Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems; Quality Reporting Programs; Overall Hospital Quality Star Ratings; and Hospital Price Transparency Cs to which our CY 2015 policy will apply (79 FR 66872 through 66873). In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70424), we finalized our policy to no longer specify a list of devices to which the OPPS payment adjustment for no cost/full credit and partial credit devices would apply and instead apply this APC payment adjustment to all replaced devices furnished in conjunction with a procedure assigned to a device-intensive APC when the hospital receives a credit for a replaced specified device that is 50 percent or greater than the cost of the device. b. Policy for No Cost/Full Credit and Partial Credit Devices In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79659 through 79660), for CY 2017 and subsequent years, we finalized a policy to reduce OPPS payment for device- intensive procedures, by the full or partial credit a provider receives for a replaced device, when a hospital furnishes a specified device without cost or with a full or partial credit. Under our current policy, hospitals continue to be required to report on the claim the amount of the credit in the amount portion for value code ‘‘FD’’ when the hospital receives a credit for a repla Under our current policy, hospitals continue to be required to report on the claim the amount of the credit in the amount portion for value code ‘‘FD’’ when the hospital receives a credit for a replaced device that is 50 percent or greater than the cost of the device. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 through 75007), we adopted a policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit by the lesser of the device offset amount for the APC or the amount of the credit. We adopted this change in policy in the preamble of the CY 2014 OPPS/ASC final rule with comment period and discussed it in subregulatory guidance, including chapter 4, section 61.3.6 of the Medicare Claims Processing Manual. Further, in the CY 2021 OPPS/ASC final rule with comment period (85 FR 86017 through 86018, 86302), we made conforming changes to our regulations at § 419.45(b)(1) and (2) that codified this policy. We are not proposing any changes to our policies regarding payment for no cost/full credit and partial credit devices for CY 2026. V. Proposed OPPS Payment for Drugs, Biologicals, and ied this policy. We are not proposing any changes to our policies regarding payment for no cost/full credit and partial credit devices for CY 2026. V. Proposed OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals A. Proposed OPPS Transitional Pass- Through Payment for Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals 1. Background Section 1833(t)(6) of the Act provides for temporary additional payments or ‘‘transitional pass-through payments’’ for certain drugs and biologicals. A ‘‘biological’’ as used in this proposed rule includes (but is not necessarily limited to) a ‘‘biological product’’ or a ‘‘biologic’’ as defined under section 351 of the PHS Act. As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106–113), this pass-through payment provision requires the Secretary to make additional payments to hospitals for: current orphan drugs for rare diseases and conditions, as designated under section 526 of the Federal Food, Drug, and Cosmetic Act; current drugs and biologicals and brachytherapy sources used in cancer therapy; and current radiopharmaceutical drugs and biologicals. ‘‘Current’’ refers to those ederal Food, Drug, and Cosmetic Act; current drugs and biologicals and brachytherapy sources used in cancer therapy; and current radiopharmaceutical drugs and biologicals. ‘‘Current’’ refers to those types of drugs or biologicals mentioned above that are hospital outpatient services under Medicare Part B for which transitional pass-through payment was made on the first date the hospital OPPS was implemented. Transitional pass-through payments also are provided for certain ‘‘new’’ drugs and biologicals that were not being paid for as an HOPD service as of December 31, 1996, and whose cost is ‘‘not insignificant’’ in relation to the OPPS payments for the procedures or services associated with the new drug or biological. For pass-through payment purposes, radiopharmaceuticals are included as ‘‘drugs.’’ As required by statute, transitional pass-through payments for a drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a period of at least 2 years, but not more than 3 years, after the payment was first made for the drug as a hospital outpatient service under Medicare Part B. Proposed CY 2026 pass-through drugs and biologicals and their designated APCs t more than 3 years, after the payment was first made for the drug as a hospital outpatient service under Medicare Part B. Proposed CY 2026 pass-through drugs and biologicals and their designated APCs are assigned status indicator ‘‘G’’ in Addenda A and B to this proposed rule (which are available on the CMS website).55 Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through payment amount, in the case of a drug or biological, is the amount by which the amount determined under section 1842(o) of the Act for the drug or biological exceeds the portion of the otherwise applicable Medicare OPD fee schedule that the Secretary determines is associated with the drug or biological. The methodology for determining the pass-through payment amount is set forth in regulations at 42 CFR 419.64. In accordance with section V.B.9. of this proposed rule, skin substitutes with an approved Biologics License Application (BLA) would be considered under transitional drug pass-through payment status. As such, we propose to amend our regulation at § 419.64 to remove paragraph (a)(4)(iv) ‘‘A biological that is not a skin substitute or similar product that aids wound healing.’’ The regulations a tus. As such, we propose to amend our regulation at § 419.64 to remove paragraph (a)(4)(iv) ‘‘A biological that is not a skin substitute or similar product that aids wound healing.’’ The regulations at 42 CFR 419.64 specify that the pass-through payment equals the amount determined under section 1842(o) of the Act minus the portion of the APC payment that CMS determines is associated with the drug or biological. Section 1847A of the Act establishes the average sales price (ASP) methodology, which is used for payment for drugs and biologicals described in section 1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP methodology, as applied under the OPPS, uses several sources of data as a basis for payment, including the ASP, the wholesale acquisition cost (WAC), and the average wholesale price (AWP). In this proposed rule, the term ‘‘ASP methodology’’ and ‘‘ASP-based’’ are inclusive of all data sources and methodologies described therein. Additional information on the ASP methodology can be found on our website at https://www.cms.gov/ medicare/payment/fee-for-service- providers/part-b-drugs/average-drug- sales-price. The pass-through application 56 and review proc ASP methodology can be found on our website at https://www.cms.gov/ medicare/payment/fee-for-service- providers/part-b-drugs/average-drug- sales-price. The pass-through application 56 and review process for drugs and biologicals is described on our website at https:// www.cms.gov/medicare/payment/ prospective-payment-systems/hospital- outpatient/pass-through-payment- 55 https://www.cms.gov/medicare/payment/ prospective-payment-systems/hospital-outpatient. 56 To apply for OPPS transitional Pass-Through Payment Status and New Technology Ambulatory Payment Classification (APC), applicants complete an application that is subject to the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.). This information collection (CMS–10008) is currently approved under OMB control number of 0938–0802 and has an expiration date of July 31, 2027. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00137 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33612 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules status-new-technology-ambulatory- payment-classification-apc. 2. Transitional 4 1 S 7 W 9 K S D n o d n o m m a h k 33612 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules status-new-technology-ambulatory- payment-classification-apc. 2. Transitional Pass-Through Payment Period for Pass-Through Drugs, Biologicals, and Radiopharmaceuticals and Quarterly Expiration of Pass- Through Status As required by statute, transitional pass-through payments for a drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a period of at least 2 years, but not more than 3 years, after the payment was first made for the drug or biological as a hospital outpatient service under Medicare Part B. Drugs and biologicals pass-through applications are accepted and approved on a quarterly basis in which pass-through payments for approved applications could begin on the next available OPPS quarterly update. Furthermore, our current policy, which was finalized in CY 2017 OPPS/ ASC final rule with comment period (81 FR 79662), is to allow for quarterly expiration of pass-through payment status for drugs, biologicals, and radiopharmaceuticals to afford a pass- through payment period that is as close to a full 3 years as possible allow for quarterly expiration of pass-through payment status for drugs, biologicals, and radiopharmaceuticals to afford a pass- through payment period that is as close to a full 3 years as possible to allow, on a prospective basis, for the maximum pass-through payment period without exceeding the statutory limit of 3 years. Notice of drugs for which pass-through payment status is ending during the calendar year is included in the quarterly OPPS Change Request transmittals. 3. Drugs and Biologicals With Expiring Pass-Through Payment Status in CY 2025 There are 28 drugs and biologicals for which pass-through payment status expires by December 31, 2025, as listed in Table 57. These drugs and biologicals will have received OPPS pass-through payment for 3 years during the period of April 1, 2022 through December 31, 2025. In accordance with the policy finalized in the CY 2017 OPPS/ASC final rule with comment period (81 FR 79662) and described earlier, pass- through payment status for drugs and biologicals approved in CY 2017 and subsequent years will expire on a quarterly basis, with a pass-through payment period as close to 3 years as possible. With the exception of those groups of d s and biologicals approved in CY 2017 and subsequent years will expire on a quarterly basis, with a pass-through payment period as close to 3 years as possible. With the exception of those groups of drugs and biologicals that are always packaged when they do not have pass- through payment status (specifically, anesthesia drugs; drugs, biologicals, and radiopharmaceuticals 57 that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies when used in a surgical procedure), our standard methodology for providing payment for drugs and biologicals with expiring pass-through payment status in an upcoming calendar year is to determine 57 In the CY 2025 OPPS/ASC final rule with comment period (89 FR 93948), we finalized the diagnostic radiopharmaceuticals policy to separately pay those products when the per-day costs are greater than a threshold. Please refer to section II.A.3.c. of this proposed rule for more information regarding this policy. the product’s estimated per day cost and compare it with the OPPS drug packaging threshold for that calendar year, which is proposed to be $140 for CY 2026 for all drugs, biologicals, and his policy. the product’s estimated per day cost and compare it with the OPPS drug packaging threshold for that calendar year, which is proposed to be $140 for CY 2026 for all drugs, biologicals, and therapeutic radiopharmaceuticals (for high-cost diagnostic radiopharmaceuticals, we would provide separate payment when their per day cost greater than the threshold we propose to adopt of $655). These policies are discussed further in section V.B.1. of this proposed rule. If the estimated per day cost for the drug or biological is less than or equal to the applicable OPPS drug packaging threshold, we package payment for the drug or biological into the payment for the associated procedure in the upcoming calendar year. If the estimated per day cost of the drug or biological is greater than the OPPS drug packaging threshold, we provide separate payment at the applicable ASP methodology-based payment amount (which is generally ASP plus 6 percent), as discussed further in section V.B.2. of this proposed rule. BILLING CODE 4120–01–P 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00138 Fmt 4701 Sfmt 470 is proposed rule. BILLING CODE 4120–01–P 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00138 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33613 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k BILLING CODE 4120–01–C VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00139 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00140 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00141 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 33616 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00142 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00143 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17J 2:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00142 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00143 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00144 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00145 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00146 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33621 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00147 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00148 Fmt 4701 Sfmt 4725 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00149 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k / > H P G 2014 22:23 G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00149 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00150 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33625 to determine their per day cost. We did not use an ASP-based, WAC-based, or AWP-based payment rate for those items unless there was no mean unit cost reported for the product, consistent with our proposed policy described in section V.B.3.b of the CY 2025 OPPS/ ASC final rule with comment period. • For items other than diagnostic or therapeutic radiopharmaceuticals that did not have either an ASP-based payment rate, a payment rate based on WAC, or a payment rate based on AWP, we used mean unit cost of the items derived from the CY 2024 hospital claims data to determine their per day cost. We propose to package drugs, biologicals, and therapeutic radiopharmaceuticals with a per day cost less than or equal to $140 and identify items with a pe claims data to determine their per day cost. We propose to package drugs, biologicals, and therapeutic radiopharmaceuticals with a per day cost less than or equal to $140 and identify items with a per day cost greater than $140 as separately payable unless they are policy-packaged. For diagnostic radiopharmaceuticals, we propose to package those items with a per day cost less than or equal to $655 and identify items with a per day cost greater than $655 as separately payable. Consistent with our past practice (72 FR 667580), we cross-walked historical OPPS claims data from the CY 2024 HCPCS codes that were reported to the CY 2024 HCPCS codes that we display in Addendum B to this proposed rule (which is available on the CMS website) 62 for proposed payment in CY 2026. Our policy during previous cycles of OPPS rulemaking has been to use updated ASP and claims data to make final determinations of the packaging status of HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals for the OPPS/ASC final rule with comment period (71 FR 68086; 78 FR75022; 89 FR 94238). We note that it is also our policy to make an annual packaging determination for a HCPCS code only when we cals for the OPPS/ASC final rule with comment period (71 FR 68086; 78 FR75022; 89 FR 94238). We note that it is also our policy to make an annual packaging determination for a HCPCS code only when we develop the OPPS/ASC final rule with comment period for the update year (71 FR 68086). Only HCPCS codes that are identified as separately payable in the final rule with comment period are subject to quarterly updates. For our calculation of per day costs of HCPCS codes for drugs, biologicals, and radiopharmaceuticals in this proposed rule, we propose to use ASP data from the fourth quarter of CY 2024, which is the basis for calculating payment rates for drugs and biologicals in the physician’s office setting using the ASP methodology, effective April 1, 2025, along with updated hospital claims data 62 https://www.cms.gov/medicare/payment/ prospective-payment-systems/hospital-outpatient. from CY 2024. We note that we also propose to use these data for budget neutrality estimates and impact analyses for this proposed rule. We propose that payment rates for HCPCS codes for separately payable drugs and biologicals included in Addenda A and B of the CY 2026 OPPS/ ASC final rule with comment analyses for this proposed rule. We propose that payment rates for HCPCS codes for separately payable drugs and biologicals included in Addenda A and B of the CY 2026 OPPS/ ASC final rule with comment period would be based on ASP data from the second quarter of CY 2025. These data are the basis for calculating payment rates for drugs and biologicals in the physician’s office setting using the ASP methodology, effective October 1, 2025. These payment rates would then be updated in the January 2026 OPPS update, based on the most recent ASP data to be used for physicians’ office and OPPS payment as of January 1, 2026. For drugs and biologicals that do not currently have a payment rate based on ASP, WAC, or AWP, for therapeutic radiopharmaceuticals that do not currently have an ASP payment rate, and for all diagnostic radiopharmaceuticals, we will calculate their mean unit cost from all of the CY 2024 claims data and updated cost report information available for the CY 2026 final rule with comment period to determine their final per day cost. Consequently, the final rule packaging status of some HCPCS codes for drugs, biologicals, and radiopharmaceuticals in this proposed rule may be d comment period to determine their final per day cost. Consequently, the final rule packaging status of some HCPCS codes for drugs, biologicals, and radiopharmaceuticals in this proposed rule may be different from the same drugs’ HCPCS codes’ packaging status determined based on the data used for this proposed rule. Under such circumstances, we propose to continue to follow the established policies initially adopted for the CY 2005 OPPS final rule with comment period (69 FR 65780) is in order to more equitably pay for those drugs whose costs fluctuate relative to the proposed CY 2026 OPPS drug packaging threshold and the drug’s payment status (packaged or separately payable) in CY 2026. These established policies have not changed for many years and are the same as described in the CY 2016 OPPS/ ASC final rule with comment period (80 FR 70434). Specifically, for CY 2026 and subsequent years, consistent with our historical practice, we propose to apply the following policies to those HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to the drug packaging threshold changes based on the updated drug packaging threshold and on the final updated CS codes for drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to the drug packaging threshold changes based on the updated drug packaging threshold and on the final updated data: • HCPCS codes for drugs, biologicals, and radiopharmaceuticals that were paid separately in CY 2025 and that are proposed for separate payment in CY 2026, and that then have per day costs equal to or less than the CY 2026 final rule drug packaging threshold or diagnostic radiopharmaceutical packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2026 final rule, would continue to receive separate payment in CY 2026. • HCPCS codes for drugs, biologicals, and radiopharmaceuticals that were packaged in CY 2025 and that are proposed for separate payment in CY 2026, and that then have per day costs equal to or less than the CY 2026 final rule drug packaging threshold or diagnostic radiopharmaceutical packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2026 final rule, would remain packaged in CY 2026. • HCPCS codes for drugs, biologicals, and radiopharmaceuticals for which we proposed packaged payment in CY 2026 but t al claims data used for the CY 2026 final rule, would remain packaged in CY 2026. • HCPCS codes for drugs, biologicals, and radiopharmaceuticals for which we proposed packaged payment in CY 2026 but that then have per-day costs greater than the CY 2026 final rule drug packaging threshold or diagnostic radiopharmaceutical packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2026 final rule, would receive separate payment in CY 2026. c. Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals As mentioned earlier in this section, under the OPPS, we package several categories of nonpass-through drugs, biologicals, and radiopharmaceuticals, regardless of the cost of the products. Because the products are packaged according to the policies in 42 CFR 419.2(b), we refer to these packaged drugs, biologicals, and radiopharmaceuticals as ‘‘policy- packaged’’ drugs, biologicals, and radiopharmaceuticals. These policies are either longstanding or based on longstanding principles and inherent to the OPPS and are currently as follows: • Anesthesia, certain drugs, biologicals, and other pharmaceuticals; medical and surgical supplies and equipment; surgical d gstanding principles and inherent to the OPPS and are currently as follows: • Anesthesia, certain drugs, biologicals, and other pharmaceuticals; medical and surgical supplies and equipment; surgical dressings; and devices used for external reduction of fractures and dislocations (§ 419.2(b)(4)); • Intraoperative items and services (§ 419.2(b)(14)); • Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure (including but not limited to, diagnostic radiopharmaceuticals with per-day costs at or below the per- day diagnostic radiopharmaceutical packaging threshold for the applicable year, contrast agents, and pharmacologic stress agents) (§ 419.2(b)(15)); and • Drugs and biologicals that function as supplies when used in a surgical VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00151 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33626 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules procedure (including, but not limited to, skin substitutes and similar products that aid wound healing and implantable biologicals egister / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules procedure (including, but not limited to, skin substitutes and similar products that aid wound healing and implantable biologicals) (§ 419.2(b)(16)). The policy at § 419.2(b)(16) is broader than the policy at § 419.2(b)(14). As we stated in the CY 2015 OPPS/ASC final rule with comment period: ‘‘We consider all items related to the surgical outcome and provided during the hospital stay in which the surgery is performed, including postsurgical pain management drugs, to be part of the surgery for purposes of our drug and biological surgical supply packaging policy’’ (79 FR 66875). The category described by § 419.2(b)(15) is large and includes diagnostic radiopharmaceuticals that have a per day cost below the finalized diagnostic radiopharmaceutical packaging threshold that we discuss in section II.A.3. of this proposed rule, contrast agents, stress agents, and some other products. The category described by § 419.2(b)(16) currently includes skin substitutes and some other products. We believe it is important to reiterate that cost consideration is not a factor when determining whether an item is a surgical supply (79 ) currently includes skin substitutes and some other products. We believe it is important to reiterate that cost consideration is not a factor when determining whether an item is a surgical supply (79 FR 66875). d. Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological but Different Dosages In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 through 60491), we finalized a policy to make a single packaging determination for a drug, rather than an individual HCPCS code, when a drug has multiple HCPCS codes describing different dosages because we believe that adopting the standard HCPCS code- specific packaging determinations for these codes could lead to inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others. We continue to believe that making packaging determinations on a drug-specific basis eliminates payment incentives for hospitals to report certain HCPCS codes for drugs and allows hospitals flexibility in choosing to report all HCPCS codes for different dosages of the same drug or only the lowest dosage HCPCS code. Therefore, we propose to continue our policy to make packaging determinations on a y in choosing to report all HCPCS codes for different dosages of the same drug or only the lowest dosage HCPCS code. Therefore, we propose to continue our policy to make packaging determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages in CY 2026. In order to propose a packaging determination that is consistent across all HCPCS codes that describe different dosages of the same drug or biological, we aggregated both our CY 2024 claims data and our pricing information, which is based on the ASP methodology, generally ASP plus 6 percent, across all of the HCPCS codes that describe each distinct drug or biological in order to determine the mean units per day of the drug or biological in terms of the HCPCS code with the lowest dosage descriptor. The following drugs did not have pricing information available for the ASP methodology for this proposed rule; and, as is our current policy for determining the packaging status of other drugs, we used the mean unit cost available from the CY 2024 claims data to make the proposed packaging determinations for them: HCPCS code J3472 (Inj icy for determining the packaging status of other drugs, we used the mean unit cost available from the CY 2024 claims data to make the proposed packaging determinations for them: HCPCS code J3472 (Injection, hyaluronidase, ovine, preservative free, per 1000 usp units); HCPCS code J7100 (Infusion, dextran 40,500 ml); and HCPCS code J7110 (Infusion, dextran 75,500 ml). For all other drugs and biologicals that have HCPCS codes describing different doses, we then multiplied the proposed weighted average ASP methodology based payment rate, which is generally ASP plus 6 percent, per-unit payment amount across all dosage levels of a specific drug or biological by the estimated units per day for all HCPCS codes that describe each drug or biological from our claims data to determine if the estimated per day cost of each drug or biological is less than or equal to the proposed CY 2026 drug packaging threshold of $140 (in which case all HCPCS codes for the same drug or biological would be packaged) or greater than the proposed CY 2026 drug packaging threshold of $140 (in which case all HCPCS codes for the same drug or biological would be separately payable). The proposed packaging status of e d) or greater than the proposed CY 2026 drug packaging threshold of $140 (in which case all HCPCS codes for the same drug or biological would be separately payable). The proposed packaging status of each drug and biological HCPCS code to which this methodology would apply in CY 2026 is displayed in Table 60. 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00152 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33627 We propose that our policy to make packaging determinations on a drug- specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages in CY 2026 would also apply to diagnostic radiopharmaceuticals. This is because, as with drugs and biologicals, we believe that adopting standard HCPCS code-specific packaging determinations for radiopharmaceutical codes could lead to inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others. To propose a packaging determination that is consistent across all HCPCS rmaceutical codes could lead to inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others. To propose a packaging determination that is consistent across all HCPCS codes that describe different dosages of the same diagnostic radiopharmaceutical, we would aggregate our CY 2024 claims data across all of the HCPCS codes that describe each distinct diagnostic radiopharmaceutical in order to determine the mean units per day of the diagnostic radiopharmaceutical in terms of the HCPCS code with the lowest dosage descriptor. We would then analyze the aggregate per day cost of the diagnostic radiopharmaceutical to determine if the per day cost is less than or equal to the proposed CY 2026 diagnostic radiopharmaceutical packaging threshold of $655 (in which case all HCPCS codes for the same diagnostic radiopharmaceutical would be packaged) or greater than the proposed CY 2026 diagnostic radiopharmaceutical packaging threshold of $655 (in which case all HCPCS codes for the same diagnostic radiopharmaceutical would be separately payable). There are currently no diagnostic radiopharmaceuticals that this policy would apply to. 2. Proposed Payment for Drugs an codes for the same diagnostic radiopharmaceutical would be separately payable). There are currently no diagnostic radiopharmaceuticals that this policy would apply to. 2. Proposed Payment for Drugs and Biologicals Without Pass-Through Status That Are Not Packaged a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other Separately Payable Drugs and Biologicals outpatient drug, as defined in section 1927(k)(2) of the Act, for which a separate APC has been established and that either is a radiopharmaceutical agent or a drug or biological for which payment was made on a pass-through basis on or before December 31, 2002. Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and biologicals are designated as exceptions and are not included in the definition of SCODs. These exceptions are— • A drug or biological for which payment is first made on or after January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act. • A drug or biological for which a temporary HCPCS code has not been assigned. • During CYs 2004 and 2005, an orphan drug (as designated by the Secretary). Section 1833(t)(14) of the Act defines certain separately paya ical for which a temporary HCPCS code has not been assigned. • During CYs 2004 and 2005, an orphan drug (as designated by the Secretary). Section 1833(t)(14) of the Act defines certain separately payable radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a ‘‘specified covered outpatient drug’’ (known as a SCOD) is defined as a covered Section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug for that year as determined by the Secretary, subject to any adjustment for overhead costs and considering the hospital acquisition cost survey data VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00153 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00154 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33629 therapeutic E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33629 therapeutic radiopharmaceuticals with ASP information for January 2026 will be determined through the standard quarterly process where ASP data submitted by manufacturers for the third quarter of CY 2025 (July 1, 2025, through September 30, 2025) will be used to set the payment rates that are released for the quarter beginning in January 2026 in December 2025. In addition, in Addenda A and B to this proposed rule, payment rates for drugs, biologicals, and therapeutic radiopharmaceuticals for which there was no ASP, WAC, or AWP information available for April 2025, as well as all separately payable diagnostic radiopharmaceuticals, are based on mean unit cost in the available CY 2024 claims data. If new pricing information becomes available for payment for the quarter beginning in January 2026, we will price payment for these drugs, biologicals, therapeutic radiopharmaceuticals, and diagnostic radiopharmaceuticals based on their newly available information. Finally, there may be drugs, biologicals a price payment for these drugs, biologicals, therapeutic radiopharmaceuticals, and diagnostic radiopharmaceuticals based on their newly available information. Finally, there may be drugs, biologicals and therapeutic radiopharmaceuticals that have ASP, WAC, or AWP information available for the proposed rule (reflecting April 2025 ASP data) that do not have ASP, WAC, or AWP information available for the quarter beginning in January 2026. These drugs, biologicals and therapeutic radiopharmaceuticals would then be paid based on mean unit cost data derived from CY 2024 hospital claims. Therefore, the proposed payment rates listed in Addenda A and B to this proposed rule are not for January 2026 payment purposes and are only illustrative of the CY 2026 OPPS payment methodology using the most recently available information at the time of issuance of the CY 2026 OPPS/ ASC proposed rule. We note that payment amounts for most drugs separately payable under Medicare Part B are determined using the methodology in section 1847A of the Act, and in many cases, payment is based on the average sales price (ASP) plus a statutorily mandated 6 percent add-on. In CY 2025, we clarified that only ASP data methodology in section 1847A of the Act, and in many cases, payment is based on the average sales price (ASP) plus a statutorily mandated 6 percent add-on. In CY 2025, we clarified that only ASP data or, if ASP data are not available, mean unit cost data, would be used to set payment rates for separately payable nonpass-through therapeutic radiopharmaceuticals under the OPPS. For CY 2026, we are not proposing any changes to our policies for payment for separately payable therapeutic or diagnostic radiopharmaceuticals other than the technical update being proposed to the diagnostic radiopharmaceutical packaging threshold update factor as discussed in section V.B.1. of this proposed rule. For CY 2026, we are not proposing any changes to our policies for payment for separately payable drugs, biologicals, and radiopharmaceuticals. We propose to continue our payment policy that has been in effect since CY 2013 to pay for separately payable drugs and biologicals in accordance with section 1833(t)(14)(A)(iii)(II) of the Act (the statutory default). b. Biosimilar Biological Products For CY 2024, we finalized the exception of biosimilars from the OPPS threshold packaging policy when their 833(t)(14)(A)(iii)(II) of the Act (the statutory default). b. Biosimilar Biological Products For CY 2024, we finalized the exception of biosimilars from the OPPS threshold packaging policy when their reference products are separately paid (88 FR 81783 through 81785). This policy allows for separate payment for biosimilars even if the biosimilar’s per- day cost is below the packaging threshold if the biosimilar’s reference product is separately paid. This policy removes the financial incentive to use a more expensive separately payable biological and promotes biosimilar use as a lower cost alternative to higher cost reference products. Payment rates for drugs and biologicals (including biosimilars) under Medicare Part B are determined using the methodology in section 1847A of the Act, and in many cases, payment is based on the average sales price (ASP) plus a statutorily mandated 6 percent add-on. Additionally, section 11403 of the IRA requires that a qualifying biosimilar be paid at ASP plus 8 percent of the reference product’s ASP rather than 6 percent during the applicable 5- year period. Section 1847A(b)(8)(B)(ii) of the Act defines the applicable 5-year period for a qualifying P plus 8 percent of the reference product’s ASP rather than 6 percent during the applicable 5- year period. Section 1847A(b)(8)(B)(ii) of the Act defines the applicable 5-year period for a qualifying biosimilar for which payment has been made using ASP (that is, payment under section 1847A(b)(8) of the Act) as of September 30, 2022, as the 5-year period beginning on October 1, 2022. For a qualifying biosimilar for which payment is first made using ASP during the period beginning October 1, 2022, and ending December 31, 2027, the statute defines the applicable 5-year period as the 5- year period beginning on the first day of such calendar quarter of such payment (88 FR 81783). These payment rates are published in the quarterly release of Addendum B or ASP pricing files. c. Invoice Drug Pricing for CY 2026 In the CY 2025 OPPS/ASC final rule with comment period (89 FR 94243 to 94244), we finalized without modification that, for separately payable drugs or biologicals for which CMS does not provide a payment rate in Addendum B, which would indicate to MACs that CMS does not have pricing information (specifically, that ASP, WAC, AWP, and mean unit cost information is not available to de t provide a payment rate in Addendum B, which would indicate to MACs that CMS does not have pricing information (specifically, that ASP, WAC, AWP, and mean unit cost information is not available to determine a payment rate), MACs would calculate the payment based on provider invoices. The drug or biological invoice cost would be the net acquisition cost minus any rebates, chargebacks, or post- sale concessions. Before calculating an invoice-based payment amount, MACs would use the provider invoice to determine that: (a) the drug is not policy packaged; and (b) the per-day cost of the drug, biological, therapeutic radiopharmaceutical or diagnostic radiopharmaceutical is above the threshold packaging amount, as applicable. If both conditions are met, the MACs would use the provider invoice amount to set a payment rate for the separately payable drug, biological, or radiopharmaceutical until its payment amount becomes available to CMS. We generally expect invoice pricing to be temporary, lasting two to three quarters, for qualified drugs required to report ASP under section 1847A of the Act. For drug products that are not required to report ASP under section 1847A of the Act (i.e., di lasting two to three quarters, for qualified drugs required to report ASP under section 1847A of the Act. For drug products that are not required to report ASP under section 1847A of the Act (i.e., diagnostic pharmaceuticals), invoice pricing may be used on a longer term basis until a MUC can be calculated. We finalized the invoice pricing policy for drugs to be effective January 1, 2026, with the intent to make technical updates to outpatient hospital claims and to allow providers time to prepare for any operational changes. We noted that National Uniform Billing Committee (NUBC) created a value code that would allow for the reporting of invoice prices of drugs, biologicals, and radiopharmaceuticals for CY 2026 for the purpose of this policy. The NUBC value code create is 92 (Drug/Biologic Invoice Cost), with the definition of: ‘‘Invoice Cost of drug/biologic. For use with Revenue Category 0636 when required by federal regulation.’’ We propose a technical clarification to this policy. Previously, we stated that MACs would use the provider invoice to determine that: (1) the drug is not policy packaged; and (2) the per-day cost of the drug, biological, therapeutic radiopharmaceutica Previously, we stated that MACs would use the provider invoice to determine that: (1) the drug is not policy packaged; and (2) the per-day cost of the drug, biological, therapeutic radiopharmaceutical or diagnostic radiopharmaceutical is above the threshold packaging amount, as applicable. However, we propose to clarify that CMS will determine whether the first condition is met, whether the drug is not policy packaged; however, the MAC will continue to determine whether the second condition is met, whether the per-day cost of the drug, biological, therapeutic radiopharmaceutical or diagnostic VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00155 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33630 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules radiopharmaceutical is above threshold packaging amount, as applicable. 3. Payment Policy for Radiopharmaceuticals For a complete history of the OPPS payment policy for radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811), the CY 2006 OPPS final rule with comment period (70 ete history of the OPPS payment policy for radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811), the CY 2006 OPPS final rule with comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524). a. Payment Policy for Therapeutic Radiopharmaceuticals In the CY 2023 OPPS/ASC final rule with comment period, we adopted as final our proposal to continue our longstanding payment policy for therapeutic radiopharmaceuticals for CY 2023 and subsequent years. Accordingly, this payment policy for therapeutic radiopharmaceuticals will continue to apply in CY 2026. Specifically, our policy of paying for separately payable pass-through therapeutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biologicals described in section V.A.1. of this proposed rule will continue to apply for CY 2026. We will pay for separately payable nonpass-through therapeutic radiopharmaceuticals through a modified ASP methodology where we pay at ASP plus 6 percent if ASP data are available. However, if ASP information is unavailable for a separately payable nonpass-through therapeutic radiopha hrough a modified ASP methodology where we pay at ASP plus 6 percent if ASP data are available. However, if ASP information is unavailable for a separately payable nonpass-through therapeutic radiopharmaceutical, we will continue to base the payment rate on arithmetic mean unit cost data derived from hospital claims. Our policy not to use WAC or AWP to establish payment for separately payable nonpass-through therapeutic radiopharmaceuticals if ASP is not available will continue for CY 2026. We explained our rationale in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through 60525) when we first adopted our policy to apply the principles of separately payable drug pricing to therapeutic radiopharmaceuticals. For a full discussion of ASP-based payment for therapeutic radiopharmaceuticals, we refer readers to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60520 through 60521). We will rely on CY 2024 mean unit cost data derived from hospital claims data for payment rates for separately payable nonpass-through therapeutic radiopharmaceuticals for which ASP data are unavailable and update the payment rates for these products according to our usual process f ayment rates for separately payable nonpass-through therapeutic radiopharmaceuticals for which ASP data are unavailable and update the payment rates for these products according to our usual process for updating the payment rates for separately payable drugs and biologicals on a quarterly basis if updated ASP information becomes available. The proposed CY 2026 payment rates for separately payable nonpass-through therapeutic radiopharmaceuticals are included in Addenda A and B of this proposed rule (which are available on the CMS website).65 b. Payment Policy for Diagnostic Radiopharmaceuticals For CY 2025, we finalized, as described in the CY 2025 OPPS/ASC final rule (89 FR 93948 through 93963), to pay separately at arithmetic mean unit cost for diagnostic radiopharmaceuticals with a per day cost above our proposed diagnostic radiopharmaceutical packaging threshold (proposed at $655 for CY 2026). We also finalized our policy to pay for pass-through diagnostic radiopharmaceuticals based on ASP, WAC, and AWP. We continue to believe that paying for nonpass-through diagnostic radiopharmaceuticals using arithmetic mean unit cost would appropriately pay for the average price of a nonpass on ASP, WAC, and AWP. We continue to believe that paying for nonpass-through diagnostic radiopharmaceuticals using arithmetic mean unit cost would appropriately pay for the average price of a nonpass- through separately payable diagnostic radiopharmaceutical. In our view, MUC is an appropriate proxy for the average price for a diagnostic radiopharmaceutical for a given year, as it is calculated based on the average costs for a particular year and is directly reflective of the actual cost data that hospitals submit to CMS. As we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60523), we believe that WAC or AWP is not an appropriate proxy to provide OPPS payment for radiopharmaceuticals because these pricing methodologies do not include discounts. Specifically, the absence of appropriate ASP reporting could result in payment for a separately payable diagnostic radiopharmaceutical based on WAC or AWP indefinitely, a result which we believe would be inappropriate, as these pricing metrics do not capture all of the pricing discounts that may be reflected in the ASP. Additionally, in the CY 2025 OPPS/ ASC final rule with comment period (89 FR 93948 through 93963), w these pricing metrics do not capture all of the pricing discounts that may be reflected in the ASP. Additionally, in the CY 2025 OPPS/ ASC final rule with comment period (89 FR 93948 through 93963), we finalized to base the initial payment for new diagnostic radiopharmaceuticals with HCPCS codes that do not have pass- through status or claims data on ASP, and on the WAC for these products if ASP data for these diagnostic radiopharmaceuticals are not available. To further clarify, these products will be paid based on ASP plus 6 percent, and at WAC plus 3 or 6 percent according to the policy in section V.B.2.a. of this proposed rule if ASP data are not available. If the WAC also is unavailable, we proposed to make payment for new diagnostic radiopharmaceuticals at 95 percent of the products’ most recent AWP. We believe the volume of products in this category will typically be very low; however, in these rare situations, we believe it would be appropriate to use ASP, WAC, or AWP until a MUC is established for new diagnostic radiopharmaceuticals with HCPCS codes that do not have passthrough status or claims data. Please refer to section II.A.3.c of this proposed rule information regard UC is established for new diagnostic radiopharmaceuticals with HCPCS codes that do not have passthrough status or claims data. Please refer to section II.A.3.c of this proposed rule information regarding our payment policies for diagnostic radiopharmaceuticals, including our proposed policy to pay separately for diagnostic radiopharmaceuticals above a certain cost threshold. The proposed CY 2026 payment rates for separately payable nonpass-through diagnostic radiopharmaceuticals are included in Addenda A and B of this proposed rule (which are available on the CMS website).66 4. Payment for Blood Clotting Factors For CY 2026, we propose to continue our established policy to provide payment for blood clotting factors using the same methodology as other separately payable drugs and biologicals under the OPPS and to continue to pay a furnishing fee. For a full discussion of our established payment policy for blood clotting factors, please refer to the CY 2023 OPPS/ASC final rule with comment period (87 FR 71969 through 71970). In accordance with our policy as finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we will announce the actual figure of the percen nt period (87 FR 71969 through 71970). In accordance with our policy as finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we will announce the actual figure of the percent change in the applicable CPI and the updated furnishing fee calculation based on that figure through the applicable program instructions and posting on the CMS website at https://www.cms.gov/ medicare/payment/fee-for-service- providers/part-b-drugs/average-drug- sales-price. 5. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes but Without OPPS Hospital Claims Data In the CY 2023 OPPS/ASC final rule with comment period, we adopted as 65 https://www.cms.gov/medicare/payment/ prospective-payment-systems/hospital-outpatient. 66 https://www.cms.gov/medicare/payment/ prospective-payment-systems/hospital-outpatient. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00156 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33631 final our proposal to continue our longstanding payment policy for n O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33631 final our proposal to continue our longstanding payment policy for nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS hospital claims data for CY 2023 and subsequent years. Therefore, for CY 2026, this policy will continue to apply. For a detailed discussion of the payment policy and methodology, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70442 through 70443). Consistent with our policy, because we have no claims data and must determine if these products, drugs, biologicals, therapeutic radiopharmaceuticals, and diagnostic radiopharmaceuticals, exceed the per- day cost threshold, we estimated the average number of units of each product that would typically be furnished to a patient during one day in the hospital outpatient setting and utilized the payment rate for the product, typically the ASP methodology, to determine whether their payment will be packaged as well as their payment status indicators. 6. Requirement in the CY 2026 Physician Fee Schedule Proposed Rule for HO typically the ASP methodology, to determine whether their payment will be packaged as well as their payment status indicators. 6. Requirement in the CY 2026 Physician Fee Schedule Proposed Rule for HOPDs and ASCs To Report Discarded Amounts of Certain Single- Dose or Single-Use Package Drugs Section 90004 of the Infrastructure Investment and Jobs Act (Pub. L. 117– 9, November 15, 2021) (‘‘the Infrastructure Act’’) amended section 1847A of the Act to re-designate subsection (h) as subsection (i) and insert a new subsection (h), which requires manufacturers to provide a refund to CMS for certain discarded amounts from a refundable single-dose container or single-use package drug. We explain in this CY 2026 OPPS/ASC proposed rule that the CY 2026 PFS proposed rule includes proposals related to the discarded drug refund policy, including proposals that may impact hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs). Similar to our past notices in OPPS/ASC proposed rules, such as in the CY 2025 OPPS/ASC proposed rule (89 FR 59370), we wanted to ensure interested parties were aware of these proposals and knew to refer to the CY 2026 PFS proposed rule for a full rules, such as in the CY 2025 OPPS/ASC proposed rule (89 FR 59370), we wanted to ensure interested parties were aware of these proposals and knew to refer to the CY 2026 PFS proposed rule for a full description of the proposed policy. Interested parties are asked to submit comments on any proposals to implement section 90004 of the Infrastructure Act to the CY 2026 PFS proposed rule. We note that public comments on these proposals would be addressed in the CY 2026 PFS final rule with comment period. 7. CY 2026 Prospective Adjustment to Payments for Non-Drug Items and Services To Offset the Increased Payments for Non-Drug Items and Services Made in CY 2018 Through CY 2022 as a Result of the 340B Payment Policy a. Overview Under the OPPS, we generally set payment rates for separately payable drugs, and biologicals (hereinafter referred to collectively as ‘‘drugs’’ in this section) under section 1833(t)(14)(A) of the Act). Section 1833(t)(14)(A)(iii)(II) of the Act provides that, if hospital acquisition cost data are not available, the payment amount is the average price for the drug in a year established under sections 1842(o), 1847A, or 1847B of the Act, as the case may be. Payment ital acquisition cost data are not available, the payment amount is the average price for the drug in a year established under sections 1842(o), 1847A, or 1847B of the Act, as the case may be. Payment rates for drugs have usually been established under section 1847A of the Act, which generally sets a default rate of the average sales price (ASP) plus 6 percent. Section 1833(t)(14)(A)(iii)(II) of the Act also provides that the average price for the drug in the year as established under section 1847A of the Act, is calculated and adjusted by the Secretary as necessary for purposes of paragraph (14). In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353 through 59371), CMS reexamined the appropriateness of paying the ASP plus 6 percent for drugs acquired through the 340B Drug Pricing Program (hereinafter referred to as the ‘‘340B Program’’), a Health Resources and Services Administration (HRSA)-administered program that allows covered entities to purchase certain covered outpatient drugs at discounted prices from drug manufacturers. Based on findings of the Government Accountability Office (GAO),67 the HHS Office of the Inspector General (OIG),68 and the Medicare Payment patient drugs at discounted prices from drug manufacturers. Based on findings of the Government Accountability Office (GAO),67 the HHS Office of the Inspector General (OIG),68 and the Medicare Payment Advisory Commission (MedPAC) 69 that 340B hospitals were acquiring drugs at a significant discount under the 340B 67 Government Accountability Office. ‘‘Medicare Part B Drugs: ‘‘Action Needed to Reduce Financial Incentives to Prescribe 340B Drugs at Participating Hospitals.’’ June 2015. Available at https:// www.gao.gov/assets/gao-15-442.pdf. 68 Office of Inspector General. ‘‘Part B Payment for 340B Purchased Drugs. OEI–12–14–00030’’. November 2015. Available at: https://oig.hhs.gov/ oei/reports/oei-12-14-00030.pdf. 69 Medicare Payment Advisory Commission. March 2016 Report to the Congress: Medicare Payment Policy. March 2016. Available at Medicare Payment Advisory Commission. March 2016 Report to the Congress: Medicare Payment Policy. March 2016. Available at https://www.medpac.gov/ document/http-www-medpac-gov-docs-default- source-reports-may-2015-report-to-the-congress- overview-of-the-340b-drug-pricing-program-pdf/. Program, CMS adopted a policy beginning in 2018 generally to pay ment/http-www-medpac-gov-docs-default- source-reports-may-2015-report-to-the-congress- overview-of-the-340b-drug-pricing-program-pdf/. Program, CMS adopted a policy beginning in 2018 generally to pay an adjusted amount of ASP minus 22.5 percent for certain separately payable drugs or biologicals acquired through the 340B Program. This adjustment amount was based on our concurrence with an analysis by MedPAC that concluded that the estimated average minimum discount of 22.5 percent of ASP adequately represented the average minimum discount that a 340B participating hospital received for separately payable drugs under the OPPS (82 FR 59354 through 59371). Our intent in implementing this payment reduction was to reflect more accurately the actual costs incurred by participating hospitals in acquiring 340B drugs. We stated our belief that such changes would allow Medicare beneficiaries and the Medicare program to pay a more appropriate amount when hospitals participating in the 340B Program furnished drugs to Medicare beneficiaries that were purchased under the 340B Program (82 FR 59353 through 59371). b. Payment for 340B Drugs and Biologicals in CYs 2018 through 2022 From January 1, 2 m furnished drugs to Medicare beneficiaries that were purchased under the 340B Program (82 FR 59353 through 59371). b. Payment for 340B Drugs and Biologicals in CYs 2018 through 2022 From January 1, 2018 through September 27, 2022, under the OPPS we generally paid for certain separately payable drugs acquired through the 340B Program at ASP minus 22.5 percent. In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59369 through 59370), we finalized our proposal to adjust the payment rate for separately payable drugs (other than drugs with pass-through payment status and vaccines) acquired under the 340B Program from ASP plus 6 percent to ASP minus 22.5 percent. We also noted that critical access hospitals are not paid under the OPPS and therefore were not subject to the OPPS 340B drug payment adjustment policy. For ease of reference, the OPPS 340B drug payment adjustment policy is hereinafter referred to as the ‘‘340B Payment Policy’’ and refers both to the adjustments made to payment rates for 340B-acquired drugs described here and the corresponding rate adjustment for non-drug services and items described later in section V.B.7.c. We note that rural sole community hospital ayment rates for 340B-acquired drugs described here and the corresponding rate adjustment for non-drug services and items described later in section V.B.7.c. We note that rural sole community hospitals, children’s hospitals, and PPS-exempt cancer hospitals were exempted from the adjustments made to payment rates for 340B-acquired drugs primarily due to these hospitals receiving special payment adjustments under the OPPS. In addition, as stated in the CY 2018 OPPS/ASC final rule with comment period, this policy change did not apply to drugs with pass-through payment VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00157 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33632 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules status, which are required to be paid based on the ASP methodology, or vaccines, which are excluded from the 340B Program. In the CY 2019 OPPS/ASC final rule with comment period (83 FR 58981), we continued the Medicare 340B payment policies that were implemented in CY 2018 and adopted a policy to pay for non-pass-through 340B-acquired biosimilars at ASP le with comment period (83 FR 58981), we continued the Medicare 340B payment policies that were implemented in CY 2018 and adopted a policy to pay for non-pass-through 340B-acquired biosimilars at ASP minus 22.5 percent of the biosimilar’s ASP, rather than the reference biological product’s ASP. Additionally, in the CY 2019 OPPS/ASC final rule with comment period (83 FR 59015 through 59022), we finalized a policy to pay ASP minus 22.5 percent for 340B-acquired drugs furnished in non-exempted off-campus provider- based departments (PBDs) paid under the PFS. We adopted this payment policy for CY 2019 and subsequent years. Also, during the CY 2019 OPPS/ ASC rulemaking cycle, we clarified that the 340B payment adjustment applied to drugs priced using either wholesale acquisition cost (WAC) or average wholesale price (AWP), and since the policy was first adopted, we applied the 340B payment adjustment to 340B- acquired drugs priced using these pricing methodologies. The 340B payment adjustment for WAC-priced drugs was WAC minus 22.5 percent. 340B-acquired drugs that were priced using AWP were paid an adjusted amount of 69.46 percent of AWP (83 FR 37125).70 As discussed further in sectio ent for WAC-priced drugs was WAC minus 22.5 percent. 340B-acquired drugs that were priced using AWP were paid an adjusted amount of 69.46 percent of AWP (83 FR 37125).70 As discussed further in section V.B.7.f. of this proposed rule, the results of this policy meant that hospitals received an estimated $10.6 billion less in 340B drug payments (including money that would have been paid by Medicare and money that would have come from beneficiaries as copayments) than they would have for drugs provided in CY 2018 through September 27th of 2022 had the 340B Payment Policy not been implemented (88 FR 77162). These reduced payments are detailed in Table 61 and are derived from Addendum AAA published with the 340B Remedy Rule (88 FR 77150). For more detailed descriptions of our OPPS payment policy for drugs acquired under the 340B Program during this timeframe, we refer readers to the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353 through 59371); the CY 2019 OPPS/ASC final rule with comment period (83 FR 59015 through 59022); the CY 2020 OPPS/ASC final rule with comment period (84 FR 61321 through 61327); the CY 2021 OPPS/ASC final rule with comment period (85 FR 86042 throu with comment period (83 FR 59015 through 59022); the CY 2020 OPPS/ASC final rule with comment period (84 FR 61321 through 61327); the CY 2021 OPPS/ASC final rule with comment period (85 FR 86042 through 86055); the CY 2022 OPPS/ASC final rule with comment period (86 FR 63640 through 63649); the CY 2023 OPPS/ASC final rule with comment period (87 FR 71972 through 71973); and the CY 2024 OPPS/ASC final rule with comment period 88 FR 81789 through 81792). c. Payment for Non-Drug Items and Services in CY 2018 Through CY 2022 In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59216, 59258), to comply with the statutory budget neutrality requirements under sections 1833(t)(9)(B) and (t)(14)(H) of the Act, we finalized our proposal to redistribute our estimated reduction in payments for separately payable drugs as a result of the 340B Payment Policy by increasing the conversion factor used to determine the payment amounts for non-drug items and services. As further described in the CY 2018 OPPS/ASC final rule with comment period, we used updated CY 2016 claims data and a list of 340B-eligible providers to calculate an estimated impact of $1.6 billion based on the final CY 2018 CY 2018 OPPS/ASC final rule with comment period, we used updated CY 2016 claims data and a list of 340B-eligible providers to calculate an estimated impact of $1.6 billion based on the final CY 2018 policy to pay for OPPS 340B-acquired drugs at a payment rate of generally ASP minus 22.5 percent. To effectuate the budget neutrality provisions of the OPPS for CY 2018, we redistributed an estimated $1.6 billion in reduced drug payments from adoption of the final 340B payment methodology to all hospitals paid under the OPPS by increasing the payment rates by 3.19 percent for nondrug items and services furnished by all hospitals paid under the OPPS for CY 2018. We carried through this conversion factor adjustment from CYs 2019 through 2022, increasing payments for non-drug items and services in these CYs. This resulted in approximately $7.769 billion, which for ease of reference in this rule we hereafter refer to as $7.8 billion, in additional spending on non- drug items and services from CYs 2018 through 2022. d. Litigation History of the 340B Payment Policy The 340B Payment Policy was the subject of extensive litigation. See the Proposed Remedy for the 340B- Acquired Drug Payment Pol CYs 2018 through 2022. d. Litigation History of the 340B Payment Policy The 340B Payment Policy was the subject of extensive litigation. See the Proposed Remedy for the 340B- Acquired Drug Payment Policy for Calendar Years 2018–2022 (hereinafter referred to as the ‘‘proposed remedy rule’’) for a more comprehensive summary of the litigation history (88 FR 44079 through 44080). On June 15, 2022, the Supreme Court held that because we had not conducted a survey of hospitals’ acquisition costs, we could not vary the payment rates for outpatient prescription drugs by hospital group. See Am. Hosp. Ass’n v. Becerra, 142 S. Ct. 1896, 1906 (2022). The Supreme Court declined to opine on the appropriate remedy, id. at 1903, and on September 28, 2022, the district court vacated the reimbursement rate for 70 The 69.46 percent of AWP was calculated by first reducing the original 95 percent of AWP price by 6 percent to generate a value that is similar to ASP or WAC with no percentage markup. Then we applied the 22.5 percent reduction to ASP/WAC- similar AWP value to obtain the 69.46 percent of AWP, which was similar to either ASP minus 22.5 percent or WAC minus 22.5 percent. VerDate Sep 2014 22:2 applied the 22.5 percent reduction to ASP/WAC- similar AWP value to obtain the 69.46 percent of AWP, which was similar to either ASP minus 22.5 percent or WAC minus 22.5 percent. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00158 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00159 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33634 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules reduction, which was predominantly designed to account for non-drug item and service payments made during CY 2018 through CY 2022. As we explained, that meant that we would calculate payment rates for new providers using the conversion factor before applying the 0.5 percent annual reduction to the conversion factor for non-drug items and services that would apply for hospitals that are not ‘‘new providers’’ for purposes of this policy. For the purpose of designating a new provider, we defined the date of enrollment in Medicare as the provider’s CMS certifi ply for hospitals that are not ‘‘new providers’’ for purposes of this policy. For the purpose of designating a new provider, we defined the date of enrollment in Medicare as the provider’s CMS certification number (CCN) effective date. We codified the exclusion of these new providers from the prospective payment adjustment to the conversion factor for the duration of its application in the regulations by adding new paragraph (b)(1)(iv)(B)(12) to § 419.32. We have reviewed our provider enrollment and OPPS billing records, and based on that data, the providers that would be subject to the proposed payment reduction are listed in Addendum R–340B Remedy Offset Providers to this proposed rule. We welcome comment on the providers listed in Addendum R–340B Remedy Offset Providers to this proposed rule, and based upon those comments, we propose to publish a final Addendum R–340B Remedy Offset Providers for CY 2026 in the CY 2026 OPPS/ASC final rule with comment period. Providers not included on this list (providers that began billing Medicare under the OPPS after January 1, 2018) will not be subject to the proposed payment reduction. For a complete discussion of our exclusion of new provid n this list (providers that began billing Medicare under the OPPS after January 1, 2018) will not be subject to the proposed payment reduction. For a complete discussion of our exclusion of new providers from the prospective payment adjustment, we refer readers to the Final Remedy rule (88 FR 77182 through 77185). h. CY 2026 Proposed Prospective Payment Adjustment When we considered how to recover the estimated $7.8 billion in increased payments made for non-drug items and services from 2018 through 2022, we considered several alternatives, including those that would fully recover that amount in a single year. For example, in the Proposed Remedy rule, we rejected an aggregate payment approach which would have implemented budget neutrality requirements through an immediate lump sum payment recoupment that would mirror the lump sum remedy payment because ‘‘[s]uch an approach would require immediate, and in many cases large, retroactive recoupments from the majority of OPPS hospitals and would impose a substantial, immediate burden on these hospitals as well as an uncertain impact on beneficiaries.’’ (88 FR 44083). To avoid imposing such a burden, we elected to reduce payments prospec would impose a substantial, immediate burden on these hospitals as well as an uncertain impact on beneficiaries.’’ (88 FR 44083). To avoid imposing such a burden, we elected to reduce payments prospectively until the total offset was reached, which we estimated would take approximately 16 years. As discussed previously in this section, we considered various methods to implement this prospective payment reduction. In the Final Remedy rule, we made the prospective payment reduction by applying an annual 0.5- percentage point downward adjustment to the OPPS conversion factor. We continue to believe that a downward adjustment to the OPPS conversion factor is a fair way to apportion the $7.8 billion reduction amongst hospitals, because relative hospital utilization of non-drug items and services beginning in 2026 will approximately track the relative hospital utilization for non-drug items and services each hospital received from CY 2018 through CY 2022. The future payment reductions will thus roughly offset the windfall those hospitals received from increased payments from CY 2018 through CY 2022. And as we noted in the final rule, the approach of tethering future payments for each non hus roughly offset the windfall those hospitals received from increased payments from CY 2018 through CY 2022. And as we noted in the final rule, the approach of tethering future payments for each non-drug item and service for each hospital ‘‘was similar to the original budget neutrality adjustment in the 340B Payment Policy that increased the payment for every non-drug item and service for CY 2018 through CY 2022 to offset the downward adjustment in the payment rate for drugs acquired under the 340B Program.’’ (88 FR 77172.) Finally, the methodology does so with minimal administrative burden to hospitals and beneficiaries, because we can effectuate the offset by calculating the appropriate payment reduction in annual rulemaking without requiring any subsequent action by hospitals. Other methodologies—like delivering a series of demand letters to each hospital for a share of the $7.8 billion—would not only require us to recalculate the proper amount to apportion to each hospital but would most likely require large lump-sum payments from hospitals after each demand letter. Hospitals may find it financially disruptive to promptly write such one-time checks depending on their financia uld most likely require large lump-sum payments from hospitals after each demand letter. Hospitals may find it financially disruptive to promptly write such one-time checks depending on their financial circumstances when we issue the demand letters, whereas implementing a percentage reduction in their Medicare OPPS payments over a number of years would be less disruptive. Such one-time payments would impose greater administrative burden on hospitals and possibly introduce complications to our collections efforts if hospitals delay payments. While we continue to believe that a reduction to the OPPS conversion factor is the best way to effectuate budget neutrality, we are reconsidering whether the timing we selected—a 0.5- percentage point annual reduction for approximately 16 years—best achieves the overarching goal of the Final Remedy rule, which is to restore hospitals to as close to the financial position they would have been in had the 340B Payment Policy never been implemented as is reasonably feasible. In particular, the further away from CY 2018 through CY 2022 the adjustments extend, the less likely that relative hospital utilization of non-drug items and services will corre s reasonably feasible. In particular, the further away from CY 2018 through CY 2022 the adjustments extend, the less likely that relative hospital utilization of non-drug items and services will correlate to the relative hospital utilization of non-drug items and services from 2018 through 2022. In other words, a hospital’s utilization of non-drug items and services is likely going to diverge more from CY 2018 utilization in CY 2041 than it would in CY 2031 or CY 2026. And the more a hospital’s utilization of non-drug items and services diverge, the less hospitals would be restored to as close as possible to the approximate financial position as they would have been in had the 340B Payment Policy never been implemented. By beginning the decrease to non-drug item and service payments in CY 2026, there is already an 8-year delay between the first year of the OPPS 340B payment policy and the first year of the prospective offset. Thus, the longer it takes for us to fully recover the $7.8 billion, the less likely that the relative burden on hospitals from the adjustments will match the relevant benefits those hospitals previously received. In addition, it is possible that at least some illion, the less likely that the relative burden on hospitals from the adjustments will match the relevant benefits those hospitals previously received. In addition, it is possible that at least some hospitals that benefited from the increased payments from CY 2018 through CY 2022 will leave the market before 2041, increasing the risk that the remaining hospitals might ultimately account for a larger share of the payment reductions than they would have if the annual reduction to the OPPS conversion factor concluded sooner. We note the $7.8 billion dollar figure calculated in the 340B Remedy Rule (88 FR 77150) does not and will not account for inflation and does not contain interest even though the prospective offset is occurring many years after both the start of the 340B payment policy in CY 2018 as well as the lump sum remedy payments made in CY 2024. Accordingly, effective January 1, 2026, we propose to revise the annual reduction to the OPPS conversion factor under § 419.32(b)(1)(iv)(B)(12) used to determine the payment amounts for non-drug items and services from 0.5 VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00160 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 v)(B)(12) used to determine the payment amounts for non-drug items and services from 0.5 VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00160 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33635 percent to 2 percent. Under this revised rate, we expect it would take approximately 6 years to reach the total offset of $7.8 billion (see Table 62). Consistent with the Final Remedy rule, this reduction would not apply to new providers. We have also included on Table 62 an alternative policy option with an annual reduction of 5 percent which would reach the total offset of $7.8 billion in approximately 3 years. We acknowledge that this revised annual reduction would be a change to the approach we finalized in the Final Remedy rule and that, at that time, we considered but did not adopt a suggestion from a commenter requesting that we recover the amount over a shorter timeframe than 16 years. (88 FR 77179.) Our basis for not accepting the suggestion was that the 0.5 percent rate/ 16-year timeframe ‘‘properly reverses the incr at we recover the amount over a shorter timeframe than 16 years. (88 FR 77179.) Our basis for not accepting the suggestion was that the 0.5 percent rate/ 16-year timeframe ‘‘properly reverses the increased payments for non-drug items and services to comply with statutory budget neutrality requirements while at the same time accounting for any reliance interests and ensuring that the offset is not overly burdensome to impacted entities.’’ We now think that this balancing insufficiently accounted for the main premise of the Final Remedy rule, which is to implement the budget neutrality requirement in a manner that restores affected 340B covered entity hospitals to the financial position they would have been in had the 340B Payment Policy not been implemented in 2018. For the reasons explained above, we believe that a 6- year time frame better achieves that main goal. And we believe this time frame balances better that goal and our budget neutrality obligations against hospital burden and reliance interests. For example, the 16-year timeframe is more than three times longer than the 5- year period the 340B Payment Policy was in place. The 6 years we expect that the revised policy woul reliance interests. For example, the 16-year timeframe is more than three times longer than the 5- year period the 340B Payment Policy was in place. The 6 years we expect that the revised policy would be in effect, by contrast, is closer to the timeframe the 340B Payment Policy was in place, and the 2 percent payment reduction we propose is still well below the 3.19 percent payment increase hospitals received for that time period (82 FR 52624 through 52625). Because we are proposing this policy in advance of CY 2026 and before any rate reductions go into effect for OPPS and Medicare Fee for Service payments, any reliance interests hospitals have in a policy that has not been implemented yet for these payment systems would be minimal and outweighed by the other considerations discussed in this proposed rule. BILLING CODE 4120–01–P 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00161 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 33636 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k BILLING 702 E:\FR\FM\17JYP2.SGM 17JYP2 33636 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k BILLING CODE 4120–01–C i. Impact of the Prospective Offset to the OPPS Conversion Factor on the ASC Payment System As we noted in the CY 2023 OPPS/ ASC final rule with comment period (87 FR 71975), budget neutrality adjustments to the OPPS conversion factor do not impact the ASC conversion factor. However, we also noted in that rule that revisions to the OPPS conversion factor can have an indirect impact on the ASC payment system because the ASC standard ratesetting methodology adopts OPPS payment rates and the device portion (or device offset amount). Specifically, because the device portion for device-intensive procedures is held constant with the OPPS and is not calculated with the ASC conversion factor, a reduction to VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00162 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00163 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S fmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00163 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33638 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules the add-on payment are paid out of the Part B trust fund and are not subject to OPPS budget neutrality. We defined high cost drugs (i.e., drugs qualifying for the add-on payment) for the purpose of the policy as all drugs covered under Medicare Part B and for which payment would otherwise be made under the OPPS whose per day cost exceeds two times the lower 48 AIR amount in effect at the time of the release of each year’s OPPS/ASC final rule. In the CY 2025 OPPS/ASC final rule with comment period, this amount was identified as $1,334 (2 times the CY 2024 lower 48 AIR of $667). To determine the calculated per day cost for each drug HCPCS code, we employed a methodology similar to our longstanding methodology used to calculate the per day cost of drugs for OPPS payment purposes. Specifically, to calculate the per day cost for CY 2025, we used an estimated payment rate based on the A ongstanding methodology used to calculate the per day cost of drugs for OPPS payment purposes. Specifically, to calculate the per day cost for CY 2025, we used an estimated payment rate based on the ASP methodology payment rate, which for purposes of the policy was generally ASP plus 0 percent (which is the payment rate for separately payable IHS drugs under the policy). We then used the manufacturer- submitted ASP data from the fourth quarter of CY 2023 to determine the per day cost. For drugs that did not have either an ASP-based payment rate or a payment rate based on WAC, we used mean unit cost (MUC) of the items derived from the CY 2023 hospital claims data to determine their per day cost. We finalized that the amount of the add-on payment for a high-cost drug would be the average sales price (ASP) for the drug with no additional payment (i.e., ASP plus zero percent). We note that this add-on payment was implemented on a per-dose basis. In the event ASP pricing information was not available for a particular drug, we paid the Wholesale Acquisition Cost (WAC) plus 0 percent and if WAC pricing information was not available, we paid 89.6 percent of Average Wholesale Price (AWP). W available for a particular drug, we paid the Wholesale Acquisition Cost (WAC) plus 0 percent and if WAC pricing information was not available, we paid 89.6 percent of Average Wholesale Price (AWP). We also adopted a drug packaging threshold exception for biosimilars in which the add-on payment is made for biosimilars whose per-day costs do not exceed the threshold of two times the lower 48 AIR but whose reference products do exceed the threshold. To implement this policy, we finalized in the CY 2025 OPPS/ASC final rule with comment period a recurring annual process in which the lower 48 AIR in effect at the time of the release of each year’s OPPS/ASC final rule with comment period would be used to create a list of drugs qualifying for the add-on payment for the following calendar year. Once the drugs qualifying for the add-on payment were determined, the payment rate for a unit of the drug would be determined in accordance with the above described pricing hierarchy. The results of that process for CY 2025 were displayed in Addendum Q to the CY 2025 OPPS/ASC final rule with comment period. We additionally finalized that during the calendar year, the list of drugs would be modified t process for CY 2025 were displayed in Addendum Q to the CY 2025 OPPS/ASC final rule with comment period. We additionally finalized that during the calendar year, the list of drugs would be modified on a quarterly basis to add new-to-market drugs with per-day costs that exceeded two times the lower 48 AIR and to update qualifying drugs’ ASPs. For a full discussion of the AIR add-on payment for high cost drugs provided by IHS and tribal hospitals, we refer readers to the CY 2025 OPPS/ASC final rule with comment period (89 FR 94280 through 94286). b. AIR Add-On Payment for High-Cost Drugs Provided by Indian Health Service and Tribal Facilities Policy for CY 2026 For CY 2026, as described in the CY 2025 OPPS/ASC final rule with comment period, we would continue to separately pay IHS and tribal hospitals for high-cost drugs furnished in hospital outpatient departments through an add- on payment in addition to the AIR using the authorities under which the AIR is calculated. We would continue to define high cost drugs (i.e., drugs qualifying for the add-on payment) for the purpose of the policy as any drugs covered under Medicare Part B and for which payment would otherwise be made unde ue to define high cost drugs (i.e., drugs qualifying for the add-on payment) for the purpose of the policy as any drugs covered under Medicare Part B and for which payment would otherwise be made under the OPPS which have per day costs exceeding two times the lower 48 AIR amount in effect at the time of the release of the CY 2026 OPPS/ASC final rule with comment period. For CY 2026, if the CY 2025 lower 48 AIR amount is in effect at the time of the release of the CY 2026 OPPS/ASC final rule with comment period, this amount would be $1,436 (2 times the CY 2025 lower 48 AIR of $718). To determine the calculated per day cost for each drug HCPCS code, we would continue using an estimated payment rate based on the ASP methodology payment rate (generally ASP plus 0 percent) and then using the manufacturer-submitted ASP data from the fourth quarter of CY 2024 to determine the per day cost. For drugs that do not have either an ASP-based payment rate or a payment rate based on WAC, we would continue to use the MUC of the items derived from the CY 2024 hospital claims data to determine their per day cost. With respect to the amount of the add-on payment, we propose to use the same pricing hi tinue to use the MUC of the items derived from the CY 2024 hospital claims data to determine their per day cost. With respect to the amount of the add-on payment, we propose to use the same pricing hierarchy that we adopted in the CY 2025 OPPS/ASC final rule with comment period. For CY 2025, we now explain that we adopted a practice of paying the MUC when AWP pricing is not available for a particular drug, and we propose to continue that practice for CY 2026. We propose for CY 2026 that the amount of the add-on payment for each dose of a high-cost drug will continue to be the average sales price (ASP) for the drug with no additional payment (i.e., ASP plus zero percent). In the event ASP pricing information is not available for a particular drug, we propose to continue to pay the Wholesale Acquisition Cost (WAC) plus 0 percent. If WAC pricing information is not available, we propose to continue to pay 89.6 percent of Average Wholesale Price (AWP). And, consistent with our practice for purposes of CY 2025, if AWP pricing information is not available, we propose to pay the MUC. Finally, we continue the drug packaging threshold exception for biosimilars in which the add-on payment is purposes of CY 2025, if AWP pricing information is not available, we propose to pay the MUC. Finally, we continue the drug packaging threshold exception for biosimilars in which the add-on payment is made for biosimilars whose per-day costs do not exceed the threshold of two times the lower 48 AIR but whose reference products do exceed the threshold. c. Proposed List of Drugs Qualifying for the Add-On Payment for CY 2026 Using two times the lower 48 AIR amount of $718 that is in effect for CY 2025 and applying the above described per-day cost methodology and pricing hierarchy, we have included as Addendum Q a preliminary list of the drugs qualifying for the proposed add- on payment and their proposed add on payment rates for CY 2026. We will create a final Addendum Q in the CY 2026 OPPS/ASC final rule with comment period using the claims data (units used per day) and ASPs available at that time. HCPCS codes for drugs that are proposed for separate payment in CY 2026, but then have per day costs equal to or less than $1,436 (2 times $718) in the CY 2026 OPPS/ASC final rule with comment period, based on the updated ASPs and hospital claims data used for the CY 2026 OPPS/ASC final rul day costs equal to or less than $1,436 (2 times $718) in the CY 2026 OPPS/ASC final rule with comment period, based on the updated ASPs and hospital claims data used for the CY 2026 OPPS/ASC final rule with comment period, would still receive separate payment in CY 2026. Finally, during CY 2026, as we did during CY 2025, we propose to modify the list on a quarterly basis (January, April, July, October) to add new-to- market drugs with per-day costs that exceed two times the lower 48 AIR and to update qualifying drugs’ ASPs. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00164 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33639 9. Payment for Skin Substitutes a. Background The CY 2014 Hospital Outpatient Prospective Payment System (OPPS)/ Ambulatory Surgical Center (ASC) final rule with comment period describes skin substitutes as ‘‘a category of products that are most commonly used in outpatient settings for the treatment of diabetic foot ulcers and venous leg ulcers’’ (78 FR 74930 through 74931). When a procedure ut itutes as ‘‘a category of products that are most commonly used in outpatient settings for the treatment of diabetic foot ulcers and venous leg ulcers’’ (78 FR 74930 through 74931). When a procedure utilizing a skin substitute product is performed, providers bill one or more Healthcare Common Procedure Coding System (HCPCS) codes to describe the preparation of the wound, the use of at least one skin substitute product, and application of the skin substitute product through suturing or various other techniques. Specifically, CPT codes 15271 through 15278 describe the application of skin substitutes to various size wounds and anatomical locations. Recently, several novel industry practices have come to our attention, likely driving substantial and unusual increases in the number of available skin substitute products, the sales and distribution structure for these products, and the rapidity of products changing manufacturer ownership. These industry changes are causing a significant increase in spending under Medicare Part B for skin substitute products in the non-facility setting. According to Medicare claims data, Part B spending for these products rose from approximately $250 millio se in spending under Medicare Part B for skin substitute products in the non-facility setting. According to Medicare claims data, Part B spending for these products rose from approximately $250 million in 2019 to over $10 billion in 2024, a nearly 40- fold increase, while the number of patients receiving these products only doubled. Increases in payment rates, and launch prices for skin substitutes, especially newer products, account for the majority of observed Medicare spending increases on these products. Of note, as part of its workplan, the U.S. Department of Health and Human Services’ Office of the Inspector General announced, in November 2024, plans to review Medicare Part B claims for skin substitutes to identify payments that were at risk for noncompliance with Medicare requirements with an expected issue date of fiscal year 2026.76 We outlined our HCPCS Level II coding and payment policy objectives for skin substitutes in the CY 2023 OPPS/ASC proposed rule (87 FR 71985) because we concluded it would be beneficial for interested parties to understand our priorities as we work to create a consistent approach for the suite of products we have referred to as 76 https://oig.hh se we concluded it would be beneficial for interested parties to understand our priorities as we work to create a consistent approach for the suite of products we have referred to as 76 https://oig.hhs.gov/reports-and-publications/ workplan/summary/wp-summary-0000894.asp. skin substitutes. As discussed in the CY 2023 OPPS/ASC proposed rule, we have a number of objectives related to refining our Medicare policies in this area, including: (1) ensuring a consistent payment approach for skin substitute products across the physician office and hospital outpatient department settings; (2) ensuring that appropriate HCPCS codes describe skin substitute products; (3) employing a uniform benefit category across products within the physician office setting, regardless of whether the product is synthetic or comprised of human- or animal-based material, so we can incorporate payment methodologies that are more consistent; and (4) promoting clarity for interested parties on CMS skin substitutes policies and procedures. Interested parties have asked CMS to address what they have described as inconsistencies in our payment and coding policies, indicating that treating clinically similar products ( cies and procedures. Interested parties have asked CMS to address what they have described as inconsistencies in our payment and coding policies, indicating that treating clinically similar products (for example, animal-based and synthetic skin products) differently for purposes of payment is confusing and problematic for healthcare providers and patients. These concerns exist specifically within the non-facility setting; however, interested parties have also indicated that further alignment of our policies across the non-facility and hospital outpatient department settings would reduce confusion. On April 25, 2024, the Medicare Administrative Contractors (MACs) released a proposed Local Coverage Determination (LCD) to provide appropriate coverage for skin substitute grafts used for chronic non-healing diabetic foot and venous leg ulcers. The MACs issued the collaborative proposed Skin Substitute Grafts/Cellular and Tissue-Based Products for the Treatment of Diabetic Foot Ulcers and Venous Leg Ulcers LCD to make sure that Medicare covers, and people with Medicare have access to, skin substitute products that are supported by evidence that shows that they are reasonable and necessar nous Leg Ulcers LCD to make sure that Medicare covers, and people with Medicare have access to, skin substitute products that are supported by evidence that shows that they are reasonable and necessary for the treatment of diabetic foot and venous leg ulcers in the Medicare population and that coverage aligns with professional guidelines for appropriately managing these wounds. All of the MACs have delayed the effective date of the final local coverage determinations for cellular and tissue- based products for wounds in diabetic foot ulcers and venous leg ulcers, moving the implementation date across all MAC jurisdictions to January 1, 2026. For details, please see the final LCD, L36377, titled: Skin Substitute Grafts/Cellular and Tissue-Based Products for the Treatment of Diabetic Foot Ulcers and Venous Leg Ulcers at https://www.cms.gov/medicare- coverage-database/view/lcd.aspx?lcdId= 36377&ver=19. We note that additional coverage determinations may apply to skin substitute products. The Medicare statute, regulations, and manual provisions empower the Medicare program to determine if a product is reasonable and necessary for the treatment of a beneficiary’s condition and safe and The Medicare statute, regulations, and manual provisions empower the Medicare program to determine if a product is reasonable and necessary for the treatment of a beneficiary’s condition and safe and effective, not experimental or investigational, and appropriate and therefore eligible for coverage under Part B. See, e.g., 42 U.S.C. 1395l(e), 1395y(a)(1)(A), 42 CFR 411.15(k)(1), 424.5(a)(6), Medicare Program Integrity Manual Section 3.6.2.2, Medicare Benefit Policy Manual chapter 15, section 50.4.1–50.4.3, and Medicare Program Integrity Manual, chapter 13 section 13.5.3, 13.5.4. The inclusion of a product in this payment rule does not necessarily imply that a determination has been made by CMS or its contractors that it is reasonable and necessary and meets the other preconditions to Medicare coverage. Similarly, the use of short descriptors and associated FDA regulatory categories 77 may reflect current FDA regulation but are not intended to imply that FDA has determined that a product meets any specific FDA statutory or regulatory requirements. FDA’s statutory and regulatory framework, including, for example, FDA’s findings that a product is ‘‘safe and effective,’’ is not control t meets any specific FDA statutory or regulatory requirements. FDA’s statutory and regulatory framework, including, for example, FDA’s findings that a product is ‘‘safe and effective,’’ is not controlling of Medicare’s determination under its own authorities of whether a product is ‘‘reasonable and necessary’’ for a Medicare beneficiary and meets all preconditions for Medicare coverage and payment. FDA does not make Medicare coverage or payment determinations, nor do FDA statutes and regulations govern Medicare coverage or payment determinations. However, CMS has determined that, when it is setting payment rates on a prospective basis, a different inquiry and set of considerations apply and that it makes sense to consider how FDA regulates products that CMS considers to be skin substitutes. We continue to believe that our existing payment policies are unsatisfactory, unsustainable over the long term, and rooted in historical practice established two decades ago prior to significant evolutions in medical technology and practice. After 77 The term ‘‘FDA regulatory categories’’ is used in this proposed rule when referring to the basis for CMS’ proposed payment policies but is not inte lutions in medical technology and practice. After 77 The term ‘‘FDA regulatory categories’’ is used in this proposed rule when referring to the basis for CMS’ proposed payment policies but is not intended to reflect or imply that the products discussed within this Proposed Rule are characterized as such or grouped together by FDA. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00165 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33640 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules holding a town hall 78 to provide an opportunity for public input, including discussion of potential approaches to the methodology for payment of skin substitute products, as well as reviewing several years of comments in response to CY rulemaking in 2023, 2024, and 2025 on this subject, we have developed a proposal that addresses our stated objectives as well as many of the comments we have received. b. Medicare Part B Payment for Skin Substitutes (1) Payment for Skin Substitutes When Used During a Covered Application Procedure Under the PFS in the Non- Facility Setting CMS has historic received. b. Medicare Part B Payment for Skin Substitutes (1) Payment for Skin Substitutes When Used During a Covered Application Procedure Under the PFS in the Non- Facility Setting CMS has historically considered skin substitutes to be biologicals for payment purposes under Medicare Part B. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108–173) (MMA) established a payment methodology for drugs and biologicals under section 1847A of the Act. Under this methodology, a vast majority of drugs and biologicals separately paid under Medicare Part B are paid at the Average Sales Price (ASP) plus six percent. Section 303 of the MMA, titled ‘‘Payment reform for covered outpatient drugs and biologicals,’’ amended Title XVIII of the Act by adding new section 1847A of the Act. In part, this section established the use of the ASP to determine the payment limit for drugs and biologicals described in section 1842(o)(1)(C) of the Act (that is, drugs or biologicals billed by a physician, supplier, or any other person and not paid on a cost or prospective payment basis) furnished on or after January 1, 2005. Because Medicare is currently paying for most skin s ls billed by a physician, supplier, or any other person and not paid on a cost or prospective payment basis) furnished on or after January 1, 2005. Because Medicare is currently paying for most skin substitutes as biologicals using the methodology under section 1847A of the Act, each skin substitute product receives a unique billing code (typically, a Level II HCPCS code) and payment limit. Section 401 of Division CC, Title IV of the Consolidated Appropriations Act, 2021 (Pub. L. 116–260) (CAA, 2021) amended section 1847A of the Act to add new section 1847A(f)(2) of the Act, which requires certain manufacturers without a Medicaid drug rebate agreement, such as certain 78 CMS Skin Substitutes Town Hall, which was held virtually on January 18, 2023. More information regarding the CMS Skin Substitutes Town Hall such as links to recording and transcripts is available at https://www.cms.gov/ medicare/payment/fee-schedules/physician/skin- substitutes#:∼:text= The%20CMS%20Skin%20Substitutes %20Town,Physician%20Fee%20 Schedule%20(PFS). manufacturers of skin substitutes, to report ASP data to CMS for calendar quarters beginning on January 1, 2022, for drugs or biologicals payable under Medi 20Town,Physician%20Fee%20 Schedule%20(PFS). manufacturers of skin substitutes, to report ASP data to CMS for calendar quarters beginning on January 1, 2022, for drugs or biologicals payable under Medicare Part B and described in sections 1842(o)(1)(C), (E), or (G) or 1881(b)(14)(B) of the Act, including items, services, supplies, and products that are payable under Part B as a drug or biological. Because most skin substitutes are currently paid as biologicals using the methodology described in section 1847A of the Act, manufacturers of these products are currently required to report their ASP data to CMS every quarter. Prior to this, section 1927(b)(3)(A)(iii)(I) of the Act only required manufacturers with a Medicaid drug rebate agreement to report ASP data to CMS for drugs or biologicals described in section 1842(o)(1)(C) of the Act. Section 1847A of the Act also includes several relevant definitions. While the definition of ‘‘single-source drug or biological’’ provided at section 1847A(c)(6)(D) of the Act includes ‘‘a biological,’’ sections 1847A(c)(6)(H) and (I) of the Act offer more insight into the meaning of the term for purposes of this section. Subparagraph (I) defines the 7A(c)(6)(D) of the Act includes ‘‘a biological,’’ sections 1847A(c)(6)(H) and (I) of the Act offer more insight into the meaning of the term for purposes of this section. Subparagraph (I) defines the term ‘‘reference biological product’’ as a biological product licensed under section 351 of the PHS Act. Subparagraph (H) defines the term ‘‘biosimilar biological product’’ as ‘‘a biological product approved under an abbreviated application for a license of a biological product that relies in part on data or information in an application for another biological product licensed under section 351 of the Public Health Service Act.’’ Section 1927 of the Act, which is referred to multiple times in section 1847A of the Act, also references section 351 of the PHS Act when referencing biologicals. The title of section 303 of the MMA, which added section 1847A to the Act, refers to ‘‘covered outpatient drugs,’’ defined in section 1927(k)(2) of the Act. Subparagraph (B) adds biological products to this definition when those products are licensed under section 351 of the PHS Act, among other requirements. In the CY 2022 PFS final rule, to address the need to establish a payment mechanism for synt his definition when those products are licensed under section 351 of the PHS Act, among other requirements. In the CY 2022 PFS final rule, to address the need to establish a payment mechanism for synthetic skin substitutes in the physician office setting and to be responsive to feedback received from commenters, we finalized an approach for payment of each synthetic skin substitute for which we had received a HCPCS Level II coding application. We finalized that those products would be payable in the physician office setting and billed separately from the procedure to apply them using HCPCS A-codes (86 FR 65120). (2) Payment for Skin Substitutes Under the Outpatient Prospective Payment System (OPPS) Prior to CY 2014, all products considered to be skin substitutes were separately paid under the OPPS as if they were biologicals according to the ASP methodology (78 FR 74930 through 74931). In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74938), we unconditionally packaged skin substitute products furnished in the hospital outpatient setting into their associated application procedures as part of a broader policy to package all drugs and biologicals that function as suppli n substitute products furnished in the hospital outpatient setting into their associated application procedures as part of a broader policy to package all drugs and biologicals that function as supplies when used in a surgical procedure. As part of the policy to package skin substitutes, we also finalized a methodology that divides the skin substitutes into a high-cost group and a low-cost group, to ensure adequate resource homogeneity among APC assignments for the skin substitute application procedures (78 FR 74933). In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66886), we stated that skin substitutes are best characterized as either surgical supplies or devices because of their required surgical application and because they share significant clinical similarity with other surgical devices and supplies. Skin substitutes assigned to the high- cost group are described by CPT codes 15271 through 15278. Skin substitutes assigned to the low-cost group are described by HCPCS codes C5271 through C5278. Claims billed with primary CPT codes 15271, 15273, 15275, or 15277 are used to calculate the geometric mean costs for procedures assigned to the high-cost group, and claims codes C5271 through C5278. Claims billed with primary CPT codes 15271, 15273, 15275, or 15277 are used to calculate the geometric mean costs for procedures assigned to the high-cost group, and claims billed with primary HCPCS codes C5271, C5273, C5275, or C5277 are used to calculate the geometric mean costs for procedures assigned to the low- cost group (78 FR 74935). The graft skin substitute administration add-on codes, which include ‘‘each additional 25 sq cm’’ in the description (i.e., CPT codes 15272, 15274, 15276, and 15278; HCPCS codes C5272, C5274, C5276, and C5278), are packaged into the payment rates for the primary administration codes. For CY 2025, each of the HCPCS codes described earlier are assigned to one of the following three skin procedure APCs according to the geometric mean cost for the code: APC 5053 (Level 3 Skin Procedures): HCPCS codes C5271, C5275, and C5277; APC 5054 (Level 4 Skin Procedures): HCPCS codes C5273, 15271, 15275, and 15277; or APC 5055 (Level 5 Skin Procedures): VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00166 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m Skin Procedures): VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00166 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33641 HCPCS code 15273. In CY 2025, the payment rate for APC 5053 (Level 3 Skin Procedures) is $612.13, the payment rate for APC 5054 (Level 4 Skin Procedures) is $1,829.23, and the payment rate for APC 5055 (Level 5 Skin Procedures) is $3,660.97. Table 63 lists the APC assignments and CY 2025 payment rates for the HCPCS codes describing the skin substitute application procedures. This information is also available in Addenda A and B of the CY 2025 final OPPS/ASC rule with comment period (the Addenda A and B are available on the CMS website https://www.cms.gov/ medicare/payment/prospective- payment-systems/hospital-outpatient/ regulations-notices). Beginning in CY 2016, we adopted a policy where we determine the high- cost/low-cost status for each skin substitute product based on either a product’s geometric mean unit cost (MUC) exceeding the geometric MUC threshold or the product’s per day cost (PDC), ne the high- cost/low-cost status for each skin substitute product based on either a product’s geometric mean unit cost (MUC) exceeding the geometric MUC threshold or the product’s per day cost (PDC), which is calculated as the total units of a skin substitute multiplied by the mean unit cost and divided by the total number of days, exceeding the PDC threshold. We assign each skin substitute that exceed either the MUC threshold or the PDC threshold to the high-cost group. In addition, we assign any skin substitute with a MUC or a PDC that does not exceed either the MUC threshold or the PDC threshold to the low-cost group (87 FR 71976). We also assign skin substitutes with pass-through payment status to the high-cost category. We assign skin substitutes with some pricing information but without claims data for which to calculate a geometric MUC or PDC to either the high-cost or low-cost category based on the product’s ASP plus 6 percent payment rate as compared to the MUC threshold. If ASP is not available, we use the wholesale acquisition cost (WAC) plus 3 percent to assign a product to either the high-cost or low-cost category. Finally, if neither ASP nor WAC is available, we use ASP is not available, we use the wholesale acquisition cost (WAC) plus 3 percent to assign a product to either the high-cost or low-cost category. Finally, if neither ASP nor WAC is available, we use 95 percent of average wholesale price (AWP) to assign a skin substitute to either the high-cost or low-cost category. In the CY 2021 OPPS/ASC final rule with comment period, after the first entirely synthetic skin substitute products were introduced into the market, we revised our description of skin substitutes to include both biological and synthetic products (85 FR 86064 through 86067). Any skin substitute product that is assigned to a code in the HCPCS A2XXX series is assigned to the high-cost skin substitute group, including new products without pricing information. New skin substitutes without pricing information that are not assigned a code in the HCPCS A2XXX series are assigned to the low-cost category until pricing information is available to compare to the MUC and PDC thresholds (89 FR 94247). In the CY 2014 OPPS/ASC final rule, we also noted that several skin substitute products are applied as either liquids or powders per milliliter or per milligram and are employed in proc (89 FR 94247). In the CY 2014 OPPS/ASC final rule, we also noted that several skin substitute products are applied as either liquids or powders per milliliter or per milligram and are employed in procedures outside of CPT codes 15271 through 15278. We stated that these products ‘‘will be packaged into the surgical procedure in which they are used.’’ (78 FR 74930 through 74931). We also clarified that our definition of skin substitutes does not include bandages or standard dressings, and that, under the OPPS, these items cannot be assigned to either the high- cost or low-cost skin substitute groups or be reported with either CPT codes 15271 through 15278 or HCPCS codes C5271 through C5278 (85 FR 86066). c. Current FDA Regulation of Products CMS Considers To Be Skin Substitutes The FDA regulates products that CMS considers to be skin substitutes based on a variety of factors, including product composition, mode of action, and intended use. Relevant categories of FDA regulation for skin substitute products include the following: (1) Self Determination Under Section 361 of the PHS Act and the Regulations in 21 CFR 1271 (361 HCT/Ps) Human Cells, Tissues, and Cellular and Tissue-Based Pr ubstitute products include the following: (1) Self Determination Under Section 361 of the PHS Act and the Regulations in 21 CFR 1271 (361 HCT/Ps) Human Cells, Tissues, and Cellular and Tissue-Based Products (HCT/Ps) are defined in 21 CFR 1271.3(d) as articles containing or consisting of human cells or tissues that are intended for implantation, transplantation, infusion, or transfer into a human recipient. Examples include bone, ligament, skin, dura mater, heart valve, cornea, hematopoietic stem/progenitor cells derived from peripheral and cord blood, manipulated autologous chondrocytes, epithelial cells on a synthetic matrix, and semen or other reproductive tissue. Pursuant to section 361 of the Public Health Service (PHS) Act, FDA promulgated regulations at 21 CFR 1271, et seq that create an electronic registration and listing system for establishments that manufacture HCT/ Ps, regulate donor eligibility, and establish current good tissue practice and other procedures to prevent the introduction, transmission, and spread of communicable diseases by HCT/Ps. A subset of HCT/Ps are those that are regulated solely under section 361 of the PHS Act and the regulations in 21 CFR 1271 (3 introduction, transmission, and spread of communicable diseases by HCT/Ps. A subset of HCT/Ps are those that are regulated solely under section 361 of the PHS Act and the regulations in 21 CFR 1271 (361 HCT/Ps). The FDA has taken a risk-based, tiered approach in regulating HCT/Ps; as the potential risk posed by a product increases, so does the level of oversight (63 FR 26745). Although FDA is authorized to apply the requirements in the Federal Food, VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00167 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00168 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33643 d. Proposed Payment of Skin Substitute Products Under the PFS and OPPS 1. Separate Payment for Skin Substitute Products as Incident-To Supplies We have carefully considered our policy objectives, which include: (1) ensuring a consistent payment approach for skin substitute products acro ent for Skin Substitute Products as Incident-To Supplies We have carefully considered our policy objectives, which include: (1) ensuring a consistent payment approach for skin substitute products across the physician office and hospital outpatient department settings; (2) ensuring that appropriate HCPCS codes describe skin substitute products; (3) employing a uniform approach across products within the physician office setting, regardless of whether the product is synthetic or comprised of human- or animal-based material; and (4) providing clarity for interested parties on CMS skin substitutes policies and procedures. We propose, starting January 1, 2026, to separately pay for the provision of certain groups of skin substitute products as incident-to supplies when, for those products that are coverable under Medicare’s rules, they are used during a covered application procedure paid under the PFS in the non-facility setting or under the OPPS. This proposal does not apply to biological products licensed under section 351 of the PHS Act, which will continue to be paid as biologicals under 80 No premarket authorization is required for 361 HCT/Ps. 81 https://www.fda.gov/industry/fda-us products licensed under section 351 of the PHS Act, which will continue to be paid as biologicals under 80 No premarket authorization is required for 361 HCT/Ps. 81 https://www.fda.gov/industry/fda-user-fee- programs/medical-device-user-fee-amendments- mdufa. 82 These numbers include either a review within 180 days for decisions without advisory committee input or a review within 320 days for decisions with advisory committee input, respectively. 83 PDUFA performance goals call for FDA to review and act on 90 percent of original BLA submissions within 10 months of the 60-day filing date. Other regulatory pathways may have different timelines. See https://www.fda.gov/patients/learn- about-drug-and-device-approvals/fast-track- breakthrough-therapy-accelerated-approval- priority-review; https://www.fda.gov/drugs/ development-approval-process-drugs. 84 https://www.fda.gov/industry/fda-user-fee- programs/prescription-drug-user-fee-amendments. the ASP methodology in section 1847A of the Act. While we considered proposing to pay separately for skin substitutes initially under just the PFS in non-facility settings consistent with current practice, one of our primary policy objectives is to While we considered proposing to pay separately for skin substitutes initially under just the PFS in non-facility settings consistent with current practice, one of our primary policy objectives is to ensure a consistent payment approach for skin substitute products across the physician office and hospital outpatient department settings; and so, we ultimately determined that the suite of products referred to as skin substitutes should be treated in a uniform manner across different outpatient care settings, to the extent permitted by applicable law, such as section 1833(t)(2)(B) of the Act. The physician, in consultation with his or her patient, decides the site of service for treatment. While many factors are considered as a part of that decision, substantial differences in payment for the application of the same skin substitute product in one site of service versus another, or between similar skin substitute products, should not be one of them. Establishing a consistent framework for how these products are treated within the non- facility and hospital outpatient settings would empower providers to make the best treatment decisions for their patients, ensure equitable access to ne how these products are treated within the non- facility and hospital outpatient settings would empower providers to make the best treatment decisions for their patients, ensure equitable access to needed services, and pay appropriately for these services. We also considered bundling payment for skin substitute products in both the PFS and OPPS as part of this proposal. While supplies are generally bundled into the payment of the service in both the physician office and hospital outpatient departments, for many years skin substitute products have been paid separately in the physician office setting, where the majority of these products are currently applied. So, we have determined that bundling payment for skin substitute products with their administration procedures across both settings under this new proposal, before efforts are made to address improper utilization patterns, would be premature. Depending on whether our proposal is finalized, and the outcomes of a final policy, we may consider packaging skin substitute products with the related application procedure in both the hospital outpatient setting and non- facility setting in future rulemaking. We seek comments on our prop consider packaging skin substitute products with the related application procedure in both the hospital outpatient setting and non- facility setting in future rulemaking. We seek comments on our proposal to separately pay for the provision of certain groups of skin substitute products as well as on our proposal to implement this policy in both the non- facility and hospital outpatient settings. For additional details on the PFS proposal for skin substitutes, please see the CY 2026 PFS proposed rule with comment period; the remainder of this policy proposal will focus on implementation under the OPPS. In the CY 2014 OPPS/ASC final rule with comment period, we finalized a policy to package the payment for skin substitutes into high- and low-cost administration codes (see 78 FR 74930 through 74931 and 42 CFR 419.2(b)(16)). Under this proposal, the payment for skin substitutes would no longer be packaged into the administration procedures under the OPPS, when performed in the outpatient hospital setting. Rather, we propose to remove skin substitutes from the list of packaged items and services at 42 CFR 419.2(b)(16) and specify that we will continue to package payment for products tha ospital setting. Rather, we propose to remove skin substitutes from the list of packaged items and services at 42 CFR 419.2(b)(16) and specify that we will continue to package payment for products that aid wound healing that are not skin substitute products. Accordingly, the C-codes describing the low-cost group, HCPCS codes C5271 through C5278, would be deleted; and skin substitutes assigned to the high- cost group, described by HCPCS codes 15271 through 15278, would remain to describe skin substitute administration procedures. As a result of the unbundling of the skin substitute products from HCPCS codes 15271 through 15278, the costs associated with VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00169 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00170 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33645 homologous use of cover and protect in order to be a 361 HCT/P.85 Intended uses S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33645 homologous use of cover and protect in order to be a 361 HCT/P.85 Intended uses such as wound treatment, promotion or acceleration of wound healing, or serving as a skin substitute would generally be non-homologous uses of structural tissues. Instead, products for such intended uses (for example, the treatment of wounds) generally are subject to PMA or BLA requirements. b. Devices Requiring 510(k)s A 510(k) is a premarket submission made to the FDA generally by the manufacturer of a device to demonstrate that the device to be marketed is substantially equivalent to legally marketed device that is not subject to premarket approval. (FD&C Act sections 510(k),513(i)). Currently, 510(k)-cleared devices that we are considering for purposes of this proposal generally are dressings intended only to cover and protect a wound, to absorb exudate, and to maintain appropriate moisture balance within the wound. They are not intended to act on the wound to mediate, facilitate, or accelerate wound healing. Their activity is typically limited to that of a physical covering or wra sture balance within the wound. They are not intended to act on the wound to mediate, facilitate, or accelerate wound healing. Their activity is typically limited to that of a physical covering or wrap. When intended only to cover and protect a wound, to absorb exudate, and to maintain appropriate moisture balance within the wound and otherwise meeting the device definition, generally the FDA’s Center for Devices and Radiological Health (CDRH) regulates wound dressings composed of natural biomaterials, including animal and human derived tissue as devices, and they are currently subject to 510(k) requirements. At this time, wound dressings have not been 510(k) cleared by FDA for indications such as wound treatment, promotion or acceleration of wound healing, or serving as a skin substitute.86 Instead, products for such intended uses generally are subject to PMA or BLA requirements. For the purposes of this policy, we propose to group any skin substitutes authorized through the De Novo pathway with those cleared under 510(k)s. Similar to products cleared under 510(k)s, De Novo classification is a marketing pathway for medical devices for which general controls alone (class I), or gen athway with those cleared under 510(k)s. Similar to products cleared under 510(k)s, De Novo classification is a marketing pathway for medical devices for which general controls alone (class I), or general and special controls (class II), provide reasonable assurance 85 See Regulatory Considerations for HCT/Ps: Minimal Manipulation and Homologous Use, July 2020 (pg. 19). 86 FDA Executive Summary Prepared for the October 26 & 27, 2022 Meeting of the General and Plastic Surgery Devices Panel of the Medical Devices Advisory Panel Classification of Wound Dressings with Animal-derived Materials (Section 3). Available at download. of safety and effectiveness. While products authorized through the De Novo pathway have no legally marketed predicate device, devices that are classified into class I or class II through a De Novo request may be marketed and used as predicates for future premarket notification (that is, 510(k)) submissions, when applicable. Because of this, we would expect skin substitutes authorized through the De Novo pathway and those cleared under 510(k)s to be similar for payment purposes. We seek comment on our proposal to group skin substitutes into three FDA approval cat titutes authorized through the De Novo pathway and those cleared under 510(k)s to be similar for payment purposes. We seek comment on our proposal to group skin substitutes into three FDA approval categories, PMA, 510(k), and 361 HCT/P, to set payment rates and our proposal to group any skin substitutes authorized through the De Novo pathway with those cleared under 510(k)s for payment purposes. c. Products Subject to PMAs Premarket approval is the most rigorous type of review and generally is required for class III medical devices. Similar to BLA-approved wound care products, PMA-approved wound care products generally are intended to go beyond a simple wound cover to provide some type of direct treatment effect. The FDA has not defined the term ‘‘skin substitute.’’ However, the term has been used as a descriptor for certain wound care constructs that are currently approved under a BLA or PMA for treatment of burns or skin ulcers, including ulcers that appear to have failed to heal after standard of care. The intended uses of these products may include scaffold claims, reference to matrix attributes that promote endogenous cell binding, migration, differentiation, or proliferation, er standard of care. The intended uses of these products may include scaffold claims, reference to matrix attributes that promote endogenous cell binding, migration, differentiation, or proliferation, and/or activities mediated by matrix-associated regulatory factors that facilitate wound healing. Currently, wound care products intended to interact with the wound to facilitate, promote, or accelerate wound healing generally require approval of a BLA or, in some instances, a PMA. Approval of these products requires demonstration of safety and efficacy for the intended use, which generally requires the performance of clinical studies. So PMA-approved devices can be readily distinguished from 510(k)- cleared devices and 361 HCT/P products, which are intended mainly to cover and protect the wound. They are clinically different, provide different benefits, and would theoretically be used for patients presenting with different clinical scenarios. As discussed, PMA-approved devices also go through a much more rigorous review process before marketing as compared to the substantial equivalence requirements for 510(k)s and lack of premarket review for registered 361 HCT/Ps. This more rigorou rough a much more rigorous review process before marketing as compared to the substantial equivalence requirements for 510(k)s and lack of premarket review for registered 361 HCT/Ps. This more rigorous review for PMAs, as well as differences in clinical utility, and the associated costs to manufacturers, suggests that the resources involved in furnishing these products could be distinct from 361 HCT/Ps and 510(k)s. We seek comment on our proposal to group skin substitutes into three FDA categories, PMA, 510(k), and 361 HCT/P, to set payment rates. We note that device pass-through payment status would still be available to new skin substitutes that meet the pass-through payment criteria in the hospital outpatient setting. However, while skin substitutes approved under device pass-through payment status are currently assigned to the high-cost category, because our proposal would eliminate the low- and high-cost groups, we propose to pay for skin substitutes approved under device pass-through payment status consistent with other devices approved under that payment pathway. For the purposes of eligibility of skin substitutes for transitional drug pass-through payment, we propose to def ough payment status consistent with other devices approved under that payment pathway. For the purposes of eligibility of skin substitutes for transitional drug pass-through payment, we propose to define the term ‘‘biological’’ consistent with our interpretation of the term under section 1847A of the Act. Under this proposal, skin substitutes with an approved BLA would be considered under transitional drug pass-through payment status and skin substitutes with PMA or 510(k) clearance would continue to be evaluated under transitional device pass-through payment status. See section IV.A. of this proposed rule for more information on device pass-through payments under the OPPS and see section V.A. of this proposed rule for more information on drug pass-through payments under the OPPS. Section 1833(t)(2) requires the Secretary to establish groups so that services classified within each group are comparable clinically and with respect to the use of resources. To effectuate this categorization into a payment policy under the OPPS, we propose to create three new APCs for HCPCS codes that describe skin substitute products organized by clinical and resource similarity. These three APCs will n into a payment policy under the OPPS, we propose to create three new APCs for HCPCS codes that describe skin substitute products organized by clinical and resource similarity. These three APCs will divide skin substitutes by their FDA regulatory pathway. Specifically, we propose to create: APC 6000 (PMA Skin Substitute Products); APC 6001 (510(k) Skin Substitute Products); or APC 6002 (361 HCT/P Skin Substitute Products). In addition, as noted previously, we propose to assign any skin substitutes approved through the De Novo pathway to APC 6001 (510(k) Skin Substitute Products) based on our proposed policy of categorizing products with these two VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00171 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33646 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules regulatory statuses together. We also propose to create three new unlisted C- codes, one to describe skin substitute products in each approval pathway, for new skin substitute product that have received FDA approval or clearance but do not yet have their own code in effe ted C- codes, one to describe skin substitute products in each approval pathway, for new skin substitute product that have received FDA approval or clearance but do not yet have their own code in effect. We propose to create HCPCS placeholder codes QXXX1 (Unlisted PMA skin substitute product) and assign it to APC 6000 (PMA Skin Substitute Products); QXXX2 (Unlisted 510(k) skin substitute product) and assign it to APC 6001 (510(k) Skin Substitute Products); and QXXX3 (Unlisted 361 HCT/P skin substitute product) and assign it to APC 6002 (361 HCT/P Skin Substitute Products). We propose to create these unlisted codes to prevent delays in Medicare payments for new FDA- approved or cleared skin substitute products. We note that unlisted codes should only be reported when there is no other existing CPT or HCPCS code that adequately describes the service being performed. 3. Alternative Payment Categories As a conceptually possible alternative to our proposal to group skin substitutes based on FDA regulatory categories for purposes of payment, we considered aligning these products based on their composition, for example, whether they are non-synthetic or synthetic. Two examples provided by FDA regulatory categories for purposes of payment, we considered aligning these products based on their composition, for example, whether they are non-synthetic or synthetic. Two examples provided by interested parties include grouping the products as allografts (for example, amniotic products, cellular products), xenografts (for example, collagen products derived from animals), synthetics (for example, artificial products made from various biomaterials) and grouping the products as human living/cryopreserved tissue, dehydrated human/amniotic tissue, animal xenografts, and synthetics/ polymers. However, as noted previously, skin substitutes are a heterogenous group with an increasing intersection between tissue, bioengineered, and synthetic components. With many products now including both non-synthetic and synthetic components, clear categorization of skin substitutes is no longer feasible. This makes this alternative extremely complex to implement because it would be necessary to determine which category would be most appropriate for each individual product based on the components of its composition and an assessment of the importance of each component. In addition, it is unclea termine which category would be most appropriate for each individual product based on the components of its composition and an assessment of the importance of each component. In addition, it is unclear if grouping products based solely on their composition would provide accurate differentiation with respect to resource or clinical similarity for the purposes of setting an appropriate payment rate. Other alternatives we considered include grouping all products together to set a single payment rate or creating two or more categories reflecting product cost, similar to the groupings used currently to set payment rates for skin substitutes in hospital outpatient departments. While these options may offer certain operational advantages for their simplicity, neither recognizes the clinical differences among skin substitutes as reflected by their different intended uses. Paying for similar items and services at a comparable rate is a foundational aspect of our payment systems, but hospital outpatient departments paid under the OPPS and physicians and other practitioners paid under the PFS would instead have a financial incentive to use the least expensive skin substitute or the product of tpatient departments paid under the OPPS and physicians and other practitioners paid under the PFS would instead have a financial incentive to use the least expensive skin substitute or the product offering the greatest discount, which could negatively affect patient outcomes and disincentivize innovation in this space if clinical differences are not recognized and differential payments rates are not set. In addition, dividing products by cost relies on pricing set by manufacturers. Especially in light of the dramatic growth of skin substitutes’ ASP-based payment limits, this method is unlikely to accurately reflect skin substitute resource costs or clinical similarity. We seek comment on whether adding certain subcategories to the three proposed FDA categories would improve clinical or resource similarity. One potential example is creating certain subcategories for payment based on one or more FDA device product codes, which is a categorization process that FDA uses to group similar products together. Other examples that have come to our attention include setting unique payment rates for 361 HCT/Ps based on the number of tissue layers (for example, one layer, two layers, and three roducts together. Other examples that have come to our attention include setting unique payment rates for 361 HCT/Ps based on the number of tissue layers (for example, one layer, two layers, and three or more tissue layers) or entirely synthetic products versus non-synthetic products for 510(k)s. If significant clinical or resource differences were identified between products in one or more of these categories, CMS could create a separate payment grouping for these products for payment purposes. We also seek comments on whether products that are not in sheet form are appropriately considered skin substitutes for the purposes of providing separate payment under this policy. Examples include gel, powder, ointment, foam, liquid, or injected products listed in the nontraditional units of cc, mL, mg, and cm3. We request feedback on whether these products could be appropriately used as part of the CPT administration codes in the range 15271 through 15278, despite existing CPT coding guidelines limiting their use, and how these units could be paid using the FDA regulatory category groups. For example, assuming these products were appropriate to administer using the noted CPT administratio es limiting their use, and how these units could be paid using the FDA regulatory category groups. For example, assuming these products were appropriate to administer using the noted CPT administration codes or other administration codes, CMS could include products listed in units of cc, mL, or cm3 in the applicable FDA categories and equate a single cm2 unit to each cc, mL, or cm3 for payment purposes. We seek comments on whether other administration codes could be used to appropriately describe services performed using products with units other than cm2. 4. Establishing Initial Payment Rates We propose to establish initial payment rates for the three FDA regulatory categories based on the volume-weighted average ASP, with no additional markup, for skin substitute products in each category as submitted by manufacturers, when available. We have developed initial payment rates for each group based on the weighted, per- unit average of ASPs for the fourth quarter of calendar year 2024. These initial payment rates are listed in the file titled ‘‘Skin Substitute Products by FDA Regulatory Category’’ on the CMS website under downloads for the CY 2026 PFS proposed rule at https:// www.cm hese initial payment rates are listed in the file titled ‘‘Skin Substitute Products by FDA Regulatory Category’’ on the CMS website under downloads for the CY 2026 PFS proposed rule at https:// www.cms.gov/Medicare/Medicare-Fee- for-Service-Payment/Physician FeeSched/PFS-Federal-Regulation- Notices.html. When ASP was not available, we used the MUC, which we currently use to determine the high- cost/low-cost status for each skin substitute product in the hospital outpatient setting to calculate the proposed initial rates. We considered using only the MUC data to calculate payment rates for these products. However, when ASP is reported, it may serve as a better estimate of cost across both settings as the ASP reflects sales to physicians as well as hospitals. We seek comment on our proposal to calculate payment rates for skin substitute products in each of the three FDA regulatory categories using ASP, or MUC when ASP is not available, using per-unit averaged pricing data from the fourth quarter of 2024. We also seek comments on whether these calculations, if finalized, should be updated with the most recently available data at the time the final rule is drafted. As we are proposing quarter of 2024. We also seek comments on whether these calculations, if finalized, should be updated with the most recently available data at the time the final rule is drafted. As we are proposing to implement this policy for CY 2026 in a site-neutral manner across both the non-facility setting under the PFS and hospital outpatient setting under the OPPS, we are including all products used in either setting to calculate the rates. However, VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00172 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33647 when product-specific utilization across both settings is used to calculate volume-weighted average payments, the result is an apparent rank order anomaly; despite having a more rigorous regulatory review process and receiving indications to treat and heal wounds, the PMA category has the lowest average payment. We are concerned that the use of the novel pricing practices noted above has resulted in a decoupling of actual resource costs from the ASP. To address this, as a sho y has the lowest average payment. We are concerned that the use of the novel pricing practices noted above has resulted in a decoupling of actual resource costs from the ASP. To address this, as a short-term measure, we propose to weight the product-specific utilization in calculating the proposed rates using the proportions from only the hospital OPPS data and establish, for CY 2026, a single payment rate that would apply to all skin substitute products in the three FDA regulatory categories, or APCs. We believe the OPPS utilization data may better predict utilization patterns under our proposed policies for non-facility settings because, similar to our proposals, these products are already grouped together for payment purposes under the OPPS. By grouping skin substitutes into high- and low-cost groups in the OPPS, hospitals are incentivized to choose either the lowest- cost, clinically appropriate product in the low-cost group or the lowest-cost, clinically appropriate product in the high-cost group. No similar incentive currently exists in the non-facility setting for physicians and other suppliers billing under the PFS. As the proposed policies are intended to mitigate the prob high-cost group. No similar incentive currently exists in the non-facility setting for physicians and other suppliers billing under the PFS. As the proposed policies are intended to mitigate the problematic incentives associated with current patterns of use in the non-facility setting by establishing payment rates for the products in groups instead of individually, we do not believe it would reflect the expected resource costs involved in providing care if we were to base the initial rates on utilization data from the non-facility setting that may be skewed by incentives that would no longer exist under our proposals. For these reasons, we propose to initially use hospital outpatient utilization to weight how much each product’s price contributes to the proposed payment rates for skin substitutes cleared through the 510(k) pathway, self-determined to be 361 HCT/Ps, or approved under a PMA. We seek comments on the use of these product utilization patterns to set payment rates. We also propose for CY 2026 to establish the same initial APC payment rate for each group of skin substitutes, including 510(k)-cleared products, registered 361 HCT/Ps, and approved PMAs. To ensure we are not propose for CY 2026 to establish the same initial APC payment rate for each group of skin substitutes, including 510(k)-cleared products, registered 361 HCT/Ps, and approved PMAs. To ensure we are not underestimating the resources involved in using these products in furnishing care, we propose to use the highest of the calculated volume-weighted average payment amounts for 510(k)s, 361 HCT/ Ps, and PMAs to set initial payment valuations. As the 361 HCT/Ps have the highest volume-weighted average payment amount, this average payment rate is reflected in the proposed initial payment rate below. However, we note that, in future notice and comment rulemaking, we intend to propose using claims data to set payment rates for products in these three categories, which would likely result in payment valuations that diverge based on the updated data. Another alternative is to set the payment rate for products in these categories at the volume-weighted average for all three categories, resulting in a lower initial payment rate for all three groups of products. We seek comment on our proposal to use the 361 HCT/P volume-weighted average payment amount to set the initial payment rates for produc n a lower initial payment rate for all three groups of products. We seek comment on our proposal to use the 361 HCT/P volume-weighted average payment amount to set the initial payment rates for products in all three categories as well as the alternative of using a pooled average of the three categories to set the initial payment rates. Alternatively, while the ASP Pricing Files show that skin substitutes across all three of the FDA regulatory categories have increased in cost substantially since 2019, unlike the self- determined 361 HCT/Ps and 510(k)- cleared devices, there has not been a substantial increase in the number of skin substitutes with approved PMAs. Consequently, it is possible that the non-facility utilization of the skin substitutes with approved PMAs is not as distorted as the utilization of the other kinds of skin substitutes. Setting a separate payment rate for this category using combined product utilization patterns (from both OPPS and non- facility settings), would result in a higher initial payment rate for the PMA category. This would rationally order the FDA regulatory categories, based on clinical considerations and some indicators of resource cost, until p result in a higher initial payment rate for the PMA category. This would rationally order the FDA regulatory categories, based on clinical considerations and some indicators of resource cost, until pricing data removed from these aberrant financial incentives can be incorporated. We seek comment on this alternative policy option. The proposed calculation methodology would result in an initial payment rate of $125.38 for all three proposed new APCs based on the FDA categories including PMA-approved devices, 361 HCT/Ps, and 510(k) devices. Specifically, this proposal would result in an initial payment rate of $125.38 for each HCPCS code assigned to APC 6000 ‘‘PMA Skin Substitute Products,’’ APC 6001 ‘‘510(k) Skin Substitute Products,’’ and APC 6002 ‘‘361 HCT/P Skin Substitute Products.’’ We seek comments on these proposed initial payment rates. We determined these proposed rates using product pricing and volume for skin substitutes from paid claims with dates of service in the fourth quarter of 2024 because it is the most recent, substantially complete quarter of data available. For professional claims, we excluded claims without a positive line- level allowed amount, so that we did arter of 2024 because it is the most recent, substantially complete quarter of data available. For professional claims, we excluded claims without a positive line- level allowed amount, so that we did not inadvertently include volume without presumed costs in the calculation. In addition, in reviewing the ASP pricing files from the first quarter of 2017 through the first quarter of 2025, the most complete ASP reporting is in the fourth quarter of each year. To determine the payment rates, we first used a product’s ASP if it was available. If the ASP rate was missing, we used the 2024 MUC for the HCPCS code. We then calculated a single rate for each FDA category by taking the volume-weighted average of the rates for the applicable codes using the hospital outpatient utilization to weight each category. We note that if rather than using the final quarter of CY 2024, we alternatively, were to use pricing and volume from all four quarters of 2024 to determine proposed rates, the rate for all categories would be approximately $114.87. Using a pooled payment rate across all three categories would result in a rate of approximately $65.85, while splitting the categories to pay the PMA cate ll categories would be approximately $114.87. Using a pooled payment rate across all three categories would result in a rate of approximately $65.85, while splitting the categories to pay the PMA category using the combined product utilization patterns and the 510(k) and 361 HCT/P categories using the OPPS utilization patterns would result in rates of approximately $259.47 and $125.38 respectively. We seek comment on our proposed process to calculate initial payment rates as well as these alternatives. We propose to maintain the current structure of HCPCS codes for skin substitutes, including a process to introduce new product-specific codes and propose initial valuation based on the typical resource costs (i.e., those reflected in ASP and MUC data) of the groups associated with each skin substitute’s HCPCS code. We propose to assign each current HCPCS code that describes an individual skin substitute product to one of the three new APCs based on the product’s appropriate FDA regulatory category. For a complete list of codes and FDA categories, please see file entitled ‘‘Skin Substitute Products by FDA Regulatory Category’’ available on the CMS website under downloads for the CY 20 y category. For a complete list of codes and FDA categories, please see file entitled ‘‘Skin Substitute Products by FDA Regulatory Category’’ available on the CMS website under downloads for the CY 2026 PFS proposed rule at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00173 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33648 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules PhysicianFeeSched/PFS-Federal- Regulation-Notices.html. Individual HCPCS coding, as provided in the file, remains necessary to provide identification on claims and track each product’s cost. This will also allow effectuation of any applicable coverage policies and improve our ability to determine if any refinements in payment categories would be appropriate in future rulemaking. For the most part, materials or supplies furnished incident to a service (for example, a suture, customized surgical kit, scalpel, or clip, other than a radiological site marker) are not paid separately under the OPPS. However, separate payment for products nt to a service (for example, a suture, customized surgical kit, scalpel, or clip, other than a radiological site marker) are not paid separately under the OPPS. However, separate payment for products is not novel, since Medicare pays for various components of services through the use of separate HCPCS codes and/or payment modifiers. The most obvious examples of these kinds of payment and coding splits occur in diagnostic tests, radiation treatment services, and blood product services. For example, under the OPPS, blood products receive specific HCPCS codes and are paid separately from other services. In this case, the procedure of applying or administering a skin substitute product would not be described or paid for by a single code. Rather, when a skin substitute product is applied, both the application code as well as the HCPCS code of the skin substitute that is being applied would be billed under the OPPS. For example, when CPT Code 15271 (application of skin substitute graft, leg or ankle) is billed, we would expect for the hospital outpatient department to also report a skin substitute HCPCS code, which would be paid at a payment rate that includes the resources involved in or ankle) is billed, we would expect for the hospital outpatient department to also report a skin substitute HCPCS code, which would be paid at a payment rate that includes the resources involved in using the skin substitute product. We propose for skin substitute products to receive a separate payment independent from the payment for the application procedure. To effectuate this proposed payment policy under the OPPS, we propose to create a new status indicator for HCPCS codes describing skin substitutes that are assigned to one of the three new APCs for skin substitutes based on FDA regulatory pathway. Specifically, we propose to create status indicator ‘‘S1’’ to indicate that the skin substitute product is paid separately from other procedure codes under the OPPS. We propose to assign all existing HCPCS codes describing skin substitute products to status indicator ‘‘S1’’ for CY 2026. The proposed status indicator ‘‘SI,’’ along with its descriptor and payment status, is listed in Table 65. We also seek comments on whether we should consider treating the codes describing skin substitute products as add-on codes to the current CPT administration codes (CPT codes 15271–15278). This ble 65. We also seek comments on whether we should consider treating the codes describing skin substitute products as add-on codes to the current CPT administration codes (CPT codes 15271–15278). This would more clearly indicate that the only skin substitute products to be paid for and treated as supplies by Medicare are those used in conjunction with the already existing CPT administration codes. If we were to treat these codes as add-on codes to the administration codes, we would effectuate this by revising the code descriptors of the skin substitute products to state ‘‘list separately in addition to the primary procedure.’’ While we would normally assign the add-on codes to a status indicator that indicates that payment is packaged (i.e., status indicator ‘‘N’’ (Items and Services Packaged into APC Rates)), given our proposal to pay separately for skin substitute products as incident-to supplies, we would still propose to assign status indicator ‘‘S1,’’ to the skin substitute codes. We propose that new HCPCS codes describing skin substitutes would be categorized based on whether they are PMA-approved, 510(k)-cleared, or 361 HCT/Ps and the payment rates that apply to that categor We propose that new HCPCS codes describing skin substitutes would be categorized based on whether they are PMA-approved, 510(k)-cleared, or 361 HCT/Ps and the payment rates that apply to that category would be applied to the new code at the next quarterly update. Currently, HCPCS Level II coding applications are submitted and reviewed during our quarterly and biannual coding cycles. We post our coding determinations for drugs and biologicals on a quarterly basis, and do not routinely review those applications at a HCPCS public meeting. For non- drugs and non-biologicals, we post our coding decisions on a biannual basis. For our biannual cycles for non-drugs and non-biologicals, we post preliminary coding determinations then invite feedback on those preliminary coding determinations at a biannual HCPCS public meeting; final coding determinations are posted following the HCPCS public meeting. CMS has been reviewing skin substitutes marketed as 361 HCT/Ps in the quarterly drugs and biologicals coding cycle and 510(k)- cleared skin substitutes in the biannual, non-drugs and non-biologicals coding cycle. Beginning January 1, 2026, we propose to review HCPCS Level II coding applications gicals coding cycle and 510(k)- cleared skin substitutes in the biannual, non-drugs and non-biologicals coding cycle. Beginning January 1, 2026, we propose to review HCPCS Level II coding applications for all skin substitutes marketed as 361 HCT/Ps through our biannual coding cycle for non-drugs and non-biological products, rather than on a quarterly basis. Skin substitutes that received a 510(k) clearance, PMA approval, or a granted De Novo request would continue to be evaluated in the biannual HCPCS Level II coding cycles. Therefore, under this proposal, CMS would evaluate all complete HCPCS Level II applications for skin substitutes in our biannual cycles. Should any products come to market under the BLA, NDA, or ANDA pathways that could potentially be considered skin substitutes, CMS would instead review them in a quarterly HCPCS Level II drugs and biologicals coding cycle. Before a code is assigned to describe the skin substitute product, not otherwise classified (NOC) codes would be used and the CMS MACs would assign the appropriate payment based on the product’s FDA category. We propose to create three new unlisted codes to describe skin substitute products that are FDA auth be used and the CMS MACs would assign the appropriate payment based on the product’s FDA category. We propose to create three new unlisted codes to describe skin substitute products that are FDA authorized or cleared but have not yet received a specific individual HCPCS or CPT code: HCPCS placeholder codes QXXX1 (Unlisted PMA skin substitute product), QXXX2 (Unlisted 510(k) skin substitute product), and QXXX3 (Unlisted 361 HCT/P skin substitute product). We propose to assign the unlisted HCPCS codes to the appropriate APCs based on the product’s FDA approval or clearance. Specifically, we propose to assign HCPCS code QXXX1 to APC 6000 (PMA Skin Substitute Products); QXXX2 to APC 6001 (Unlisted 510(k) VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00174 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00175 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33650 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules itself and (2) that, beginning M 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33650 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules itself and (2) that, beginning January 1, 2026, any preparatory procedures for tissue procurement required for manufacturing an autologous cell-based immunotherapy or gene therapy that were paid for by the manufacturer be included in the calculation of the manufacturer’s ASP. We are making readers aware of this proposal as it may impact therapies paid under the OPPS and ASC payment system. We direct readers to submit their comments on this topic to the CY 2026 PFS proposed rule. Comments submitted to the PFS rule will be responded to in the CY 2026 PFS final rule with comment period along with the finalized policy. 11. Medicare Part B Drugs Without a Medicaid National Drug Rebate Agreement (NDRA) CMS has reviewed drugs, biologicals, and radiopharmaceuticals with HCPCS codes that meet the definition of a covered outpatient drug (defined at 42 CFR 447.502) and are receiving payment under Medicare Part B. In accordance with section 1927(a)(1) of the Social Security Act, for payment to be available under Medicare Part ent drug (defined at 42 CFR 447.502) and are receiving payment under Medicare Part B. In accordance with section 1927(a)(1) of the Social Security Act, for payment to be available under Medicare Part B for covered outpatient drugs of a manufacturer, the manufacturer must have entered into and have in effect a Medicaid NDRA. As of the writing of this notice, our records indicate that the manufacturers of the single source drugs, biologicals, and radiopharmaceuticals listed in Table 66 do not currently have a Medicaid NDRA in effect. Accordingly, if the manufacturers, or labelers, of these products do not promptly enter into a Medicaid NDRA, Medicare Part B payment will no longer be available for these products, which includes payment under the OPPS and ASC payment system. These HCPCS codes will be assigned to an OPPS status indicator of E1, which indicates a non-payable status by Medicare when submitted on outpatient claims (any outpatient bill type). Similarly, these HCPCS codes will be assigned to an ASC payment indicator of B5. BILLING CODE 4120–01–P 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 e assigned to an ASC payment indicator of B5. BILLING CODE 4120–01–P 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00176 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33651 BILLING CODE 4120–01–C 12. Add-on Payment for Technetium- 99m (Tc-99m) Derived From Domestically Produced Molybdenum-99 (Mo-99) Radioisotopes are widely used in modern medical imaging, particularly for cardiac imaging and predominantly for the Medicare population. Technetium-99m (Tc-99m), the radioisotope used in the majority of such diagnostic imaging services, is produced through the radioactive decay of molybdenum-99 (Mo-99). The United States makes up roughly half of global demand for molybdenum-99 (Mo-99). However, 100 percent of this crucial radioisotope is produced outside of the United States. The aging reactors producing it and the fast decay of the radioisotope over long shipping distances leave the United States vulnerable to supply disruptions. Congress passed the American Medical Isotopes Production Act of 2012 (AMIPA) to support the y of the radioisotope over long shipping distances leave the United States vulnerable to supply disruptions. Congress passed the American Medical Isotopes Production Act of 2012 (AMIPA) to support the development of a reliable supply of Mo- 99 produced in the United States. In support of this effort, beginning in CY 2013, CMS finalized a policy to provide an additional payment of $10 for the marginal cost for radioisotopes produced by non-Highly Enriched Uranium (HEU) sources (77 FR 68323). In the CY 2023 OPPS/ASC final rule VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00177 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k / > H P G 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00178 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33653 § 419.49 to specify when a dose of Tc- 99m generated from domestically produced Mo-99 could be eligible for the add-on payment. b. Coding and Documentation for the Add-On Payment for Tc-99m Derived From Domesti o specify when a dose of Tc- 99m generated from domestically produced Mo-99 could be eligible for the add-on payment. b. Coding and Documentation for the Add-On Payment for Tc-99m Derived From Domestically Produced Mo-99 In CY 2013, we finalized a policy to provide an additional payment of $10 for the marginal cost for radioisotopes produced by non-HEU sources (77 FR 68323). Under this policy, hospitals reported HCPCS code Q9969 (Tc-99m from non-highly enriched uranium source, full cost recovery add-on per study dose) once per dose, along with any diagnostic scan or scans furnished using Tc-99m, as long as the Tc-99m doses used could be certified by the hospital to be at least 95 percent derived from non-HEU sources (77 FR 68323). In this rule, we propose to establish new HCPCS C-code C917X (Tc-99m from domestically produced non-HEU Mo-99, [minimum 50 percent], full cost recovery add-on, per study dose), effective January 1, 2026. Similar to the implementation plan for the non-HEU add-on payment policy and the reporting of the corresponding HCPCS code Q9969, hospitals will be able to report new HCPCS C-code C917X once per dose, along with any diagnostic scan or scans furnished usin on payment policy and the reporting of the corresponding HCPCS code Q9969, hospitals will be able to report new HCPCS C-code C917X once per dose, along with any diagnostic scan or scans furnished using Tc-99m derived from domestically produced Mo-99. Hospitals can bill this add-on code if the hospital can certify that at least 50 percent of the Mo-99 in the Tc- 99m generator to produce the Tc-99m was domestically produced Mo-99. Similar to the non-HEU add-on payment certification and tracking requirement, we expect that hospitals requesting this additional payment will perform standard due diligence to ensure that their claims are supported by internal records. For example, we believe that facilities could accept a tracking mechanism by a supplier (invoice, label, contract, among others) to track a dose that has been labeled or claimed as both irradiated and processed in the United States as satisfactory proof for the purposes of the facility with minimum administrative burden. We note that the use of the word ‘‘certify’’ in this subsection is meant only to indicate a formal statement by one party to assure another party of the source and composition. c. Comment Solicitation on the that the use of the word ‘‘certify’’ in this subsection is meant only to indicate a formal statement by one party to assure another party of the source and composition. c. Comment Solicitation on the Add-On Payment for Tc-99m Derived From Domestically Produced Mo-99 CMS aims to account for the per-dose cost of Tc-99m derived from domestically produced Mo-99 while limiting administrative burden for hospitals and protecting the Medicare trust fund. We are seeking comment on the following questions: • Please provide any insight regarding the irradiation and processing required to produce Mo-99 that may be relevant. • As we mentioned in the CY 2025 OPPS/ASC final rule, available information from the Organization for Economic Co-operation and Development, Nuclear Energy Agency (OECD/NEA) supports an add-on payment amount of $10 as appropriate to address the cost of Tc-99m derived from domestically produced Mo-99 for hospital outpatient departments. However, we are seeking additional information that could further inform the cost differentials between radioisotopes derived from domestic and foreign-produced Mo-99, including, but not limited to, production, transportation, and storage co ation that could further inform the cost differentials between radioisotopes derived from domestic and foreign-produced Mo-99, including, but not limited to, production, transportation, and storage costs that outpatient hospital departments may incur that would not be accounted for in historical claims data. CMS may consider reevaluating the amount of the add-on payment if we receive new, substantial information to inform these cost differential factors of Tc-99m derived from domestically produced Mo-99. • The threshold for billing the Tc- 99m add-on code in this proposed rule is that 50 percent of the Mo-99 used in the Tc-99m generator to produce the Tc- 99m was domestically produced Mo-99. Is this the appropriate threshold to use? What are some additional factors that CMS may consider when defining the eligibility threshold? • What forms and levels of documentation are most viable and efficient for tracking and certifying if the Mo-99 and Tc-99m were domestically produced? • What additional steps can CMS take to reduce administrative burden or improve tracking of domestically produced Mo-99 for purposes of this add-on payment? C. Notice of Intent To Conduct Medicare OPPS Drugs Ac itional steps can CMS take to reduce administrative burden or improve tracking of domestically produced Mo-99 for purposes of this add-on payment? C. Notice of Intent To Conduct Medicare OPPS Drugs Acquisition Cost Survey As noted above, section 1833(t)(14)(A)(iii) requires the Secretary to set payment rates for specified covered outpatient drugs (SCODs) 89 beginning in 2006 at the amount the Secretary determines to be the average acquisition cost for the drug for that year, at least when certain hospital acquisition cost survey data is available. To collect the cost survey data for the Secretary to use for 2006 payment rates, section 1833(t)(14)(D)(i)(I) of the Act required the Comptroller General of the United States to conduct a survey in each of 2004 and 2005 to determine the hospital acquisition cost for each SCOD. To inform payment rates in later years, section 1833(t)(14)(D)(ii) requires the Secretary periodically to conduct surveys of hospital acquisition costs for each SCOD. In developing that survey, section 1833(t)(14)(D)(i)(II) requires the Secretary to take into account certain recommendations from the Comptroller General regarding frequency and methodology of subseque n developing that survey, section 1833(t)(14)(D)(i)(II) requires the Secretary to take into account certain recommendations from the Comptroller General regarding frequency and methodology of subsequent surveys. The GAO conducted the required surveys in 2004 and 2005, and, in reporting the results in 2006, recommended that the Secretary thereafter validate, ‘‘on an occasional basis—possibly every 5 or 10 years— ASP data that manufacturers report to CMS for developing SCOD payment rates.’’ 90 CMS has not yet conducted a survey of the acquisition costs for each SCOD for all hospitals paid under the OPPS. Additionally, on April 18, 2025, President Trump signed Executive Order (E.O.) 14273, ‘‘Lowering Drug Prices by Once Again Putting Americans First.’’ 91 Section 5 of the E.O., ‘‘Appropriately Accounting for Acquisition Costs of Drugs in Medicare,’’ directs the Secretary of HHS to publish in the Federal Register a plan to conduct a survey under section 1833(t)(14)(D)(ii) of the Act so he can determine the hospital acquisition cost for covered outpatient drugs at hospital outpatient departments. Accordingly, under section 1833(t)(14)(D)(ii) of the Act, we will be conducting a survey of can determine the hospital acquisition cost for covered outpatient drugs at hospital outpatient departments. Accordingly, under section 1833(t)(14)(D)(ii) of the Act, we will be conducting a survey of the acquisition costs for each separately payable drug acquired by all hospitals paid under the OPPS, including SCODs, and drugs and biologicals CMS historically treats as SCODs. This survey will be open starting at the end of CY 2025 to early CY 2026. We have reviewed and taken into account the Comptroller General’s recommendations regarding the frequency and methodology of these surveys in developing our proposed survey, and we intend for the survey to be completed in time for the survey results to be used to inform policy making beginning with the CY 2027 OPPS/ASC proposed rule. We intend to propose and seek comment on any payment rates for SCODs based on the survey results in CY 2027 rulemaking. Under section 1833(t)(14)(D)(iii) of the Act, the surveys must have a large 89 For the definition of a SCOD, see section 1833(t)(14)(B) of the Act at https://www.ssa.gov/OP_ Home/ssact/title18/1833.htm. 90 https://www.gao.gov/assets/gao-06-372.pdf. 91 https://www.govinfo.gov/content/pkg/FR inition of a SCOD, see section 1833(t)(14)(B) of the Act at https://www.ssa.gov/OP_ Home/ssact/title18/1833.htm. 90 https://www.gao.gov/assets/gao-06-372.pdf. 91 https://www.govinfo.gov/content/pkg/FR-2025- 04-18/pdf/2025-06837.pdf. VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00179 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33654 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules sample of hospitals that is sufficient to generate a statistically significant estimate of the average hospital acquisition cost for each specified covered outpatient drug. Consequently, we will seek an adequate response rate to the survey and surveyed hospitals have an obligation to respond to the survey. Hospitals have ample notice in this proposed rule regarding the intent and the details of the OPPS Drug Acquisition Cost Survey, so we expect all hospitals will submit their acquisition costs in a timely manner to CMS. We understand that hospitals have significant drug acquisition costs, and so (consistent with the Comptroller’s General experience conducting earlier drug acquisition costs in a timely manner to CMS. We understand that hospitals have significant drug acquisition costs, and so (consistent with the Comptroller’s General experience conducting earlier drug acquisition cost surveys in which 83 percent of the hospitals surveyed provided usable data 92), we anticipate hospitals would want to respond to this survey to demonstrate to CMS these costs. We request comment from readers on whether we should make responding to the survey a mandatory requirement of all hospitals paid under the OPPS through 1833(t)(14)(D)(iii) of the Act. We also welcome comment on how we might propose to interpret non- responses to the survey. For example, since a failure on the part of a hospital to respond to the survey could suggest that the hospital has minimal acquisition costs, or has lower acquisition costs than an otherwise similar hospital that responds to the survey and so is withholding its response strategically, we might, if the data so suggests, determine that groups of hospitals who do not respond to the survey have lower acquisition costs for SCODs than their otherwise similar counterparts under section 1833(t)(14)(A)(iii)(I) of the Act. In such instances, we wo of hospitals who do not respond to the survey have lower acquisition costs for SCODs than their otherwise similar counterparts under section 1833(t)(14)(A)(iii)(I) of the Act. In such instances, we would consider various appropriate ways, taking into account the hospital acquisition cost survey data, to determine the average acquisition cost. One method we might consider, depending on the cost survey data, could be to use the lowest acquisition cost reported among otherwise similar responding hospitals as a proxy for the average acquisition costs for hospitals that do not respond to the survey. We might also consider supplemental data sources to inform our determination of average acquisition costs for hospitals for whom we lack cost acquisition survey data. For example, we might consider using, as available, pricing from the Federal 92 https://www.gao.gov/assets/gao-06-372.pdf. Page 7. Supply Schedule (FSS); 93 340B ceiling price; 94; ASP plus 6 percent, 0 percent or another percentage; or other recognized drug pricing for payment of hospitals that do not respond to the survey. We could also consider a hospital’s non-response to the survey when determining how to package drug cost e; or other recognized drug pricing for payment of hospitals that do not respond to the survey. We could also consider a hospital’s non-response to the survey when determining how to package drug costs for particular hospital groups. Under section 1833(t)(2)(B) of the Act, the OPPS establishes groups of covered HOPD services, namely APC groups, and uses them as the basic unit of payment. In the case of much of the care paid under the OPPS, we view a complete service as potentially being reported by a combination of two or more HCPCS codes, rather than a single code, and establish payment policies that support this view. Ideally, we would consider a complete HOPD service to be the totality of care furnished in a hospital outpatient encounter or in an episode of care. We generally package payment for items and services that are typically ancillary and supportive into the payment for the primary diagnostic or therapeutic modalities in which they are used rather than pay for them separately. As noted previously, if a hospital does not submit its acquisition cost data, it could suggest that the hospital has minimal acquisition costs. If the hospital has minimal acquisition costs for dru y. As noted previously, if a hospital does not submit its acquisition cost data, it could suggest that the hospital has minimal acquisition costs. If the hospital has minimal acquisition costs for drugs, that could support viewing those costs as ancillary or supportive, and we might, if the data supports it, conclude that hospitals who do not report their drug acquisition costs lack meaningful additional, marginal costs related to their acquisition of these drugs and, as such, their drugs costs should not be paid separately but rather should be packaged into the payment for the associated service. We seek comment broadly on how to approach payment to hospitals for drugs usually paid under the OPPS absent a hospital’s response to the survey. Consistent with E.O. 14273 and Paperwork Reduction Act requirements, additional details of this survey can be found in section XXII. of this proposed rule. 93 FSS pricing from the Veteran Affairs’ (VA’s) pharmaceutical pricing database is publicly available at the NDC level and published at https:// www.va.gov/opal/nac/fss/pharmPrices.asp. 94 Section 340B(a)(1) of the Public Health Service Act. https://www.hrsa.gov/about/faqs/what- difference-be vailable at the NDC level and published at https:// www.va.gov/opal/nac/fss/pharmPrices.asp. 94 Section 340B(a)(1) of the Public Health Service Act. https://www.hrsa.gov/about/faqs/what- difference-between-340b-ceiling-price-package- adjusted-price-which-are-both-published-340b. VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Amount of Additional Payment and Limit on Aggregate Annual Adjustment Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional pass-through payment for drugs, biologicals, and categories of devices for a given year to an ‘‘applicable percentage,’’ currently not to exceed 2.0 percent of total program payments estimated to be made for all covered services under the OPPS furnished for that year. If we estimate before the beginning of the calendar year that the total amount of pass- through payments in that year would exceed the applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction in the amount of each of the transitional pass-through payments made in that year to ensure that the limit is not exceeded. We estimate )(6)(E)(iii) of the Act requires a uniform prospective reduction in the amount of each of the transitional pass-through payments made in that year to ensure that the limit is not exceeded. We estimate the pass-through spending to determine whether payments exceed the applicable percentage and the appropriate pro rata reduction to the conversion factor for the projected level of pass-through spending in the following year to ensure that total estimated pass-through spending for the prospective payment year is budget neutral, as required by section 1833(t)(6)(E) of the Act. For devices, developing a proposed estimate of pass-through spending in CY 2026 entails estimating spending for two groups of items. The first group of items consists of device categories that are currently eligible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2026. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have used in previous years to develop the pass-through spending estimate for known device categories continuing into the applicable update year. The second group of items consists of devices that we know are n in previous years to develop the pass-through spending estimate for known device categories continuing into the applicable update year. The second group of items consists of devices that we know are newly eligible, or project may be newly eligible, for device pass- through payment in the remaining quarters of CY 2025 or beginning in CY 2026. The sum of the proposed CY 2026 pass-through spending estimates for these two groups of device categories equals the proposed total CY 2026 pass- through spending estimate for device categories with pass-through payment status. We determined the device pass- through estimated payments for each device category based on the amount of payment as required by section 1833(t)(6)(D)(ii) of the Act, and as VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00180 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules 33655 outlined in previous rules, including the CY 2025 OPPS/ASC final rule with comment period (89 FR 94259 through 94261). We note that, beginning in CY 2010, the pass-through evaluatio oposed Rules 33655 outlined in previous rules, including the CY 2025 OPPS/ASC final rule with comment period (89 FR 94259 through 94261). We note that, beginning in CY 2010, the pass-through evaluation process and pass-through payment methodology for implantable biologicals newly approved for pass-through payment beginning on or after January 1, 2010, that are surgically inserted or implanted (through a surgical incision or a natural orifice) use the device pass- through process and payment methodology (74 FR 60476). As has been our past practice (76 FR 74335), we include an estimate of any implantable biologicals eligible for pass-through payment in our estimate of pass-through spending for devices. Similarly, we finalized a policy in CY 2015 that applications for pass-through payment for skin substitutes and similar products be evaluated using the medical device pass-through process and payment methodology (76 FR 66885 through 66888). Therefore, as we did beginning in CY 2015, for CY 2026, we also propose to include an estimate of any skin substitutes and similar products in our estimate of pass-through spending for devices. For drugs and biologicals eligible for pass-through pay 2026, we also propose to include an estimate of any skin substitutes and similar products in our estimate of pass-through spending for devices. For drugs and biologicals eligible for pass-through payment, section 1833(t)(6)(D)(i) of the Act establishes the pass-through payment amount as the amount by which the amount authorized under section 1842(o) of the Act (or, if the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary determines is associated with the drug or biological. Consistent with current policy, we propose to apply a rate of ASP plus 6 percent to most drugs and biologicals for CY 2026, and therefore our estimate of drug and biological pass- through payment for CY 2026 for this group of items is $15.2 million. Payment for certain drugs,95 specifically contrast agents without pass-through payment status, is packaged into pay ological pass- through payment for CY 2026 for this group of items is $15.2 million. Payment for certain drugs,95 specifically contrast agents without pass-through payment status, is packaged into payment for the associated procedures, and these products are not separately paid. In 95 In the CY 2025 OPPS/ASC final rule with comment period, we finalized the high-cost diagnostic radiopharmaceuticals policy to separately pay those products when the per-day costs are greater than a threshold. Please refer to section II.A.3.c. of this proposed rule for more information regarding this policy. addition, we policy-package non-pass- through drugs and biologicals that function as supplies when used in a diagnostic test or procedure unless a high-cost diagnostic radiopharmaceutical with a per-day cost greater than the proposed per-day threshold referenced in section II.A.3.c. of this proposed rule is used for the test or procedure. We policy-package all drugs and biologicals that function as supplies when used in a surgical procedure or for anesthesia, and other categories of drugs and biologicals, as discussed in section V.B.1.c. of this proposed rule. Consistent with current policy, for CY lies when used in a surgical procedure or for anesthesia, and other categories of drugs and biologicals, as discussed in section V.B.1.c. of this proposed rule. Consistent with current policy, for CY 2026, we propose that policy-packaged drugs and biologicals with pass-through payment status will be paid at ASP+6 percent, like other pass-through drugs and biologicals less the policy-packaged drug APC offset amount described below. Our estimate of pass-through payment for policy- packaged drugs and biologicals with pass-through payment status approved prior to CY 2026 is not $0. This is because the pass-through payment amount and the fee schedule amount associated with the drug or biological will not be the same, unlike for separately payable drugs and biologicals. In the CY 2024 OPPS/ASC final rule with comment period (88 FR 81774 through 81776), we discussed our policy to determine if the costs of certain policy-packaged drugs or biologicals are already packaged into the existing APC structure. If we determine that a policy-packaged drug or biological approved for pass-through payment resembles predecessor drugs or biologicals already included in the costs of the APCs that are ass structure. If we determine that a policy-packaged drug or biological approved for pass-through payment resembles predecessor drugs or biologicals already included in the costs of the APCs that are associated with the drug receiving pass-through payment, we offset the amount of pass-through payment for the policy-packaged drug or biological. For these drugs or biologicals, the APC offset amount is the portion of the APC payment for the specific procedure performed with the pass-through drug or biological, which we refer to as the policy-packaged drug APC offset amount. Consistent with current policy described in section V.A.5. of this proposed rule, if we determine that an offset is appropriate for a specific policy-packaged drug or biological receiving pass-through payment, we propose to reduce our estimate of pass-through payments for these drugs or biologicals by the APC offset amount. Similar to pass-through spending estimates for devices, the first group of drugs and biologicals requiring a pass- through payment estimate consists of those products that were recently made eligible for pass-through payment and that will continue to be eligible for pass- through payment in CY 2026 quiring a pass- through payment estimate consists of those products that were recently made eligible for pass-through payment and that will continue to be eligible for pass- through payment in CY 2026. The second group contains drugs and biologicals that we know are newly eligible, or project will be newly eligible, in CY 2026. The sum of the CY 2026 pass-through spending estimates for these two groups of drugs and biologicals equals the total CY 2026 pass-through spending estimate for drugs and biologicals with pass-through payment status. B. Proposed Estimate of Pass-Through Spending for CY 2026 For CY 2026, we propose to set the applicable pass-through payment percentage limit at 2.0 percent of the total projected OPPS payments for CY 2026, consistent with section 1833(t)(6)(E)(ii)(II) of the Act and our OPPS policy from CY 2004 through CY 2025 (89 FR 94260). The pass-through payment percentage limit is calculated using pass-through spending estimates for devices and for drugs and biologicals. For the first group of devices, consisting of device categories that are currently eligible for pass-through payment and will continue to be eligible for pass-through payment in CY 2026, t iologicals. For the first group of devices, consisting of device categories that are currently eligible for pass-through payment and will continue to be eligible for pass-through payment in CY 2026, there are 14 active categories for CY 2026. The active categories are described by HCPCS codes C1600, C1601, C1602, C1603, C1604, C1605, C1606, C8000, C1735, C1736, C1737, C1738, C1739, and C9610. Based on information from the device manufacturers, we estimated that HCPCS code C1600 will cost $0.3 million in pass-through expenditures in CY 2026, HCPCS code C1601 will cost $5.0 million in pass-through expenditures in CY 2026, HCPCS code C1602 will cost $0.2 million in pass- through expenditures in CY 2026, HCPCS code C1603 will cost $0.1 million in pass-through expenditures in CY 2026, HCPCS code C1604 will cost $2.0 million in pass-through expenditures in CY 2026, HCPCS code C1605 will cost $113.0 million in pass- through expenditures in CY 2026, HCPCS code C1606 will cost $0.3 million in pass-through expenditures in CY 2026, HCPCS code C8000 will cost $2.9 million in pass-through expenditures in CY 2026, HCPCS code C1735 will cost $16.0 million in pass- through expenditures in CY 2026, ass-through expenditures in CY 2026, HCPCS code C8000 will cost $2.9 million in pass-through expenditures in CY 2026, HCPCS code C1735 will cost $16.0 million in pass- through expenditures in CY 2026, HCPCS code C1736 will cost $32.8 million in pass-through expenditures in CY 2026, HCPCS code C1737 will cost $34.1 million in pass-through expenditures in CY 2026, HCPCS code C1738 will cost $0.8 million in pass- through expenditures in CY 2026, VerDate Sep 2014 22:23 Jul 16, 2025 Jkt 265001 PO 00000 Frm 00181 Fmt 4701 Sfmt 4702 E:\FR\FM\17JYP2.SGM 17JYP2 2 S L A S O P O R P h t i w D O R P 4 4 1 S 7 W 9 K S D n o d n o m m a h k 33656 Federal Register / Vol. 90, No. 135 / Thursday, July 17, 2025 / Proposed Rules HCPCS code C1739 will cost $8.5 million in pass-through expenditures in CY 2026, and HCPCS code C9610 will cost $36.0 million in pass-through expenditures in CY 2026. Therefore, we propose an estimate for the first group of devices of $252.0 million. In estimating our proposed CY 2026 pass-through spending for device categories in the second group, we included the following: (1) device categories that we assumed at the time of the development of the proposed rule would be new 2026 pass-through spending for device categories in the second group, we included the following: (1) device categories that we assumed at the time of the development of the proposed rule would be newly eligible for pass- through payment in CY 2026; (2) additional device categories that we estimated could be approved for pass- through status after the development of this proposed rule and before January 1, 2026; and (3) contingent projections for new device categories established in the second through fourth quarters of CY 2026. For CY 2026, we propose to use the general methodology described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66778), while also taking into account recent OPPS experience in approving new pass- through device categories. For this proposed rule, the proposed estimate of CY 2026 pass-through spending for this second group of device categories is $319.8 million. To estimate proposed CY 2026 pass- through spending for drugs and biologicals in the first group, specifically those drugs and biologicals recently made eligible for pass-through payment and continuing on pass- through payment status for at least one quarter in CY 2026, we propose to first group, specifically those drugs and biologicals recently made eligible for pass-through payment and continuing on pass- through payment status for at least one quarter in CY 2026, we propose to use the CY 2024 Medicare hospital outpatient claims data regarding their utilization, information provided in their respective pass-through applications, other historical hospital claims data, pharmaceutical industry information, and clinical information regarding these drugs and biologicals to project the CY 2026 OPPS utilization of the products. For the known drugs and biologicals (excluding policy-packaged contrast agents, drugs, biologicals, radiopharmaceuticals with per-day costs at or below the packaging threshold that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure) that will be continuing on pass-through payment status in CY 2026, we estimated the pass-through payment amount as the difference between the general payment rate of ASP+6 percent and the payment rate for non-pass- through drugs and biologicals that would be separately paid. Because we propose to utilize a payment he difference between the general payment rate of ASP+6 percent and the payment rate for non-pass- through drugs and biologicals that would be separately paid. Because we propose to utilize a payment rate of ASP plus 6 percent for most separately payable drugs and biologicals in this proposed rule, the proposed payment rate difference between the pass-through payment amount and the non-pass- through payment amount is $0 for this group of drugs. Because payment for policy-packaged drugs and biologicals is packaged if the product is not paid separately due to its pass-through payment status, we propose to include in the CY 2026 pass- through estimate the difference between payment for the policy-packaged drug or biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is not available) and the policy-packaged drug APC offset amount, if we determine that the policy-packaged drug or biological approved for pass-through payment resembles a predecessor drug or biological already included in the costs of the APCs that are associated with the drug receiving pass-through payment. Diagnostic radiopharmaceuticals that currently have pass-through status, b rug or biological already included in the costs of the APCs that are associated with the drug receiving pass-through payment. Diagnostic radiopharmaceuticals that currently have pass-through status, but would likely be paid separately because of the policy initially established in the CY 2025 OPPS/ASC final rule with comment period (89 FR 93953) to separately pay for high-cost diagnostic radiopharmaceuticals with per-day costs greater than the proposed per-day threshold and which we propose to continue as discussed in section II.A.3.c of this proposed rule, are not considered to be policy-packaged and therefore are not included in this group. For this first group of policy-packaged drugs and biologicals, we estimated a pass-through spending for CY 2026 of $5.2 million. To estimate proposed CY 2026 pass- through spending for drugs and biologicals in the second group (that is, drugs and biologicals that we knew at the time of development of this proposed rule were newly eligible or recently became eligible for pass- through payment in CY 2025, additional drugs and biologicals that we estimated could be approved for pass-through status subsequent to the development of this proposed ru tly became eligible for pass- through payment in CY 2025, additional drugs and biologicals that we estimated could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2026, and projections for new drugs and biologicals that could be initially eligible for pass-through payment in the second through fourth quarters of CY 2026), we propose to use utilization estimates from pass-through applicants, pharmaceutical industry data, clinical information, recent trends in the per unit ASPs of hospital outpatient drugs, and projected annual changes in service volume and intensity as our basis for making the CY 2026 pass-through payment estimate. We also propose to consider the most recent OPPS experience in approving new pass- through drugs and biologicals. Using our proposed methodology for estimating CY 2026 pass-through payments for this second group of drugs, we calculated a proposed spending estimate for this second group of drugs and biologicals of approximately $10 million. We estimate for this proposed rule that the amount of pass-through spending for the device categories and the drugs and biologicals that are continuing to re