).
In the FY 2027 IPPS/LTCH proposed rule (91 FR 19476 through 19478) we proposed, using our authority under section 1886(d)(5)(I)(i) of the Act, to continue to apply the narrow transitional payment exception to the calculation of FY 2027 IPPS payments for low wage index hospitals significantly impacted by the discontinuation of the low wage index hospital policy that we adopted in CY 2026. As indicated in that rule, we proposed to continue this temporary payment exception because “[s]ome hospitals that previously benefitted from the low wage index hospital policy would continue to experience decreases of approximately 5 percent or more per year from their FY 2024 wage index (with the low wage index hospital policy applied).” 8 To address these same concerns under the OPPS, we correspondingly propose to continue the transitional payment exception for CY 2027 under the OPPS that we adopted in CY 2026 using our equitable adjustment authority under section 1833(t)(2)(E) of the Act.
8 91 FR 19477.
Core Based Statistical Areas (CBSAs) are made up of one or more constituent counties. Each CBSA and constituent county has its own unique identifying codes. The FY 2018 IPPS/LTCH PPS final rule (82 FR 38130) discussed the two different lists of codes to identify counties: Social Security Administration (SSA) codes and Federal Information Processing Standard (FIPS) codes. Historically, CMS listed and used SSA and FIPS county codes to identify and crosswalk counties to CBSA codes

for purposes of the IPPS and OPPS wage indexes. However, the SSA county codes are no longer being maintained and updated, although the FIPS codes continue to be maintained by the U.S. Census Bureau. The Census Bureau's most current statistical area information is derived from ongoing census data received since 2010; the most recent data are from 2015
icare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)). Applying this adjustment is consistent with our policy of adopting IPPS wage index policies for hospitals paid under the OPPS. We note that, because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage index adjustment if they are located in a section 505 out-migration county. This is the same out-migration adjustment policy that would apply if the hospital were paid under the IPPS. For CY 2027, we propose to continue our policy of allowing non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a section 505 out-migration county (section 505 of the MMA) (88 FR 49585 through 49586). Furthermore, we propose that the wage index that would apply for CY 2027 to non-IPPS hospitals paid under the OPPS would continue to include the rural floor adjustment and any other policies and adjustments applied to the IPPS wage index. In addition, we propose that the wage index that would apply to non-IPPS hospitals paid under the OPPS would include the 5 percent cap on wage index decreases and the previously described proposed transitional payment exception for hospitals significantly impacted by the discontinuation of the low wage index hospital policy.
For CMHCs, for CY 2027, we propose to continue to calculate the wage index by using the post-reclassification IPPS wage index based on the CBSA where the CMHC is located. Furthermore, we propose that the wage index that would apply to a CMHC for CY 2027 would continue to include the rural floor adjustment and any other policies and adjustments applied to the IPPS wage index. In addition, the wage index that would apply to CMHCs would include the 5 percent cap on wage index decreases and proposed transitional exception. Also, we propose that the wage index that would apply to CMHCs would not include the out-migration adjustment because that adjustment only applies to hospitals
rge Ratios (CCRs)
In addition to using CCRs to estimate costs from charges on claims for ratesetting, we use overall hospital-specific CCRs calculated from the hospital's most recent cost report (OMB control number 0938-0050 for Form CMS-2552-10) to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. For certain hospitals, under the regulations at 42 CFR 419.43(d)(5)(iii), we use the statewide average CCRs to determine the payments mentioned earlier if it is not possible to determine an accurate CCR for a hospital in certain circumstances. This includes new hospitals, defined for this purpose as entities that have not accepted assignment of an existing hospital's provider agreement, and hospitals that have not yet submitted a cost report. We also use the statewide average default CCRs to determine payments for hospitals whose CCR falls outside the predetermined ceiling threshold for a valid CCR or for hospitals in which the most recent cost report reflects an all-inclusive rate

status (Medicare Claims Processing Manual (Pub. 100-04), Chapter 4, Section 10.11).
We discussed our policy for using statewide average CCRs (also referred to as statewide average default CCRs), including setting the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in the context of our adoption of an outlier reconciliation policy for cost reports beginning on or after January 1, 2009. For details on our process for calculating the statewide average CCRs, we refer readers to the Claims Accounting Narrative for this proposed rule, which is posted on the CMS website. We propose to calculate the default ratios for CY 2027 using the most recent cost report data
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the Act provides the Secretary the authority to make an adjustment to OPPS payments for rural hospitals, effective January 1, 2006, if justified by a study of the difference in costs by APC between hospitals in rural areas and hospitals in urban areas. Our analysis showed a difference in costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, items paid at charges reduced to costs, and devices paid under the pass-through payment policy, in accordance with section 1833(t)(13)(B) of the Act.
In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68227), for purposes of receiving this rural adjustment, we revised our regulations at § 419.43(g) to clarify that essential access community hospitals (EACHs) are also eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, two hospitals are classified as EACHs, and as of CY 1998, under section 4201(c) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), a hospital can no longer become newly classified as an EACH.
This adjustment for rural SCHs is budget neutral and applied before calculating outlier payments and copayments. We stated in the CY 2006 OPPS final rule with comment period (70 FR 68560) that we would not reestablish the adjustment amount on an annual basis, but we may review the adjustment in the future and, if appropriate, would revise the adjustment. As detailed in the CY 2026 OPPS/ASC final rule with comment period (90 FR 53499), we provided the same 7.1 percent adjustment to rural SCHs, including EACHs, again in CYs 2008 through 2026
nal rule with comment period (70 FR 68560) that we would not reestablish the adjustment amount on an annual basis, but we may review the adjustment in the future and, if appropriate, would revise the adjustment. As detailed in the CY 2026 OPPS/ASC final rule with comment period (90 FR 53499), we provided the same 7.1 percent adjustment to rural SCHs, including EACHs, again in CYs 2008 through 2026.
For CY 2027, we propose to continue the current policy of a 7.1 percent payment adjustment for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, items paid at charges reduced to costs, and devices paid under the pass-through payment policy, applied in a budget neutral manner.
F. Payment Adjustment for Certain Cancer Hospitals for CY 2027
1. Background
Since the inception of the OPPS, which was authorized by the BBA, Medicare has paid the 11 hospitals that meet the criteria for cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered outpatient department services. These cancer hospitals are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), the Congress added section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” which requires the Secretary to determine OPPS payments to cancer and children's hospitals based on their pre-BBA payment amount (these hospitals are often referred to under this policy as “held harmless” and their payments are often referred to as “hold harmless” payments)
e defined at § 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital Cost Report or the Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-2552-10 (OMB No. 0938-0050), respectively), as applicable each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations.
Section 3138 of the Patient Protection and Affordable Care Act (Pub. L. 111-148) amended section 1833(t) of the Act by adding a new paragraph (18), which instructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed outpatient costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as determined appropriate by the Secretary. Section 1833(t)(18)(A) of the Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by cancer hospitals and other hospitals. Section 1833(t)(18)(B) of the Act provides that, if the Secretary determines that cancer hospitals' costs are higher than those of other hospitals, the Secretary shall provide an appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect these higher costs. In 2011, after conducting the study required by section 1833(t)(18)(A) of the Act, we determined that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incurred by other OPPS hospitals. For a

complete discussion regarding the cancer hospital cost study, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74200 and 74201).
Based on these findings, we finalized a policy to provide a payment adjustment to the 11 specified cancer hospitals that reflects their higher outpatient costs, as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 74206)
removed the cost report data of nine hospitals because these hospitals had cost report data that were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to a proposed analytic file of 3,315 hospitals with cost report data.
Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS were approximately 89 percent of reasonable cost (weighted average PCR of 0.89). Therefore, after applying the 1.0 percentage point reduction, as required by section 16002(b) of the 21st Century Cures Act, using our standard process the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.88 for each cancer hospital.
Table 7 shows the estimated percentage increase in OPPS payments to each cancer hospital for CY 2027, due to the cancer hospital payment adjustment policy. The actual, final amount of the CY 2027 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2027 payments and costs from the settled CY 2027 cost report. We note that the requirements contained in section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs will be assessed, as usual, after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period.
EP07JY26.022
G. Proposed Hospital Outpatient Outlier Payments
1. Background
The OPPS provides outlier payments to hospitals to help mitigate the financial risk associated with high-cost and complex procedures, where a very costly service could present a hospital with significant financial loss
ts, including the cancer hospital payment adjustment, have been made for a cost reporting period.
EP07JY26.022
G. Proposed Hospital Outpatient Outlier Payments
1. Background
The OPPS provides outlier payments to hospitals to help mitigate the financial risk associated with high-cost and complex procedures, where a very costly service could present a hospital with significant financial loss. As explained in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66832 through 66834), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for the prospective year. Outlier payments are provided on a service-by-service basis when the cost of a service exceeds the APC payment amount multiplier threshold (the APC payment amount multiplied by a certain amount) as well as the APC payment amount plus a fixed-dollar amount threshold (the APC payment plus a certain dollar amount). In CY 2026, the outlier threshold was met when the hospital's cost of furnishing a service exceeded 1.75 times the APC payment amount (the multiplier threshold) and exceeded the APC payment amount plus $6,225 (the fixed-dollar amount threshold) (90 FR 53502 through 53504). If the hospital's cost of furnishing a service exceeds both the multiplier threshold and the fixed-dollar threshold, the outlier payment is calculated as 50 percent of the amount by which the hospital's cost of furnishing the service exceeds 1.75 times the APC payment amount. Beginning with CY 2009 payments, outlier payments are subject to a reconciliation process similar to the IPPS outlier reconciliation process for cost reports, as discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599).
It has been our policy to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the OPPS
ginning with CY 2009 payments, outlier payments are subject to a reconciliation process similar to the IPPS outlier reconciliation process for cost reports, as discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599).
It has been our policy to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the OPPS. Our estimate of total outlier payments as a percent of total CY 2025 OPPS payments, using CY 2025 claims available for this proposed rule, is approximately 0.93 percent. Therefore, for CY 2025, we estimate that we did not meet the outlier target by 0.07 percent of total aggregated OPPS payments.
For the CY 2027 OPPS/ASC proposed rule, using CY 2025 claims data and CY 2026 payment rates, we estimate that the aggregate outlier payments for CY 2026 would be approximately 1.19 percent of the total CY 2026 OPPS payments. We provide estimated CY 2027 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.
2. Proposed Outlier Calculation for CY 2027
For CY 2027, we propose to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS. We propose that a portion of that 1.0 percent, an amount equal to less than 0.01 percent of outlier payments (or 0.0001 percent of total OPPS payments), would be allocated to CMHCs for partial hospitalization program (PHP) and intensive outpatient program (IOP) outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold as a proportion of total estimated OPPS outlier payments
imulate CY 2027 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2027, we propose to apply an adjustment factor of 0.977497 to the CCRs that were in the April 2026 OPSF to trend them forward from CY 2026 to CY 2027. The methodology for calculating the proposed CCR adjustment factor is discussed in the FY 2027 IPPS/LTCH PPS proposed rule (91 FR 19807 through 19809.
To model hospital outlier payments for this CY 2027 OPPS/ASC proposed rule, we applied the overall CCRs from the April 2026 OPSF after adjustment (using the proposed CCR inflation adjustment factor of 0.977497 to approximate CY 2027 CCRs) to charges on CY 2025 claims that were adjusted (using the proposed charge inflation factor of 1.15154 to approximate CY 2027 charges). We simulated aggregated CY 2027 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiplier threshold constant and assuming that outlier payments would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2027 OPPS payments. We estimate that a proposed fixed dollar- threshold of $7,100 combined with the proposed multiplier threshold of 1.75 times the APC payment rate, would allocate 1.0 percent of aggregated total OPPS payments to outlier payments for CY 2027. For CMHCs, we propose that, if a CMHC's cost for partial hospitalization or intensive outpatient services exceeds 3.40 times the APC payment rate, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC payment rate
schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the Hospital Outpatient Quality Reporting (OQR) Program requirements. For further discussion of the payment reduction for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to section XIV. of this proposed rule.
Below we demonstrate the steps used to determine the APC payments that will be made in a CY under the OPPS to a hospital that fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “J1,” “J2,” “P,” “Q1,” “Q2,” “Q3,” “Q4,” “R,” “S,” “T,” “U,” or “V” (as defined in Addendum D1 to this proposed rule, which is available via the internet on the CMS website), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood products with status indicator “R” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements.
Individual providers interested in calculating the payment amount that they would receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this proposed rule (which are available via the internet on the CMS website) should follow the formulas presented in the following steps
ents when a hospital fails to meet the Hospital OQR Program requirements.
Individual providers interested in calculating the payment amount that they would receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this proposed rule (which are available via the internet on the CMS website) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the reporting ratio of 0.9805 times the “full” national unadjusted payment rate. The national unadjusted payment rate used in the calculations below is either the full national unadjusted payment rate or the reduced national unadjusted payment rate, depending on whether the hospital met its Hospital OQR Program requirements to receive the full CY 2027 OPPS fee schedule increase factor.
Step 1. Calculate 60 percent (the labor-related portion) of the national unadjusted payment rate. Since the initial implementation of the OPPS, we have used 60 percent to represent our estimate of that portion of costs attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. During our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553), we confirmed that this labor-related share for hospital outpatient services is appropriate
S post-reclassified wage index, including, but not limited to, the rural floor adjustment and a wage index floor of 1.00 in frontier States, in accordance with section 10324 of the Affordable Care Act of 2010. For further discussion of the wage index we are applying for the CY 2027 OPPS, including the low wage index hospital policy, we refer readers to section II.C. of this proposed rule.
Step 3. Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173). Addendum L to this proposed rule (which is available via the internet on the CMS website) contains the qualifying counties and the associated wage index increase developed for the proposed FY 2027 IPPS wage index, which are listed in Table 3 associated with the FY 2027 IPPS proposed rule and available via the internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. (Click on the link on the left side of the screen titled “FY 2027 IPPS Proposed Rule Home Page” and select “FY 2027 Proposed Rule Tables”.) This step is to be followed only if the hospital is not reclassified or redesignated under section 1886(d)(8) of the Act or section 1886(d)(10) of the Act.
Step 4. Multiply the applicable wage index determined under Steps 2 and 3 by the amount determined under Step 1 that represents the labor-related portion of the national unadjusted payment rate.
The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the national unadjusted payment rate for the specific service by the wage index.
X a is the labor-related portion of the national unadjusted payment rate (wage adjusted). X a = labor-portion of the national unadjusted payment rate * applicable wage index. Step 5
in CBSA 35614 in New York, which includes the adoption of the proposed IPPS 2027 wage index policies, is 1.3260.
Step 4. The wage adjusted labor-related portion of the proposed full national unadjusted payment is approximately $645.60 ($486.88 * 1.3260). The wage adjusted labor-related portion of the proposed reduced national adjusted payment is approximately $633.01 ($795.64 * 1.3260).
Step 5. The nonlabor-related portion of the proposed full national unadjusted payment is approximately $324.58 (0.40 * $811.46). The nonlabor-related portion of the proposed reduced national adjusted payment is approximately $318.26(0.40 * $795.64).
Step 6. For this example of a provider located in Brooklyn, New York, the rural adjustment for rural SCHs does not apply.
Step 7. The sum of the labor-related and nonlabor-related portions of the proposed full national unadjusted

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FR_PRORULE_2026-13656. Check the current official text before relying on it. Not legal advice.